COLUMBUS, Ohio (AP) -- Federal and Ohio officials couldn't agree on spending for a state-run stopgap health insurance plan that covers Ohioans who can't get coverage elsewhere, so the U.S. government will take it over, state officials said Tuesday.
A similar scenario is playing out in 17 other states, creating uncertainty for tens of thousands of people with serious medical conditions.
The program is part of President Barack Obama's health care law. It's meant to be a temporary patch until 2014, when the federal law will require insurers to accept all applicants, regardless of medical history. The law capped spending on the program nationally at $5 billion, and the money is running out because the beneficiaries turned out to be costlier to care for than expected.
Last month, the Obama administration gave proposed contract terms for the program's remaining months to the state-based plans. If no agreement could be reached, the federal government said it would take over that state's program for the rest of this year.
The administrator of Ohio's program requested more funding but it was denied, Ohio Lt. Gov. Mary Taylor wrote in a letter Tuesday to U.S. Department of Health and Human Services Secretary Kathleen Sebelius.
Taylor, the state's most vocal critic of the federal health care law, also wrote that she was concerned about the impact that the shift to a federally run program could have on residents.
"Changes to benefits, treatment plans, deductibles, access to provider networks, and a potential lapse in coverage later in 2013 could harm consumers relying on the high-risk pool for their health care needs," wrote Taylor, who is also the state's insurance director.
The federal proposal was about $12 million less than what was needed to ensure that those with serious medical problems could maintain their benefits, Ohio estimated.
The program, the Pre-Existing Condition Insurance Plan, targets patients who applied for insurance but were turned down because of such pre-existing conditions as cancer or heart disease.
The plan continues to provide important coverage to those with few alternatives, an HHS spokesman said Tuesday.
"These actions will help ensure the program's smooth transition to 2014, when the new market reforms will be implemented and insurance companies will no longer be able to deny coverage because of pre-existing conditions," said agency spokesman Fabien Levy.
About 100,000 people participate nationwide. States and local nonprofits in 27 states administer the program, while the federal government runs the remaining plans. HHS said Tuesday that 18 states would transition to the federal plan.
A group that includes administrators of state-based plans has expressed concern to Sebelius that a likely consequence of the money crunch could be a cost shift to people in the program, resulting in sudden increases in premiums and copayments.
An industry group, the National Association of State Comprehensive Health Insurance Plans, also said in a letter that it feared "catastrophic disruption of coverage for these vulnerable individuals," though the federal government doesn't expect that to happen.
The switch to a federally operated program could be felt differently by patients across the states, said Michael Keough, the association's chairman.
"We're in a wait-and-see mode," he said in an interview.
Keough runs North Carolina's program, which offers four benefit plans to its 6,000 enrollees. The federal government offers one benefit plan, he said, so out-of-pocket costs for those making the switch could vary.
Medical Mutual of Ohio, a nonprofit insurance company, administers the Ohio's program. It covers more than 3,500 residents.
A spokesman for Medical Mutual in Cleveland said the company's contract for administering the program will end June 30, and it will work with the federal government for a smooth transition.
Next year, subsidized private insurance will be available through new online markets, as well as an expanded version of Medicaid for low-income people in states that make that choice. At the same time, virtually all Americans will be required to carry a policy, or pay a fine.
Associated Press writer Ricardo Alonso-Zaldivar in Washington contributed to this report.