WASHINGTON - According to public health officials, a loophole in President Obama's children's health insurance program cost the government more than $250 million in tobacco revenue in its first year, the Associated Press reports.

The loophole allowed companies to avoid large tax increases on loose rolling tobacco by relabeling their product as pipe tobacco. The result was a tax of $2.83 per pound, rather than $24.78 per pound that is assessed on rolling tobacco.

The technicality prompted tobacco companies to beef up production of pipe tobacco to record levels and decrease production of roll-your-own tobacco.

The loophole was identified last November though it was unclear at the time whether the production shift was short-term or represented a long-term trend.

The trend has not slowed. In March, tobacco firms produced more than 2 million pounds of pipe tobacco, a record month for an industry that produced roughly 270,000 pounds a month prior to the tax change.

While the Obama administration said last year that it would release new rules for distinguishing between roll-your-own tobacco and pipe tobacco, it has yet to do so.

"We're still studying, from a technical standpoint, how to distinguish between the two products," said Arthur Resnick, a spokesman for the Alcohol and Tobacco Tax and Trade Bureau.

The Obama administration said the only distinction between pipe tobacco currently produced and roll-your-own tobacco is in product labeling.

The Pipe Tobacco Council (PTC) said that it supports regulations distinguishing between traditional pipe tobacco and roll-your-own tobacco, which the organization maintains is being mislabeled.

"It's not really a loophole. It's fraud," said PTC spokesperson Norman Sharp.