Can I use my Medicaid money to buy a private health plan?

Q. I applied for insurance on my state’s marketplace and was told that because I’m eligible for Medicaid I can’t get financial help to buy private insurance. Is this allowed? I’d rather take the Medicaid money and use it to buy a private plan.

A. Sorry, you can’t unless you live in Arkansas or Iowa. Here’s why.

The new health care law gives states the option of expanding Medicaid, the venerable public health insurance program, for certain low-income groups (families with young kids, the disabled, people in long-term care facilities) to automatically cover anyone with an income of less than 133 percent of the federal poverty level. That’s $15,282 for a single person, $20,628 for a couple, and $31,321 for a family of four. Twenty-five states plus the District of Columbia have expanded Medicaid in this way.

But there’s a catch. In these states, if your household income puts you within Medicaid eligibility range, you’re disqualified from receiving a tax credit to lower the cost of purchasing private insurance through the Health Insurance Marketplace. If you don’t want Medicaid (and we think you should take it if you’re eligible), you’ll have to pay full price for a private plan.

Except in Iowa and Arkansas. They applied for and were granted special federal permission to use their Medicaid money (the federal government is footing 100 percent of the bill for the first three years, and 90 percent thereafter) to enroll beneficiaries in the same private health plans sold to higher-income people through the state marketplaces.

The only difference is that people in the Medicaid income range must enroll in a Silver plan and if they don’t, they’ll be automatically assigned to one. In Arkansas the plans are free. In Iowa beneficiaries can get premium-free coverage if they complete a “health risk assessment” and get a checkup. Out-of-pocket costs are minimal.

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We are blogging regularly about the new health care law, which took full effect on Jan. 1, 2014. (Read the previous posts in the series.) To get health insurance advice tailored to your situation, use our Health Law Helper, below.