If healthcare reform bill ABX1 1 passes the Senate and the governor's desk as it stands, it will lack several components that physicians loathed in its predecessors, and it will contain some positives. But a new healthcare plan will face daunting state budget troubles and a possible legal challenge.

The much-anticipated Health Care Reform and Cost Control Act passed the California Assembly on Dec. 17 during the special session, and it was poised to be heard by the Senate Health Committee on Jan. 23, after this magazine went to press. A product of long negotiations between Governor Arnold Schwarzenegger and author Assembly Speaker Fabian Nœ–ez, the $14.4 billion measure contains no physician taxes and draws funding from a wide variety of sources, some of which must be approved at the ballot.

According to Jonathan Gruber of the Massachusetts Institute of Technology Department of Economics, the reform will cover about 70 percent of uninsured California residents, leaving 1.5 million without coverage.

But the bill still lacks one vital component-guaranteed funding. At least four funding sources are subject to voter approval in a November ballot measure. If approved, the measure would: require employers to pay 1 percent to 6.5 percent of wages, depending on company size; levy a tobacco tax of up to $2 per pack; extract an annual fee from hospitals based on patient revenues; and shift certain county healthcare funds to the state to cover indigent patients.

Other funding comes from employer contributions to the California Cooperative Health Insurance Purchasing Pool, federal contributions to match money going into Medi-Cal and Healthy Families, and savings from Medi-Cal and Healthy Families resulting from Californians moving to other insurance coverage.

Asked whether the current budget crisis was the right climate for far-reaching healthcare reform, Deputy Director of the California Department of Health Care Services Norman Williams said, "Significant federal dollars will be introduced into the system that would help to, for instance, increase rates to hospitals and physicians." In 2008-09, "healthcare reform would basically allocate about $500 million in total funds, which would increase fee-for-service and managed care rates," he said. "That would basically backfill the cuts to physicians that were implemented as part of the budget act."

However, the reform package raises ERISA concerns. The Employee Retirement Income Security Act is a federal law that prevents local and state laws from interfering with employer-provided insurance, in order to protect them from a pastiche of requirements. At press time, San Francisco's universal healthcare measure had received a provisional green light from the Ninth Circuit U.S. Court of Appeals, allowing the city to begin charging employers a fee to support its program. But the case could still end up in the Supreme Court, and California might be heading down a similar legal path.