Health insurance coverage is a valuable asset that is sometimes overlooked during the divorce process. About half of all Americans receive their health care coverage through their employer, and many of these policies also cover the employee’s spouse and children. Since divorce terminates a non-employee ex-spouse’s right to coverage, divorcing spouses should plan for how they will continue health care coverage before their divorce is finalized.
COBRA and Continuation Coverage
The Affordable Care Act (Obamacare) provides a 60-day special enrollment period for individuals who have lost coverage due to divorce.
Ex-spouses may be eligible for up to three years of health care coverage through their ex-spouse’s employer. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) is a federal law that requires insurers and employers to cover non-employee ex-spouses on group insurance policies for up to three years after divorce. The non-employee ex-spouse will make payments directly to the insurance company, which may not charge more than 102 percent of the plan’s cost. However, the plan may be relatively expensive, considering that the employer may have previously covered a portion of the premiums. After the coverage period expires, the non-employee must be offered an equivalent private policy without needing to provide medical records or submit to medical tests. These policies are often more expensive than a policy that an individual could procure through a new employer, the Affordable Care Act, or another health plan.
COBRA covers all private employers with 20 or more employees that offer group health plans, and most states have enacted mini-COBRA laws for employers with fewer than 20 employees. State laws may also extend coverage to employees of public entities. In addition, employers may offer their own continuation coverage options with similar requirements and benefits.
The time period for COBRA coverage typically starts on the date of the final divorce order, but an insurer may start the clock on the day when they receive notice of the couple’s divorce, even if the divorce is not yet final. To ensure the greatest period of additional coverage, divorcing spouses should not notify the employer or insurance company of the divorce until the final judgment is entered.
The employee ex-spouse has 60 days after the final divorce order to notify the plan administrator of the divorce
The plan administrator has 14 days to inform the non-employee ex-spouse of their right to COBRA coverage
The non-employee ex-spouse has 60 days to elect coverage
The non-employee ex-spouse has an additional 45 days to pay all premiums due
Children and Health Insurance
Divorce will most likely not affect a child’s eligibility for coverage under their employee parent’s health care plan. Federal law prohibits an employee parent, an employer, or an insurance company from denying coverage to an employee’s child because the child does not live with the employee, is not claimed by the employee as a dependent on their federal income tax return, or lives outside the plan’s service area. If the employee’s child otherwise qualifies for coverage under the plan, but the employee, employer, or insurance company refuses to cooperate, a lawyer can draft a qualified medical child support order (QMCSO) to ensure that the employer continues to cover the child. The QMCSO will also protect the non-employee parent’s right to receive information from the insurer and employer and will allow the insurance company to reimburse the non-employee parent directly for health care claims. Parents may also reach out to the insurance company directly for resources to help protect their child’s coverage.
Regardless of how an ex-spouse or child will be insured, divorcing spouses may want to account for health insurance premiums and other medical expenses in their spousal support and child support agreements. An ex-spouse may agree or be ordered to pay a portion of the ex-spouse’s or child’s medical expenses, including premiums, or make third-party support payments directly to the insurance company. Accounting for the cost of premiums and other medical expenses in support agreements may be an important step to securing coverage for parties who otherwise could not afford insurance.
Ex-spouses of military members are not eligible for COBRA, but they may qualify for other coverage.