What to know about your health insurance and divorce

Divorce can be a challenging transition on many levels. There are a lot of things to sort out, from divvying up assets to figuring out living situations. And although it may not be on the top of your list, health insurance is also one of the things that needs to be discussed because divorce can change coverage for you and your family.

Learn why planning ahead may help make this life-changing transition a bit smoother.

Often, a married couple is covered under one plan, often provided through a spouse’s employer. The non-employee on the plan is considered a family member or dependent. When a couple decides to divorce, they both stay insured on the existing plan during the process.

But once the divorce is final, the non-policyholder is no longer considered a family member and isn’t covered on the plan. That spouse will have to find new insurance coverage and pay their own premium.

“People who are divorcing will mention health insurance coverage during negotiations if someone thinks to bring it up. But it’s usually not a top contender for discussion,” says Ken Jewell, a matrimonial and family law attorney and founder of the firm Jewell Law in New York City.

One reason it sometimes falls to the wayside is that the spouse providing the health insurance often passively pays the premium every month — the cost is coming out of their paycheck. So it can be easy to forget that health insurance should be a part of the divorce negotiations, Jewell adds.

One spouse will likely be in a position to find new coverage. And it may be the first time in many years that they’re paying for it themselves. That’s why it’s critical to figure out what type of health insurance fits your needs and what you’ll be able to afford.

There are several options to consider for health insurance when you get divorced:

The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families the right to continue with their group health plan even if they lose their benefits due to qualifying life events such as divorce or job loss. For this to apply, the group health plan must be covered by COBRA and the employer must have at least 20 employees. (A company that has fewer may have a mini-COBRA plan available.)¹

• COBRA pros:
  You have 60 days to decide if you want to continue your coverage under COBRA. If you go this route, you can stay on the plan for up to 3 years.
• COBRA cons:
  “This may end up being your most expensive option because your premium could include the full cost of your policy, plus a 2% administration fee,” explains Malia Rogers, principal insurance broker and founder of MediGap Pros LLC in Coeur d’Alene, Idaho.
  
  “I tell people not to take the COBRA coverage unless it’s cheaper than other plans you’re considering,” says Ginita Wall, CPA and co-founder of the Women’s Institute for Financial Education in San Diego and co-author of The ABCs of Divorce for Women. “Besides, it might be better to find insurance that’s not going to run out in 3 years, leaving you in the position of having to get coverage again.”

Coverage offered through your current employer is a great option. In most states, your employer is required to pay for at least half of your premium, says Rogers. “If you work for a large employer, the coverage is most likely better than anything you can buy on your own because they have buying power,” she explains.

And even if your employer doesn’t provide the same level of coverage you had on your spouse’s plan, it’s still a practical choice. “Even if the coverage isn’t better than what you had, you’ll likely find that your employer’s insurance comes at a lower price,” Wall says.

If this sounds like the way to go, talk to your employer about how to enroll in the company’s plan.

The Affordable Care Act (ACA) makes health insurance available to people who are looking for individual or family coverage via the government’s Health Insurance Marketplace. Under the ACA, health insurance plans must cover a set of 10 categories. These include hospital care, prescription medications, mental health services, pregnancy and childbirth. Some plans may cover more services, but all plans must offer dental and vision coverage for children.²

“This is a popular option currently, because more people than ever are qualifying to get a subsidy to purchase their own insurance at a highly discounted monthly rate,” Rogers says. “It’s one of the safest options to go with, especially if you have major health conditions. It covers preexisting conditions and has no dollar limits on how much the policy will cover you on essential health benefits.”

UnitedHealthcare Individual & Family ACA Marketplace plans offer affordable, reliable coverage options. See Individual & Family plans to get started.

Some states and the District of Columbia have their own marketplace exchanges. To see whether your state uses its own marketplace or if you’ll need to shop at the federal marketplace, go to healthcare.gov.

People going through a divorce who can’t afford health care may want to consider applying for Medicaid. It’s a government insurance program that provides free or low-cost health care coverage to some low-income individuals, families and children, older people, pregnant people and people with disabilities. Medicaid benefits and program names vary somewhat between states.

“Out-of-pocket costs are low or none for services, but you’re limited to doctors that accept Medicaid,” Rogers says. “In some parts of the country, this isn’t an issue. But in other parts, it may be difficult to find care due to the shortage of providers accepting Medicaid.” You can enroll in this option any time of year, so there are no deadlines to apply.

This type of insurance offers fast, flexible coverage during times of change in your life. Short term insurance provides a bridge to fill in any temporary gaps in your insurance coverage. It can provide benefits for 1 to 3 years, depending on your state. These limited-duration plans don’t have to cover ACA’s essential health benefits such as maternity care and prescription medications. They also don’t have to cover preventive care such as vaccinations or cancer screening.

Most short term plans are medically underwritten. That means people with health conditions can be denied or charged greater premiums. It’s also worth noting that the availability of these plans and the maximum term limits can vary widely from state to state. 11 states don’t offer short term plans at all, says Jewell.  

Purchasing a plan from a private insurance company may be a possibility if your employer doesn’t offer insurance, you don’t qualify for a subsidy or none of the other options is available to you. Be careful with these plans — many will have coverage limitations, such as preexisting conditions or wellness services that aren’t covered.

“Do not assume they cover what you think traditional plans should cover. If you choose a private plan, make sure you’re working with an experienced broker who thoroughly explains the risks and exclusions,” Rogers advises.

Children can remain on the existing insurance plan as dependents without any disruption. It’s also possible for a child to switch to the other parent’s insurance or to be on both plans. The latter is helpful if the primary health care insurance doesn’t fully cover the child’s medical care.

Regardless, when child support is involved, federal law requires the order to include medical support, which can be private health insurance from an employer or the marketplace, public health care coverage such as Medicaid or payment toward the child’s health care costs.

In cases where parents can’t come to a mutual decision about whose insurance will cover their kids, a court may determine who is responsible for providing their child’s health insurance coverage.

There are families whose incomes are too high to qualify for Medicaid, but too low to afford private coverage. In these cases, they can seek health coverage for their uninsured kids through the joint federal and state-run Children’s Health Insurance Program (CHIP).

Income eligibility levels vary from state to state and range from as low as 170% of the federal poverty level (FPL) up to 400% of the FPL.³ You can find the income eligibility standards on medicaid.gov.

Knowing your health insurance coverage options can help you choose the optimal plan once you’re divorced. With the help of an experienced insurance agent, it’s possible to find a plan that best fits your needs and your budget.

A skilled attorney can also help you iron out the details during negotiations. “Many divorce lawyers will offer you a free consultation,” says Jewell. “It’s a great opportunity to ask any legal questions and prepare yourself for what’s ahead.”