As a married couple, should we get separate health insurance plans or share a single one?

Both my wife and I have employers with health insurance plans that pay 100% premium for the employee but does not cover premiums for family (spouse or dependents). It seems financially cheaper to each sign up for our own individual plans and put our dependents on whichever one is cheaper, premium-wise. I've found that even on the family benefits plans, each person still has their own deductibles (it's not just one big pool). So I really don't see a financial reason to share the same insurance benefits. Is this financially feasible? Are there any catches I need to look out for? Does this impact income taxes (we file jointly)?

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@MD-Tech I reverted your edits, you actually introduced misspelled words and your edits add no value to my post. Please do not alter the wording of my post.

my spell checker is set to British English, sorry, see: oxforddictionaries.com/definition/english/dependant

Sounds like you need a new spell checker then, even in the UK both are now acceptable (read your link, for example).

It might be worth checking with your employer. At a job I had, they told us that if a spouse had access to an insurance plan, they had to use the other plan. We were not supposed to put them on our plan if it could be avoided. It seemed kinda sketchy to me, and not sure how common that is.

Don't just check the deductible. Also pay attention to out-of-pocket maximum. In my plan, the out-of-pocket max is a single pool for the whole family even thought the deductibles are separate. If any single person in your family uses a lot of healthcare, OOP max becomes very important. My family has a big healthcare user, and so we hit the max halfway through the year. The deductibles for the rest of us are irrelevant because we don't have to pay them. Any of us could go to the ER for free for the second half of the year if we wanted to.

3 Answers 3

It's very common for two income households to each have separate insurance - at least until you have children. That's because of exactly what you describe: the employer will often cover a higher amount of the employee's premium than other family members.

As far as for what you should watch out for:

• Two insurances might mean two insurers, might mean non-overlapping pools of doctors. Are you okay with this? For some that's a benefit, for some it's a detriment.
• Both of you will likely have to separately handle your medical bills - it will be harder for one to handle both (not impossible, but more work). Are both of you good at paying bills on time, and good at calling up insurers/hospitals/doctors when there's an issue?
• Are both insurance plans equally good? Sometimes it's worth choosing the family plan if one of you has a much better plan. My wife works at a hospital and didn't get their insurance even before we had kids, because it wasn't as flexible as mine, for example.

As far as taxes, no, it won't affect you there.

Not sure what you mean in point #2. Most of my physicians send bills separately for us anyway, even if we use the same doctor, because in their system we each have diff. account numbers. Am I misunderstanding your point? Thanks for your response.

@void.pointer If you're both on the same insurance, then it's usually easy for one spouse to deal with the problems - if you have one spouse who's very willing to do things like that and one who's not. Being on separate insurances can make that more difficult. (When you're both on one insurance, the person the insurance is under is often considered the responsible party for the payments, even if they're for the other spouse or children). It isn't a big deal - but if one of you really hates dealing with bills, it could be a consideration.

@Joe you can deal with the bills of your spouse regardless of what insurance arrangements you have in place.

I agree with your line of thinking.

Just FYI, if you're in the US, and if both of your plans are HSA compatible, the plan with the children added will allow you to contribute up to $6650/yr, and the single HSA plan will allow you to contribute up to $3350/yr. However, regardless of what those plans allow you to do, together you cannot contribute the sum of those amounts (10K) for a single tax year. The total max you both can contribute between the two of you is still $6650/yr minus whatever your employers contribute on your behalf.

1. The total limit in this case may possibly be $6700 instead of $6650. (It always annoyed me that the sum of two individuals could be $50 off from the family limit. This happens because when they adjust for inflation, they round to the nearest $50 in both cases, so some years there is a discrepancy.)
2. You actually can contribute more than the HSA limit, however the overage will not be tax deductible and you may have to pay an additional tax/penalty on the overage amount.

tl;dr - Plans frequently have differences in what is covered and how that can make an appreciable difference, but you need to do the math to decide.

For tax implications I would consult a tax adviser - usually medical premiums are deductible (it is unlikely this is worth it), but I do not know how it might affect state taxes where you live (if you have them).

Tenfour04 mentioned in the comments the bit about out of pocket maximum, but there are other similar considerations I thought I would mention.

Deductible Gotchas

Posted here for others, as well as a reminded for you to double check that there isn't a higher combined deductible, even though each person "has their own"

All the health insurance plans I have seen (WA state) have a per-person and per-family deductible. The per-family is usually some multiple of the per-person, the ones I have seen are either 2x or 3x. In the 2x case for a family of 3, you could wind up on the hook for at least a 3x difference (the 2x on the plan with kids and the 1x on the plan without). In general, if your family size is greater than the per-family deductible multiplier, you could wind up on the hook for extra in a split plan because of having to pay for one extra per-person deductible. You would need to math the difference (and of course factor in your personal health history as to if you think you will even hit the deductible).

Let's say you have two plans with a $250/$500 deductible and you use exactly the deductible. Unless your monthly premium is more than $20.83, you are out of pocket more.

If your family is unusually big, you become much more likely to hit the per-family deductible without hitting a per-person deductible for anyone, meaning that an extra plan just adds an extra deductible either way. There are other considerations, but this can be a noticeable one.

Note, the oop max usually follows a similar pattern (where there is a per-person and per-family that are related, and having more people makes hitting the limit much more likely).

Plan Differences

Plans are not all the same. In addition to the deductible and oop max, you could have major differences in the plans for what is covered and how much.

Plans can differ in what they cover (some places allow for more variation than others), so one plan may cover needed medical benefits while another may not. A perfect example would be if one plan covers mental health and the other does not. For example, if you need regular chiropractic adjustments or counseling sessions, and your plan does not cover those but your spouses do, joining your spouses plan will almost certainly save you money (again, math it out to be sure).

Another consideration is the copay, and what services receive a copay, and if the deductible is waved in the presence of a copay or not. If you mostly get care in the form of office visits, this can be a big factor. The copay amounts can be different (e.g. $10/visit vs $25/visit), but sometimes the copay means the deductible is ignored for that visit. This is very plan specific, but that could wind up making a significant difference one way or the other.

Finally the covered amount also can make a big difference. If one plan covers 90% and the other 60% after deductible, this could swing the decision pretty decisively, especially in the event of a hospitalization or chronic condition. If you are healthy and usually don't even meet your deductible, this is less of a concern.

Children Considerations

For a couple without children, or with only adult dependents, you can usually estimate your healthcare costs based on the previous years costs. In general, if you had back problems the year before you probably will, but if you didn't need to do more than the annual checkup, you likely won't need more than that again.

This changes drastically if you have small children. Children are wonderful in both their dedication to getting themselves killed, and their ability to contract every disease they have opportunity to. Just because a child did not use health benefits last year, does not mean they will not this year. While you should make your own assessments, I always assume that my children will use at least their full deductible.

Parting Thoughts

There are a few simple rules of thumb that can be helpful:

• If your family is you and your spouse, you do not plan to change that before the end of the plan year, and the plans are identical, then take the two plans
• If your family routinely hits the out-of-pocket max, take the cheaper plan

Otherwise, you have to do the math for each plan with your specific circumstances to decide which route is better.