By Susan Guyett
INDIANAPOLIS, Sept 3 (Reuters) - The federal government will allow Indiana to operate its own health program temporarily, Governor Mike Pence said on Tuesday, making it the first state to receive such a major exception this year under President Barack Obama's signature medical reform law.
Indiana is one of the Republican-led states that rejected the federal government's incentives to expand the Medicaid health program for the poor and declined to set up a health insurance exchange to allow consumers to shop for insurance.
The exception granted Indiana, known officially as a "waiver," is the first major ruling by the federal government on applications from that state, Iowa and Arkansas, seeking permission to make changes to health programs that involve Federal law.
At a press conference, Pence, a conservative Republican, voiced rare praise for the Obama administration's "good faith approach" in negotiating the deal.
The state's program, known as Healthy Indiana Plan, offers health insurance to about 37,000 people who do not qualify for Medicaid, including childless adults aged 19 to 64. It is based on high-deductible health plans and tax-free health savings accounts.
The plan has been operating under a waiver since 2008 that required renewal because the governor has wanted to use the program as the foundation for possible Medicaid expansion coverage, according to Robin Rudowitz, an associate director at the Kaiser Family Foundation.
About half of U.S. states currently offer similar programs that cover childless adults. Under Medicaid expansion, the Federal government will pay for three years to extend benefits to people with incomes at 138 percent of the federal poverty level and pay 90 percent of the cost after that.
"We look forward to working with Indiana and all other states in bringing a flexible, state-based approach to Medicaid coverage expansion and encourage the state to explore these options," said a spokesperson for the Centers for Medicaid and Medicare Services, which granted the one-year waiver.
Indiana's request extends an existing program, while Arkansas and Iowa want to use funds available under Medicaid expansion to provide subsidies for buying insurance on the new state-based exchanges. These exchanges will open next month to sell insurance for 2014.
The announcement said eligibility standards for the Indiana program will change under the agreement, but details were not immediately available.