When does it make sense to split
individual health insurance
policies?
There are times when splitting
California individual health insurance policies
within a family makes sense.
There are even times when it forced
by the carrier depending on the
underwriting of individual family
members. Usually, when a
family or two or more people in a
family (say subscriber and spouse,
or subscriber and child/children)
applies for coverage, the family
members assume everyone will be on
the same plan together. Let's
look at both the pro's and con's of
a family policy versus split
policies.
Family members on one health
insurance policy
There are two main benefits to
having family members all on one
policy. First, with most
individual health insurance plans in
California, with two adults on the
same plan (either family or
subscriber/spouse), the rate is
based on the age of younger spouse.
If the two adults are in the same
age band (typically five year bands
such as 35-39), there is not much
benefit in this. If the adult
ages are spread out among different
bands, this can provide a
significant savings.
The other benefit to having all
family members (over
two people on one policy), is that
most plans on the
California
individual health insurance market
have a
two-member max. This
means that if two family members in
a family hit their
deductible or
max
out-of-pocket, the other family
members will not need to. The
chances of this having an impact are
small since you would need very
large expenses for more than 2
family members but it can mean a lot
of money for a larger family in such
a situation.
Health Savings Account or HSA plans
are different. The deductible
and max out of pocket is cumulative
with these plans which means that
all the family members (2 or more
people) are working towards one
deductible (which is usually twice
the deductible of a single person).
Splitting an HSA plans can work in
some cases and not others depending
on how claims hit during the year.
If one family member has very large
bills, it's better to have an
individual deductible. If
multiple family members had big
bills, the family deductible works
better. It can also affect how
much you can fund if choose to take
advantage of the tax favored account
associated with the HSA-qualified
high deductible plan.
Of course, there is one billing and
policy number to keep track of.
Having all family members on one
policy requires that everyone is on
the same plan and the same rating
tier. If these two situations
do not apply, split policies may be
the best if not only option.
When split policies make sense with
Family health plans in California
The two situations above (same plan
and same tier) do not always apply.
First, let's look as same tier.
Different tiers for family members
When you apply for coverage, the
underwriter can come back say that
one or more family members were approved
but at a higher separate rate.
The rates you see when you run your
instant Individual and Family health
insurance quote for California are
Tier 1. The rates can go up by
25%, 50%, 75%, and greater depending
on the carrier. If a family
applies for coverage but one family
member has health issues and can
still qualify for coverage at a
higher tier, the health insurance
carrier will likely approve this one
family member at a higher tier and
the other family members at the best
tier. Unless you have other
and better options, we usually
recommend accepting this split
policy and trying to reduce the tier
in the future if the underlying
health issue improves or we have
more time away from it. There
is also an option on some
applications to "Approve all family
members or none". We recommend
NOT checking this so that the
underwriters can underwriter all
family members in case one person
does not qualify. We can then
look at options for that one person
separately.
Different plans for family members
There are times when it makes sense
to have different plans for each
family member. Certain
family members may have different
needs.
Maternity is a perfect
example. It might make sense
for the female spouse on the policy
to have a plan that covers
maternity, but have the spouse
and/or family on another plan.
Since costs are significantly more
for adults, the adults on the plan
may opt for less expensive plans
while children are on a richer plan
that addresses their health care
needs better. Keep in mind
that this negates the age benefit
above if the adults are in different
age bands.
New plans on market are individual
policy only
Some of the newer plans being
introduced on the market such as the
Right Plan $40 by Blue Cross of
California or Vital 2900 by Blue
Shield of California are designed as
single policies. You can still
apply on one
health application but the
family members will be split onto
separate plans. This is also
true for the
Tonik health insurance
plans. This can actually work
for a male who's spouse or
significant other is pregnant.
With the more traditional health
plans, the male in this scenario
would not qualify for coverage since
the baby can automatically come onto
his policy. With these single
policy plans, the baby must qualify
based on health. This may
allow
the male to qualify.
Other
important
concepts
to help
you
understand
your
California health
insurance
quote
are:
Individual
health
insurance
underwriting
The
concept
of
health
insurance
A quick
introduction
to
California
health
insurance
history
Understanding
health
insurance
costs
To
run your
instant
health
insurance:
California
Individual
Family
health
insurance
quote
California
group
health
insurance
quote
SPLIT
POLICY