Impending Divorce: What the Health Do I Do Now?

A key issue keeping divorcing individuals up at night is often: “What will I do for health insurance?” It can seem like a daunting question, but knowledge is power. Using employer sponsored group coverage is typically the easiest and lowest cost solution. At home spouses sometimes decide to seek employment post-divorce in large part so that they qualify for their own group insurance policy.  If that doesn’t fit your situation, don’t panic!  There are three other potential options available to get the health insurance coverage you need.

1. COBRA – The Consolidated Omnibus Budget Reconciliation Act of 1985 created federal legislation that almost all companies need to follow allowing individuals to continue health insurance coverage for a designated period after a qualifying event occurs. While employer sponsored plans will not insure the ex-spouse of an employee, children can stay on the company sponsored plan until they are 26.  Divorce is considered a qualifying event under COBRA making the ex-spouse eligible for the same benefits that were being received for up to three years post-divorce unless they remarry.  Unfortunately, the cost of that same coverage will go up significantly as you will pay the full monthly premium with no company subsidy plus a 2% administrative fee.  In addition, you will have to pay the premiums with after-tax cash flow rather than pre-tax payroll deduction.

2. Illinois Spousal Continuation (ISC) – The second potential option is called Illinois Spousal Continuation. ISC applies to all group accident, health, and HMO policies written in Illinois. As with COBRA, the ex-spouse is eligible for the same benefits that were being received at an increased cost of the total group rate with no company subsidy.  With ISC there is no administrative fee for the first two years, but for those who are under age 55 at the time the divorce ISC stops after the two years verses the three years of eligibility with COBRA.  Fortunately for individuals older than age 55 when divorced, ISC continues until Medicare eligibility at age 65.  A 57-year-old woman we helped greatly benefited from this as she has cancer and was fortunate her husband’s employer qualified for ISC at the time of the divorce.  Even though her former husband left that company post-divorce, she still qualifies until she’s 65. However, the extra years come with extra cost of an additional administration fee of 20% of the total group rate after the first two years of coverage.

3. Individual Policies – It’s smart to check with an insurance broker for options for individual policies. When group coverage isn’t suitable, many people enroll in plans under the Affordable Care Act. There are multiple plans and network types. A good place to start is www. healthcare.gov to see the coverage and premium costs for different providers. While open enrollment is typically November 1^st – December 15^th, losing health insurance due to divorce qualifies for a special enrollment period for 60 days after the divorce.

While healthcare is a challenge for all Americans, there are options.  In addition to basic healthcare insurance costs, it’s important to plan for prescriptions, vision and dental costs as well as co-pays and deductibles.  It’s critical to find out when the notification and enrollment deadlines are. Our BDF Divorce Practice Group helps people explore alternatives to find coverage that will work for their family’s unique situation. Our book “The Next Chapter – A Practical Roadmap for Successfully Navigating Through, and Beyond, Divorce” includes information on health insurance and all aspects of divorce.  Please email TheNextChapter@bdfllc.com if you would like a complimentary copy for someone contemplating divorce to help them make sound decisions and avoid costly mistakes.