When the company that you work for offers you medical insurance under an employer-sponsored health plan, they will often give you the opportunity to add family members to your coverage. In many cases, adding dependent family members must be done at the full expense of the employee. Larger companies may offer to pay all, or part, of the additional premium incurred when you elect to enroll family members. By law, they are not required to pay any portion of the premium for dependents, but they are responsible for paying a portion of the employee-only premium. The amount that the employer pays for the employee’s health insurance is called the “employer contribution.” The balance is what the employee will be responsible for if they accept coverage and enroll as an insured member under the group health plan. This is called the “employee contribution.”
Compare Rates Based on Employer Contribution for Dependents
If your employer is generous enough to pay at least 50% of the premium for any family member, adding your family members to your group coverage will probably be the logical choice. However, you still want to compare your total employee contribution for adding family members to the other options available for providing your family with health insurance. If your employer does not pay any portion of the dependent premium, you will likely be able to save money by insuring your family members under a separate individual health insurance policy. Rates under a group health plan can often be more expensive than those offered for individual health insurance in the same market. This depends on the type of coverage that your employer is offering, the overall healthiness of your group, the average ages of the employees insured under the group plan, and the geographical location of those employees.
Separate the Cost for Each Family Member
Once you are provided with your group health plan options and rates, you want to separate the cost of insuring each family member under the group health plan. This will help you determine if more reasonable options are available on the individual health insurance market. Request that your employer provide you with a full breakdown of the various rate combinations. You will want to see your share of cost for the following options:
- Employee Only – The cost of insuring only yourself under the group plan and not adding family members. If your employer pays 100% of the employee only premium, this amount should be $0.
- Employee and Spouse – The cost of only insuring yourself and your spouse on the group policy, and not your children.
- Employee and Child(ren) – The cost of insuring yourself and your child or children on the group plan, and not your spouse.
- Employee and Family – The cost of insuring yourself and all dependent family members on the group plan.
Having the rates for all of these possible combinations will allow you to determine your share of cost for each family member that you want to add to your group health plan. If you are just provided the “Employee and Family” rate, you will not be unable to calculate the per family member premium. Use the formulas listed below to calculate your additional share of cost for each family member:
- Spouse = “Employee and Spouse” minus “Employee Only” premium
- Child/Children = (“Employee and Child(ren)” minus “Employee Only” premium) / (number of children)
- All Family = (“Employee and Family” minus “Employee Only” premium) / (1 + number of children)