Health Insurance and Divorce

1. How will my divorce impact my health insurance benefits?

A divorce causes major issues with health insurance benefits. Many families have an employer that provides and/or pays for health insurance benefits that covering the entire family. After a divorce, the spouse with the family health insurance coverage can no longer cover the dependent spouse. The dependent spouse is no longer a “family member” who can take advantage of the employer-based policy. There is no way around this unfortunate reality. If a couple gets divorced, then the dependent spouse will lose his or her health insurance coverage.

If both parties do not have adequate health insurance benefits available, and if the cost of obtaining COBRA benefits or an alternative health insurance policy is prohibitive, then there is one way to continue benefits without additional cost: enter into a separation agreement, but delay filing for divorce. That way, the parties remain married and can stay on the same health insurance plan even though they are separated. The parties can consent to waiting for one, two, or more years before either spouse files for divorce. While the parties will remain married, their property, custody, and support issues will be addressed in their separation agreement. Under some circumstances, this is an optimal resolution.

Another option is for the dependent spouse to obtain COBRA coverage. COBRA is a federal law which mandates that a person covered under a health insurance policy be given the right to continue that coverage, at his/her own cost, for a set time period if certain requirements exist. For example, if you obtain a divorce and your spouse has family health insurance coverage through his employer, then the employer would have to provide COBRA coverage for you after the divorce. That COBRA coverage would require that you have the same health insurance policy, although your coverage would now be individual and not family. You would have to pay the employer’s cost for that individual policy.

2. What are the different types of medical insurance available?

a. Employer-provided medical insurance – The best source for medical insurance today is your employer-provided plan because its cost is most likely subsidized by your employer. These medical plans are generally one of four types: indemnity plans, service provider plans, preferred provider plans, or health maintenance organizations.

b. Individual medical insurance – Medical insurance policies are available directly from insurance companies for individuals. The advantage of this type of policy is that you may shop for the type of benefits you want. The disadvantage is you have to pay the whole cost of the policy premiums.

c. Medicare – Medicare provides mandatory basic hospitalization benefits for all U.S. citizens over the age of 65 under Part A coverage. Part B coverage is a voluntary program that provides coverage for doctor bills at a monthly cost to the participant. Medicare typically covers only half of the average senior citizen’s health care bills. It may be supplemented with Medigap insurance.

3. What is COBRA coverage?

COBRA is the federal law that entitles you to continued coverage in an employer’s group health plan, even if you’ve become ineligible to participate because of job loss or divorce. If you were covered under your spouse’s employer-sponsored health plan policy prior to your divorce or legal separation, then you should still be entitled to continued coverage under COBRA. However, the employer who sponsors the health plan no longer has to pay the premiums for this coverage. A divorced spouse must pay his or her own premiums.

The main advantage of applying for COBRA benefits is that it enables a divorced spouse to maintain his or her health insurance policy provided by the former spouse. If an employer-based health plan has good coverage, then it may be advantageous to continue coverage under that policy. COBRA coverage lasts for 36 months. After the 36-month period expires, the divorced spouse must obtain his or her own health insurance benefits. In some narrow circumstances, COBRA can be extended for an additional 18 months.

4. What are my available health insurance options after I am divorced?

There are many things to consider during divorce, and maintaining health insurance coverage should be a priority. When a marriage ends, there are normally four good options that a divorced spouse can pursue to maintain health insurance coverage:

a. Continue the coverage offered through your ex-spouse’s policy: The most common option is to apply for COBRA benefits. The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federally-mandated law that was designed to protect employees and their families from losing coverage as a result of divorce, death, job loss, and other life circumstances. It really is a stopgap though, because most people simply can’t afford the coverage premiums. COBRA is very expensive.

If your spouse maintains health insurance coverage through the company, and the company employs at least twenty people, than you may continue your health insurance coverage for up to three years. However, the divorced spouse must pay for all of the premiums. Once you remarry or obtain coverage of your own under another policy, the COBRA law then terminates.

b. Get coverage through your current employer: Another option for a divorced spouse is to obtain health insurance through his or her own employer. If you are working and if your employer offers an affordable health plan, it is highly advisable to assess and compare the cost of COBRA versus the costs of participating in your employer’s plan.

c. Ask for health insurance coverage as part of the settlement: This may or may not work, but it is definitely worth discussing with your lawyer. Many divorced wives focus solely on the amount and the length of their alimony payments. This can be short sighted. I always try to obtain a settlement where the ex-husband is legally responsible for covering his former wife’s COBRA payments. Alternatively, I try to obtain a settlement where the ex-husband is legally responsible for paying for any costs in obtaining a new health insurance policy for his ex-wife.

The typical cost for COBRA is about $650 to $750 per month. This is extremely high and is quite a shock for most newly divorced wives. Therefore, it is always advisable to try to convince a court to require that a divorced husband pay for the COBRA coverage. In my opinion, one of the most important parts of a divorce case is insisting that a divorced spouse have her health insurance continued. In my assessment, the continuation of maintaining health insurance is as equally as important as the amount and length of an alimony award.

d. Purchase an individual health benefits plan: In some or most cases, this may be your only or best option. Once again, you will have to pay the monthly fee on your own, but you will be surprised as to what is available for the uninsured and underinsured, as well as for those with ongoing medical conditions. There are various plans from which to choose, even though many want you to believe there are only two options. There are plans that place constraints on access to hospitals and physicians for a lower price, and plans that offer ready access to hospitals and physicians for a higher price.

However, with the healthcare crisis comes another healthcare option called “consumer-driven healthcare.” One benefit of the consumer-driven healthcare alternative is that it puts the relationship back where it needs to be – into the hands of the patient and the physician.

There are tons of other benefits, especially if you and your children are fairly healthy people and are not in and out of the hospital often. The additional benefits can range anywhere from no deductibles, co-pays, and waiting periods, to being able to have ongoing conditions covered and having all services (like your ancillary, dental, prescription, vision, etc.) under one umbrella policy.

A divorced spouse should know exactly how much it will cost him or her to obtain health insurance under a private plan. This information should be disclosed to the court. The court will take into consideration the costs to obtain monthly health insurance when it determines the amount of spousal support.

5. Is there a time limit for a divorced spouse to apply for COBRA benefits?

Yes. Your spouse’s employer is required to provide COBRA coverage for you, but only if you notify the health plan administrator within 60 days of becoming divorced. If you don’t give the administrator proper notice, then you will not be eligible for the coverage.

6. Can my husband keep me on his employer’s group health insurance plan after we are divorced?

No. Even if your spouse will be providing health insurance for the children, he or she cannot provide coverage for you through the employer’s group plan, because you’re no longer a member of his or her family. If your spouse has been providing coverage for you, and if your spouse’s employer has more than 20 employees, you’ll want to explore coverage under COBRA.

7. What are the major problems with COBRA?

There are two problems with obtaining COBRA insurance coverage. The first is the cost of the coverage. COBRA coverage is considerably more expensive than the coverage available from most employers, because you’ll have to pay 102% of the premium. The average price for the COBRA premium ranges from $650 to $750 per month.

The second problem is the risk of becoming uninsurable. COBRA coverage will end by its own terms 36 months after your divorce is effective. What happens if you’re stricken with heart disease or cancer during those 36 months? You would then face the unpleasant prospect of searching for new medical insurance at the end of the 36 months with a most unappealing medical history.

8. Is there any possible way to “beat the system” and stay on my ex-husband’s health insurance policy after the divorce?

The only possible way for a divorced spouse to remain on her husband’s health insurance policy is to obtain a legal separation, or a divorce from bed and board. There really is no formal proceeding for a legal separation in New Jersey, but there is an outdated legal proceeding called a divorce from bed and board that is similar to a legal separation. Basically, a divorce from bed and board is a legal proceeding that is not really a divorce, but is more than a legal separation. It is also called a limited divorce, and was very popular in the 50’s and 60’s. Many people believed that getting a divorce was a mortal sin, resulting in damnation. This belief was especially prevalent for people of the Catholic faith.

To address these concerns, the courts developed a legal proceeding called a divorce from bed and board, where the parties are economically divorced but are still legally married. The parties will receive a judgment that equitably distributes their assets, issues support awards, and apportions marital debt. A limited divorce has all of the same attributes of an absolute divorce, except the parties can’t remarry.

The benefit of having a divorce from bed and board is that a dependent spouse can still receive health insurance benefits from the other spouse’s health plan because there is not a complete divorce. In my experience, retaining health benefits is the primary reason why a couple may choose to pursue a divorce from bed and board. Because it is often impossible for a wife to obtain affordable health insurance benefits after her divorce, it is imperative that she is able to maintain adequate health insurance if a medical condition exists. In my assessment, if there is a long-term marriage, a divorce from bed and board can enable a wife to retain her coverage; thus, prohibitive payments through COBRA or private policies are avoided.

A divorce from bed and board should only be pursued if the parties are still civil to each other. Moreover, this type of legal proceeding is really only applicable to a very long-term marriage, where neither party has an intention to remarry.

The drawback of a divorce from bed and board is that the parties are still technically married. Neither spouse can remarry, and it may therefore be impossible to seriously date other people. It is no fun to date a married person no matter how you look at it! Also, some spouses may still attempt to exert control over the other spouse because a technical marriage still exists.

If a divorce from bed and board is obtained, either spouse is permitted to file an application with the court to convert it to an absolute divorce. An absolute divorce is a full divorce, and both parties are free to remarry. Of course, if an absolute divorce is entered, the dependent spouse will lose his or her health benefits. Once the family unit is officially terminated, any employer-based health plan is no longer legally obligated to provide coverage to a dependent spouse.

In summary, understanding the full range of implications of a divorce from bed and board can be very complicated. It may take several meetings with an experienced lawyer to fully understand the pros and cons that a limited divorce has to offer. However, if a dependent spouse suffers from a severe medical condition(s), and if maintaining health insurance is a “life or death” issue, then it is worth serious consideration.