Spouse Insurance Coverage Under Obamacare
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- Obamacare does not require employers to cover spouses of employees in their plans
- Obamacare requires employers to cover dependent children up to age 26
- Obamacare provides an Affordable Insurance exception to the Individual Mandate
- Obamacare provides an Affordable Insurance exception for employer plans
- Obamacare provides an exemption when insurance costs more than 8 percent of annual income
Spousal coverage was not included in the Affordable Care Act. During debates, it was noted that most employers offered spouse coverage when providing employee coverage. The law expressed a preference for employer coverage when it denied Obamacare benefits to those who received offers of employer coverage. When searching for coverage for an non-covered spouse, applicants should use comparison shopping to find the best value. Comparison shopping is an excellent tool for determining the value of Obamacare Health plans and those offered by private insurers outside of the marketplace. Start comparing health insurance rates now by using our FREE tool above!
Individual Mandate and Penalty
The Affordable Care Act requires every citizen, national, and other authorized permanent resident to get and maintain health insurance coverage that provides the ten essential health benefits defined in the law. The below-described items describe the penalty provisions for failing to get and maintain insurance coverage for 2016. The Shared The 2016 Shared Responsibility penalties are the greater of:
- $675.00 per adult individual
- $347.50 per child
- $2,085 total family limit or
- 2.5 percent of annual individual income
- $2.085.00 for a family, or
- 2.5 percent of household family income minus the filing threshold amount.
Two Tests of Affordable Care
It is somewhat confusing, but there are two separate tests in the Affordable Care Act for exemptions due to unaffordable insurance. One applies to employer plans, and the other applies to marketplace plans. Those who have an offer of coverage from an employer cannot be exempt unless the premiums cost more than 9.5 percent of family income. Those who do not have available employer coverage can get an exemption if the lowest priced plan costs more than 8 percent of family or individual income. The government bases affordability on the costs of certain basic plans, called benchmark plans.
Private Employers Can Choose
Obamacare does not require employers to offer insurance coverage to spouses of employees. It does require coverage for dependents up to age 26. Companies were free to decide to cover spouses before and after Obamacare.
Covering a spouse may be more valuable after Obamacare because a high-income earner spouse would have to buy insurance outside of Obamacare if dropped by the spouse’s employer’s coverage.
Presumably an employed spouse would have options from his or her employer, but if not, there could be a significant added expense. Determining eligibility of a non-covered spouse uses the income figures of the entire family before deductions for the covered spouse’s employer-sponsored insurance. This forces the uninsured spouse to reach the maximum 9.5 percent range to get an exemption.
Getting the Affordability Exemption
The exemptions for persons who cannot get affordable health insurance coverage applies to spouses of employees covered by an employers plan. The cost of adding a spouse may raise the price of insurance overall, and often will cost more than 9.5 percent of their adjusted annual income. Persons who cannot get private insurance for 8 percent or less of their income or employer plans for less than 9.5 percent of income are entitled to hardship exemptions from the individual mandate.
Private Plan Conversion
Changing to a private health plan from an employer health plan requires careful consideration. There are price and coverage benefits from employer coverage that will add to costs when purchased privately as an individual or family. The loss of employer contribution is the initial factor, and the separate sets of deductibles to be paid before coverage kicks in is another consideration.
Higher Incomes Must Shop Outside the Marketplace
Experts and the Obamacare advice to consumers agree that those near or above the upper-income limit for benefits should shop outside of the marketplace. Insurers offer plans based in part on geographic areas. To see all of the available options in a location, applicants must search outside of the marketplace for available plans that insurers do not put on the Obamacare marketplace.
IRS Computation for Exemptions
The IRS Form 8965 provides a computation worksheet to determine the affordable health insurance exemption for an individual or a household family member. It helps determine the adjusted family income for a family member or the adjusted annual individual income.
The Individual Mandate exemption applies when insurance costs more than 8 percent of the annual income.
This protection was aimed at geographic areas in which there were few or no insurance providers. Typical of low density and rural areas, some parts of a state have dozens of insurers while others may only have one. Areas that lack competition can have high costs, additionally rural, remote and sparsely populated areas pose challenges for insurers such as few available medical services providers.
Spouse Coverage and Tax deductions
Individuals and families cannot get subsidies from Obamacare because income is too high or because they have employer-offered coverage. They may get tax deductions for amounts they pay for premiums and medical expenses. The basic rule is that premiums are deductible if paid by the taxpayer. These include self-employed persons and sole proprietors who can deduct the premiums and medical expenses they pay for ACA required coverage.
Spouse Coverage under the Affordable Care Act
The Affordable Care Act makes spousal coverage by employers more valuable because it can save thousands of dollars in additional premiums and deductible expenses. Already a valuable pre-Obamacare benefit, employers can now use spousal coverage as a major selling point to attract top talent. The flip side of the equation is the tax deductions available to those who pay for health insurance outside of an employer’s plan for an uncovered spouse or family member. These deductions protect income and reduce taxation. When subsidies are not available to an uncovered spouse because of employer coverage, there may be some softening of the impact of buying additional coverage. Self-employed options may also help along with Health Savings Accounts.
Getting the Best Coverage for Your Spouse
Obamacare provides individual health plans, small group plans, and standards for larger employer plans. Spouse coverage was not part of the law. Many commentators have proposed this as an area for further study. Until changed, the ACA leaves spouse coverage to the individual and family decisions on how best to make a budget work for maximum benefits. Comparison shopping is the best way to find coverage for a spouse and family under the Affordable Care Act. Start comparing health insurance rates now by entering your zip code in our FREE tool below!