LITTLE ROCK –Thousands of newly insured low-income Arkansans enrolled under the "private option" will lose their health coverage at mid-year if the Legislature fails to reauthorize the program, state human services officials say.

LITTLE ROCK –Thousands of newly insured low-income Arkansans enrolled under the "private option" will lose their health coverage at mid-year if the Legislature fails to reauthorize the program, state human services officials say.

The future of Arkansas’ alternative to expanding Medicaid under the Affordable Care Act is uncertain as lawmakers prepare to set state spending priorities for the budget year that begins July 1 during the Legislature’ fiscal session that convenes Feb. 10.

Gov. Mike Beebe presented a $5 billion budget for Fiscal 2014-15 to lawmakers last week, a proposal that administration officials say takes into consideration the state’s previous spending and bases proposed expenditures on future outcomes.

The governor’s budget proposal includes a $105.8 million increase in spending over the current fiscal year, and factors in $89 million in savings from the private option. Not reauthorizing the private option would cause repercussions across state government and hurt many low-income Arkansans, said Department of Finance Director Richard Weiss said last week.

"That would just be a huge problem at all levels and the people we provide services for, particularly," Weiss said.

Under the program, approved during the 2013 legislative session, federal Medicaid dollars are being used to subsidize the purchase of private health insurance for people with annual incomes of up to 138 percent of the federal poverty level — $15,856 for an individual, $32,499 for a family of four — through the state’s health insurance exchange rather than adding them to the Medicaid rolls.

As of Jan. 11, 70,057 people had enrolled in the private option, according to DHS. Another 17,500 had been determined to be eligible and more than 30,000 others had expressed interest in applying.

DHS Director John Selig said last week that if the private option is not reauthorized during the upcoming fiscal session, about 90 percent of those currently enrolled would lose their insurance on July 1. He said the current budget has enough funding to last until the end of the current fiscal year on June 30.

Those who lose the insurance would probably have difficulty getting onto the federal health exchange, Selig said, because the sign-up period for that program ends at the end of March.

Along with the thousands who would lose coverage, Selig said other unintended consequences would result from failing to reauthorize the private option.

Rural hospitals and other health care providers across the state also would suffer financially, he said.

"The Affordable Care Act really made a trade-off for hospitals," Selig said, cutting their Medicaid reimbursements but also reducing their uncompensated care because more people would be insured.

"So the Medicaid cuts are in place and the state can’t do anything about those, so the hospitals have taken that hit," he said. "If they then don’t get help with their uninsured (through the private option) they are basically taking a double hit. Particularly some of the rural hospitals, some of the critical access hospitals, really could be at risk."

Brandon Sharp, DF&A’s budget director, said last week that the $89 million in savings anticipated by the private option are intertwined throughout the governor’s proposed budget and include about $55.8 million in savings in Medicaid spending, as well as drastic reductions in uncompensated care costs.

Those reductions include about $8 million from the state Department of Health for community health centers, local public hospitals and community mental health centers; $7.6 million from the University of Arkansas for Medical Sciences; and $2.2 million from the state Department of Correction.

Selig said those agencies are giving up some of their uncompensated care money because of the expectation that they will have less uncompensated care.

""Obviously, if you don’t have the private option you are going to have more people, particularly very poor people who don’t have insurance, and I think you would just about have to restore some of that money back to their budgets and take it from somewhere," Selig said.

Also factored into the proposed $5 billion budget is a significant amount of savings from the state Medicaid program, Weiss told lawmakers while presenting the governor’s proposed $5 billion balanced budget. That program has experienced only a 2.5 percent growth rate during the first half of the current fiscal year, the lowest growth rate in more than 20 years.

Weiss also said the federal government has raised the federal matching rate from 70.1 percent to 7.88 percent, which is forecast to add about $75 million in unexpected federal aid for the upcoming fiscal year.

Because of that anticipated money, the proposed $5 billion budget includes reallocating $50 million from the state’s Rainy Day Fund for a number of agencies, including a $7 million increase for county-jail reimbursements, and an additional $3.1 million increase for the state Department of Correction to add 300 more prison beds, Weiss said.

Budget hearings, which began last week, are expected to end Tuesday when DHS completes presentation of its budget. The private option is expected to receive significant debate.

House Speaker Davy Carter, R-Cabot, said last week that he continues to support reauthorization of the private option but isn’t convinced that chaos will result if it is not reapproved.

"There is no crisis to be averted here," he said. "Big picture-wise, we’ve done a lot over the last year and think right now we are in a good spot."

Carter said state economists are forecasting 2 percent growth for next year, and the state has been able to absorb tax cuts approved by the Legislature last year. About $140 million in tax cuts over a three year-period were approved by lawmakers. About $10 million of the cuts took effect Jan. 1 and $85 million are to take effect July 1.

"So, if you take all that into consideration, I think that’s pretty darn good," he said.

Sen. Bart Hester, R-Cave Springs, who opposed the private option last year, said he would do so again in the fiscal session.

"If it is defunded, grandma is not going to be thrown out of the nursing home, the hospitals aren’t going to go out of business. It’s just not going to happen," he said.