Updated at: 09/27/2013 5:36 PM
By ANDREW DeMILLO
(AP) LITTLE ROCK, Ark. - Arkansas became the first state on Friday to win federal approval to use Medicaid funding to purchase private insurance for thousands of low-income residents under the federal health care law, clearing the way for a model that several other states are eyeing.
The Centers for Medicare and Medicaid Services approved the state’s request to implement the "private option" plan as an alternative to expanding Medicaid’s enrollment. Arkansas formally submitted its request to the federal government last month after the plan was approved in April by the state’s Republican-controlled Legislature and Democratic governor.
Supporters of the president’s health care overhaul have pointed to Arkansas as an example of a Republican-trending state that is still implementing a key part of the 2010 law, and several states have expressed interest in a similar approach. Pennsylvania Gov. Tom Corbett, a Republican, earlier this month submitted to the federal government a proposal inspired by Arkansas’ plan.
"Arkansas and CMS worked together to find flexibilities that gave the state the tools to build a program that worked for them and their residents," CMS spokeswoman Emma Sandoe said in an email. "We appreciate the collaboration with Arkansas throughout the process and applaud their commitment to providing Arkansans with access to high, quality health coverage."
Under the private-option law approved in Arkansas earlier this year, the state will accept the federal money allocated for Medicaid expansion under the federal health care overhaul but will use it to buy private insurance for about 250,000 eligible low-income residents. Those individuals who earn up to 138 percent of the poverty line _ or $15,415 per year _ would purchase subsidized private insurance through the state’s insurance exchange.
Open enrollment for the exchange begins Tuesday, with coverage to begin Jan. 1.
"Our actions have drawn positive attention from across the country, and now we will focus on getting this insurance to the Arkansans who need it to lead healthier, more productive lives," Arkansas Gov. Mike Beebe said in a statement released by his office. "Hopefully, this bipartisan, intergovernmental achievement can be an example for Congress as the government shutdown looms."
The private option plan sharply divided Republicans, who won control of the Arkansas Legislature in November, partly on a vow to fight the federal health care law. Some Republican lawmakers have said they’ll try to block funding for the insurance expansion when the Legislature returns for next year’s session.
The next step for state officials will be preparing for the thousands of workers expected to sign up for the expanded health coverage through the state’s insurance exchange, an online marketplace to compare and buy health insurance. It goes online Tuesday. About half of the roughly 500,000 people expected to participate in the exchange will be on the private option plan.
"We have a lot of work ahead of us," Arkansas Medicaid Director Andy Allison said. "We have a tremendous amount of work behind us."
Allison said officials will also now focus on getting approval for other measures that were included in the private option legislation to try and cut costs in the Medicaid program. They include a pilot program for health savings accounts and efforts to move others on Medicaid to private insurance.
Republicans who helped craft the insurance plan said those changes are key to reforming the state’s Medicaid program.
"I just think if we’re ever going to be serious about entitlement reform, this is a key first step," said Rep. John Burris, R-Harrison, chairman of the House Public Health Committee. "The many, many bad consequences of the (Affordable Care Act) gave Arkansas the opportunity to try and manage those consequences to make them as least harmful as possible."
Associated Press Writer Marc Levy contributed to this report.
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(Copyright 2013 by The Associated Press. All Rights Reserved.)