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This is MORNING EDITION from NPR News. I'm Renee Montagne.

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And I'm David Greene.

Last year, when it ruled on the federal health care law, the Supreme Court gave states a choice. They could opt to expand Medicaid or opt not to. Well, states have largely been making that decision along party lines. States run by Democrats have been opting in. States run by Republicans have mostly been saying no or holding back.

Well, now a new option could be make an expansion more palatable in Republican-leaning states. It involves placing new Medicaid patients into private insurance plans. Arkansas is giving the idea a try, as NPR's Julie Rovner reports.

JULIE ROVNER, BYLINE: Arkansas has a Democratic governor but a heavily Republican state legislature. And the few adults who currently qualify for Medicaid have to be really poor, says Andy Allison, who runs the program for the state.

ANDY ALLISON: We cover just at 17 percent of the poverty level for those who are parents. And we don't cover childless adults unless they have a disability.

ROVNER: Seventeen percent of poverty is less than $2,000 a year. Expanding Medicaid under the Affordable Care Act to 133 percent of poverty, about $15,000, would add about a quarter of a million Arkansans to the rolls. It seemed a political nonstarter. That is, until someone suggested the idea of enrolling those new people in the same private plans individuals and small businesses will be purchasing; those in the new marketplaces called exchanges.

ALLISON: I think this is likely to be the only way that expansion or coverage for this population could occur.

ROVNER: So far the idea has been given a tentative go-ahead by the U.S. Department of Health and Human Services. That's caught the attention of several other Republican-run states that had been holding out on the Medicaid expansion, including Ohio, Florida, and even Texas.

Health and Human Services Secretary Kathleen Sebelius says the proposal isn't as novel as some are suggesting.

SECRETARY KATHLEEN SEBELIUS: Right now, I would say for most states in the country the vast majority of Medicaid services are delivered in private plans. And that has been part of the framework for a long time. I know we did that in Kansas.

ROVNER: Where Sebelius was governor for six years.

When the Arkansas arrangement first went public about a month ago, there was some immediate handwringing about its potential cost. But Medicaid watchers say that overall, it could produce a win-win for both the new Medicaid recipients and the others who will be buying coverage in the new exchanges.

One potential problem private plans address is called churning. It happens when a person's income is near the threshold, between qualifying for Medicaid and qualifying for federal help to buy private coverage. Those people could be forced to change plans multiple times a year depending on their earnings, says Sara Rosenbaum. She's a law professor and Medicaid expert at George Washington University.

SARA ROSENBAUM: And you get a letter saying, well, yeah. You're earning more money so now you have to leave your plan, you and your kids have to leave your doctors; you have to pick a new plan.

ROVNER: Rosenbaum says enrolling Medicaid beneficiaries in plans in the exchange could protect as many as 28 million people a year from churning if their income does get too high.

ROSENBAUM: Your plan will stay your plan. Your doctors will stay your doctors. Basically, the bank of Medicaid and the bank of the exchange will have a conversation with each other about who pays the bills. And your premiums may be a little bit different and your co-pays may be a little bit different, but your healthcare won't be interrupted.

ROVNER: There's also a second benefit to having Medicaid beneficiaries in plans in the health exchanges, Rosenbaum says. Many of the new Medicaid enrollees will be relatively healthy, relatively young people with relatively low insurance costs. They could help bring premiums down for those in the exchanges who are older and sicker.

ROSENBAUM: It's the woman who's 32 working at Wal-Mart with a couple of kids who we really need in the exchange. And so, if we buy her in and keep her in, it's going to be that much better off for the 55-year-old woman who is sick and unable to work and needs coverage through the exchange, because of a lot of health conditions.

ROVNER: Still, one of the fundamental appeals of putting new Medicaid enrollees in private plans remains political, says Alan Weil. He runs the National Academy for State Health Policy.

ALAN WEIL: I think in states where the resistance to the Medicaid expansion was based primarily on: this is a big government program that we can't make any bigger, finding a way to do the expansion through private coverage will open a door to a conversation that was otherwise not taking place.

ROVNER: A key issue for many states is that the federal government hasn't yet said exactly how much states can spend on the private plans. Secretary Sebelius says officials will spell out more details on that soon.

Julie Rovner, NPR News, Washington.

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