Divorce can send a ripple effect through your finances, breadwinner or not. Throughout the emotionally charged arguments surrounding division of assets, child custody and support, health insurance coverage is easily forgotten.
DeeAn Gillespie, a Phoenix divorce attorney, says many spouses mistakenly believe they’ll be able to ride out their current insurance policy through the end of the calendar year. Unfortunately, this is not the case.
It’s critical for both parties to understand how divorce affects their shared policies, especially the spouse who will, undoubtedly, be left with no coverage. While it may seem trivial compared to other matters, minding the details now could save you time, trouble and sudden medical expenses in the immediate future.
WHEN DOES HEALTH INSURANCE END AFTER DIVORCE?
Spousal health insurance coverage ends once a divorce is legally finalized.
Despite many people receiving health insurance benefits from their workplace or though state programs, federal laws dictate when and how health insurance policies end post-divorce. State laws, however, do serve to protect people’s coverage throughout divorce proceedings.
Most state laws put a freeze on assets and related economic issues, generally including insurance changes, once a party files divorce papers. Plus, it’s extremely difficult to change policies outside of a major life event. While a finalized divorce qualifies, simply filling does not.
There is one loophole, but both spouses will have to agree. Legal separation, opposed to divorce, means a couple is still legally married but living apart with a court order dictating the situation. Because the marriage is still in tact on paper, insurance coverage is generally not terminated. Although, some companies have specific rules for separated couples and those interested in pursuing legal separation should speak with their employer or insurance provider before moving forward, as well as their individual divorce attorneys.
“Legal separation may initially sound like a good option, but it almost never is,” Gillespie says. “The rare instances where it would be recommended include religious or financial protection reasons.”
Such qualifiable reasons to consider legal separation may include a serious upcoming surgery or when one spouse has a disability or ongoing medical condition.
IS IT POSSIBLE TO EXTEND HEALTH INSURANCE COVERAGE POST-DIVORCE?
There are no permanent ways to remain on a former spouse’s insurance plan or force them to pay for your new, separate one. However, some states, like Utah, do allow for parties to delay the entry of their divorce decree. Insurance coverage will continue until the decree is processed, with a maximum delay of three months.
If you’re looking for a longer extension, COBRA is the only viable option.
The Consolidated Omnibus Reconciliation Act (COBRA) is a federal law requiring companies with 20 or more employers to continue offering health insurance to individuals who would otherwise lose such benefits, such as former spouses. Cobra coverage for former spouses extends for 36 months. It’s also intended to help terminated employees, full to part-time employees, and retirees who don’t qualify for Medicare.
It’s not as sweet of a deal as it may initially sound, however. While offered through employers and guaranteeing the same coverage, from co-pays to surgery costs, the employer is not required to subsidize the costs. In fact, employers may charge 102 percent of the premium costs—the extra 2 percent to cover any administrative costs. For this reason, COBRA is often too expensive for individuals to justify; the spouse leaving the current insurance plan should first consider joining their employer’s policy or research private and state policies.
WHAT ABOUT HEALTH INSURANCE FOR OUR CHILDREN?
Coverage for your children is unaffected by divorce. If there’s a disagreement surrounding which parent should be responsible for financing insurance coverage, a judge will decide as part of the divorce proceedings. A decision may be based off the who is more financially independent, who has better access to affordable coverage or who provides child support.
Health insurance can be complicated even without outside stressors, like divorce, taking their toll on you. Avoid figuring out the intricate details alone and after the fact by discussing viable options with your divorce attorney and current insurance provider.