Gov. Bill Haslam's proposal to extend health coverage to 280,000 low-income Tennesseans has failed during a special legislative session.
The Senate Health Committee defeated the Republican governor's Insure Tennessee plan Wednesday on a 7-4 vote.
Haslam spent 21 months negotiating a special deal for Tennessee that included market-based elements like vouchers to buy private insurance, co-pays and assurances that the state could pull out of the deal if it ended up being more expensive than expected.
Hospitals pledged to cover the $74 million state share, meaning taxpayers wouldn't be on the hook for for extra health insurance costs.
However, opponents of the Insure Tennessee proposal objected to adding to the federal debt by having the state draw down $2.8 billion in federal money under President Barack Obama's health care law.