Health insurance has been like musical chairs for the past couple years. In 2014, enrollment in individual health plans skyrocketed thanks to the Affordable Care Act (ACA), which required that new essential benefits like maternity and mental health be covered on all plans and prohibited insurers from declining coverage or charging more for pre-existing medical conditions. Many dependents who had previously signed up for their spouse’s employer-sponsored health insurance left those plans in favor of individual coverage; at the time, it made sense.
Now it’s 2016, and we’re seeing just the opposite happen: people with individual health insurance policies are jumping ship and signing up for spousal coverage once again. It’s as if the birds who flew south for the winter are heading back home.
So what happened? Why are people giving up on the individual market? There are several reasons, and most of them are attributable to the number one change made by the Affordable Care Act: guaranteed issue, community rated plans. While the ACA’s guaranteed issue provision has helped millions of people with ongoing medical conditions obtain health insurance coverage, insurance companies typically lose money on these folks. For guaranteed issue to work, insurers also need young, healthy people to sign up, and that hasn’t happened as quickly as they had hoped. Insurance carriers are losing millions of dollars and, as a result, have had to increase the premiums while cutting the benefits. Here are some of the effects:
- Prices are going up. For most people who don’t qualify for a subsidy, individual coverage is now more expensive than group coverage.
- Benefits are being slashed. Along with increasing premiums, we’re also seeing increased exposure for individual policy holders. Deductibles and out-of-pocket limits are increasing significantly: the maximum out of pocket is now $6,850 for individuals and twice that for families, and they’re both going up again next year. Additionally, predictable, fixed-dollar copayments have been removed from many bronze- and silver-level plans, forcing consumers to pay the full negotiated rate when they need to visit the doctor or pick up prescriptions. And, speaking of prescriptions, many insurance companies have added additional cost-sharing tiers to their drug formularies and moved more medications to the “non-preferred” levels.
- Networks are getting smaller. This is a recent and very disturbing development. In Texas, most insurance companies have eliminated their out-of-network benefit completely except for medical emergencies, and the remaining network of contracted doctors and hospitals is much smaller than before. This means that many consumers have had to give up one or more of their favorite providers, and for many that’s the straw that broke the camel’s back.
No longer impressed with their options in the individual market, many people have started to return to their spouse’s plan. Unfortunately, not everybody has a spouse’s plan that they can join, and those that do can’t just sign up whenever they want. In general, there are two times that you can sign up for coverage under a spouse’s (or parent’s) health plan: during a special enrollment period or during the annual open enrollment period.
Special enrollment periods occur 1) when you have a life event like getting married or having a baby or 2) when you lose other coverage. In these situations you usually have 30 days to “special enroll” onto the group health plan. However, the loss of coverage must be involuntary, like when you quit a job or the insurance company cancels your policy and pulls out of the market. If you simply decide that you no longer want your group or individual health plan, that’s not involuntary loss of coverage and will not create a special enrollment period, which means you’ll have to wait until the next open enrollment period to sign up.
Open enrollment periods occur once per year. That’s the time when employees can make changes to their plans, and it’s also when they get to add or drop dependent coverage.
The lesson is this: First, if you currently have individual coverage for you and/or your children and are not happy with the plan benefits, network, or monthly premium, you need to find out when your spouse’s annual open enrollment period is. Second, you’ll want to compare the benefits and rates to your current policy, but it won’t benefit you to do that now; since group benefits and premiums also tend to change at renewal time, you’ll want to compare the renewal options with your individual coverage. If it makes sense, go ahead and sign up for spousal coverage during the company’s annual enrollment period—it could save you both money and frustration.
One added bonus of a spouse’s plan is that you can usually pay with pre-tax dollars through a section 125 plan, but this option usually comes with an “irrevocable election rule.” What that means is that you’re usually locked in for a year: during the plan year, you’re not allowed to cancel the coverage unless you have a “qualifying event” that permits you to do so, so just be aware of that when you’re signing up for coverage. Also keep in mind that most employers subsidize the employee premium but may require dependents to pay full price, so don’t be surprised if your cost for the employer coverage is significantly higher than your spouse’s coverage. Still, the numbers will work for many people, and if they do for your family you should consider signing up.
If you’re having trouble deciding between group and individual coverage, contact JME and one of our licensed agents will be happy to help you compare your options.