It’s the most wonderful time of the year… health care open enrollment is upon us!
Ok, ok, so picking a health insurance plan isn’t super exciting stuff. Fair enough. But, we all know that health insurance is important, and picking a plan is a critical step to protect our finances (and, of course, our health) in the coming year.
For couples, though, making decisions about health insurance is much more complicated. Should your family have one health insurance policy for both of you, or separate policies? Before you drop your health insurance plan and add yourself to your spouse’s, let’s discuss a list of things to consider to determine the right steps for your family.
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Your Goal: Get the Best Benefits for the Lowest Cost
At a high level, this doesn’t seem all that complicated. You want the best health insurance policy you can get at the lowest overall cost.
If your spouse’s company offers much better health insurance than yours, you may want to drop your coverage and get added to your spouse’s plan. On the other hand, if the coverage of each of your policies is similar, but yours is less expensive, this might be a reason for your spouse to join your policy.
Sometimes, the quality and cost between your plans will be negligible. It probably isn’t worth the time or effort in these cases to make a change.
But Unfortunately, It’s Not That Simple
When evaluating the cost of a policy, there are a lot of other factors to consider rather than just the premium amount. You need to sit down with your spouse and really dig into each policy to figure out which one is going to give your family the best benefits at the lowest cost.
There are many factors to review:
Your Expected Medical Expenses
Consider your overall level of health. Are you the type of person who hasn’t needed to see the doctor in years? Or, are you regularly working with specialists on a particular health issue?
Take stock of how often you usually have sick visits to the doctor, whether you are working with any specialists, and any prescriptions that you take.
You want to compare coverage of the services that you know you’ll be using under all of your available health insurance plans. If you have no underlying medical conditions, a High Deductible Health Plan (HDHP) with minimal coverage and low premiums might be a great fit for you. But, if you make frequent doctor’s visits, you may find that a more comprehensive policy is a much cheaper option for you than a HDHP, even if the monthly premiums are more expensive. This analysis should be one of the primary factors to consider when choosing between your health insurance plans.
Make Sure You’re Protected in an Emergency
Beyond your expected medical expenses, make sure that you know how much you’ll need to pay in the event of an emergency. Comprehensive plans often cover most of the cost of emergency care. Under a HDHP, you’ll likely pay for 100% of the medical cost up to a specified dollar amount.
Review both of your insurance policies to understand how they handle emergency treatment prior to deciding. While it probably won’t be the basis for your decision, it’s critical to know what’s covered and what’s not.
Understand How Much You’re Expected to Pay When You Visit the Doctor
Different health insurance plans will expect you contribute different amounts toward your health care. While reviewing your options, you should identify the deductible, copayments, coinsurance, and maximum out of pocket expense for each policy.
- The deductible of your policy refers to how much you’ll need to pay for your health care before the insurance company starts to “kick in” money. For example, if you have a $1,300 deductible on your policy, you are responsible for paying for the first $1,300 in healthcare expenses this year. When reviewing healthcare plans, a higher deductible means that you’ll have to pay more for health care before insurance starts to cover your medical expenses.
- Copayments, or “copays”, are flat-fee dollar amounts that you’ll need to pay when you see a doctor or get a prescription (after you hit the deductible). For example, a sick visit to your doctor might cost you a $20 copay per visit.
- Coinsurance is another way of calculating your required payment for medical care after you hit your deductible. Rather than paying a flat fee (like the $20 copay example), instead you pay a fixed percentage of your care. So, a visit to the doctor’s office might cost you 10% of the total visit under a coinsurance model. Note that under most insurance plans, you’ll have to pay a copay or coinsurance- not both.
- Finally, health insurance policies have a maximum out of pocket expense. This is the total maximum amount you’ll have to pay for your health care this year. Once you pay this amount, your insurance company will cover 100% of the remaining cost of care for the rest of the year.
When you review the health insurance options available to you and your spouse, you should review each of these terms in detail when estimating the total cost of the insurance, and choose the option that’s best for you.
Compare Premium Costs
Finally, you should compare the cost of your premiums for the insurance options you have available. In particular, you should answer the following questions:
- Do either of your employers pay a portion of your health insurance premium? If so, you’ll lose this benefit if you decide to not use this insurance policy.
- If either of your policies make you eligible to have an Health Savings Account (HSA), does your employer make contributions to your HSA? If they do, giving up that policy is giving away free money. It still might make sense to do this if the other policy has better benefits, but it is certainly a factor you’ll want to consider. We’ll talk more about HSAs in a minute.
- How do your premiums change when you add a spouse to your policy? In other words, is there a cost difference between a) having both of you on your insurance, b) having both of you on your spouse’s insurance, or c) having separate insurance plans?
Review Coverage Provisions
Picking a health insurance policy for your family needs to be about more than just picking the lowest cost policy. You’ll also want to review the coverage levels that each insurance offers. Specifically, consider:
In-Network vs Out-of-Network Providers
Many health insurance plans have a list of doctors and specialists within their network. If you go a doctor within your health insurance’s network, it will cost you less (via copay or coinsurance) than it would if the doctor is outside of your network.
The implication here: if you drop your insurance coverage and get added to your spouse’s, you may need to switch doctors if your current doctor isn’t in your new health insurance’s network. Or at the very least, it might be more expensive to continue seeing your doctor.
For every doctor or specialist you see, you want to make sure that switching health plans won’t put yourself out of network.
Coverage Exclusions
All health insurance policies cover the basics- preventive care, immunizations, and emergencies. However, if you have specific health care needs, you want to make sure that your policy actually covers them.
Many health insurance policies have certain conditions that they exclude from coverage. “Preexisting conditions” were a particular type of exclusion that has been in the news a lot over the past few years; Obamacare eliminated the exclusion for preexisting conditions, but there are other exclusions that are still allowed. So, you should review your policy options carefully to make sure you can get the coverage you need.
Beyond Costs and Benefits
Costs and benefits are the two primary drivers behind picking a health insurance policy for your family. However, there are a LOT of other things you might want to take into account before picking your family’s health insurance plan(s).
Review ALL of Your Options
I’ve touched on this in passing a few times, but when you’re deciding whether or not to combine health insurance plans for your family, you really shouldn’t just look at the plans that you and your spouse are currently on.
Take this as an opportunity to review ALL of the insurance plans that your company offers. While HDHP plans have become increasingly popular over the past several years, some companies still offer more comprehensive (but more expensive) policies that may appeal to you if you go to the doctor a lot. Review the options at each of your employers, and pick the best plan for you. Don’t just limit yourself to what you’ve done before.
Do You Want to Use a Health Savings Account?
Health Savings Accounts (HSAs) are savings and investment accounts specifically designed to be used to pay for health care expenses. You (or your employer) contributes to these accounts, you decide how you’d like to invest the money in the account, and can withdraw the money at any point to cover medical expenses.
There are a few reasons why I highly recommend HSAs for many new families. First and foremost, they have a lot of tax benefits. Any money you contribute to the account (up to $6,750 per year for a family, or $3,400 per person in 2017) isn’t counted in your taxable income for this year. What’s more, the growth of your money in the HSA isn’t taxed, and as long as you spend the money on medical expenses, it isn’t taxed when you spend it, either.
Particularly for families with low medical expenses, HSA’s can be a great way to invest for the future. By investing the money in your HSA now, you have a source of tax free money in the future when you need to pay for your medical expenses.
But, there’s a catch. You can only contribute to an HSA if you have a High Deductible Health Plan (HDHP). So, if you currently have an HDHP and switch to your spouse’s (non-HDHP) plan, you would no longer be eligible to contribute to an HSA. You’ll still be able to spend the money you’ve already put in your HSA on medical expenses for either you or your spouse… you just won’t be able to add any more. If you like the flexibility that an HSA provides and like the idea of investing money specifically for future healthcare expenses, you may want to think twice about giving up a HDHP policy.
Other Considerations
Finally, there are a handful of other things to consider when picking a health plan for your family:
- Job Security- if one of you has a much more secure job than the other, it might not make sense for you to both use the health insurance policy of the spouse with the insecure job.
- Complexity- Having two health insurance policies means twice as much paperwork to deal with, and two different sets of bills to pay. If you value simplicity in managing your household finances, it might make sense for you to combine.
- Coverage Gaps- Most health insurance plans start on January 1. But, if either of your plans have a different start date, you want to make sure that you don’t have a gap in coverage if you choose to combine. For example, let’s say that Bob’s insurance plan starts on January 1, and Amy’s starts on July 1. If the couple decides they both want to be on Amy’s insurance plan, they will need to make sure that Bob is covered by his insurance plan from January to July.
This is a decision with a lot of factors to consider before making the right decision for your family. To learn more about other big financial decisions to make once you get married, download our free Newlywed Money Checklist. Ultimately, evaluate all of the points in this article to weight the pros and cons before making a decision.