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INDIANAPOLIS | Gov. Mike Pence has won federal approval to implement a key portion of the Affordable Care Act "the Indiana way" -- bringing an innovative form of health coverage to some 680,000 low-income Hoosiers.

Following seven months of negotiations, Healthy Indiana Plan 2.0 was endorsed by federal health officials Tuesday with hardly any changes to the three-tiered program the Republican governor proposed last year.

Approximately 500,000 able-bodied Hoosiers ages 19 to 64 earning less than 138 percent of the federal poverty level, which is $16,104 for an individual, $21,708 for a two-person family or $32,916 for a family of four, can immediately sign up for HIP 2.0 and begin health coverage as soon as Sunday.

Applications are available online at hip.in.gov or by calling (877) GET-HIP-9. There is no enrollment deadline and coverage can start as soon as a member makes the first contribution to his or her health savings account.

All enrollees initially will join the HIP Plus plan, which requires participants make a monthly payment of between $1 and $27 -- based on their incomes -- to the program's health savings account, known as a POWER account. The program will supplement payments to bring the account total up to $2,500.

A member's annual health care costs, including vision, dental and prescription drug services, will first be paid from that shared account, with HIP 2.0 covering all expenses beyond $2,500.

Members who fail to make their monthly contributions will be dropped to HIP Basic, which offers reduced benefits and requires co-payments for all services. Depending on income, some delinquent participants will lose their HIP coverage for a minimum of six months.

The third tier of the program, HIP Link, enabling HIP-eligible working Hoosiers to use their health savings accounts to pay their share of costs associated with an employer-provided health plan won't be available until at least summer.

"HIP 2.0 is intended to give low-income Hoosiers the chance to purchase consumer-driven, private, market-based health care coverage, and in a very real sense take greater ownership of their own health care," Pence said.

Nearly all member health costs of HIP 2.0 are paid by the federal government, mostly through tax hikes enacted in the 2010 Affordable Care Act, also known as Obamacare, which Pence said he still wants repealed and replaced with a HIP 2.0-like alternative.

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The state is projected to spend $1.6 billion on HIP 2.0 over the next seven years. That money is set to come from the 2007 cigarette tax increase now dedicated to the original Healthy Indiana Plan and a new fee voluntarily paid by state hospitals, which they expect to make up through a reduction in uncompensated care.

The 60,000 current participants in original HIP soon will be transitioned to HIP 2.0, along with approximately 120,000 able-bodied adults earning less than 26 percent of the federal poverty level that are now served by Medicaid.

Pence said moving nondisabled Medicaid enrollees into HIP 2.0, and simultaneously referring them to state job training and job placement services, is nothing less than a wholesale transformation of the program and a model other states should follow.

"HIP 2.0 is not intended to be a long-term entitlement program, it's intended to be a safety net that aligns incentives with human aspirations and gets Hoosiers access to the kinds of coverage that will help improve their lives and improve their opportunities for success and productivity in the long run," he said.

Pence said HIP 2.0 approval would not have been possible without the willingness of Republicans and Democrats at the Statehouse and in Congress, especially U.S. Rep. Pete Visclosky, D-Merrillville, and U.S. Sen. Joe Donnelly, D-Ind., to look beyond politics and encourage the Obama administration to do the right thing.

"You know, this is not about policies and programs and dollars and cents. It's about people. It's about members of our family, it's about co-workers, neighbors, friends," Pence said. "HIP 2.0 is a better way to a better future for working Hoosiers."

House Democratic Leader Scott Pelath, D-Michigan City, said it took longer than he would have liked, but he is thankful low-income Hoosiers no longer will be forced to rely on expensive emergency room care for their health needs.

"While there are countless disagreements over the means to achieve health care affordability, when President Obama and Mike Pence agree, we ought to feel some modest satisfaction, take stock of our future and move forward," Pelath said. "Now come the nitty-gritty details of making this work."

Statehouse Republicans cheered Pence for crafting a state-led solution to a national health care issue.

"HIP 2.0 allows Hoosiers to better manage their health, because it is based on the concept of individual responsibility," said House Speaker Brian Bosma, R-Indianapolis. "This consumer-based plan was developed by Hoosiers for Hoosiers and is a win for Indiana."

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