Advocates hailed the approval, while one critic asserted that Pennsylvania will be the state offering the "stingiest" benefits.
But whether the Healthy PA program will roll out Jan. 1 as scheduled could depend on voters. Polls show Corbett facing a double-digit deficit in his bid for reelection. His Democratic challenger, Tom Wolf, has said he supports the traditional Medicaid expansion that 26 states and the District of Columbia have already approved.
Under the decision by the Department of Health and Human Services, Pennsylvania joins Arkansas and Iowa, which also received waivers to provide Medicaid expansion under ACA.
"From the beginning, I said we needed a plan that was created in Pennsylvania for Pennsylvania, a plan that would allow us to reform a financially unsustainable Medicaid program and increase access to health care for eligible individuals through the private market," Corbett said in a statement.
His administration revised the plan several times in a year, and at one point in the spring, the governor said he had reached a breaking point in the talks. His top negotiator on the issue hailed the final version.
"They gave us a level of flexibility in many areas," said the governor's secretary of planning and policy, Jen Branstetter.
Marilyn Tavenner, administrator of the Centers for Medicaid and Medicare, said the Obama administration was committed "to supporting state flexibility and working with states on innovative solutions that work within the confines of the law to expand Medicaid to low-income individuals."
Corbett, who was on vacation in South Carolina and unavailable for comment Thursday, initially rejected any form of Medicaid expansion under ACA, calling it too expensive in the long term.
But in September, eight months after Medicaid expansion took effect in other states, he said he would seek a federal waiver to provide health insurance through companies.
The original plan drew criticism for its work-search requirements, monthly premiums, and cuts to existing health services. Most of those provisions were later dropped or modified.
Under the plan, premiums for able-bodied individuals were approved for adults with incomes 100 percent above the poverty level (starting at $11,670).
The premiums cannot exceed 2 percent of a beneficiary's household income, will not be instituted until 2016, and will be implemented on a sliding scale according to income. Those who fail to pay the premiums could lose their coverage.
But the revised proposal offers an incentive of reduced premiums if a person engages in "healthy behaviors," such as getting an annual physical, and participates in job training or a work-search program.
The federal government is paying 100 percent of the cost for expanded Medicaid coverage nationwide in the first three years of the program, and no less than 90 percent after 2016.
Reaction from health-care providers and advocates for the poor was generally positive.
"On behalf of the state's hospital and health system community, we are extremely pleased that CMS approved the Healthy Pennsylvania waiver," said Andy Carter, president of the Hospital Association of Pennsylvania. "We now will have more avenues to help those most in need - low-income working Pennsylvanians and their families."
Community Legal Services in Philadelphia, which advocates for low-income people, welcomed the news.
"Many of our clients have gone without health coverage because they are too poor to qualify for subsidized insurance through the federally facilitated marketplace but they do not meet current Medicaid rules," the group said in a statement. "Today's agreement means that those clients will qualify for coverage for the first time."
Joan Alker, a health policy expert and executive director of the Georgetown University Center for Families and Children, said she was pleased that hundreds of thousands stood to receive coverage and that punitive measures were dropped. But she said the plan imposes rules that add layers of bureaucracy while potentially reducing coverage in some areas.
"The governor clearly compromised on many of his original goals and requests. On the other hand, the rules are complicated," said Alker, a critic of Corbett's proposal, adding that Pennsylvania would have "the stingiest benefit packages."
Republicans and Democrats duked it out over whether the agreement amounted to a concession to Obamacare.
Like other Democrats across Pennsylvania, State Sen. Vincent Hughes of Philadelphia said the Corbett administration unnecessarily delayed Medicaid expansion for more than a year.
And yet, he said, for all of the administration's talk, the result is the same: "They can bristle as much as they want - this is Medicaid expansion, full out. There are no work requirements, and none of the other provisions the administration was pushing a year ago. I guess Obamacare isn't that bad after all, is it?"
Hughes said parts of the administration's proposal were approved that he and other Democrats did not like, including the requirement that after the first year, certain Medicaid recipients pay monthly premiums equal to 2 percent of their annual income. Under Corbett's plan, those recipients could also be dropped from Medicaid rolls if they do not pay premiums for three months.
But, Hughes said, those provisions do not take effect until 2016 - and Democrats are banking on Wolf's defeating Corbett in November and helping them whittle those requirements.
Wolf issued a statement lambasting Corbett for delaying health coverage for so many uninsured people for a year but gave no indication of whether he would scrap the program if he became governor.
For more information on Healthy PA, visit http://wwww.healthypa.gov.
Inquirer staff writer Angela Couloumbis contributed to this article.