LITTLE ROCK — Implementation of Arkansas’ so-called private option for expanding health insurance coverage appears to be in compliance with state law and the state’s federal Medicaid waiver, according to an audit report presented to a legislative panel Thursday.

Sen. Bryan King, R-Green Forest, Senate chairman of the Legislative Joint Auditing Committee, an opponent of the private option, requested the audit in November. The program, which uses federal Medicaid money to provide private health insurance to low-income Arkansans, launched in October and will need a legislative appropriation of federal funding this year to continue.

The report by the state Division of Legislative Audit found no aspect of the program that conflicts with state laws or the federal Medicaid waiver allowing the state to implement it.

That includes a part of the implementation process that has irked some legislators, the state Department of Human Services’ practice of automatically assigning plans to enrollees who do not select a plan.

"DLA staff did not note any procedures used to enroll or assign individuals to the private option that were in conflict with Arkansas law or the waiver," the auditors wrote.

Despite the report’s findings, King said during Thursday’s meeting that he continues to have concerns about the auto-assignment process, which he said was never mentioned during debate over the private option last year.

"In my opinion, it was directly contrary to what was said during the session when the bill was debated, that these people were going to be making their own individual health care decisions," he said.

DHS Director John Selig said the practice is intended to advance the enrollment process for people who indicate they want to participate in the private option but do not take the next step of selecting their plan. People who are automatically assigned a plan have a period during which they can choose to switch to another plan, he said.

"For many people, the choice of plans may not have been an important issue for them. What was important for them was to get enrolled," he said.

Rep. John Burris, R-Harrison, one of the main proponents of the private option, asked if any people who were automatically assigned a plan had complained. Selig said a few hundred have changed plans, but "they didn’t complain."

Burris also said auto-assignment was included in the state’s request for a Medicaid waiver, which went through a public-comment period before being submitted to the federal government.

"To claim that it was somehow deceptive just simply means you didn’t read stuff you were supposed to read," he said.

King also questioned why eligibility for the private option — which is open to people earning up to 138 percent of the federal poverty level — does not take assets into account.

State Medicaid Director Andy Allison said the federal Affordable Care Act does not permit an assets test. King asked Allison why the state did not ask for one in its waiver request.

"It would not have been allowed, I’m confident," Allison said, noting that similar requests by other states have been denied.

Rep. Andy Mayberry, R-Hensley, said many people were confident that the federal government would not approve the private option, but it did — perhaps realizing that Arkansas was unwilling to expand traditional Medicaid, as the Affordable Care Act proposed.

"The political reality here in the state of Arkansas is that the private option obviously is walking on the edge of a cliff, and so while under, shall we say, normal circumstances the federal government might not go along with some sort of waiver dealing with assets, is there a downside to having that discussion?" Mayberry asked.

"I think we could certainly ask," Selig said.

Rep. Charlotte Douglas, R-Alma, moved that the committee leave the audit report "open" instead of accepting it, so the panel could resume discussing the report in the future. Burris, who chairs the House Public Health, Welfare and Labor Committee, objected, saying that to leave the report open would be "non-professional" and that "I would never do that in my committee."

The motion passed 8-5.