Arkansas will use federal Medicaid grants to purchase health insurance for an additional 250,000 low-income residents under a measure signed into law last week by Gov. Mike Beebe.

The private-option funding will provide coverage through an insurance exchange for Arkansans with annual incomes of less than $15,145, or 138% of the federal poverty level.

“With what we’re signing today, we accomplished a lot that a lot of people thought was virtually impossible to accomplish,” Beebe said.

The Republican-controlled General Assembly barely approved a three-bill package setting up and funding the insurance program. The insurance exchange bill needed only a majority vote, but funding the system required a two-thirds majority.

“We didn’t have anything to spare,” Beebe said. “Some of those votes took a lot of courage.”

The state has received verbal approval from the federal Health and Human Services Department for the pilot program. Arkansas must now seek a waiver from federal authorities to put the insurance plan into effect.

The federal government will pay 100% of the insurance premiums through 2017. The state’s portion will be capped in 2020 at 10% of the total cost.

Beebe said the state will save $670 million with the private insurance exchange as Arkansans leave the state-subsidized program for the new one. Arkansas employers are expected to save $38 million with the system.

The state’s current Medicaid program costs $5 billion a year and serves 780,000 people.

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