Allison has led the Medicaid program through adoption of the private-option health insurance program, which the Legislature created to accommodate President Barack Obama's Medicaid expansion plan.
The state Medicaid director of Health Care Innovation, Dawn Zekis, will step in as interim director.
DHS Director John Selig says the agency will conduct a nationwide search to replace Allison.
Selig praised Allison's expertise in getting the private option successfully launched.
More than 155,000 people have applied for coverage under the plan.
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