Lost Medicaid After a Raise? What Happens Next and How to Avoid a Coverage Gap

A raise that pushes you over the Medicaid limit does not have to mean a coverage gap or a huge premium. Depending on your state and household, you may keep Medicaid longer than you think (children stay covered for 12 months no matter what), move to a Marketplace plan that costs little or nothing at your income, or land in a state program built exactly for this transition. Here is the order to check things in before you panic or drop coverage.

First: confirm you are actually over the limit

• Medicaid counts gross monthly income, but MAGI allows pre-tax deductions: 401(k)/403(b) contributions, traditional IRA, HSA contributions and student loan interest all reduce countable income. A $200/month 401(k) contribution can put a borderline raise back under the limit, while also saving for retirement.
• The 5% disregard: states subtract 5% of the poverty level before comparing, so the real cutoff is higher than the published one.
• Household math: a raise is measured against your household-size limit. A new baby, a parent moving in as your dependent, or a spouse's job loss changes the denominator.
• Run the numbers in the eligibility calculator before assuming you are out.

Who keeps coverage even over the limit

• Children: 12 months continuous eligibility in every state. Since 2024, a child who was eligible at enrollment or renewal stays covered for a full year regardless of income changes. Your raise ends your coverage, not theirs.
• Pregnant members keep coverage through pregnancy and the postpartum period (12 months in most states) regardless of income changes after enrollment.
• Transitional Medical Assistance (TMA): in many states, parents who lose Medicaid because of increased earnings get 6–12 extra months of coverage automatically. Ask specifically about TMA when you report the raise.
• Workers with disabilities: most states have a Medicaid buy-in program letting disabled workers earn well above normal limits (often 250% FPL, higher in some states) and pay a small premium to keep Medicaid.

Report the raise, do not hide it

You must report income changes, usually within 10 days. Not reporting risks an overpayment claim and makes things messy at renewal. Reporting also starts the protections above: TMA only triggers when the state knows the reason you went over is earnings. Coverage does not stop the day you report; the state sends a notice with an end date, typically the end of the following month.

The Marketplace handoff: cheaper than people expect

Losing Medicaid opens a 60-day special enrollment period on HealthCare.gov (or your state exchange), and you can enroll before your Medicaid end date so there is no gap.

• Between 100% and 150% of FPL, most people qualify for a benchmark silver plan for $0/month premium after subsidies, with strong cost-sharing reductions.
• From 150% to 250% FPL, premiums are modest and silver plans still carry reduced deductibles.
• Subsidies are based on your annual income estimate, so a mid-year raise averages against the lower months you already earned.

Pick a silver plan if your income is under 250% FPL; the cost-sharing reductions only attach to silver.

Special cases worth knowing

• Employer insurance offer: if your new pay comes with an insurance offer that is "affordable" under IRS rules (employee-only premium below roughly 9% of household income), you lose Marketplace subsidies for yourself. Compare the employer plan against a full-price Marketplace plan before declining either.
• Overtime and bonuses: if the raise is temporary or fluctuating (seasonal overtime), tell the agency; states can average fluctuating income, and a one-time bonus counts only in the month received for MAGI monthly budgeting.
• Non-expansion states: in Texas, Florida and the other eight, parents lose Medicaid at very low income; the Marketplace with subsidies starts at 100% FPL, so most working parents land there with $0–$50 premiums.
• Medicare Savings Programs: if you are 65+ or on Medicare and a raise ends full Medicaid, you may still fit QMB/SLMB/QI, which have higher limits. See MSP limits.

Timeline: what happens when

What to do next

1. Recalculate countable income after pre-tax deductions; consider raising your 401(k) contribution if you are barely over.
2. Report the change and ask two questions by name: "Do I qualify for Transitional Medical Assistance?" and "Are my children still covered under continuous eligibility?"
3. The week your termination notice arrives, create a HealthCare.gov application; the special enrollment window is 60 days but plans start on the 1st, so timing matters.
4. Choose silver if under 250% FPL, and re-report to the Marketplace if your income changes again.

Frequently asked questions