Indiana won't expand its high-risk insurance pool for people with pre-existing medical conditions, instead allowing the federal government to establish such coverage in the state, Gov. Mitch Daniels said Friday.

Daniels sent a letter to U.S. Health and Human Services Secretary Kathleen Sebelius saying the costs and requirements for Indiana because of the expanded coverage are unknown and federal funding for the project will run out before the program ends in 2014.

"The risks Indiana is being asked to take are well beyond any range of acceptability," Daniels wrote. Expanding Indiana's existing high-risk program, he wrote, could expose state taxpayers to "an open-ended and potentially enormous new burden."

The new federal health care law offers subsidized premiums to people with some pre-existing conditions. Sebelius gave states a Friday deadline to say whether they'd participate. A federal backup program will serve residents of states not participating in the expansion.

The expanded high-risk pool will be temporary and last only until 2014, when denial of coverage for medical reasons will be illegal and new insurance markets will offer taxpayer- subsidized coverage for millions of people.

David Roos, director of the public health insurance advocacy group Covering Kids & Families of Indiana, said Daniels' decision effectively will create two government options, one federal and one state, for people with existing conditions who aren't able to get private coverage.

"I think the governor is being prudent," Roos said.

However, federal coverage will be available only to people uninsured for at least six months. People now on Indiana's program who opt to switch to the federal program would have to go without insurance for six months.

Premiums for the federal coverage, due to take effect June 21, haven't been set.

Indiana is one of 34 states offering its own high-risk pool, the Indiana Comprehensive Health Insurance Association. It covers about 7,000 people who either have or have received treatment for cancer, hemophilia, AIDS and certain other conditions. The monthly premium for the highest-deductible plan is $562, and $763 for the lowest-deductible one, according to Kaiser State Health Facts, a project of the Henry J. Kaiser Family Foundation.

Indiana is among at least 18 states suing to overturn the health care overhaul. Daniels contends it will lead to higher taxes, higher health care costs and a weaker economy.