Topeka ? If Kansas doesn’t put together its own health insurance exchange, the federal government will install one, taking over major portions of the health care system in the state, an official said Tuesday.

“It takes huge control away from states,” said Linda Sheppard, director of the health and accident division of the Kansas Department of Insurance, about a federally implemented exchange.

Gov. Sam Brownback rejected a $31.5 million federal grant to help set up a Kansas-designed health insurance exchange. He said there were too many strings attached to the grant, although he had earlier supported it and some of the contentions by his administration about the exchange have been refuted.

Critics of Brownback have said he rejected the grant to appease those who oppose any movement to prepare for the federal Affordable Care Act.

The health insurance exchanges are a key provision under the federal law and are required to be in place by 2014. The exchanges will provide a one-stop marketplace for hundreds of thousands of Kansans to purchase health insurance. The exchange will also determine eligibility for subsidies to buy coverage.

If a state doesn’t design its own exchange, the federal government will step in and do it, said Sheppard, who recently attended meetings in Washington, D.C., with officials from the U.S. Department of Health and Human Services to discuss what an exchange would be like if the federal government implemented it in Kansas.

On Tuesday, she reported about those discussions to a working group that is handling health insurance reform issues.

Sheppard said she was told a federally implemented exchange would determine eligibility for Medicaid, enrollment of consumers in qualified health plans, and what coverage insurance plans would offer.

“They (the federal government) would be taking over eligibility and enrollment,” Sheppard said. “They would be determining who was eligible and tell states who you need to cover. It would take eligibility control over the states.”

Sheppard added, “We communicated with them we didn’t like that.”

She said that the federal officials said they were open to ideas and recommendations from the states.

“There was some sense they were open to talking to us,” she said.

Several members of the working group said failure by Kansas to establish an exchange could jeopardize potential Medicaid reforms.