:max_bytes(150000):strip_icc()/GettyImages-591954317-48f02e22fa434aba881c0473ceee114e.jpg)
Erin Gobler is personal finance coach and a writer with over decade of experience. She specializes in writing about investing, cryptocurrency, stocks, and more. Her work has been published on major financial websites including Bankrate, Fox Business, Credit Karma, The Simple Dollar, and more.
Updated on May 9, 2024 Reviewed byKhadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder.
Fact checked byJane is a freelance editor for The Balance with more than 30 years of experience editing and writing about personal finance and other financial and economic subjects.
In This Article In This Article
Medicaid and private health insurance provide coverage for millions of people, and it’s common for the average person to have one insurance or the other. However, it’s possible to have both Medicaid and private insurance.
Learn how having Medicaid and private health insurance works, what coordination of benefits entails, and how it can benefit you—as well as the potential downsides.
Generally, you can buy private insurance through your employer (if your employer offers it), directly from an insurer, or via online marketplaces. For Medicaid, states generally must cover individuals with low incomes, children and pregnant women who meet certain requirements, and those eligible for Supplemental Social Security Income—although the exact requirements may differ slightly from state to state.
If you purchase your health insurance through the Health Insurance Marketplace, then the marketplace will determine whether you qualify for Medicaid based on your application information. If it turns out you do qualify, the Marketplace will send the relevant information to your state, and your state will contact you.
In some cases, you can have both Medicaid and private health insurance, as long as you meet your state’s income requirements to qualify for Medicaid. Having both types of insurance might make your medical care significantly more affordable. Additionally, your child can still be covered by Medicaid if you have private insurance. That said, there may be some downsides to using both.
If you have both Medicaid and private insurance, it’s important to understand how they interact. This interaction is known as the coordination of benefits (COB).
In most cases, when you have Medicaid as well as another health insurance coverage, Medicaid serves as last-resort supplemental coverage—often known as “wrap-around” coverage. This means your other health insurance plan is required to pay for covered expenses first. It’s only after your other plan has kicked in that Medicaid will cover what’s left.
Carrying both Medicaid and private insurance can drastically reduce your out-of-pocket costs, especially if your private insurance plan has a high deductible or pays for only a small percentage of your care.
Let’s say you get a hospital bill for $5,000 and you have a coinsurance of 20% on your private insurance plan. As a result, your plan will cover 80% of your hospital bill, which amounts to $1,000. Under normal circumstances, you would be on the hook for the remaining $1,000.
But if you have Medicaid as supplemental coverage, it would pay for the remaining balance, minus any coinsurance or copay you have. So if your Medicaid coverage requires a copayment of $50, you would pay that amount while Medicaid covers the other $950.
If you’re eligible for Medicaid, you’re no longer eligible for any premium tax credits on Obamacare coverage. As a result, rather than Medicaid saving you money, it could actually increase your premiums if you continue to carry the plan you bought from the Marketplace.
There could also be a disadvantage even if your private insurance plan isn’t a Marketplace plan, but is provided by your employer. If you choose to keep Medicaid and your employer insurance, maintaining your employer-sponsored coverage likely means continuing to pay substantial costs for premiums.
The average employee with an employer-sponsored insurance plan paid $6,575 per year in premiums in 2023 for a family plan and $1,401 for individual coverage, according to KFF’s Employer Health Benefits Survey. Healthcare costs can be even higher for those who don’t have coverage through their employer and must purchase a plan directly through a private insurer.
Considering that Medicaid eligibility is dependent on having a low income, the yearly premiums for private health insurance could make up a significant amount of your budget. If you feel like your Medicaid coverage is as good as or better than your private plan, it may not be worth it to keep your private insurance.
To decide whether it’s worth it to maintain both coverages, run the numbers to see what your total out-of-pocket cost would be for only Medicaid versus Medicaid with your private insurance. Pay special attention to what your state’s Medicaid covers since it could be worth it to keep your private insurance if your state’s Medicaid doesn't provide all the coverage you need.
To help you decide, let’s back up a bit and go over some basic information about Medicaid and private health insurance.
Medicaid and private insurance are two of the most popular types of health insurance coverage for American families.
Medicaid is a government-funded health insurance program that works as a partnership between the federal and state governments. This program is designed for individuals with low income, children, elderly adults, pregnant women, and those with disabilities.
Roughly 76 million people are enrolled in Medicaid.
Medicaid was created in 1965. Each state operates its own Medicaid program and can have different program guidelines, features, and requirements. The exact services covered under Medicaid may differ depending on the state, but services that all states are required to cover include (but aren’t limited to):
The federal government allows states to require you to pay for some of your Medicaid costs in the form of copayments, deductibles, and coinsurance. However, cost-sharing isn’t allowed for emergency services, family planning services, or children’s preventive care. States must cover 100% of those services.
Private health insurance includes any health insurance plan that’s offered by a private insurer and isn’t funded by the government. Many Americans receive their private insurance through an employer-sponsored group plan, while others purchase their coverage directly through a private insurer or the Health Insurance Marketplace.
How private insurance works may look a bit different depending on whether or not it’s an employer-sponsored plan. When companies offer insurance plans, they often give their employees a select list of plans to choose from. They may also cover a certain portion of their employees’ premiums. But if you buy health insurance outside of an employer-sponsored plan, you’re usually responsible for your entire premium, unless you buy a Health Insurance Marketplace plan and are eligible for federal premium tax credits.
Because private insurance isn’t a government-run program, plans may look different from one insurer to the next. That said, there are 10 essential health benefits all private insurance plans must cover (not including short-term insurance), as required by the Affordable Care Act:
Like Medicaid, private insurance usually requires you to share the cost of your care in the form of premiums, copayments, deductibles, and coinsurance.
Whether Medicaid or private insurance is better depends on your situation. In most cases, Medicaid is a better option because it is typically more comprehensive and more affordable than private insurance.
Yes, you can maintain your employer-sponsored insurance plan as your primary coverage while also qualifying for Medicaid, which would pay for, generally speaking, any qualifying expense that your primary plan doesn’t cover.
