Divorce & Health Insurance
Divorce is a confusing and very emotionally turbulent time for most people. In addition to the many things that you have to consider along the way, like asset division, bills, custody, and child and spousal support, you will also need to give some thought to the issue of your Insurance. Since several things have changed under the Obamacare Affordable Care Act, (and may change again in the future) we recommend staying updated on what the new law allows.
What is COBRA?
Commonly in a marriage, only one of the spouses has the family’s medical insurance through their employer. That in turn provides coverage for the other spouse and any children. Of course, divorce changes that, as no Michigan insurance companies are willing to continue providing coverage for spouses once they are divorced. And this is where COBRA federal law comes in.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows spouses to continue receiving insurance coverage through their ex-spouse’s employer, even though they are no longer married to an employee of that company. But as you might expect, there are lots of hoops to jump through for anyone wanting to continue having insurance coverage. Using COBRA to continue this coverage is a very common practice, but you need to be aware that in order to continue having coverage, you will be required to pay for your own coverage in full.
Using COBRA to keep your Health Insurance
The first thing to know is that COBRA only applies if the insurance was a group plan through a company that had at least 20 employees the year before the divorce. If there were the requisite number of employees at the company, the employer has 14 days after the divorce to provide you with materials that will allow you to continue insurance coverage through them. You will then have 45 days to choose to accept the continued coverage. If you do nothing during those 45 days, your insurance coverage will be automatically terminated. That means as a former spouse, you have up to 60 days after your divorce to tell the company you would like continued insurance coverage through them or else you will miss your chance to get insurance coverage through your ex-spouse’s employer.
If you do elect to continue receiving your insurance coverage through your ex-spouse’s employer, know that you cannot keep it forever. Continuing your insurance through COBRA after a divorce is a minimum 36-month extension of your insurance, which may terminate early if:
- you do not pay the premium,
- the employer no longer offers group insurance,
- the employer goes out of business,
- you obtain insurance through another group plan that does not have limits for pre-existing conditions, or
- you become eligible for Medicare.
What is the cost of COBRA?
You should expect to pay a lot of money for this extension of your ex-spouse’s employer’s insurance benefits under COBRA. The COBRA plan can, and often does, charge former spouses up to 100% of the cost of the premiums plus another 2% administration fee. Therefore, in order to get the same insurance you had before, it is likely to cost hundreds of dollars each month. Long story short, COBRA is usually good, but expensive insurance coverage. Less expensive options can often be found,
This may not be an expense you are willing or able to pay at the time immediately following a divorce in our Oakland County area, especially if you are unemployed. One study determined that the average cost for insurance extensions under COBRA equaled about 84% of the average monthly unemployment benefit. For this reason, it may not be worth it to get extended insurance coverage through your ex-spouse’s employer under COBRA following a divorce. This is an important financial decision, and should be thoroughly discussed with your attorney, accountant, or financial advisor. There are options available all over Metro Detroit that are worth exploring.
What about Obamacare?
The Affordable Care Act made some very significant changes in how insurance will affect people after their divorce, particularly women. Studies show that it is primarily women who are left uninsured after a divorce, as the majority of women’s health care coverage is provided through their spouse’s employers.
However Obamacare, as it is commonly known, has changed a number of factors that previously made it difficult for women to get health care coverage after divorce. One of those is the fact that Obamacare allows people with previous conditions to apply for and receive healthcare. So for spouses with preexisting conditions, like cancer, HIV/AIDS and even pregnancy, Obamacare forbids insurance companies from denying them health care coverage.
Another aspect of the Affordable Healthcare Act that may work in the favor of the recently divorced, especially women, if the fact that the Act prohibits Insurance companies from applying discriminatory gender-based insurance costs.
While there are limit periods in which people are encouraged to sign up for the Affordable Healthcare Act, a person can enroll at any times if they’ve experienced a qualifying life event, such as a divorce, marriage, or birth of a child.
Lastly, one final way in which Obamacare can positively affect a family after divorce, is through the cost of alimony or spousal support. Sometimes, in the wake of a divorce, the breadwinning spouse is required by the court to pay spousal support to their ex after the divorce for a period of time. These alimony awards, also called spousal support, and somewhat common in Oakland County Family Courts. Because the recipient’s costs of living expense is used to help determine how much alimony is awarded, cheaper health insurance can mean less alimony paid out. If the receiving spouse is able to qualify for subsidies under the Affordable Care Act, thus paying less for health insurance, the spouse who is required to pay can make the argument that the alimony should be lower. And if you are the one paying, this is good news. (As with most topics in Michigan divorce law, there is much more to the alimony story including the receiving spouse having to declare that alimony as taxable income.)
Mid-Michigan Divorce Attorneys
At The Kronzek Firm we are highly-skilled family law attorneys with decades of combined experience of practicing family law. We can help walk you through the process of extending your insurance benefits or of purchasing new health insurance coverage.
Divorce is a hard and confusing time, and we can help take away some of the stress associated with insurance. We offer free, no-pressure initial consultations with one of our team of Oakland County family law attorneys. Our team has help hundreds of divorce clients over the decades and we sure can make the process smoother for you too. Call today to schedule your appointment! Call our Farmington Hills office today! (248) 479-6200.