Should I count health insurance if I can get it through my spouse?

Should I Count Health Insurance if I Can Get It Through My Spouse?

When it comes to 💡 Definition:A spending plan that tracks income and expenses to ensure you're living within your means and working toward financial goals.budgeting💡 Definition:Process of creating a plan to spend your money on priorities, including fixed expenses like pet care. and financial planning💡 Definition:A strategic approach to managing finances, ensuring a secure future and achieving financial goals., one question that often crops up is whether to include health insurance costs when you have the option of coverage through a spouse’s plan. This decision can be influenced by several factors, including potential costs, tax implications, and subsidy eligibility. Understanding these elements can help you make a more informed decision about your health insurance strategy.

Understanding the Health Insurance Landscape

The Family Glitch

One of the most significant considerations is the "family glitch," a quirk in the Affordable Care Act (ACA) that affects many families. Under the ACA, employer-sponsored health insurance is considered affordable if the employee's contribution for self-only coverage is below a specific percentage💡 Definition:A fraction or ratio expressed as a number out of 100, denoted by the % symbol. of household income (around 8.39% for 2025). However, this affordability test does not extend to family coverage, which can be substantially more expensive. This means if your spouse's employer offers affordable self-only coverage, you might not be eligible for Marketplace subsidies, even if the family coverage is unaffordable.

Household Income and Subsidy Eligibility

The eligibility for subsidies through the Health Insurance Marketplace is determined by your household's Modified Adjusted 💡 Definition:Your total income before any taxes or deductions are taken out—the starting point for tax calculations.Gross Income💡 Definition:Gross profit is revenue minus the cost of goods sold, reflecting a company's profitability on sales. (MAGI). This includes all sources of income from all household members. If your spouse's employer offers coverage, this affects whether your family can receive premium💡 Definition:The amount you pay (monthly, quarterly, or annually) to maintain active insurance coverage. tax credits💡 Definition:A dollar-for-dollar reduction in tax liability, providing direct savings on taxes owed. or cost-sharing reductions. The affordability of the employer's plan for self-only coverage can block access to these subsidies.

Real-World Scenarios

Scenario 1: Affordable Self-Only, Unaffordable Family Coverage

Consider a situation where an employee is offered self-only coverage at $150/month, which is deemed affordable. However, the family coverage costs $800/month. In this case, the family would not qualify for Marketplace subsidies due to the family glitch, even though the family coverage is quite costly. Here, you should include the $800/month as a health insurance expense if you opt for the family coverage.

Scenario 2: Both Spouses Have Employer Options💡 Definition:Options are contracts that grant the right to buy or sell an asset at a set price, offering potential profit with limited risk.

If both you and your spouse have the option for employer-sponsored coverage, evaluate each plan's costs and benefits separately. For instance, if your plan offers self-only coverage at $100/month and family coverage at $700/month, while your spouse's plan offers self-only at $150/month and family at $600/month, you should compare the total costs and see which option is more financially viable for your family.

Common Mistakes and Considerations

• Not Accounting💡 Definition:Accounting tracks financial activity, helping businesses make informed decisions and ensure compliance. for Actual Costs: If adding you to your spouse’s plan incurs an additional cost, that should be factored into your budget.
• Ignoring Future Income Estimates: Subsidy calculations are based on expected income for the coverage year, not past income. Accurately estimating your income is crucial.
• Overlooking Documentation: Keep detailed records of contribution amounts from pay stubs for both self-only and family coverage options to ensure accurate assessment.

Bottom Line

When deciding whether to count health insurance costs when it's available through your spouse, consider the actual cost implications, your household income, and subsidy eligibility. If adding you to the plan is free or if you’re already on it, you can leave health insurance at $0 in your budgeting. However, if there are costs involved, be sure to include them in your financial planning. Understanding these nuances can help you make the best decision for your financial situation.