Gov. Terry Branstad's office said Friday it will use a new multimillion-dollar federal grant to ensure Iowa isn't "left holding the bag" on the cost of building a health insurance exchange if President Barack Obama is re-elected.

However, a state Democratic leader said later that regardless of the grant, the Branstad administration will not be able to move forward quickly enough to ensure a state-operated exchange in 2014.

The U.S. Department of Health and Human Services (HHS) announced Thursday that it has awarded a $26.6 million grant to the state of Iowa for further development of a health insurance exchange.

Iowa was among eight states in this latest round of funding by the agency, which awarded the state two earlier grants of $1 million for planning and a $7.7 million implementation grant to establish an exchange. Iowa was among eight states awarded a total of $765 million in new grants on Thursday.

Tim Albrecht, a spokesman for Gov. Terry Branstad, said the state plans to use the funding regardless of which presidential candidate wins the election.

“What we have been doing as a state is preparing in the case that Obamacare is upheld, and that we’re not left holding the bag if they flip the switch in 2014,” Albrecht said. “We will use this (grant) to improve our health-care system, regardless of how this turns out. If we’re forced to proceed, we’ll do that. If (Mitt) Romney wins, this grant will still be used to improve Iowa’s health-care system.”

Albrecht said a state-operated exchange would be preferable to one that is federally operated, though no decision has been made on that direction.

“This administration is going to fight to make sure that this fits Iowans, and that it’s not a one-size fits all approach,” he said.

Sen. Jack Hatch, a Des Moines Democrat, said late Friday that the state will be subject to a federally operated exchange for at least one year in 2014 because state agencies have not even begun the process to submit an application to HHS by the Nov. 16 deadline. Hatch on Friday reiterated statements he made to the Business Record in May that the application will not be accepted by the department without legislative approval. 

Under provisions of the Patient Protection and Affordable Care Act, states must notify HHS by Nov. 16 whether they intend to operate their own exchange or have the federal government operate it for them. States may also opt for a hybrid model in which it handles some functions of the exchange.

According to HHS, Iowa will use the grant to further develop and enhance the eligibility system initiated with the first Level One grant to include:

- a redesign of the current database and web application to change the system from an application (household) centered architecture to a person centered architecture;

- implementation of an Enterprise Service Bus, a software model used for interacting between software applications;

- integration of the eligibility solution into the state’s system for Medicaid and CHIP eligibility;       

- integration of the eligibility solution into the state’s exchange for the determinations of Medicaid and CHIP eligibility, as well as tax credit subsidies or other eligibility for Qualified Health Plan participation; and

- further automation of eligibility business processes and incorporation of expanding populations into online enrollment.