Medicaid and Your State's Line

For a person leaving employment to build something, Medicaid is the door most likely to be open and least likely to be checked. Corporate employees assume they earn too much, which is often true while employed and often false in the launch year, because Medicaid looks at your income now, not your history.

The map

Forty states plus Washington, D.C. have expanded Medicaid to cover nearly all adults. Ten have not: Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming. If you live in one of the ten, read this lesson anyway, because the trap is in here.

In expansion states, the line for a single adult is 138 percent of the poverty level, about $22,000 a year in 2026, with no premium in most states. For a household of two, the line sits near $29,900. Below those numbers, Medicaid is not a fallback: it is the best coverage available at the price, covering nearly everything, with tiny or zero cost sharing, and eligibility runs monthly on current income rather than annually on a projection.

What counts as income when your business is brand new

Medicaid uses the same family of income rules as the marketplace: modified adjusted gross income, counted by month for Medicaid. For a self-employed person, that means net profit after business expenses, not revenue. The month you invoice $6,000 and spend $5,000 on equipment and supplies counts as $1,000 of income. A business that earns nothing yet counts as zero, and a founder drawing down savings while the business ramps has savings that do not count at all: Medicaid has no asset test for this population. Wages count too, which matters for the part-time version of a launch year: if you are keeping some employment income while the business ramps, employment income and the Medicaid line interact the same way, and the dual-track guide walks that case.

The practical consequence for a launch year is big. The founder who quits in March, earns $9,000 net from the business by December, and has a working spouse under the income line is a Medicaid household for those months, at a premium of zero. Then the business works, income rises over the line, and the transition off Medicaid opens a marketplace special enrollment window automatically, so coverage does not gap. This movement between doors is normal and anticipated by the system, not a sign you did something wrong.

The ten-state gap

In the ten non-expansion states, the door is closed for most adults without children, and closed below remarkably high incomes for parents too. Georgia and Wisconsin are the partial exceptions: both cover adults up to 100 percent of the poverty line through Medicaid waivers, so nobody falls into the gap there, though marketplace subsidies still do not reach below 100 percent. What the other eight create is the coverage gap: an income too high for the state's Medicaid and too low for marketplace subsidies, because subsidies start at 100 percent of poverty on the assumption that everyone below is on Medicaid. An estimated 1.2 million people are standing in that gap nationwide, and if your state is on the list and your launch-year income will land under $15,650, you may be one of them, uninsured at any price the marketplace can offer.

There is one honest workaround inside the gap, and it is the same one Medicaid expansion states created for themselves: some gap-state residents find that a modest amount of additional documented net income brings them to 100 percent of poverty, where subsidized marketplace coverage begins at a required contribution around 2 percent of income. That is not a game I am suggesting you play with invented income. It is a reason to run your real numbers precisely, because at the bottom of the scale the difference between $14,000 and $16,000 of actual net income is the difference between no option and a $30 premium.

The interaction with everything else

Medicaid sits at the bottom of the income scale, so it interacts with the cliff lesson from "How Subsidies Work Now" in one direction only: if your estimated marketplace income collapses mid-year, report it, and the marketplace itself will route you to Medicaid if your state's line now catches you. What you cannot do is hold marketplace coverage with subsidies while Medicaid-eligible, which is why reporting income drops quickly matters both directions.

The doors are all priced now. What remains is the calendar, which is where good decisions go to die.