Women, in particular, often lose health insurance coverage as a result of divorce.
According to a 2012 study by the University of Michigan, about 115,000 women every year lose their private health insurance after divorce. 65,000 remain uninsured for months or years. One quarter of those who were previously dependent on their husbands’ plans were still uninsured six months after their divorce.
Even women who have health insurance through their own employers may find themselves unable to afford coverage after divorce. The study found that 11% of these women became uninsured.
The study focused on women ages 26 to 64 during the years 1996 through 2007 and found that moderate-income women and women age 50-64 were most likely to lose their health insurance.
The study did not examine the impact of divorce on insurance coverage for men, but the study’s author said that men were less likely to be insured via a wife’s policy, and in general tended to suffer less of a negative economic impact after divorce.
The provision of health insurance after divorce is governed by state and federal law as well as by the parties’ settlement agreement.
Insurance Coverage for Former Spouses
Many employers provide insurance coverage for current spouses. However, coverage for former spouses is available only in limited circumstances, and often at a high cost.
Under COBRA (the Consolidated Omnibus Budget Reconciliation Act), if one former spouse works for a company that employs 20 or more people, the other former spouse is eligible under federal law to apply for continued coverage.
Insurance coverage under COBRA costs the entire amount of the premium, plus a surcharge, for a total of 102% of the group rate. This is more than many people can afford.
A former spouse must apply for COBRA coverage within 60 days after becoming divorced. Coverage lasts for up to 36 months.
If a company has fewer than 20 employees, coverage is available under the North Carolina “mini-COBRA” law.
The state mini-COBRA law requires insurance policies to provide continued coverage for 18 months (rather than 36 as with the federal plan). Also, the state law only covers hospital, surgical, and major medical insurance but generally not dental or vision plans.
Once coverage ends, under either the COBRA or mini-COBRA statues, a former spouse will need to find new health insurance. If a former spouse becomes ill or injured or acquires a chronic health condition (such as diabetes) while covered by COBRA, he or she may have a difficult time finding an insurer who will provide coverage.
However, under the Patient Protection and Affordable Care Act (PPACA), commonly called “Obamacare” or the Affordable Care Act (ACA), as of January 1, 2014 insurers are prohibited from discriminating against applicants or charging them higher rates based on pre-existing medical conditions. Under the ACA, more people will become eligible for Medicaid and for government subsidies to help pay for health insurance.
Individuals who were formerly covered by a former spouse’s insurance plan may also seek to become covered by their own employer’s plan. Under federal law, a person who has lost access to other health insurance may enroll in an employer’s plan outside the annual open enrollment period.
Self-employed people may be able to obtain group rates for insurance, even if their businesses are very small.
Former Spouses of Federal Civil Servants
Under the Civil Service Retirement Spouse Equity Act of 1984, certain former spouses of current and former Federal employees may qualify to enroll in a health benefits plan under the Federal Employees Health Benefits (FEHB) Program.
A former spouse is eligible if he or she:
- Was divorced from a Federal employee, or a former Federal employee receiving an annuity, during the period that the Federal employee was employed by the Federal government or receiving the annuity;
- Was covered as a family member under the FEHD at least one day during the 18 months before the marriage ended;
- Is entitled to a portion of the Federal employee’s annuity or to a former spouse survivor annuity; and
- Has not remarried before age 55.
Former spouses must pay the full premium for FEHB coverage (i.e., the former spouse must pay both the employee and government shares of the premium cost).
Other Government Programs
Low-income individuals who can’t afford private health insurance may be eligible for Medicaid.
Those who don’t have access to either employer-sponsored coverage or COBRA may be eligible for the Pre-existing Condition Insurance Plan (PCIP) under the ACA. To qualify, an applicant must have been uninsured for at least six months and have a health condition that makes it difficult to obtain private insurance. PCIP rates for North Carolina range from $144 to $575 per month, based on the age of the applicant.
Individuals 65 and older are eligible for Medicare.
Insurance Coverage for Spouses and Settlement Agreements
Insurance coverage for a former spouse may be part of a settlement agreement.
Spouses in the process of divorce should research the costs of continuing coverage via COBRA as well as private insurance options. They should take into account the cost of premiums, co-payments, deductibles, and out-of-pocket medical expenses.
Under a settlement agreement, a former spouse may be required to cover the other spouse’s health insurance costs for the rest of his or her life, or only for a limited time. For example, one spouse may cover the other’s costs until he or she obtains a job with health benefits. The new job may require a waiting period, typically 30 to 60 days, before such coverage is provided – so this gap should also be covered.
A former spouse concerned about whether the other spouse will keep up with monthly insurance premium payments may wish to have the divorce settlement include a lump sum to cover future health insurance payments.
Separation and Health Insurance
Because health insurance can be such a major expense, especially where one spouse has a serious health condition, some couples opt for legal separation rather than divorce.
Some health insurers provide spousal coverage for separated spouses, but some do not. Thus, couples contemplating separation should carefully investigate whether continued coverage is even an option.
Health insurance companies require notification of a divorce (or of a separation that terminates coverage eligibility) within a specified time, and failure to provide this notification may be considered insurance fraud.
Insurance Coverage for Children
Determining who will pay for insurance coverage for children is often part of the settlement agreement process.
The parties may agree that the children will be covered under a parent’s employee’s group plan, or that one party will obtain private insurance. The parents may agree that one of them will bear 100 percent of the cost, or they may share costs in proportion to their incomes.
If both parents are covered by group insurance plans, then one plan can be designated “primary” and the other “secondary.” The secondary plan would cover most or all costs not covered by the primary plan. Insurance companies can help parents decide which plan should be primary and which secondary, and explain the process for handling claims covered by both plans.
As with insurance coverage for former spouses, parents need to take into account not only insurance premiums but also co-payments, deductibles, and out-of-pocket medical expenses for their children.
If a child has a pre-existing medical condition, it may be especially important to avoid the need to switch plans, if at all possible.
Of course, just because parents have an agreement about who will pay for what, former spouses do not always honor their agreements. Parents can enter into a formal contract with the children’s doctor’s office, stating who is responsible for what costs. For example, the parents may agree to split bills 50/50 or 75/25. The doctor’s billing department would then bill each parent separately. And one parent’s failure to pay would not (hopefully) result in collection agency calls or credit report damage for the other parent.
North Carolina courts have the authority to order parents to pay a child’s medical expenses as a form of child support. This includes medical, dental, and hospital expenses.
Under North Carolina law, the court must order a parent to maintain health insurance (including dental insurance) for a child when it is available at a reasonable cost. The cost of employment-based or other group health insurance is deemed “reasonable.”
- The court may order a parent of a minor child to provide medical support for the child, or the parties may enter into a written agreement regarding medical support for the child. An order or agreement for medical support for the child may require one or both parties to pay the medical, hospital, dental, or other health care related expenses.
- The party ordered or under agreement to provide health insurance shall provide written notice of any change in the applicable insurance coverage to the other party.
- The employer or insurer of the party required to provide health, hospital, and dental insurance shall release to the other party, upon written request, any information on a minor child’s insurance coverage that the employer or insurer may release to the party required to provide health, hospital, and dental insurance.
- When a court order or agreement for health insurance is in effect, the signature of either party shall be valid authorization to the insurer to process an insurance claim on behalf of a minor child.
- If the party who is required to provide health insurance fails to maintain the insurance coverage for the minor child, the party shall be liable for any health, hospital, or dental expenses incurred from the date of the court order or agreement that would have been covered by insurance if it had been in force.
- When a noncustodial parent ordered to provide health insurance changes employment and health insurance coverage is available through the new employer, the new employer shall enroll the child in the employer’s health insurance plan.
Insurance Coverage for Children under Title IV-D
Title IV-D is a federal program that provides parenting and support enforcement services. It covers families who receive benefits from the Temporary Assistance for Needy Families (TANF) program. Families that formerly received such assistance can continue Title IV-D services and families may also voluntarily enroll.
For child support orders under Title IV-D, both federal and state laws impose requirements on employers of non-custodial parents who are subject to court orders to provide health insurance. The employer must withhold from the non-custodial parent’s wages the cost of the health insurance premium for the child and transfer it directly to the company’s insurance carrier to pay for the child’s insurance. The statutes impose penalties on employers who fail to comply.
It’s important for divorcing couples to understand their own health insurance rights and options and those of their children. Spouses should be sure and do the appropriate legwork to determine the best way to obtain insurance. If a spouse fails to be proactive and research his or her options prior to separation, they could be stuck paying more than they can afford. Or worse, they could find themselves uninsured.