Pence re-submitted former Gov. Mitch Daniels' request earlier this year that HIP be used for an expansion of Medicaid and has spent the past month touting the program.
"I believe that securing the waiver to continue the Healthy Indiana Plan is a victory for Hoosiers enrolled in this innovative program," Pence said.
As part of the federal approval, the state will cut in half the income cap for eligibility from 200 percent of the federal poverty level to 100 percent. For a single adult, that means the new limit is earning $11,500 a year. Residents earning up to $22,300 already enrolled in the program will have to seek private insurance.
The move will allow the state to add a few thousand more residents to the program but is not expected to put a significant dent in the roughly 50,000 residents on the waiting list to enroll.
The Republican governor has lined up big stakes in the perceived success of the HealthyIndiana Plan, spending the better part of the last two weeks talking up the state-run plan in national appearances. He called the program a better alternative to the federal health care law in the Republican weekly radio address and has done spots on MSNBC and Fox News recently pumping the plan.
Pence and legislative leaders had originally sought to use HIP to cover more than 400,000 uninsured residents under the expansion. But Pence's health care advisers lowered their sights following a June meeting with federal officials.
A formal sign-off on the one-year extension has been expected for a few months. Family and Social Services Administration Secretary Debra Minott told lawmakers in June that the state had adopted an approach of securing the extension before negotiating any expansion.
But House Minority Leader Scott Pelath, D-Michigan City, called the decision a "failure" by Pence and his team.
"This news is being presented as some sort of success. It's no success, and it's an embarrassment," he said.
Democrats and supporters of an expansion, including the Indiana Hospital Association, have argued the state would lose out on billions of dollars in federal aid. But Republicans have said the cost to the state could outweigh the benefits of accepting federal aid for an expansion.