Officials of the state's health insurance exchange were rebuked by lawmakers and community groups Tuesday over the way they awarded $4 million in federal grants to organizations to get the word out about the new marketplace.

Some 30 groups were named last month as recipients of the grants out of hundreds of applicants. But members of the MNsure Legislative Oversight Committee questioned why organizations that have long served minorities and hard-to-reach communities were overlooked while others, including an insurance broker arrested after pointing a shotgun at a Wisconsin deputy during a traffic stop, were selected.

Brian Beutner, the chairman of the MNsure board, acknowledged problems with the selection process for the grants, which still are under review.

"We may not have done as good a job as we could," Beutner said, adding that the issue will be addressed at Wednesday's scheduled board meeting.

Beutner pledged to find additional money for a second wave of grants that would expand the number of recipients, but tamped down expectations.

"At the end of this, there will still be gaps," he said.

MNsure,the state's new health insurance marketplace, launches Oct. 1 for open enrollment. In addition to making it easier for individuals and small-business owners to comparison-shop among health plans, a key aim is to help the more than 490,000 uninsured Minnesotans sign up for affordable coverage.

The grants, which range from $2,000 to $500,000, are part of a larger $20 million outreach effort that includes a $9 million marketing campaign, a recently opened call center and a certification process for hundreds of "navigators."

The navigators will work at libraries, community centers, health clinics and brokerage firms to help people sign up for insurance through the MNsure website.

Sen. Jeff Hayden, DFL-Minneapolis, railed against Beutner and MNsure Executive Director April Todd-Malmlov, who told him there were no African-American staff members involved in the selection process.

Hayden counted more than 10 groups with experience working in the African-American community that were left off the list, which he called a "huge oversight" and "missed opportunity" that is the result of a "systemic problem."

"You blew it," he told Todd-Malmlov. "You just flat out didn't get it right."

Members of groups such as the church-based coalition ISAIAH, the Stairstep Foundation, the Minneapolis Urban League, the Somali Community Services Coalition and TakeAction Minnesota filled the hearing room of the State Office Building, waiting more than two hours to explain their frustrations before the 10-member legislative committee.

Alfred Babington-Johnson, CEO and founder of Stairstep Foundation, said he came before the group "with a certain measure of sadness and frustration."

His organization has long been involved in African-American health issues, and received a $90,000 grant from the state this year for its work using a network of churches to help curb diabetes.

Babington-Johnson chided MNsure for passing over his own organization as well as groups that specialize in mental health concerns and nonprofits that work with Somali immigrants. He evoked the civil rights struggle, even singing, "Hold on, keep your eyes on the prize."

The prize, he said, was the "bright, shining goal" of having better and more affordable health insurance in Minnesota and eliminating health disparities.

Scott Gray, CEO of the Minneapolis Urban League, said his group "wants to see MNsure be successful."

The organization's roots go back 87 years and "should not be turned back in a process like this," Gray said. "We think we have the capacity to do the work."

Todd-Malmlov said the recipients, whose applications are not yet public, were selected based on scoring criteria and that it was important to include some with geographic reach beyond the Twin Cities.

Sen. Michelle Benson, R-Ham Lake, singled out several recipients, including a pro-MNsure small-business group and a coalition just a few days old, saying their selection gave "the appearance of impropriety."

Rep. Dianne Loeffler, DFL-Minneapolis, shared concerns that deep community resources weren't represented.

"I hope it wasn't a reward for good grant writing," she said.