What if an Employee Gets Insurance Through Their Spouse? Here's the Deal.

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So, you’re a small business owner wrestling with the headache of setting up health coverage for your team. Maybe one of your employees told you, “Hey, I have insurance through my spouse, so I’m good.” Great, right? But here’s the deal: what does that actually mean for your health plan choices, your budget, and your legal obligations? And more importantly, how do you decide whether to encourage waiving coverage, require proof of other coverage, or just go with traditional group health insurance plans?

Let’s cut through the insurance noise—because, frankly, most brokers have a vested interest in pushing you into complicated, pricey plans that your tiny business neither needs nor can afford. In this post, I'll lay out what you need to know about employees who get coverage via their spouses, how that impacts your options, and how you can keep your bottom line intact while doing right by your crew.

Why Does It Matter if Employees Get Insurance Through Their Spouse?

First off, when employees have access to insurance through a spouse’s plan, it can affect your participation rates. Participation requirements matter because most Small-Group Health Plans and marketplaces like the SHOP Marketplace expect a minimum percentage of eligible employees to enroll.

So, what’s the catch?

Participation requirement issues: If too many employees waive coverage to go with their spouse’s insurance, you might struggle to meet minimum participation criteria. That can lead to higher premiums or even losing access to certain group plans. Waiving coverage: You’ll need a process to formally document when employees decline your plan because they have other coverage. This typically means requesting proof of other coverage—like a copy of the spouse’s insurance card.

Skipping these steps can turn into a compliance nightmare with the IRS or state insurance regulators. And believe me, the last thing a small business needs is extra legal headaches on top of payroll, inventory, and day-to-day chaos.

How Employee Spouse Coverage Affects Your Health Plan Choices

Think of health insurance options like car maintenance for your business. You need to keep the engine running without blowing the budget on unnecessary parts.

The Traditional Group Health Plan: The Reliable Sedan

This is what most small businesses think of first: a plan where everyone’s in the same boat, paying on the same schedule. Traditional Small-Group Health Plans offer some predictability and comprehensive coverage.

Pros:

Stable, group-negotiated premiums Tax advantages for employers and employees Stronger employee benefits appeal if you offer good coverage

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Cons:

Participation requirements can be a pain if many waive coverage Premiums can be $200-$300 monthly per employee or more depending on location and plan Less flexibility for employees who have cheaper or better spouse coverage

Health Reimbursement Arrangements (HRAs): The Hybrid Hybrid

HRAs are a nice workaround if your workforce includes folks with spouse coverage. Basically, you give employees a monthly contribution—say, that $200-$300 range—to reimburse their individual market premiums or any other medical expenses.

But is it actually worth it?

Here’s what HRAs do best:

They keep costs predictable for you Remove participation requirements because you’re not offering a group policy Allow employees to shop for coverage that fits them best (maybe through HealthCare.gov)

Downsides?

Employees must actively purchase individual coverage to use the funds There is some complexity around IRS compliance and documentation Potential confusion for employees who don’t understand how the arrangement works

The SHOP Marketplace and Tax Credits: What Does That Even Mean for Your Business?

The SHOP Marketplace is a government platform designed to help small businesses buy qualified health plans. It can be a straightforward option, especially if your business has fewer than 25 employees and average wages below $58,000 (numbers from the latest data). Why? Because you might qualify for the Small Business Health Care Tax Credit, reducing your contribution burden dramatically.

Size of Business Average Employee Wage Tax Credit Eligibility Estimated Monthly Employer Contribution per Employee Under 25 Employees Below $58,000 Yes, up to 50% of premiums for PEOs and 50% for direct SHOP plans $200-$300 (before credit) Over 25 Employees Varies No $200-$400+

The kicker? Your participation rate still matters here, so if you have many employees waiving the coverage because of spouse insurance, your ability to purchase through SHOP and get tax credits may be limited.

Common Mistake: Not Getting Employee Input Before Choosing a Plan

This one drives me nuts—business owners pick a plan or an HRA structure without asking their team two very important questions:

Who already has coverage through a spouse? What do employees value most in their health plan?

Without that insight, you might buy a plan that fewer than half your employees use, or spend $200-$300 per employee on premiums when many have coverage elsewhere. The result? You pay more per covered life, and your team’s satisfaction tanks.

The solution? Distribute a simple survey or have one-on-one chats before you pick any insurance option. That way, you can tailor your offering, whether that’s a full group plan, an HRA, or a mix, to what actually fits your business and your team.

Proof of Other Coverage: Why You Need It and How to Get It

Waiving coverage is more than a casual "I don't want it" statement from employees. For compliance, especially under Affordable Care Act rules and IRS regulations, you must have proof they’re covered elsewhere.

This can be as simple as:

A photo or scan of the spouse’s insurance card A letter or statement from the spouse’s insurer A signed waiver form acknowledging other coverage

Keep that documentation organized—think of it like keeping your car’s maintenance log. You don’t want to be caught unprepared during an audit or when renewing your plan.

Bottom Line: What Should a Small Business Owner Do?

If you’ve made it this far, here’s my no-BS advice:

Survey your employees first. Find out who has spouse coverage, and who needs you to provide insurance. Set up a clear waiver and proof of coverage process. Don’t skip treating waivers like official business paperwork. Consider HRAs for a flexible, cost-controlled option. They’re increasingly popular for teams with mixed coverage needs. Compare prices and tax credits on the SHOP Marketplace. For small businesses under 25 employees, tax credits can make a big difference. Keep participation requirements in mind. Too many waivers can crimp your plan selection and raise costs. Shop around and ask hard questions. If a broker tries to sell you a Cadillac plan when your business needs a reliable commuter, run.

Health insurance is never going to be as straightforward as topping off your oil, but with a solid plan—and some homework—you can keep the engine running smoothly without breaking the bank or your sanity.

Need a spreadsheet to map this out? I’ve got one for that too.

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