Federal Benefits Law Looms Over Health Reform Negotiations

The special legislative session on health care reform appears to be nearing the homestretch. Assembly Speaker Fabian Núñez (D-Los Angeles) this week predicted that he and Gov. Schwarzenegger are about two weeks away from reaching a deal.

Echoing Núñez's remarks, Aaron McLear, the governor's press secretary, said, "It's just a matter of closing the last few inches."

So what's the outstanding issue?

The "main sticking point," according to Núñez, "is the funding formula and where is the revenue stream."

The plan by Núñez and Senate President Pro Tempore Don Perata (D-Oakland) called for employers to pay 7.5% of revenue to help cover the cost of expanding coverage, while Schwarzenegger advocated a 4% contribution from employers.

Lawmakers set on using employer contributions to fund a coverage expansion could find themselves challenged by how to structure the plan so that it doesn't conflict with ERISA, a 1974 federal law that limits states' authority to regulate health care coverage for employers.

Some business groups have raised the possibility of a legal challenge to any plan that includes mandatory employer contributions, arguing that ERISA bars employer mandates. Other groups have used that argument successfully in overturning health care expansion efforts in Maryland and Suffolk County, N.Y.

Officials in San Francisco are grappling with a similar challenge to their universal health access program. A ruling in that case is expected by November and could have major implications for the health care reform debate nationwide.

As the governor and lawmakers debate the final details of a health care overhaul plan, many bills remain on the governor's desk, including legislation to revise admission standards for nursing programs and a measure to consolidate the state's medical board.