* HHS says exchanges on track for Oct 1 enrollment
* Senators openly concerned about potential costs
* Democrat says millions of families could "get pounded"
By David Morgan
WASHINGTON, Feb 14 (Reuters) - The Obama administration on Thursday assured U.S. lawmakers that it is on track to enroll millions of people in new state health insurance markets, but it quickly came under fire from Republicans and Democrats about how costly the coverage may be.
Gary Cohen, the Department of Health and Human Services official responsible for implementation of the markets known as health exchanges, told a Senate panel the online marketplaces would meet an Oct. 1 enrollment deadline in all 50 states.
"We are making great progress. We are on track and we will be ready for people all across the country," Cohen said at a hearing of the Senate Finance Committee, one of several congressional panels that oversee healthcare.
The exchanges, being set up under President Barack Obama's healthcare law, are scheduled to start providing subsidized private coverage on Jan. 1, and could attract up to 26 million customers during the next decade, according to the nonpartisan Congressional Budget Office.
CBO estimated that another 12 million people will obtain coverage through a planned expansion of the Medicaid program for the poor.
Seventeen states and the District of Columbia have won conditional approval to operate their own exchanges, leaving the administration to operate federal exchanges in the remaining 33 states. States have until Friday to opt for a federal partnership exchange that would allow them a role in certifying health plans and determining the eligibility of applicants.
Some Republican-led states have rejected both the exchanges and the Medicaid expansion.
With eight months to go before open enrollment, lawmakers expressed concern about affordability of the coverage.
Senator Orrin Hatch, the panel's senior Republican, cited studies projecting a 30 percent to 40 percent premium increases. He said that while federal subsidies would mitigate higher rates in most cases, four in 10 consumers may not qualify for assistance. And premium increases could be far higher in some states.
"If the point of the healthcare law was to reduce costs and increase access, these estimates show that it appears to have already failed," said the Utah Republican, an outspoken critic of the healthcare law.
The administration contends that premium costs will be held in check by larger risk pools, greater competition and subsidies in the form of premium tax credits.
"There are a lot of provisions in the law that are going to keep premiums affordable," Cohen, deputy administrator of HHS' Centers for Medicare and Medicaid Services, told reporters.
But Senator Ron Wyden warned that lower-income families may have a hard time finding affordable insurance because federal assistance would be pegged to the cost of individual coverage instead of family coverage, which is often far more expensive.
"These people are going to get pounded," said Wyden, an Oregon Democrat. "They're really in this kind of no-man's land where they are unable to afford the family coverage offered through their employers and ineligible for subsidies that could be used by dependents on the exchange."
The situation could be especially tough in states that fail to adopt Medicaid expansion, leaving millions of low-income people to obtain coverage through the exchanges.
Cohen said the administration is considering giving states flexibility to address the situation. He said HHS also would look at allowing workers to use employer contributions to meet the cost of family coverage on the exchanges.
Cohen told lawmakers the administration will accept insurance plan applications for federal exchanges from March 28 to April 30 and determine which plans to accept by July.
Meanwhile, some of the harshest criticism came from two Democrats who slammed the administration for not moving ahead on a reform provision that allows states to offer low-cost public insurance, or basic health programs, beginning in 2014.
Advocates see public plans as a measure that could drive insurance costs down 10 to 15 percent. But Cohen said basic health programs would not become available until 2015, a year later than the law mandates.
"You're trying to lure states out of pursuing these basic health plans and onto the exchanges," said Senator Maria Cantwell, a Washington Democrat.
Democratic Senator Bill Nelson of Florida said HHS should be held accountablre for the slow implementation that has provided funding for basic health plans in just 24 states.
"If this is the kind of implementation we're going to see, then we're not going to fulfill the goal that we all set when we so laboriously put together ... this healthcare bill," he said.
Cohen told lawmakers that fiscal cliff legislation approved by Congress at the start of the year denies HHS the authority to fund basic health plans in states beyond the 24 where they are now being established. (Reporting by David Morgan; Editing by David Gregorio)