ALBANY, N.Y. (AP) — Federal auditors say New York improperly used as much as $150 million in grants to set up its insurance exchange under President Barack Obama's health care law and enroll people for coverage.

The Office of Inspector General for the Department of Health and Human Services says in the report provided to The Associated Press that the state used inflated population figures to claim funding, effectively saying every New Yorker would benefit from coverage through the exchange.

It's recommending requiring the state to return the money or work out the proper amounts with the Centers for Medicare and Medicaid Services. The state disputes the findings.

The auditors say the state vastly overstated the number of number of expected participants in the plan by using a formula that assumed the entire population of nearly 20 million would benefit.

[STORY BY: THE ASSOCIATED PRESS]