The bi-partisan agreement was touted as a crucial piece of legislation that helped save the Healthy Families program from devastating budget cuts.
Just before young patients were kicked off the program, health insurers agreed to be taxed 2 percent. That, combined with higher co-pays from families, allowed the state to keep the program afloat for 700,000 children in California.
"We have found a solution," Gov. Arnold Schwarzenegger said in September. "It is one of shared responsibility between government, health plans and the working families that are enrolled in the program."
But the Obama administration sent a warning recently, saying that last ditch effort, specifically the tax, may violate federal guidelines.
Children's advocates say the consequences could be traumatic.
"If the program doesn't have enough money going forward, the health coverage of 1 million children will be at risk, especially during this economic downturn, this is not a time when it's going to be helpful to children and families," Children Now spokesperson Kelly Hardy said.
And it is not lost on California leaders that at a time when President Obama is pushing for universal healthcare that such a ruling could jeopardize coverage for children.
"It doesn't quite fit that they would not move forward to help California implement this law that would a save our program," Hardy said.
Dozens of organizations have appealed the preliminary ruling. They say a new $21 billion deficit means the state has no other means to pay for the program.
The thought of losing their healthcare prompted numerous working families to trek to Sacramento several times this past year, upset leaders would even think about slashing their benefits.
"It's really important, this is not something to play with, this is something we need to have," Healthy Families patient Yesenia Gonsales said in June.