A lower court in December struck down key provisions of the program, dubbed Healthy San Francisco, which requires companies with at least 20 workers to provide health coverage or pay the city a fee to help offset the program's estimated $200 million price tag.

The Golden Gate Restaurant Association, a powerful lobby, sued the city, arguing that the mandatory contributions the city sought placed a costly burden on members already struggling to make a profit.

But a three-judge panel for the 9th U.S. Circuit Court of Appeals said Wednesday it appeared the program would ultimately prevail.

"There may be better ways to provide health care than to require private employers to foot the bill," Judge William Fletcher wrote in a unanimous ruling. But he wrote that it wasn't up to the court to "evaluate the wisdom" of the plan, only its legality.

Fletcher wrote that the city and the labor unions that joined San Francisco in defending the lawsuit "have a probability, even a strong likelihood of success."

City officials hope the program, the first of its kind in the nation, will eventually cover about 80,000 people. Mayor Gavin Newsom said that nearly 8,000 people have already signed up and that the city hopes to enlist about 40,000 more people by the end of the year.

The "ruling is an important victory for uninsured San Franciscans," Newsom said Wednesday.

U.S. District Court Judge Jeffrey White in December knocked out the business fee when he agreed with the restaurant owners and ruled that the program violated federal law.

A telephone message left Wednesday for an attorney representing the restaurant owners was not immediately returned.