With Multiple Health Insurance Options, Which One Should You Choose?

There's no right answer - it depends on your situation and the coverage offers

When you've got multiple options for your health insurance coverage, the decision can be tricky
If you've got options for health insurance coverage from more than one source, there are several things to keep in mind when deciding. Anthony Bradshaw/Creative RM/Getty Images

For some people, the decisions about where to obtain their health insurance are relatively straightforward. If you work for an employer who provides great coverage at a low cost for your whole family, the choice to enroll in your employer's plan is probably an easy one.

Similarly, if you and your spouse are both self-employed and don't have access to employer-sponsored insurance, the decision to seek out coverage in the individual market is pretty much a given—although you'll have to decide whether you should shop in the exchange or off-exchange.

But for a lot of people, the options aren't that cut and dried. Maybe you've got access to an employer-sponsored plan, but the cost to add your family is prohibitive. Or maybe you have the option to add your kids to your employer-sponsored plan, but not your spouse. Or maybe you and your spouse each have access to your own employer-sponsored plans—should you each enroll in your own coverage, or should you add the whole family to one spouse's employer-sponsored plan?

Although there's no one-size-fits-all answer, there are several things to keep in mind when you're figuring out which coverage you should choose:

The Cost of Employer-Sponsored Insurance

The Affordable Care Act requires all employers with 50 or more full-time equivalent employees to offer health insurance to all employees who work at least 30 hours per week. But there are some caveats:

  • The coverage has to be considered affordable under the ACA's guidelines, but only for the employee; there's no requirement that the cost of covering a spouse or kids be affordable.
  • Employers are required to offer coverage (but not pay for it) for their employees' kids, but they are not required to offer coverage for employees' spouses.

The result of all this is that the cost of employer-sponsored health insurance can vary tremendously from one employer to another. Some employers are still very generous with their benefits, as they know it remains a way to attract and retain high-quality workers.

These employers might cover the lion's share of the premiums for their employees as well as their employees' families. Since employer-sponsored health insurance premiums are generally paid pre-tax for both the employer and the employee (with no asset tests or income limits), this is an excellent benefit for employees who have access to it.

But some employers only offer the bare minimum in order to stay in compliance with the ACA's employer mandate. In these cases, the employer likely pays a significant portion of the employees' premiums, but does not offer coverage at all for spouses, and does not pay any portion of the premium for employees' kids. 

And there are of course plenty of employers that fall somewhere in the middle of this spectrum. But over the next couple of years, according to a survey by Towers Watson, more than half of employers are planning to "significantly" reduce the amount that they contribute to premiums for their employees' children and spouses. 

If the cost of adding your spouse and kids to your employer's insurance plan seems overly burdensome, or if you aren't happy with the coverage that your employer is offering, it makes sense to consider other offers.

Understand the Family Glitch

The first thing to keep in mind is that premium subsidies in the exchange are not available to anyone who has access to an employer-sponsored plan that is considered affordable for the employee, regardless of how much it would cost to add family members to the plan. This is referred to as the family glitch, and it can make health insurance unaffordable for some families.

So if your employer pays for your coverage but not for the rest of your family's coverage (but the coverage is technically available for your family members), the rest of your family cannot get subsidies in the exchange. If they opt to buy individual coverage instead of being added to the employer-sponsored plan, they'll have to pay full price for it.

Employer-Sponsored Insurance for Spouses

The ACA requires large employers to offer coverage to full-time employees and their kids, but not to employees' spouses. So employers are within their rights to either refuse to offer coverage to spouses altogether, to require that spouses pay full price for their coverage, or to tack on an additional surcharge for employees' spouses who have access to coverage through their own employers, but choose to be added to a spouse's employer-sponsored plan instead. 

That said, a lot of employers do still offer relatively generous benefits for employees' spouses.

If your employer offers coverage for spouses but requires that all or most of the premium be deducted from your paycheck, you'll want to compare the cost and coverage of the employer-sponsored plan with the cost and coverage of a plan available in the individual market. And if applicable, you'll also want to compare the cost and coverage with the health plan available through your spouse's employer.

Assuming that the employer-sponsored plan is considered affordable, the family glitch applies (for an employer-sponsored plan to be considered affordable in 2016, it can't cost more than 9.66 percent of household income for just the employee's portion of the premium—not counting the cost to add a spouse or kids). In that case, your spouse isn't eligible for premium subsidies in the exchange, regardless of how much it would cost to add your spouse to your employer-sponsored plan.

But you may still find that there's an individual market plan—on or off-exchange—that's less expensive than the coverage your employer offers to your spouse. You'll want to pay attention to the coverage details and to things like the provider network and the drug formularies (covered drug lists) of the plans you're considering.

In some circumstances, it's worth it to pay more for better coverage—only you can make that call though, and the choice that's right for you might not be the choice that's right for your co-worker.

When Your Employer Doesn't Offer Coverage for Spouses

If your employer simply doesn't offer coverage for spouses at all, your spouse can get coverage in the exchange, with subsidies if the applicant's household income is subsidy-eligible. The family glitch doesn't apply in this case, since the spouse has no access to the employer-sponsored plan.

Some experts believe that employers will eventually stop offering coverage for spouses altogether, regardless of whether the spouse has coverage available through their own employer. While this would no doubt be stressful for some families, it would ease the burden for families that are currently caught by the family glitch, since it would make those spouses newly-eligible for subsidies in the exchange (as opposed to their current rock-and-a-hard-place choices of unaffordable employer-sponsored insurance or unaffordable individual market insurance). 

Surcharge When Spouse Has Another Option

By 2018, according to Towers Watson, 61 percent of employers anticipate adding surcharges to cover employees' spouses when the spouses have alternate coverage available through their own employers.

If your employer offers coverage for spouses but has a surcharge for spouses who have access to alternative coverage from their own employers, you'll have to crunch the numbers to see what makes the most sense for your household.

If the coverage offered by one spouse's plan is significantly better than the other's, it might make sense to put both spouses on the better plan, even if it costs more in premiums and has a surcharge for the spouse who has alternate coverage available. Then again, if both spouses are healthy and anticipate little upcoming need for healthcare, the less expensive option might be the most attractive.

Family Out-of-Pocket Limits

If you're considering splitting your family onto multiple plans, it's important to understand how family out-of-pocket limits work. In 2016, all non-grandfathered health plans must have maximum out-of-pocket limits of no more than $6,850 for an individual, and $13,700 for a family (with individual out-of-pocket limits embedded on all family plans). For 2017, these upper limits on out-of-pocket costs will increase to $7,150 and $14,300.

But the family out-of-pocket limit only applies to family members covered under a single policy. If your spouse decides to enroll in a separate policy—either through their own employer, or in the individual market—the additional plan will have its own separate out-of-pocket exposure. This is the case even if there's no alternative other than having family members on separate policies, as would be the case when employers don't offer coverage for spouses at all.

As an example, consider a family of four with three people on one employer-sponsored plan, and one family member on a separate plan purchased through the exchange. In a worst-case scenario where all four members of the family need significant medical care in the same year, the family could potentially be on the hook for up to $21,450 in out-of-pocket costs in 2017, assuming they have plans with the highest-possible out-of-pocket exposure ($14,300 for the three family members on one plan, and $7,150 for the spouse on a separate plan).

While rare, this sort of circumstance is something to keep in mind if you're considering separate policies for some family members.


Department of Health and Human Services, PPACA Benefit and Payment Parameters for 2017. Accessed 5/21/16.

Internal Revenue Service, Employer Shared Responsibility Provisions. Accessed 5/21/16.

Internal Revenue Service, Revenue Procedure 2014-62. Accessed 5/21/16.

Willis Towers Watson, Employer Survey: Employer-Sponsored Health Insurance, March 5, 2015. Accessed 5/21/16.

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