The Senate approved legislation Thursday to save about $2.1 million next year by providing health care to fewer pregnant women and children.
The state estimates about 1,200 children and 120 women could lose state-paid health care under the bill because it would put tighter limits on how much money a family can make and still qualify for Denali KidCare.
Senate Republicans argued the current income limits - 200 percent of the federal poverty level - are too generous.
Republican Sen. Lyda Green of Wasilla said families making that much money should be encouraged to buy their own insurance.
Democrats countered that private health insurance is too expensive for many families and provides limited coverage.
Sen. Hollis French, an Anchorage Democrat, said without the state program, children won't get medical care until they're sicker, and they'll have to got to the emergency room, where costs will be four to five times higher.
Denali KidCare provides health care for children and pregnant women in families that make too much money to receive traditional welfare, but generally don't have health insurance through their jobs.
Currently, a family of four making up to $45,996 a year can qualify for the program. Under Senate Bill 105, a family of four could only make $40,260 a year. Alaska Permanent Fund dividends are not included in the income limits, and there is no "asset test," meaning the value of a family's property and savings are not factored in.
The bill goes beyond Republican Gov. Frank Murkowski's proposal to freeze income limits at current dollar levels, so they would not rise with inflation. Murkowski also proposed freezing the income level at which Alaskans can qualify for nursing home care or similar home-based services at $19,872 a year. The Senate did not change that part of the bill.