Should You and Your Spouse Have Separate Health Insurance Plans?

In some case, it may be better or necessary to have separate plans

Spouses may want to be on the same plan, or they may not. There's no one-size-fits-all answer
Does being married include sharing a health insurance plan? Maybe, but maybe not. joeyful/Creative RF/Getty Images

Spouses tend to be covered on the same health insurance policy. But that's not always possible, nor is it always the option that makes the most sense. Let's take a look at the rules that apply to spousal coverage, and the questions you should ask before deciding whether or not you and your spouse should—or can—be on the same health insurance policy.

Out-of-Pocket Exposure

Families need to consider the total out-of-pocket exposure of whatever health plan or plans they have or are considering.

The Affordable Care Act (which is likely to be repealed in 2017, but with the repeal implementation pushed out a few years) limits total out-of-pocket costs to no more than $14,300 for a family in 2017, and prevents any single member of the family from paying more in out-of-pocket costs (for in-network services) than $7,150. But the family out-of-pocket limit applies to a single policy that covers members of the family.

If the family is split up onto multiple plans—including employer-sponsored insurance, individual market coverage, or Medicare—the family out-of-pocket limits apply separately for each policy. So if a family opts to have one spouse on one plan and the other spouse on a separate plan with the couple's children, each plan will have its own out-of-pocket limit, and the total exposure could be higher than it would be if the whole family were on one plan.

Healthcare Needs

If one spouse is healthy and the other has significant medical conditions, the best financial decision might be for them to have two separate policies.

The healthy spouse might choose a lower-cost plan with a more restrictive provider network and higher out-of-pocket exposure, while the spouse with medical conditions might want a higher-cost plan that has a more extensive provider network and lower out-of-pocket costs.

This won't always be the case, particularly if one spouse has access to a high-qualty employer-sponsored plan that will cover them both with a reasonable premium.

But depending on the circumstances, some families find that it's prudent to pick separate plans based on specific medical needs.

Implications for Health Savings Accounts

If you have a Health Savings Account (HSA) or are interested in having one, you'll want to be aware of the implications of having separate health insurance plans.

You can contribute up to $6,750 to an HSA in 2017 if you have "family" coverage under an HSA-qualified high deductible health plan. Family coverage means at least two members of the family are covered under the plan.

If you have an HSA-qualified plan under which you're the only insured member, your HSA contribution limit in 2017 is $3,400. You and your spouse can each have separate HSAs and separate HSA-qualified high deductible health plans. But if one of you has an HSA-qualified plan (with no additional family members on the plan) and the other has a health insurance plan that isn't HSA-qualified, your HSA contribution will be limited to $3,400 in 2017.

Employer-Sponsored Health Insurance

Nearly half of all Americans get their health insurance from an employer-sponsored plan—by far the largest single type of coverage. If both spouses work for employers that offer coverage, they can each be on their own plan.

If the employers offer coverage to spouses, the couple can decide whether it makes sense to have their own plans, or add one spouse to the other's employer-sponsored plan.

There are several things to keep in mind when you're deciding the best course of action:

  • Employers are not required to offer coverage to spouses. The Affordable Care Act requires large employers (50 or more workers) to offer coverage to their full-time employees, and requires them to also offer coverage to those employees' dependent children. But there's no requirement that employers offer coverage to employees' spouses.
  • That said, the majority of employers that offer coverage do allow spouses to enroll in the plan. Some employers offer spousal coverage only if the spouse does not have access to their own employer-sponsored plan.
  • Under the ACA, the coverage large employers offer to their full-time employees must be considered affordable, or else the employer faces the possibility of financial penalties. But the affordability determination is based on the cost of the employee's premium, regardless of the cost to add dependents or a spouse to the plan. This is known as the family glitch, and results in some families facing significant costs to add the family to the employer-sponsored plan, but also being ineligible for subsidies in the exchange.
  • But many employers do pay the lion's share of the cost to add family members, even though they're not required to do so. In 2016, the average total premiums for family coverage under employer-sponsored plans was $18,142. Of that amount, employers paid an average of $12,865, or nearly 71 percent. But this varies considerably depending on the size of the organization; smaller firms are much less likely to pay a significant portion of the premium to add dependents and spouses to their employees' coverage.
  • Some employers add on surcharges to the premiums they charge for spouses if the spouse has an option for coverage at their own workplace. If your employer does this, the total cost will need to be taken into consideration when you crunch the numbers to see whether it's better to have both spouses on the same plan, or have each spouse use their own employer-sponsored plan.
  • Conversely, about 10 percent of employers provide additional compensation to their employees who enroll in a spouse's plan rather than enrolling in the employee's own employer-sponsored plan. These are questions you'll want to address with your human resources department during your initial enrollment period and your annual open enrollment period. The more you understand about your employer's position on spousal coverage (and your spouse's employer's position), the better-equipped you'll be to make a decision.

Individual Health Insurance

If you buy your own health insurance, either through the exchange or off-exchange, you're in what's known as the individual market. You have the option of putting both spouses on one plan, or selecting two different plans.

You can pick separate plans even if you're enrolling in the exchange with premium subsidies To qualify for subsidies, married enrollees must file a joint tax return, but they don't have to be on the same health insurance plan. The exchange will calculate your total subsidy amount based on your household income and apply it to the policies you select. You'll reconcile the subsidies on your tax return the same way your would if you had one policy covering your family, and the total subsidy amount you receive will be the same as it would if you were together on one plan (the amount you pay in premiums will be different, however, since the total pre-subsidy cost for the two plans will likely be different from the total pre-subsidy cost to have both spouses on one plan).

You can also choose to have one spouse get an on-exchange plan and the other an off-exchange plan. This might be something to consider if, for example, one spouse is receiving medical treatment from providers who are only in-network with off-exchange carriers. But keep in mind that there are no subsidies available outside the exchange, so the spouse with an off-exchange plan will pay full price for the coverage. And while the spouse with exchange coverage is still eligible for subsidies based on the total household income and the number of people in the household, the total subsidy amount could be considerably lower (here are examples to show how this works).

If one spouse has access to an affordable employer-sponsored plan and the other spouse is eligible to be added to that plan but chooses to buy an individual market plan instead, no premium subsidies are available to offset the cost of the individual plan, since subsidies aren't available to people who have access to affordable employer-sponsored coverage.

Government-Sponsored Health Insurance

In some cases, one spouse might be eligible for government-sponsored health insurance, while the other is not. Some examples include:

  • One spouse turns 65 and becomes eligible for Medicare, while the other is still younger than 65. Even once both spouses are eligible for Medicare, all Medicare coverage is individual, rather than family. Each spouse will have separate coverage under Medicare, and if they want supplemental coverage (either via a  Medicare Advantage plan that replaces Original Medicare, or Medigap and Medicare Part D to supplement Original Medicare), each spouse will have their own policies.
  • One spouse is disabled and qualifies for Medicaid or Medicare, while the other is able-bodied.
  • A pregnant woman may qualify for Medicaid or CHIP (guidelines vary by state), while her spouse does not.

When one spouse is eligible for government-sponsored health insurance, the other can continue to have private health insurance. This sort of situation might change over time. For example, a pregnant woman might no longer qualify for Medicaid or CHIP after the baby is born, and may need to return to a private health insurance plan at that point.

There's no one-size-fits-all in terms of whether spouses should be on the same health insurance plan. In some cases, they don't have access to the same plans, and in other cases, it's advantageous for them to have separate plans, for a variety of reasons.

Sources:

Internal Revenue Service, Publication 969, Health Savings Accounts.

Kaiser Family Foundation, Average Annual Workplace Family Health Premiums Rise Modest 3% to $18,142 in 2016; More Workers Enroll in High-Deductible Plans With Savings Option Over Past Two Years.

Kaiser Family Foundation, Employer Health Benefits, 2016 Summary of Findings.

Kaiser Family Foundation, Health Insurance Coverage of the Total Population.

Medicaid.gov. Medicaid and CHIP Eligibility Levels.

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