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.