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tinyfaery's avatar

Health insurance: what makes more sense for me and mine?

Asked by tinyfaery (35625 points ) November 10th, 2009

I am on my wife’s health insurance plan. She works for LAUSD and gets awesome benefits. However, since we are not married (we are Domestic Partners in the state of C.A.) she has to pay taxes on my benefits (Don’t anybody tell me Domestic Partnership is the same as marriage.) My benefits increase her taxable income by almost 5 grand a year. Since she is single with no dependents she pays a lot of taxes.

My job offers health insurance, but it’s not good.

So, would it make more sense, and cost us less money, if I got an individual plan and paid monthly for it? I checked out some plans, and for what I want I would have to pay about the same amount that is considered taxable income for my wife—about $350 a month.

I’m a totally ignorant about this stuff. My extra question is, would waiting for the health care bill to pass make any difference in regards to what I might pay for an individual plan?

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35 Answers

dpworkin's avatar

Unfortunately, due to the cowardice of some Democrats, and the pecuniary interest of other Democrats, and the wish to hurt Obama on the part of the Republicans, we will be getting a very watered-down, narrow health-care bill that is not likely to meet your needs.

In my opinion what will have to happen is that California will have to ratify gay marriage. The time is coming: our younger voters really don’t give a shit if someone is gay or not, and the traditional homophobes are getting older and older.

Val123's avatar

Also, if and when we get any kind of civilized health care, it’ll be at least 3 years before it’s implemented.

Put a pencil and calculator to the question…..If you’re talking about getting health care on your own, the premiums will be in excess of $600 a month….

tinyfaery's avatar

No. I looked. More like $400.

Val123's avatar

@tinyfaery Wow! What company?

Val123's avatar

Wow! Well, like I said paper, pencil, calculator! Also, list out what you might most be likely to go to the doctor or a hospital for, and also the difference in coverage between minor things and major things.

RareDenver's avatar

Just get married ;-)

tinyfaery's avatar

I can’t, tyvm.

RareDenver's avatar

@tinyfaery doh, I think I knew that too, sorry if I appeared insensitive, it wasn’t intentional

dalepetrie's avatar

No one here can tell you what would make the most sense without looking at the numbers. What you really have to do, and this is a LOT of work, I know, but it’s the only way (which is how the greedy insurance companies want it), is to sit down and look at each option you have available to you (you’re going to have to really know what is covered at what percent, what your copays, coinsurance AND premiums are, what the exclusions are, maximum out of pocket per person, deductibles, lifetime maximums, etc.) and you’re going to have to sit down with a pen and paper or a spreadsheet. What would help is if you are on insurance now and have been for an entire year, if you can get either online (or if you keep the ones they send you in the mail), all the explanation of benefits for an entire year for yourself. You need to figure out, “if I didn’t have insurance and I had to pay the full retail amount for all of my medical care, including drugs, what would it cost me. Then you’ll have to do a what if analysis, first of, what DID it cost you including premiums, additional taxes on your domestic partner benefits, and what did you actually have to put out of pocket in copays, coinsurance, deductibles, prescriptions, etc. Add all that up and if the insurance is good, you should still have saved money. Use that as a baseline to compare other plans to, because if you shop for individual insurance, just looking at the smallest monthly payment is not going to tell you everything you need to know. You might have a major medical plan that doesn’t kick in until you’ve spent $5,000 out of pocket. But maybe it pays 100% of everything up to a million bucks after that $5k, and maybe the premium and tax savings is in and of itself more than 5 grand. And basically you’ll want to kind of look at all the plans, come out with a figure of what the last years’ medical expenses (assuming they were typical of an average year) would have cost you under each option. The cheapest option is then the first one you want to look at, see if there are any hidden problems, like a $100k lifetime max, or it doesn’t cover certain things. Really you want to make sure that on the off chance that you get REALLY sick or injured, you won’t have to declare bankruptcy. Honestly, you could spend an entire day working up all these figures, but it will be worth it and you may well be surprised at the best option. And if you end up on an individual plan, every year I would do this exercise again, or if and when Congress actually passes health care reform, see if that changes anything. Hopefully either you, or your partner, or someone you’d trust to see your financial data is very good at math and reading fine print, because unfortunately, picking health insurance is about as complex a task you’re ever likely to encounter in the US in this day and age.

galileogirl's avatar

It makes more sense to have your own policy. If the relationship breaks up, you may find yourself uninsured and uninsurable. Better yet, spend your time and energy working for insurance reform that is sensible and fair so you don’t have to compare apples and anteaters.

MagsRags's avatar

I think you’re better off staying on her plan. It may be increasing her taxable income by $5000 but I’m sure her tax bracket is not 100% – that’s the only way it would be a wash for you to pay $5000 for comparable insurance.

If she ends up paying 25% taxes on that “extra income”, why not just pay her the $1250 or so it’s costing her? You couldn’t buy decent insurance for that.

dalepetrie's avatar

@galileogirl – it’s not necessarily better to have your own policy. I’m curious how the COBRA laws work with the breakup of domestic partnerships, but it’s my understanding that if you lose insurance through no fault of your own (which could be because of a termination of a legal status that makes one eligible), you will be eligible to get your benefits through COBRA, and even if they’re very expensive, they might be cheaper than your overall costs with an individual plans. Face it, some individual plans aren’t worth the paper they’re printed on. But you do raise a very good point, it is something to put into your what if, cost/benefit analysis. There are a number of potential events including this one, and serious injury/illness which you might want to consider on a what if basis…maybe it’s worth it to pay an extra $100 a month for policy b instead of policy a if it means on the off chance you get seriously hurt or your relationship ends that you won’t end up bankrupt. Again, it’s not a simple a or b question, you REALLY have to put effort into it.

galileogirl's avatar

There are time constraints with COBRA

dalepetrie's avatar

COBRA lasts 18 months (24 in some cases), but almost all employer based plans have some sort of conversion option. When my employer shut down, I didn’t have the opportunity to go to COBRA, but I was offered a personal plan or a conversion plan. And COBRA is meant to be temporary, so I’m saying that having a personal plan is not necessarily the best bet at this time, because maybe none of that bad stuff does happen, don’t get rid of the current plan because of the what if, deal with the what if, if you have to. Make the right decision for yourself today, and re-evaluate every year and as your situation changes.

MagsRags's avatar

@galileogirl it sounds to me like the only reason they’re not legally married is because the laws of their state prohibit it. I don’t think it would occur to any of us to suggest that a heterosexual married couple buy separate health insurance “in case” they break up. I would assume that if they’re married in their hearts, then they have made a personal lifetime committment to each other. It seems damaging to a relationship to be making contingency plans for no reason other than in case.

dalepetrie's avatar

@MagsRags – it’s no different than a prenup, some people realize there are practical legal implications and take precautions, it doesn’t mean that it has to damage the relationship, and some people are so emotionally invested in the institutions that the mere suggestion of fiscal practicality and responsibility is akin to some sort of betrayal. @galileogirl is right, it’s a very smart thing to consider, and is one which could save thousands of dollars (heck, possibly millions) with the way our health care system is run. I’m all for romance and such, but I’m not for being stupid about it, and it just depends on their relationship, whether or not it’s acceptable to think about practical things or if they’re the type of people who avoid the practical and live the fantasy.

galileogirl's avatar

Since 60% of heterosexual married couples DO break up, maybe we are remiss in not telling them to protect themselves.

BTW I never assumed they were heterosexual or homosexual. Didn’t even cross my mind.

MagsRags's avatar

OK, I agree about prenups, but that’s usually about assets that predate the relationship or a couple with very uneven earning expectations. BTW, did John Cleese get taken to the cleaners by his ex or what?
Anyway, I think choosing not to avail yourselves of the benefits of family health insurance coverage if it’s available because you think maybe you’ll break up in the future is akin to folks who get married and want to keep every bit of the finances separate. Not very trusting or intimate.

tinyfaery's avatar

We do qulaify for Cobra. And I am not worrying about paying my share or paying her back, it’s our money, and I am looking to save “us” money.

I don’t think I can get an individual plan even close to what she has. But paying out of pocket might be cheaper than paying taxes on the “income”.

MagsRags's avatar

You said the “income” is about $5000. Do you get to file joint tax returns? Look at your/her tax bracket to see what the taxes will be on that.

galileogirl's avatar

Cobra is not permanent and if the party w/o insurance devlops a condition and loses their partner’s insurance, they may never be able to get coverage. That’s the way it is-like it or not. The only way around the inequities is to have real health care reform, not figuring out how to ‘work’ a deeply flawed system.

MagsRags's avatar

@galileogirl from your mouth to the senate’s ear, please!

dalepetrie's avatar

@galileogirl – most important thing there though is, yes, you are right, if you go don’t lock into an individual plan now, and end up losing domestic partner benefits and exhaust COBRA, if ALL that happens, AND in the interim you develop a “pre-existing condition”, you could have a VERY hard time getting on an individual plan. However, two things to consider.

1) As I said, MOST employer based plans (not all, but if your SO checks with her benefits administrator you will be able to find out), have a conversion option once COBRA runs out. I have a pre-existing condition, and that’s the reason I have good health coverage is that I was able to get a conversion plan. If that’s the case, the reason they have a conversion option is so that if you can’t get private insurance, you have a plan you CAN get on. Sure, I have a $1,000 deductible, but it’s less than $300/mo, I get drug coverage, and I pay a reduced rate on all my medical billings up to that first $1,000. Again, I wouldn’t automatically say “get your own plan” because the reality might be that this is a worse option, because…

2) An individual plan, hey, they can change the rules, they can jack up the rates, there is no group behind it to keep them honest, there is no incentive not to start reducing your level of benefits or start adding uninsured conditions. What you’re fearing could happen if you went with the employer plan could just as easily happen with an individual plan. Even with individual plans, you have annual renewals. If your company gets an annual renewal, they may jack rates by as much as 20%, and your company might shop around for another group plan and maybe switch providers. But you as an individual, you get to annual renewal and they could a) jack the rates up so you could no longer afford it, b) add a list of conditions which as of renewal time are no longer covered or are covered at a significantly reduced rate, or c) increase annual out of pocket deductibles to the point where you might as well have no insurance at all (not to mention d) all of the above). The benefit to being on an employer plan as long as possible is, if they try to pull all this on a company, the company has leverage to negotiate or go somewhere else. But you, especially if you now have a pre existing condition, have nowhere else to turn and are essentially at their mercy.

tinyfaery's avatar

No joint returns. Remember, that even if I was married (in state) the federal gov does not recognize these same-sex unions and therefore, in the eyes of the IRS, we are single people.

What a fuckin’ hassle.

Val123's avatar

You know, I have a “friend” who believes there are those in society who are more “worthy” of health insurance than others. His yardstick is their financial success.

MagsRags's avatar

@tinyfaery oh yeah. Hadn’t thought about state vs fed. So much stuff we heteros take for granted.

PandoraBoxx's avatar

@tinyfaery, what will make the most sense depends on your health system utilization. If you have chronic conditions, go to the doctor a lot, then you’re going to need to look for a different sort of plan. 60% of the population uses less than $750 in health care a year. The best place to start is to get out your EOBs for the last few years and look at what your providers billed your carrier vs. what your out-of-pocket was for the services.

If it’s costing you $5,000 a year to pay $2,000 worth of medical expenses, then you are better off getting a HDHP plan and banking the difference in a HSA (Health Savings Account). While it sounds like HDHP is bad insurance, if you’re a low utilizer and sock the money away into the HSA account, then you pay your medical expenses out of that saved money. Unlike an FSA, you don’t have to use HSA money up in the plan year, you can carry it forward into retirement. I am having to have a lot of expensive dental work done this year, and I’m able to use the unused money in the account from the last three years to pay for it.

Almost all carriers have individual plans that you can purchase directly; I would look at that as well as going through a broker like e-insurance. Another option is to take your coverage through work, but purchase a supplemental coverage policy.

YARNLADY's avatar

Is taxing the benefit even legal? Jan 1, 2005… Employer provided health insurance benefits for registered domestic partners will no longer be taxed as income by the State of California. ...per this article

dalepetrie's avatar

@YARNLADY – may not be taxed by the state of CA, but Federal taxes are bigger than state taxes and it’s becuase the Federal government does not recognized same sex partnerships with any legal status, that they will still be taxed. I once worked for a company that did this same thing…my then girlfriend/now wife and I looked into getting her on my plan as my domestic partner, and we could have done it, but it would have been several hundred dollars per month in taxable income which would have been taxed by both the state and Federal government. I’m sure @tinyfaery realizes that even though it’s better than it was in 2004, there’s still an expense in addition to the premiums that has to be considered.

Blondesjon's avatar

I think the two of you should start adopting “dependents” ASAP. Try and get them between 14–17 years old. Surly same sex marriage will be legal within the next five years and by that time Mommy and Mommy’s little angels will be leaving the nest.

It’s win/win.

you’re welcome

YARNLADY's avatar

@Blondesjon I got a great laugh out of that, given their level of tolerance for offspring

@dalepetrie Thanks for the clarification, I saw the “Fed” stuff above, and it didn’t register

tinyfaery's avatar

@Blondesjon What a horrible reason to get some kids. But, we have been thinking of fostering. Maybe I’ll get off my butt and start the process.

YARNLADY's avatar

@tinyfaery Now I have to apologize for my blanket statement above, when will I ever learn not to assume? I was an emergency foster parent for many years, and I found it very rewarding.

GracieT's avatar

Join me- I really want to move to Canada or England. But I have MAJOR pre-existing conditions I doubt that they would aprove! I would love to adopt, but with my conditions- (epilepsy and a traumatic Brain Injury) it wouldn’t be good for the kids. As much as I would love to adopt, and I would adopt, I think it is better if I don’t.

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