Money Saving Health Insurance Tips for Spouses

Save Money – Switch to Your Spouse’s Health Insurance. dra_schwartz/iStockphoto

Switching to your spouse's health insurance or a partner's health plan may save you money. If you and your spouse or partner are both eligible for employee health benefits, check out each company's health insurance options during open enrollment to see which may cost you less. Employers differ considerably in terms of the contributions they make towards total premiums, and you may be able to save money by switching to your spouse's family coverage.

At your company's open enrollment time, look at the various plan options your employer offers. You may be able to save money by choosing a different plan, such as an HMO that requires you to choose a primary care doctor to coordinate your care. In some areas of the country, the local physicians may be in all or most of the health plan networks and you may not have to be concerned about changing doctors.

Take Advantage of Open Enrollment

Many large companies offer a variety of health plans. During your company's open enrollment period, you may change your coverage from one health plan to a different plan (your medical history does not play a role in your eligibility to switch plans). Depending on the plan choice that your employer offers, you may be able to make other choices, such as increasing or decreasing the amount of your annual deductible. You also can sign up for health coverage if you hadn't previously enrolled, or drop your coverage.

Most companies hold their open enrollment periods (usually lasting one month) in the fall of each year to allow for changes in health benefits on January 1 of the coming year. Some companies have their open enrollment periods at other times and you can expect to receive sufficient notice in advance.

Once your company's open enrollment period ends and you have made your choices for the coming year, your health coverage is locked in until the next yearly enrollment period. Unless you have some type of qualifying event, you will not be able to modify your health coverage for a full year.

If you are considering switching to your spouse's health insurance or vice versa, make sure that the open enrollment periods for both employers have some overlap. You'll be able to disenroll from one plan during its open enrollment, and enroll in the other plan during its open enrollment, but you could end up with a gap in coverage if the two employers don't have open enrollment at the same time.

Most employers run open enrollment in the fall, with coverage changes effective January 1. But it's important to understand that if one employer holds open enrollment in the middle of the year (with a new plan year that starts August 1, for example), and the other holds open enrollment in the fall with a plan year that follows the calendar year, you might be uninsured for a few months during the transition. If you're in good health, you can sign up for a short-term plan to cover your during the gap, but if the gap is three months or longer, you'd be on the hook for the ACA's individual mandate penalty.

Qualifying Events

A qualifying event allows you to change your job-based health insurance coverage anytime during the year. What qualifies as an "event" is determined by federal regulations and includes:

  • Marriage
  • Birth or adoption of a child
  • Divorce or legal separation
  • Death of your spouse or one of your dependents
  • Involuntary loss of coverage

During the special enrollment period triggered by a qualifying event, you can join your spouse's insurance or vice versa. Note, however, that the scenario described above (when spouses' employers have mid-matched open enrollment periods and plan year start dates) does not trigger a special enrollment period.

If you drop your coverage during your open enrollment period, and your spouse has a later open enrollment period, your loss of coverage doesn't count as a qualifying event, since it was a voluntary—rather than involuntary—loss of coverage.

Additionally, if you have a managed care plan (such as a PPO or HMO) and use a provider network, you may be able to change health plans if you move to a different community and are no longer in the network service area of your old plan.

Deciding Which Job-Based Plan Will Provide the Best Value

Although it may take you some time, run the numbers to see if it makes sense for all members of your family to stay on the same health plan. You may be able to save money by having separate health coverage for some members of the family. For example:

Don and Barbara
Don S., age 46, and his wife Barbara S., age 44, both have the option for health insurance through their employers. They have family coverage through Don, which includes coverage for their two children, ages 10 and 14. Don is overweight and has type 2 diabetes, high cholesterol, and high blood pressure; he uses a lot of health care services. Barbara and the children are in excellent health and have only needed routine checkups in the past several years.

Because of Don's health problems, they have a low deductible family health plan that has very high premiums. The family may be able to save money by having Don keep the low deductible plan through his employer and have Barbara choose a higher deductible family plan for herself and the children through her employer.

But this won't always be the best choice, because it depends in large part on how much of the premium each employer is willing to cover. According to a Kaiser Family Foundation analysis, the average employer that offers health benefits pays about 70 percent of total family premiums. But some employers only contribute to the premiums for their employees, and not for family members who are added to the plan. So in order to determine whether your family should be covered under one plan or utilize both, you'd need to know how much you're going to have to contribute in premiums under each option.

Maria and Jorge
Maria G., age 32, and her husband Jorge G., age 33, both work fulltime and each has health insurance provided by their employers. Both companies have an open enrollment period from mid-October through mid-November.

In September, Maria gave birth to a baby boy, a qualifying event that allowed them to add the baby, Jorge, Jr. to one of their health insurance plans. However, adding a dependent to either plan changes the insurance coverage from employee-only to either family coverage or employee-plus-child coverage (depending on the premium classifications that the employer uses), which significantly increases the monthly premiums.

Faced with an increase of more than $250 each month from either employer, the couple looked at their options. One option is to wait until open enrollment and put all members of the family in one health plan from one employer - this may end up saving them money, particularly if Maria's employer already bumped her coverage up to "family" premiums with the addition of Jorge, Jr.—if that's the case, adding Jorge, Sr. wouldn't increase the premiums (the premiums would increase, however, if Maria's premium is currently set at employee-plus-children, since adding Jorge, Sr. would boost the premiums to the higher family level).

Another option is to purchase an individual market policy for the baby. Depending on how much the employers charge to add dependents, it may end up being less expensive to buy a separate policy for the baby. This is unlikely to be the case if a family has more than one child, however, since large employer-sponsored plans typically charge the same price for one child or multiple children, whereas individual market plans will charge a separate premium for each child in a family, up to a maximum of three (beyond three children in one family under the age of 21, there is no additional premium in the individual market).

Understand the Family Glitch

If you're considering an individual market plan for one or more family members, in addition to coverage from an employer for one or more other family members, be aware that access to the employer-sponsored plan will affect the other family members' eligibility for premium subsidies in the individual market.

For people who buy individual market coverage, premium subsidies are available in the ACA exchange in each state, depending on income. But even if your family income makes you eligible for a subsidy, your access to an employer-sponsored plan plays a role too. If a minimum value employer-sponsored plan is available to your family and the cost to cover just the employee is considered affordable (not more than 9.56 percent of total household income in 2018), any other family members who are eligible to be added to the employer-sponsored plan (regardless of how much it would cost in premiums to add them to the plan) are not eligible for premium subsidies in the exchange. This is called the family glitch, and it's important to keep in mind when you're crunching numbers to see if some family members might be better off with individual market coverage instead of employer-sponsored coverage.

Surcharges for Spouses

Under the Affordable Care Act, large employers are required to offer coverage to their full-time employees and those employees' dependents. But they are not required to offer coverage to employees' spouses. Most employers have continued to offer coverage to employees' spouses, but some have determined that spouses are ineligible to enroll in they have coverage available through their own employers, and some firms now add a surcharge if employees' spouses choose to be added to their spouses' plans when they also have the option of signing up with their own employers' plans.

To further complicate matters, 10 percent of employers that offer health insurance benefits provide additional compensation to their employees if they decline the employer-sponsored plan and instead choose to enroll in their spouse's plan. So some employers are taking active steps to reduce the number of spouses who enroll in their plans, while some employers are taking active steps to encourage their own employees to sign up for their spouse's coverage rather than their own employer-sponsored plan.

So for example, consider Bob and Sue, who are married and each has employer-sponsored coverage available from their own employer. Both employers also use spousal surcharges when the spouse has his or her own employer-sponsored insurance option available. If Bob decides to join Sue on her employer's health plan, her employer will add on a surcharge—in addition to the premium—because Bob could instead choose to be on his own employer's plan.

It might still make the most sense to add your spouse to your employer's plan when you factor in all of the variables, but you'll want to understand whether or not your employer has a spousal surcharge for spouses who decline their own employer-sponsored plan and enroll in the spouse's plan instead.

Special Consideration If You Have an HDHP

If you or your spouse has an option for an HSA-qualified high deductible health plan (HDHP) at work, you'll need to be aware of the ramifications of having just one family member on the plan versus more than one. 

If just one family member has coverage under the HDHP, the amount you can contribute to the HSA is lower than it would be if two or more family members had coverage under the HDHP. But on the other hand, the deductible on an HDHP is typically twice a high if you have family coverage (versus coverage for just one person), and the whole family deductible has to be met before any family members become eligible for post-deductible benefits (with the caveat that no single family member can be required to incur more in out-of-pocket costs for the year than the individual out-of-pocket limit established by the federal government for that year; for 2018, it's $7,350).

So if you have or are considering HDHP coverage and contributions to an HSA, you'll want to keep these factors in mind when you decide whether the whole family should be on one plan, or on separate plans. 

Sources:

Cornell Law School, Legal Information Institute. 29 CFR 2590.701-6 - Special enrollment periods.

Internal Revenue Service. Revenue Procedure 2017-36.

K aiser Family Foundation. Employer Health Benefits 2016 Summary of Findings. September

Kaiser Family Foundation. Employer Health Benefits 2017 Summary of Findings. September 2017.

Society for Human Resource Management. 2017 versus 2018 HSA Contribution Limits. May 2017.

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