States may use Medicaid funds to purchase group health coverage such as employer-sponsored insurance or non-group coverage such as an exchange plan for Medicaid beneficiaries under state plan options known as premium assistance programs. Although states may not require individuals to enroll in premium assistance for individual coverage on the non-group market, they may require some individuals to enroll in premium assistance for group health coverage if the coverage is cost effective.
This fact sheet provides an overview of Sections 1905(a), 1906, and 1906A of the Social Security Act, the three state plan authorities that regulate state use of Medicaid funds to pay for private health insurance.
From: Federal Requirements and State Options: How states exercise flexibility under a Medicaid state plan