Should you and your spouse have separate health insurance plans?

Spouses tend to be covered by the same health insurance policy. But that’s not always possible, and it’s not always the most meaningful option. This article will explain the rules that apply to spousal coverage and the questions you should ask before deciding whether you and your spouse should (or can) buy the same health insurance policy.

Exposure at your own expense

Families need to consider the total out-of-pocket costs of any health plan or programs they have or are considering. The Affordable Care Act (ACA) places a cap on total out-of-pocket costs (in-network treatment for essential health benefits), which the Department of Health and Human Services adjusts annually for inflation.

In 2022, out-of-pocket expenses are capped at $8,700 for individuals and $17,400 for households. (These restrictions do not apply to grandfather or grandfather health plans).

However, the family out-of-pocket limit applies only to all family members covered under a single policy. If the family is divided into multiple plans—including employer-sponsored coverage or individual market coverage—the family out-of-pocket limit applies separately to each policy.

Therefore, if a family chooses to enroll one spouse in one plan and the other spouse and the couple’s children in a separate plan, each with its own out-of-pocket limit, the total risk may be higher than if the entire family in a plan.

Note that Original Medicare does not have any caps on out-of-pocket costs, this has not changed with the Affordable Care Act; Original Medicare enrollees need supplemental coverage—a Medigap plan, a Medicare Advantage plan, or coverage from a current or former employer—to limit out-of-pocket costs.

healthcare needs

If one spouse is in good health and the other has a serious medical condition, the best financial decision may be to have two separate policies.

A healthy spouse may choose a lower cost plan with a more restrictive provider network and higher out-of-pocket costs, while a spouse with a medical condition may want a plan with a broader provider network and/or or lower cost plans out of pocket.

This is not always the case, especially if one spouse has access to a high-quality employer-sponsored plan that will cover both of them at reasonable premiums. But on a case-by-case basis, some families find it wise to choose separate plans based on specific medical needs.

Impact on Health Savings Accounts

If you have a health savings account (HSA) or are interested in having one, you need to understand the implications of having a separate health insurance plan.

If you have “home” coverage under an HSA-eligible high-deductible health plan (HDHP), you can contribute up to $7,300 to your health savings account in 2022. Family coverage means that at least two family members are covered (ie, any coverage other than “self-pay” coverage under HDHP). If you have an HSA-eligible plan and you are the only covered member, your HSA contribution limit for 2022 is $3,650.

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It’s important to understand that while HDHPs can provide home coverage, HSAs cannot co-own. So even if your entire household is using one HDHP and the household contributions are equal to one HSA, it will be owned by only one household member. If you and your spouse want to have their own HSA, you can each create one and divide the total household contributions between the two accounts (note that while the HSA is not jointly owned, you can withdraw funds to pay you medical expenses), spouse or dependents, as if you were paying for medical expenses yourself).

If one of you has an HSA-eligible plan (no other household members in the plan) and the other has a non-HSA-eligible health insurance plan, your HSA contributions will be limited to the out-of-pocket amount.

Employer Sponsored Health Insurance

About half of Americans get health insurance from an employer-sponsored plan — by far the largest single type of coverage. If both spouses work for an employer that provides coverage, they can each create their own plan.

If the employer provides coverage for the spouse, the couple can decide whether it is necessary to create their own plan or add one of the spouses to the other employer-sponsored plan. However, here are a few things to keep in mind when you decide on the best course of action:

No spousal insurance required

Employers are not required to provide insurance for spouses. The Affordable Care Act requires large employers (50 or more workers) to provide coverage for their full-time employees and their dependent children. Employers are not required to provide insurance for employees’ spouses.

That said, most employers that offer coverage do allow spouses to join the plan. Some employers only offer spousal coverage if the spouse cannot get their own employer-sponsored plan.

family breakdown

Under the ACA, insurance offered by large employers to their full-time employees must be considered affordable or the employer could face financial penalties. But affordability is determined based on the cost of employee premiums, Regardless of the cost of adding a dependent or spouse to the plan.

This is known as a family breakdown, and has resulted in some families facing substantial costs to enroll families in employer-sponsored programs, but also not eligible for subsidies in the exchange.

Employers often bear the cost

But many employers Do Pay for most of the cost of adding family members, even if they don’t need to. In 2021, the average total premium for home insurance under an employer-sponsored plan is $22,221, with employers paying an average of 73% of the total.

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But the amount employers pay varies widely depending on the size of the organization; smaller companies are less likely to pay most of the premium to add dependents and spouses to an employee’s coverage.

Spouse surcharge

Some employers add a surcharge to the spouse’s premium if the spouse has the option to insure at their own workplace. In 2020, about 13% of employers charged an additional surcharge on top of regular premiums if an employee’s spouse had the option to get coverage from their own employer, but declined, opting instead to be covered by their spouse’s plan.

If your employer does, then you need to factor in the total cost when you calculate the numbers to see whether to have both spouses on the same plan or have each spouse use their own employer-sponsored plan.

These are the questions you will want to address with your Human Resources department during your initial health plan enrollment and during your annual open enrollment period. The more you know about your employer’s position on spousal insurance (and your spouse’s employer’s position), the better equipped you will be to make that decision.

personal health insurance

If you buy your own health insurance through a health insurance exchange (also known as a health insurance marketplace) or outside of an exchange, you are in what is known as a personal market (sometimes called a personal/household market). You can choose to put both spouses in one plan or choose two different plans.

Even if you sign up for an exchange with premium subsidies, you can choose a separate plan. To be eligible for the subsidy, married enrollees must file a joint tax return, but they don’t have to be enrolled in the same health insurance plan. The exchange will calculate your total subsidy amount based on your household income and apply it to the policy you choose.

If you have a policy that covers your family, you will check the subsidy on your tax return and the total subsidy amount you will receive will be the same amount you would have received if you were enrolled in a plan with you (the amount you pay, however, the premium will be different, as the total pre-subsidized cost of the two plans may differ from the total pre-subsidized cost of having both spouses in one plan).

You can also choose to have one spouse get the exchange program and the other spouse get the exchange program. This may be something to consider, for example, if a spouse is receiving medical care from an in-network provider only with an off-site operator.

But keep in mind that there are no subsidies outside of the exchange, so spouses with an out-of-exchange plan will pay full price.

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While spouses with exchange coverage are still eligible for subsidies based on total household income and family size, the total subsidy amount may be significantly lower than that of both spouses through an exchange. Here’s an article that explains how this works.

If one spouse has access to an affordable employer-sponsored plan and the other spouse is eligible for the plan but chooses to purchase an individual market plan, there is no premium subsidy available to offset the cost of the individual plan.

That’s because people with affordable employer-sponsored coverage aren’t eligible for subsidies, and affordability determinations are based solely on the cost of employee coverage — no matter how much it costs to add a family member.

How ACA subsidies change with family size

government sponsored health insurance

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

  • One spouse is over 65 and eligible for Medicare, while the other is still under 65. Even if both spouses are eligible for Medicare, all Medicare coverage is individual, not family. Each spouse will have separate coverage under Medicare, and each spouse will have their own policy if they want supplemental coverage (either through a Medicare Advantage plan that replaces Original Medicare, or supplements Original Medicare through Medigap and Medicare Part D) .
  • One spouse has a disability and is eligible for Medicaid or Medicare, while the other is not eligible for these programs.
  • Pregnant people may be eligible for Medicaid or CHIP (guidelines vary by state), while their spouses are not.

While one spouse is eligible for government-sponsored health insurance, the other spouse can continue to have private health insurance. This situation may change over time.

For example, a pregnant person may no longer be eligible for Medicaid or CHIP after the baby is born, and may need to return to a private health insurance plan at this point.

generalize

There are many reasons a spouse might have separate health insurance. This may be due to employer-provided coverage, eligibility for government-run programs such as Medicaid or Medicare, or simply personal preference.

VigorTip words

There is no one-size-fits-all approach to whether spouses should be in the same health insurance plan. In some cases, they don’t have access to the same plan, and in other cases, it’s advantageous for them to have separate plans for various reasons.

If you and your spouse are considering your health insurance options, you may find it helpful to speak with a health insurance broker or a human resources representative at your job to determine which method is best for your needs.