Key bills in California's health care reform debate passed an important test last week, setting the stage for legislative floor fights this week that will be closely monitored both by employers and industry groups.

Most of last Thursday's appropriations committee votes in the Democratic Party-dominated General Assembly and state Senate were widely regarded as no-brainers. The lead reform bills in each house were sponsored by Assembly Speaker Fabian Nu & #324;ez (D-Los Angeles) and Senate President Pro Tem Don Perata (D-Oakland).

Few believe that legislators, other than those in the Republican minority, would buck their leadership.

Both AB8 and SB48 follow loosely along the lines of what Gov. Arnold Schwarzenegger has indicated he would support, including requiring most employers who don't offer coverage to pay a fee based on a percentage of their payroll into a state-run pool that would subsidize coverage for the poor.

But neither bill requires every Californian to take responsibility for obtaining health insurance, an important requirement for Schwarzenegger, who personally had made health insurance a priority ever since he was a struggling bodybuilder newly arrived from Austria in the late 1960s.

And while Schwarzenegger has suggested 4 percent of payroll as a sufficient and fair employer mandate, legislative leaders appear headed toward approving a 7.5 percent fee. That would enable more people to be covered and neutralize opposition from physician and hospital groups, which under the Schwarzenegger plan would have paid separate assessments based on the additional revenue they would expect to gain from the plan.

California Restaurant Association President Jot Condie has been among the most vocal of business opponents to the employer mandate, and predicts the business community will band together to file lawsuits and launch petition drives to overturn the law if the governor signs it.

"This is a societal problem and there ought to be a broader base solution than hurting the very employers who are operating on very low profit margins," said Condie, who believes a lower, but more broadly applied tax would be less burdensome and punitive.

A third comprehensive reform bill, SB 840, which is a single-payer alternative from State Sen. Sheila Kuehl (D-Santa Monica), also passed out of appropriations. It's considered to have enough support among Democrats to win legislative passage, but likely will fall victim to Schwarzenegger's veto pen, as happened last year to an previous version of the bill.

The only real drama among last week's health care votes concerned the fate of AB 1553, Assemblyman Dave Jones' (D-Sacramento) attempt to correct what he considers a key flaw in both the Nu & #324;ez and Perata plans the lack of price controls over insurers.

There had been concern that Assembly leaders would back the insurance industry and block a vote on Jones' effort to limit premium hikes by regulating health insurance premiums like auto coverage. But AB 1553 passed out of appropriations by a healthy margin.

"It's going to be quite a showdown," said Jerry Flanagan of the Santa Monica-based Foundation for Taxpayer and Consumer Rights, a lead supporter of Jones' bill. Noting that that Assembly alone has until June 8 to vote on at least 450 bills that originated in that house, Flanagan said supporters would have to work hard to make sure reform legislation such as AB 1553 doesn't get lost in the shuffle.

Startups on Parade

It's a telling indicator about the scarcity of locally based funding for life science startups that a former Boston venture capitalist who's only been in town six months was recruited to co-chair this week's Southern California Biomedical Council Annual Investor Conference.

Dr. Anthony Natale admits he has felt somewhat like the belle of the ball since word hit the street that Boston-based Prism VentureWorks now has a three-man L.A. outpost looking to make deals. Depending on how you define the region, there's at most only three to five VC firms here, including Prism, that focus on biotech and medical device firms.

Venture firms tend to take a hands-on approach to nurturing their investments, so they prefer to invest close to home. Many of the richest funds are based in Silicon Valley and in the Boston-Cambridge area.

That's why events like Thursday's SoCalBio conference, now in its ninth year, have become so important for the local industry. Executive Director Ahmed Enany and his board coax VCs to fly in from around the country for panels about the state of the industry and short pitches from companies developing everything from cancer therapies to implantable devices to treat incontinence.

"The market here is really hungry for venture money," said Natale, who has yet to arrange any locally based funding, but plans to check out many of the presenters. "It's a high priority for us to find deals in the local area. It's a wide open market here."

For information on the conference, go to www.socalbio.org.

Staff reporter Deborah Crowe can be reached at (323) 549-5225, ext. 232, or at dcrowe@labusinessjournal.com.

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