Republican Gov. Matt Bevin has notified the federal government that Kentucky will dismantle its state health insurance exchange, Kynect.
The move will direct Kentuckians seeking health insurance under the Affordable Care Act, also known as Obamacare, to use the federal health insurance site, HealthCare.gov.
More than 500,000 people have gotten health insurance through Kynect.
Bevin spokeswoman Jessica Ditto called the program a "redundancy," in a statement from the governor's office. "The transition will have no impact on Kentuckians' ability to obtain or continue health care coverage for the 2016 plan year."
Under the state-managed exchange, Kentucky charges a 1 percent assessment on all insurance premiums to fund the program. Once Kynect is eliminated, the state's 1 percent charge will be eliminated, but plans acquired through the federal exchange will be charged a 3.5 percent assessment.
Since 2014, health care coverage has been required in the U.S. Kentucky is one of 17 states that has a state-based health insurance exchange.
The end of Kynect is paired with the governor's intention to change the state's approach to Medicaid, which provides health insurance to low-income residents. Bevin promised to take both actions during and soon after last year's gubernatorial campaign.
Late last year, Bevin announced that he would by 2017 "transform" the state's expanded Medicaid system into a model similar to Indiana's, which still provides health insurance for those whose household income is up to 138 percent of the federal poverty level.
Under a federal waiver, Indiana offers a complex variation on traditional Medicaid coverage. Among other things, the state's plan offers less generous benefits to newly eligible people at or below the poverty line who don't pay Medicaid premiums, according to an analysis by the Kaiser Family Foundation. People who do pay premiums get a richer package.
More than 400,000 Kentuckians have gotten health insurance through the state's expanded Medicaid program.
Under Bevin's predecessor, Democrat Steve Beshear, Kynect also included a marketing campaign and funded workers to aid people in signing up for benefits. Bevin, a Republican who took office last month, has already ended marketing for Kynect.
According to a Gallup Poll, Kentucky's uninsured rate dropped from 20.4 percent to 9 percent during the first two years of implementation.
The repeal of Kynect is a "big step backward," said Jason Bailey, executive director of the think tank Kentucky Center for Economic Policy. "We should be building on things like Kynect that are working so we can create a stronger Kentucky, not taking them apart."
Beshear's administration has said it would cost at least $23 million to dismantle the system.
KELLY MCEVERS, HOST:
Supporters of the Affordable Care Act often point to Kentucky as one of the law's success stories. Five hundred thousand people in Kentucky have signed up for health insurance through the state-run exchange known as Kynect. And the exchange didn't have the technical problems that the federal one did. But now, Kentucky's new Republican governor, Matt Bevin, has told the federal government he will scrap the exchange. Kentucky Public Radio's Ryland Barton reports it would be first state to fully dismantle its exchange.
RYLAND BARTON, BYLINE: After Kentucky opened Kynect, the state's uninsured rate dropped by more than half to 9 percent within two years. Bevin made opposition to the federal health care law a central part of his campaign. Here's Bevin's inaugural address last month.
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MATT BEVIN: We are going to shut that redundant program down. This is what we are going to do next year.
BARTON: Bevin declined an interview request, but his office says that current enrollees in Kynect will be able to keep their current insurance through 2016. Then people will have to transition onto the federal exchange if they want to keep their plans. Emily Beauregard, executive director of Kentucky Voices for Health, says many people may have trouble signing up again.
EMILY BEAUREGARD: We may lose some folks who had been on the - on Kynect and enrolled in a plan that they liked but then for whatever reason don't reenroll through the federal exchange.
BARTON: Shutting down the exchange may hit the state's 400,000 Medicaid recipients particularly hard. The Affordable Care Act requires states to have an online portal for Medicaid. But the Bevin administration hasn't said how Kentucky will sign up recipients once Kynect is shut down. Jennifer Tolbert follows state health policy at the Kaiser Family Foundation.
JENNIFER TOLBERT: There will confusion generated for Medicaid beneficiaries as to where they go to sign up if they have previously applied for coverage through Kynect. Again, I think that's another open question.
BARTON: Governor Bevin has also indicated that by 2017 the state will scale back the state's expanded Medicaid program to a program that requires participants to put, as he puts it, skin in the game. Republican State Senator Ralph Alvarado is an ally of Bevin's and says the state can't afford it even though the federal government provides almost all the money.
RALPH ALVARADO: The governor ran on that. People responded, voted for him. He's following through on his promise. And I think he's going to try to get our financial house in order right now for the state. We've got a lot of expenses.
BARTON: In fact, Bevin's plans to scale back Obamacare in Kentucky may end up costing the state money. The previous administration estimated that dismantling Kynect would cost $23 million. For NPR News, I'm Ryland Barton in Frankfort, Ky. Transcript provided by NPR, Copyright NPR.