House Speaker Davy Carter, a supporter of the private option, said representatives would take up the bill again Wednesday and each day of the session after that until it passes. Carter said he's not willing to negotiate further changes to the program.
"I would ask what the plan is for these small minority of members who want to hold everything up," Carter, R-Cabot, told reporters after the vote.
Arkansas was the first state given federal approval to use Medicaid funds to purchase private insurance for the newly eligible under the health law. More than 87,000 people in Arkansas have been enrolled in the program, and several other states are pursuing or exploring similar plans.
Supporters of the law urged colleagues to not drop the program less than a year after its adoption, saying it's already proven to be a success.
"Let's see if this experiment we voted to try works," said Rep. John Burris, R-Harrison, who helped craft the compromise expansion law last year.
A chief opponent of the law, however, said the vote would give the state a chance to show its opposition to the law that Republicans have regularly derided as "Obamacare." Republicans, who control the Legislature, have made major gains in the state over the past two elections by running against the president's healthcare law.
"Is Arkansas going to be an enabler for Obamacare and the Washington, D.C. interests who seek to impose their will upon us?" House Majority Leader Bruce Westerman, R-Hot Springs, said before the vote. "Or, are we going to hold the line on behalf of the people of Arkansas in opposition to this dreadful law?"
The legislation failed in the House even as its prospects improved in the state Senate.
Sen. Jane English, who had voted against the private option last year, announced that she would support the program's funding in exchange for changes to the state's workforce training program. Senate leaders say English's backing gives them the 27 votes they need to pass the bill in the 35-member Senate.
English R-North Little Rock, announced her support after negotiating a deal with Gov. Mike Beebe and state officials to overhaul the state's workforce training program. Beebe said the changes will help make the program more coordinated and performance-based.
"Instead of having more and more and more people on low income and poverty programs to find a way to get those people off those programs so we don't need the private option and we don't need those food stamps," English said.
The proposal failed in the House despite changes proposed to the private option law that are intended to win over opponents of the program. They include a prohibition on the state spending any public funds on promotion or outreach for the private option, as well as the insurance marketplace created under the federal overhaul.
Rep. Nate Bell, who had proposed the amendments, said he remains opposed to the private option as a policy but didn't see the need to spur a budget showdown over the vote.
"Just blocking a bill doesn't pass anything," Bell, R-Mena, said before voting for the funding measure. "Without a realistic plan from anybody to pass an alternative, we'll be sitting here 45 days from now pushing buttons and wasting the people's money and listening to rhetoric that doesn't convince anybody."