Thursday's 23-12 vote to send the measure to the House marks a key milestone for Otter's bill.
The governor maintains it will result in an online insurance marketplace for individuals and small businesses that's less expensive and friendlier to Idaho insurers and agents than Washington, D.C.'s alternative.
Republican Sen. John Tippets of Montpelier said he's among those who fiercely oppose President Obama's 2010 insurance overhaul.
But since an insurance exchange - state or federal - is a certainty come 2014, Tippets argued Idaho is better off if it's in control, not the federal government.
Foes and supporters alike argued a "No" vote was a vote for Idaho's sovereignty.
Earlier in the day, the Senate defeated a bid to amend Otter's measure to establish a state-based insurance exchange.
Thursday's 24-11 vote against changing the bill came after charged allegations that a state or federal exchange could violate people's religious freedom by forcing them to pay for abortion drugs.
Republican Sen. Sheryl Nuxoll of Grangeville raised that concern, contending insurance offered through an exchange would require coverage for morning-after style contraceptives that she believes also could be used to induce abortions.
Sen. Dean Cameron of Rupert, another Republican, urged the Senate not to start the process of modifying the bill.
Though Cameron said he appreciated Nuxoll's "heart" on the issue, he said Idaho already passed laws prohibiting insurance offered through an exchange from covering procedures to terminate a pregnancy.