Can you have commercial insurance and Medicaid at the same time, especially if you’re a small business owner or self-employed? It’s a question that trips up many—and for good reason. The overlap between public healthcare programs and private or commercial insurance policies can be complex, especially when your business requires general liability, commercial auto, or workers’ comp alongside Medicaid health coverage. 

In this article, we’ll unpack how the two can legally coexist, how Coordination of Benefits (COB) works behind the scenes, and what coverage gaps to watch for. Old Harbor Insurance Services helps business owners navigate this space with clarity—and without compromise.

Medicaid & Commercial Insurance: A Quick Primer

Before diving into how Medicaid and commercial insurance can work together, it’s important to understand what each actually covers—and why they exist in separate lanes.

What Is Medicaid?

Medicaid is a government-funded health insurance program designed for individuals and families with limited income or resources. It covers personal medical needs like doctor visits, hospital stays, prescriptions, and preventive care. Eligibility is based on income, household size, and—in many states—assets.

What Is Commercial Insurance?

Commercial insurance refers to policies purchased from private insurers to protect businesses from risk. This can include:

  • General liability insurance (for third-party injury or property damage)
  • Commercial auto insurance (for business vehicle use)
  • Workers’ compensation (for employee injuries)
  • Professional liability (for service-based errors or omissions)

Some commercial plans also include group health insurance, but these are separate from Medicaid and generally offered by employers.

Different Tools for Different Needs

  • Medicaid protects you as an individual from healthcare costs.
  • Commercial insurance protects your business from financial liability and legal exposure.

They serve different functions, and in many cases, it’s not just possible—but necessary—to have both. Understanding where they overlap and where they don’t is key to building complete protection.

Legal Basis: Coordination of Benefits (COB)

When someone is covered by more than one insurance plan, the rules that determine which policy pays first are known as Coordination of Benefits (COB). This framework becomes especially important when Medicaid is involved.

What Is Third-Party Liability (TPL)?

Medicaid operates under a third-party liability (TPL) rule, meaning it is always the payer of last resort. If you have any other insurance—whether through an employer, private plan, or commercial policy—those sources must pay claims first. Medicaid only steps in to cover costs not paid by the primary insurer.

Why This Matters for Commercial Insurance

If you’re a business owner or contractor who holds commercial insurance (like auto or general liability) and you’re personally enrolled in Medicaid, you’re still in compliance—as long as those policies are properly disclosed. In healthcare situations, Medicaid won’t duplicate coverage. It waits to see what your other plan covers and only fills the gap if needed.

Federal COB Requirements

Under federal law, commercial insurers are legally obligated to pay claims before Medicaid when applicable. This ensures Medicaid funds are preserved for those who need them most, without penalizing individuals for holding separate or supplemental coverage.

Bottom line: holding commercial insurance doesn’t disqualify you from Medicaid—it just changes the order in which claims are paid.

Real-Life Use Cases: When Medicaid and Commercial Insurance Work Together

The idea of holding both Medicaid and commercial insurance might seem contradictory—but in the real world, many business owners and self-employed professionals do exactly that. Here’s how it plays out across different scenarios.

Small Business Owner with Medicaid

A bakery owner qualifies for Medicaid based on household income. She also carries commercial auto insurance for her delivery van and general liability insurance to protect her storefront. Her Medicaid covers personal doctor visits, while her business policies protect her assets and operations. There’s no conflict—just smart layering.

Independent Contractor with Medicaid

A handyman who works part-time and earns under the Medicaid threshold carries commercial general liability to meet client requirements and protect against job-site injuries. He also has commercial auto on his work truck. Medicaid continues to cover his health needs without issue, since the commercial policies apply strictly to his business activity.

Licensed Health Technician

A part-time massage therapist qualifies for Medicaid and also holds professional liability coverage for her practice. She rents space in a wellness studio but relies on Medicaid for personal healthcare. Both types of insurance serve different needs—and both are essential to her well-being and business continuity.

These examples show that Medicaid and commercial coverage can coexist when structured properly.

State-Specific Differences & California Focus

While Medicaid is a federal program, each state sets its own rules around eligibility, benefits, and how it coordinates with other insurance—especially commercial policies. Understanding your state’s approach is key to managing both your business and your healthcare coverage.

Medicaid Expansion vs. Non-Expansion States

Under the Affordable Care Act, states had the option to expand Medicaid to cover more low-income adults.

  • Expansion states (like California, New York, and Oregon) allow more people to qualify based on income alone.
  • Non-expansion states (such as Texas and Florida) maintain stricter eligibility tied to categories like disability, pregnancy, or caregiving.

If you’re in an expansion state, it’s generally easier to qualify for Medicaid even while running a small business.

California’s Medicaid (Medi-Cal) Rules

California’s version of Medicaid—Medi-Cal—has expanded eligibility and simplified asset tests in recent years.

  • Income-based eligibility is more flexible, especially for part-time earners and sole proprietors.
  • Coordination of Benefits (COB) follows federal guidelines: commercial insurers must pay first.
  • Asset limits were eliminated for most non-long-term-care beneficiaries, making it easier to maintain coverage even with modest business assets.

If you’re a California business owner with commercial policies in place, Medi-Cal can still be a reliable safety net for personal healthcare—without risking compliance or coverage conflicts.

Coverage Gaps to Watch

While it’s possible—and often smart—to carry both Medicaid and commercial insurance, it’s crucial to understand what each policy does not cover. Overlooking these gaps can leave you exposed in both your personal and professional life.

What Business Insurance Doesn’t Cover

Commercial policies are built to protect your operations, not your personal health.

  • General liability covers third-party claims, not your medical bills.
  • Commercial auto protects the vehicle and third-party damage, but not your own healthcare costs after an accident.
  • Professional liability covers errors in service, not personal medical emergencies.

So even if you hold comprehensive business insurance, you still need personal health coverage like Medicaid for your doctor visits, prescriptions, or hospital stays.

What Medicaid Doesn’t Cover

Medicaid is strictly for personal medical care. It won’t help with:

  • Property damage caused by your business
  • Lawsuits or liability claims against your company
  • Work-related injuries, which must be covered by workers’ compensation

Essential Commercial Policies to Add

To stay protected, you may need:

  • Workers’ compensation (if you have employees)
  • Commercial auto insurance (for business-related driving)
  • General or professional liability (depending on your industry)

Knowing where Medicaid stops and commercial insurance begins helps ensure nothing important slips through the cracks.

The Smart Way to Stay Covered: How Old Harbor Bridges the Gap

Managing your health and your business at the same time is no small feat—especially when your coverage needs span both public programs like Medicaid and private commercial insurance. That’s where Old Harbor comes in.

We don’t just sell policies—we help you structure protection that works on both sides of the equation.

What Old Harbor Does Differently

  • Clarifies what Medicaid covers vs what your business actually needs—so there’s no overlap or blind spots
  • Designs tailored commercial insurance plans that protect your assets, team, and operations without jeopardizing your personal benefits
  • Navigates compliance across state lines, including California’s COB rules and Medicaid asset guidelines
  • Explains policy language in plain terms, so you fully understand what’s covered, what’s not, and what you still need

Whether you’re a solo contractor, a small business owner, or someone who qualifies for Medicaid but needs to protect your growing side hustle, Old Harbor helps you align everything—compliantly and cost-effectively.

We work across top-rated insurers to find the best fit for your unique situation, without upselling or shortcuts. With Old Harbor, you don’t have to choose between your health and your business—you can protect both.

Final Word: Health and Business Can Work Together

Balancing Medicaid with commercial insurance isn’t just possible—it’s practical, as long as you understand what each covers and where they diverge. Whether you’re protecting your health, your assets, or your livelihood, having the right combination of policies is essential to staying secure and compliant. Medicaid won’t block you from insuring your business, and your business coverage won’t replace your personal healthcare. If you need help navigating this intersection, Old Harbor is here to guide you. Reach out today for a customized quote and get a plan that protects everything that matters.