When Is It Right To “Split” Health Insurance?

SplitMuch was said, during the Health Care Reform debates of 2009-2010, that implied that “the majority of Americans get their health insurance at work.”

While technically an accurate statement, it is a bit misleading.  When the last decade started over 70% of Americans were covered with group health insurance.  However the current number of Americans with group health insurance has declined.  The latest statistics I have read indicate that the number of Americans with group health insurance has fallen in the last 10 years.  Currently, the number of Americans with group health insurance is closer to 60%.

Politicians, economists and gypsie fortune tellers all have equally good explanations for the decline of employer sponsored group health insurance.  My guess, for this phenomenon, is just as good as theirs.

In this post, however, I am not looking to place blame.  I want to share a practical strategy for coping with the changing status of health care.  I call it “Splitting Health Insurance Coverage.”


Obamacare has taken steps to discourage employers with 50 or more full-time employees from dropping their health insurance.

At the same time the Obama administration has set up the public S.H.O.P. exchanges to facilitate the purchase of group health insurance by groups of fewer than 50 employees.  Those who do not wish to use a government sponsored exchange can continue to use an insurance agent or a private exchange.

Self-employed folk and those who work for companies that do not provide group health insurance (approximately 40% of the population under age 65) can buy health insurance from the new Health Insurance Marketplaces (Exchanges) or outside of the Marketplaces either directly with an insurance company or by contacting a trained health insurance agent.

Whichever circumstance you find yourself in, one thing is certain.  When you buy your Qualifying Health Plan (QHP) for 2014, your premiums are likely to increase.


If you elect to cover your spouse and children, as dependents on your group health insurance plan, you may find that your health insurance premium, for 2014, is more than you budgeted.  However, there is no law that says that spouses, children and other dependents must remain on your group health insurance.

The PPACA states that if health insurance premiums became unaffordable, the employee would be eligible for some federal help.  Affordability is defined in the PPACA as premiums less than 9.5% of household income.

That sounded fair, at the time.  However, in February the Secretary of Health and Human Services defined affordable premiums even more.

Under the new definition, although an employee may be paying premiums for group health insurance for the entire family, only the portion of the premium that is paid for the employee counts towards the 9.5% thresh-hold.

If the premium for the entire family is $2000 a month but the employee only has to pay $300 a month, after the employer’s subsidy, the family’s premium, although they are mandated to have health insurance, will not be counted as part of the 9.5%.

If the employee is earning $250,000 a year, a premium of $2000 a month may be very affordable.  However, when the average American earns less than $50,000 a year, it is hard for me to believe that $2000 a month is “affordable.”

(In my opinion, this is just another example of how “out-of-touch” the politicians in D.C. are with middle-class America.)


There is, however, one thing that you can do in 2013 that could help you in 2014 if you find that you will be part of the Americans who face the “Affordability Crisis.”

If your spouse and children are healthy enough to pass medical underwriting, you can split them off your group health insurance and secure an individual health insurance plan for them that will not expire until the last day of 2013.

At that time you can get them coverage either through the Marketplace or outside of the Marketplace.

This strategy, in many cases, should save you a few hundred dollars each month.  However, before you commit to this strategy, review the warnings below.

  1. Many individual plans do not offer maternity, substance abuse, non-organic mental health or other types of coverage.  Before you commit to an individual plan, take the time to study the plan and see how it compares to your group plan.  If you have need of any of the coverages above, my suggestion is that you either keep them on your group plan or seek coverage from one of Obamacare’s Essential Benefit Plans that start on January 1, 2014.
  2. If you apply for an Individual plan that does not have all those extra benefits, request it to be effective at least 45 days in the future (but not after December 31, 2013).  That will give you time to review your new policy.
  3. Do not remove coverage for your spouse and children until after the new Individual Plan has been approved and you have been able to review the plan to make certain that it meets all of your needs.  If you remove them from your group too soon, you may find that it is difficult to add them back and they must accept one of Obamacare’s more expensive Essential Benefit Plans.

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