INDIANAPOLIS | Indiana has secured federal approval for a cigarette tax-funded health care plan that, beginning next year, will provide insurance coverage for up to 130,000 working poor Hoosiers, Gov. Mitch Daniels announced Friday.

"I return from Washington -- a one-day trip (Thursday) -- with good news," Daniels said. "In I think probably record time, we've secured agreement from the federal government for their participation in the upcoming plan to help Indiana's uninsured."

The Republican governor proposed the Healthy Indiana Plan last fall, and the General Assembly approved a 44-cent cigarette tax hike to bankroll the measure this spring, with state Rep. Charlie Brown, D-Gary, guiding the proposal through the Democrat-led House.

The state will begin taking applications for the health plan in December, with coverage beginning in January. Brown, chairman of House Public Health Committee, said he will work to ensure the program's availability is well publicized in Northwest Indiana.

Adults earning up to double the federal poverty line -- $19,600 for a single person -- can enroll in the Healthy Indiana Plan. They'll receive at least $500 a year in free preventive care but must pay up to 5 percent of their income into a $1,100 annual health savings account to cover doctor visits and other medical needs.

Enrollees can cash out up to $500 of unused benefits at year's end, while those who exhaust their account can access up to $300,000 a year in additional insurance coverage. The state has selected Anthem Insurance Companies and a partnership between Golden Rule and MDwise to administer the health plan.

The cigarette tax increase provides about $140 million a year, which will be used to leverage an estimated $1.1 billion in federal matching dollars over the next five years. The state also agreed to dedicate $50 million in federal funds that had flowed to hospitals to win approval from the U.S. Department of Health and Human Services and the White House Office of Management and Budget.

Indiana received permission to boost the reimbursement rates it pays physicians by roughly 10 percent, but must wait to see whether Congress and President Bush will allow the state to enroll another 39,000 children in an existing state-federal insurance program for low-income families.