Dave Boucher

USA TODAY NETWORK - Tennessee

In a major policy move, Gov. Bill Haslam has announced the new Insure Tennessee plan, a two-year pilot program that would provide health care coverage to tens of thousands of Tennesseans who currently don't have access to health insurance or have limited options.

The plan would be leveraged with federal dollars, said Haslam, who has been working for more than a year on a Medicaid expansion plan that could gain approval from both federal officials and the Republican-dominated state legislature.

"We made the decision in Tennessee nearly two years ago not to expand traditional Medicaid," Haslam said. "This is an alternative approach that forges a different path and is a unique Tennessee solution. Our approach is responsible and reasonable, and I truly believe that it can be a catalyst to fundamentally changing health care in Tennessee," Haslam said.

Haslam said he plans to call a special session in January focused on the new Medicaid expansion plan.

Five key areas of the governor's plan include:

A fiscally sound and sustainable program;

Providing two new private market choices for Tennesseans;

Shifting the delivery model and payment of health care in Tennessee from fee-for-service to outcome-based;

Incentivizing Tennesseans to be more engaged and to take more personal responsibility in their health;

Preparing participants for eventual transition to commercial health coverage.

Haslam said the program will not create any new taxes for Tennesseans and will not add any additional cost to the state budget. The Tennessee Hospital Association has committed that the industry will cover any additional expenses created by the plan, he said.

Lt. Gov. Ron Ramsey said Haslam negotiated a deal that returns tax dollars back to Tennessee.

"When a state has an opportunity to take power away from the federal government and institute real conservative reform, that is an opportunity that must be taken seriously," Ramsey said. "Governor Haslam has negotiated a deal which returns tax dollars back to Tennessee while using conservative principles to bring health insurance to more Tennesseans. I look forward to sitting down with my fellow legislators to take a hard look at what has been negotiated to make sure that the final deal, which must be approved by the legislature, is in the long-term financial interest of Tennessee."

Tennesseans 21 to 64 years old will be offered a choice of the Healthy Incentives Plan or the Volunteer Plan.

The Volunteer Plan would provide a health insurance voucher to participants that would be used to participate in their employer's health insurance plan. The voucher, valued at slightly less than the average TennCare per-enrollee cost, can be used to pay for premiums and other out-of-pocket expenses associated with participation in an individual's employer sponsored private market plan.

Participants in the Healthy Incentives Plan may choose to receive coverage through a redesigned component of the TennCare program, which would introduce Healthy Incentives for Tennesseans accounts, modeled after Health Reimbursement Accounts, which can be used to pay for a portion of required member cost-sharing.

The head of the Tennessee Justice Center, a nonprofit legal firm that advocates for access to health care, welcomed the announcement. Michele Johnson, the organization's executive director, said she appreciated Haslam's leadership on a critical issue.

"We are pleased with the governor's announcement today," Johnson said. "As an organization that works with and knows well the hardworking citizens of our state who cannot afford health insurance, this is an important moment. ... Overall, we fully support its intention to keep Tennesseans' federal tax dollars in the state, cover working families and give them financial peace of mind and support Tennessee's health care system on which we all depend."

Both of Tennessee's U.S. senators had good things to say about the plan, negotiated with U.S. Health Secretary Sylvia Burwell.

"Governor Haslam deserves credit for insisting upon a Tennessee plan that the state can afford, and Secretary Burwell deserves credit for being flexible enough to allow the governor to achieve that," said U.S. Sen. Lamar Alexander.

Haslam had tried earlier to work out an agreement with Burwell's predecessor, Kathleen Sebelius.

"I have had several conversations with Gov. Haslam and appreciate the work he and his team have done to study this issue closely and negotiate a tailored solution that works for Tennessee," said U.S. Sen. Bob Corker. ".I'm glad the administration has finally allowed appropriate flexibility, and I'm pleased our state was able to adopt a solution that will build off of the innovative ways we deliver quality health care."‎

Tennessee Democrats were also supportive.

"I'm here to be positive about it today," said House Minority Leader Rep. Craig Fitzhugh. "I'm here to congratulate the governor."

Haslam did not choose to expand Medicaid eligibility requirements earlier in the year, but said in August he would be open to some sort of expansion.

In October he said talks with federal health officials weren't going as well as he had hoped; however, in November he said he wanted to have an announcement by Christmas.

Under the federal Affordable Care Act, also known as Obamacare, states can expand the income and eligibility requirements on their Medicaid programs to allow more people to participate. The federal government pays the additional costs initially; the federal funding slightly drops, but stays at 90 percent as of 2020.

While many Democrat-controlled states have chosen to expand the program, Republicans are split on the issue. Of the 28 states that have expanded Medicaid, fewer than 10 were controlled by Republicans at the time they chose to expand eligibility, according to an August analysis from the Kaiser Family Foundation.

Many federal Republicans who oppose the Affordable Care Act say expansion is an unfunded mandate from the federal government. For weeks Haslam has said it will be challenging to find a plan that both federal health officials and state lawmakers both support.

As recently as Thursday, Lt. Gov. Ron Ramsey said he thinks Haslam could "sell" the General Assembly on expansion, but he doubted whether the "Obama administration" would approve any plan that could make it through the legislature.

More than 160,000 Tennesseans could be eligible for the new coverage if income requirements are loosened as much as allowed by the law, according to the Kaiser Family Foundation. A recent poll from Vanderbilt University said 58 percent of registered voters in Tennessee favor Medicaid expansion.

Currently, the state provides TennCare only to people who have certain medical conditions, the parents or caretakers of Medicaid eligible children and those who meet other set criteria. Under the Affordable Care Act, states have the option to expanding access to a much wider group with the federal government picking up most of the cost.

The criteria are set by federal poverty guidelines, allowing people who earn up to 138 percent of federal poverty guidelines to qualify. That's $16,104 for a single person and $32,913 for a family of four.

Reporter Tom Wilemon contributed to this report.