HHS Secretary Kathleen Sebelius (AP Photo/Charles Dharapak)

PROVIDENCE, R.I. (AP) — The federal government has given initial approval to the insurance exchange Rhode Island is creating as part of the national health care overhaul.

The U.S. Department of Health and Human Services (HHS) said Thursday Rhode Island has made “significant progress” setting up the online insurance marketplace and granted conditional approval to operate it. HHS Secretary Kathleen Sebelius says the state’s on track to begin open enrollment in 10 months.

The state last week submitted a detailed progress report on its plans for the exchange. It’s designed to connect businesses and individuals with health insurances providers.

Rhode Island is using $64 million in federal funds to create the exchange, which is part of the Patient Protection and Affordable Care Act (PPACA).

Exchange organizers reported at a meeting in November that they already had picked a technology vendor and were preparing to seek bids for the operator of an exchange contact center.

Beginning Jan. 1, 2014, most people will be required to obtain health coverage through an employer, an exchange or the traditional individual insurance market or pay a penalty.