The school authority is saying that if husband is enrolled, wife’s Medical Allowance will automatically be deducted.
This is exactly true and justified. If one is enrolled under WBHS, his/her spouse automatically comes under the scheme. If you did not include her name in the beneficiary list while enrolling yourself under the WBHS, you made a mistake, knowingly or unknowingly. Now inquire about the process how her name may be included in the beneficiary list.
If your wife opted that her husband is a Govt. employee and enrolled under WBHS while uploading her online Profile, there is no way to draw the Mediacl Allowance for her.
Now your wife should refund the Medical Allowance she has been drawing since you are enrolled under WBHS.