One issue that must be addressed in a divorce settlement is how health insurance for the spouses and the children will be handled after the divorce is final.
Why Health Insurance is a Divorce Issue
Most Americans obtain their health insurance through a group insurance plan offered by their employer. Employees can add family members to their plan as Dependents with premiums being paid through a payroll deduction.
When a couple divorce, HR is notified of the change in dependent status and the ex-spouse loses the medical, dental and vision coverage. It is important to note that children covered under their parent’s group insurance will not be impacted by the divorce and can still have coverage till they are 26-years old.
How to Obtain Health Insurance After a Divorce
The following are options for new health benefits:
The law is officially the Consolidated Omnibus Budget Reconciliation Act (COBRA). If the spouse with the employer benefit insurance plan works for an employer with 20 or more employees, federal law allows the former spouse to pay for coverage under the same plan for a period of time 36-months. The premium is the true cost of the coverage plus a 2% charge for processing. The spouse needing COBRA must pay the premium, direct to the employer with little grace period if payment is missed. COBRA paperwork is sent directly to the non-employee and then enrollment is open for 60-days from date mail was posted. Premiums are retroactive to date dependent coverage ended.
This is for the State of California companies that have 19 or fewer employees. The guidelines are the same as Federal COBRA EXCEPT they can charge 10% more in premium for processing.
Insurance with a new employer
If the spouse needing insurance goes to work, or is already employed, there may be health insurance available through their employer. Enrollment is based on the “qualifying event” of losing coverage pursuant to the divorce.
The Affordable Care Act
The Affordable Care Act (ACA) may provide coverage to meet the needs of the ex-spouse who was formerly covered by their spouse’s employer-provided health insurance. Depending on the new income level of the ex-spouse, there may be a subsidy available to help with the costs. Enrollment is based on the “qualifying event” of losing coverage pursuant to the divorce.
Individual health plans. Insurance companies provide individual health plans to those who need them. It may be costly, but it can provide the necessary coverage and will have more options than through COBRA. Enrollment is based on the “qualifying event” of losing coverage pursuant to the divorce.
Medicaid or MediCal
If taxable income is too low for a subsidy to have insurance through the ACA, coverage is available through the State system of Medicaid or MediCal (California). Enrollment is based on the “qualifying event” of losing coverage pursuant to the divorce.
Who Pays the Ex-Spouse’s Health Insurance?
As part of the settlement agreement, this would be a discussion between the client’s and the Collaborative Team. Understanding what is available, what the coverage breakdown is, and the cost are the first steps.
It is important to know your health insurance options in the time of emotionally charged changes. Fortunately, there are choices that should meet your needs and ability to afford.
Seeking an expert in the health insurance field can assist in understanding what is available and guide you in the decision that best meets your needs.