Navigating Health Insurance During a Divorce
A major concern for many today is the rising cost of health insurance and whether they even will have coverage in the near future. This too can be added to the list of issues and stresses that couples deal with during a divorce. Particularly for the spouse that stays at home or is self-employed, obtaining health insurance after the divorce must always be kept at the forefront. This article delves into how health insurance is affected once the couple separates and then their options once the divorce is finalized.
Health Insurance While Separated
While the couple is separated but still married, the spouse who had been maintaining the health insurance for the family will typically be required to keep that in place until a divorce is finalized. Unless the court allows otherwise, the couple is supposed to maintain the status quo. Meaning that during the separation, life insurance policies, health insurance and 401(k) beneficiary designations should all stay in place as if the couple were still together. So even in the most contentious of cases, you are not allowed to just drop your spouse from the insurance plan especially if they are not offered coverage through their own employment.
On the plus side, you do get a reduction in your support payments based upon the additional cost in premiums to cover your spouse and children. With premiums continually on the rise, this could give you a break year after year in your support. So if you already have a support order in effect and it has been some time since it’s been reviewed, it might be worthwhile to take a look and see if you are entitled to a further reduction.
Health Insurance After the Divorce
Dealing with health insurance post-divorce has become one of the most difficult issues to resolve. Once a divorce is finalized, the health insurance provider will terminate the non-employee spouse from the plan as they are no longer a dependent of the employee. So for the non-employed spouse, this makes a huge impact on their lives as they will be required to get their own insurance. Their attorney should be addressing this with them well in advance of the divorce being entered.
In the past, the typical process had been for a spouse who did not have their own health insurance to obtain COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage through the ex-spouse. COBRA is a federal law that allows a person to continue health insurance coverage under certain circumstances for a set period (usually 18 to 36 months) in the event one leaves their job or retires. COBRA also applies to a person who wants to continue health insurance coverage through their ex-spouse’s plan after a divorce. Being able to continue coverage for 36 months after a divorce sounds great, except that you have to pay the total cost of the premiums out of pocket. Keep in mind, the amount that comes out of every paycheck is just a small portion of what the health insurance costs. The employer is actually covering the majority of the cost of the premium. In prior years, when premiums were much lower, this was typically still a great option. But now with premiums as high as they are, paying the full cost of the insurance often makes COBRA too costly to afford. Most are left looking to the open market to find health insurance post-divorce which still can be extremely expensive.
What has become a popular method to avoid having to get ones’ own insurance, at least for a period of time, is for the parties to agree to delay the divorce decree. What this means is that the parties can sign off on their settlement agreement regarding the financial terms of their divorce, i.e. selling the house, dividing the retirement accounts, alimony, etc. but delay the court issuing the order that actually dissolves the marriage. Since under the law, the parties would still be married, the spouse can remain on the employed spouse’s health insurance. This of course requires the parties to be able to cooperate and is yet another reason why working together amicably can pay off! There are reasons why this will not be the right option for couples, such as if one of them is looking to remarry soon after the divorce. But for those who aren’t, it can be a great way for the parties to save money and soften the initial financial blow that they face from a divorce. As always, you should consult with an experienced family law attorney to discuss the specific facts of your case.