UPDATE: Pence to propose 2-tier insurance plan for poor

Low-income Indiana residents would have more health-insurance options, including some with no cost, under a two-tiered plan Gov. Mike Pence plans to unveil on Thursday.

The proposal is an attempt to win federal approval to continue insuring poor Indiana residents through the state-run Healthy Indiana Plan rather than by expanding Medicaid. President Barack Obama's health reform law called for expanding traditional Medicaid coverage to people earning up to 138 percent of the federal poverty level.

The state has been talking with federal Health and Human Services officials about using Healthy Indiana as its vehicle for Medicaid expansion but has not received approval to do so beyond Dec. 31, when a one-year extension expires. Pence's proposal appears to be an attempt to address some of the federal government's concerns about HIP, including a requirement that recipients under the poverty line contribute the first $1,100 of their care.

Statehouse and health care leaders with direct knowledge of Pence's new proposal told The Associated Press on Wednesday that participants enrolled in the first tier would receive very limited coverage at little or no cost. A higher level dubbed HIP Plus would include dental and vision coverage and require participants to pay in.

The officials spoke on condition of anonymity because they weren't authorized to discuss the proposal before it was announced.

Pence's new proposal has not yet been submitted to the federal government.

The Healthy Indiana Plan was launched in 2008 under former Gov. Mitch Daniels as a way to provide insurance to Indiana residents who did not qualify for traditional Medicaid but couldn't afford private insurance. The program currently covers about 40,000 low-income Indiana adults.

Those briefed on Pence's proposal say participation could rise as high as 500,000 people if the federal government approves the plan.

Department of Health and Human Services spokesman Fabien Levy noted that any expansion of Medicaid would be covered 100 percent by the federal government for new enrollees the first three years and then be scaled down to 90 percent of the cost after that.

"We are encouraged by Indiana and Governor Pence's commitment to helping cover more of the state's uninsured population through the Healthy Indiana Plan and look forward to seeing his proposal," Levy said.

IBJ reported Tuesday that Pence's proposal involves a combination of the Healthy Indiana Plan, employer-sponsored health plans and health savings accounts.