Divorce and COBRA Insurance
It is no secret that a divorce requires both parties to make significant adjustments to their lives. For one thing, both parties must now adjust to living apart from one another and may need to deal with the new spouse of the other party. Whereas both parties may have been accustomed to spending significant time with their children before a divorce, a divorce can result in one party seeing the children less often. And then (of course) the parties must adjust to living without the income and benefits the other party.
Where one spouse has health insurance through his or her employer, and that employer offers the opportunity to purchase a family plan, it is not uncommon for married spouses to take advantage of this. Where one spouse has gotten health insurance through the other spouse’s employer, a divorce can bring this to an abrupt and perhaps unexpected end. What can a spouse do in such a situation to continue receiving the health insurance he or she is accustomed to?
Wait…You Mean I Lose My Health Insurance if I Get a Divorce?
If you have health insurance through your own employer, or if you have an individual health insurance plan, a divorce should not affect your health insurance coverage. But if you get your health insurance through your spouse’s employer because your spouse pays for a family plan (or the employer pays for family coverage), a divorce can bring this coverage to an end. Since the two of you would no longer be considered spouses or a family after a divorce, the employer’s health insurance provider will not continue to provide you health insurance coverage once the divorce is finalized.
In some cases – such as where the spouses are young and healthy – this does not present much of a problem. The spouse who formerly got his or her insurance through the other’s employer will simply obtain an individual plan or obtain insurance through his or her own employer. But where this is not an option, the non-employed spouse can continue the health insurance coverage he or she enjoyed during the marriage through COBRA.
What is COBRA?
COBRA is an acronym that stands for the Consolidated Omnibus Budget Reconciliation Act. Part of this law (passed in 1986) allows individuals to keep their health insurance for a period of time after the coverage would normally terminate. This was meant to help workers and their families transition to a different health care plan without having to be uninsured for any period of time. The most common situation in which COBRA is encountered occurs when a covered employee leaves his or her job. In most cases, termination of employment also results in the termination of any benefits that employee enjoyed, including health insurance. For example, if John received health insurance coverage through his employer but left his job, the employer would normally terminate that health insurance coverage the day that John left. COBRA would allow John to continue with the same health insurance coverage he enjoyed while employed for a period of time. If John’s family was also covered by the plan provided by John’s employer, they too can have their coverage continue through COBRA.
Not all employer-provided health insurance plans are eligible through continuation under COBRA, however. First, COBRA only applies to health insurance plans provided by employers who employ at least 20 workers. For purposes of COBRA, it usually does not matter if the “employer” is a public or private entity, or if the employer is a partnership, corporation, or other business entity. However, COBRA does not apply to health insurance plans provided by the federal government or by religious institutions. So if John is employed by the federal government, or if John is employed by a church as a minister, he will not be entitled to continue his health insurance plan or that of his family under COBRA if he leaves his employment.
When Does COBRA Apply?
Not only can a health care plan continue under COBRA when the employed spouse leaves his or her employment, COBRA can also allow a covered spouse to continue his or her coverage following a divorce. As will be explained in further detail below, there are certain steps that the spouse must take in order to have his or her coverage continue under COBRA after a divorce. COBRA will also help continue coverage in other circumstances under which a person loses his or her employee-provided coverage.
How Much Does COBRA Coverage Cost?
Continuing health insurance coverage under COBRA is not cheap; in order to continue coverage under COBRA, the person desiring to continue coverage must usually pay the full premium amount of the coverage he or she enjoyed while employed. This can present a problem to an employee or family member who may be used to having the employer pay a portion or all of the of the premium. For example, John may pay $100 per pay period for coverage for himself, his wife, and his child. This may not represent the full cost of the health insurance plan. Suppose that John’s employer pays 80% of the premium cost of the plan, and John’s premium represents 20% of the cost of the plan. If John seeks to continue coverage under COBRA, he will have to pay the full $1,000 premium per month.
The same holds true when health insurance is continued under COBRA following a divorce. If John’s wife Mary was previously covered under John’s plan and her premium cost John and his employer a total of $800 per month, Mary will need to be prepared to pay the $800 premium herself in order to have the coverage continue.
How Long Does COBRA Coverage Last?
COBRA coverage does not last indefinitely. Under the law, health insurance coverage that is continued under COBRA can only last for a maximum of 36 months, regardless of the circumstances or situation of the individual or couple. After this period of time, any ability to continue previous health insurance coverage under COBRA will terminate. The person will then either need to become covered under an employer’s plan or obtain an individual health insurance plan or he or she will be without coverage.
Can My Coverage Be Changed if I Continue it Under COBRA?
Additionally, if the employer makes changes to the health insurance plan, any coverage that is being continued under COBRA will also be modified. For example, suppose Mary is continuing the coverage she used to receive under her ex-spouse’s employer under COBRA. During their marriage, Mary’s copay for office visits was $25.00. Suppose further that the employer changes all of its healthcare plans such that office visits now cost $40.00. Mary’s plan will be similarly affected and she will need to begin paying $40.00 for office visits.
How Do I Make Sure I Can Continue Coverage Under COBRA After a Divorce?
Individuals who believe they may want to continue the health insurance they receive from their spouse’s employer after divorce must take action while they are still married in order to be eligible to take advantage of COBRA. First, it is important that the spouse actually be covered by his or her spouse’s employer’s insurer. You are not entitled to continued coverage under COBRA if you were not actually covered by your spouse’s employer’s plan prior to divorce. Upon the beginning of your coverage under your spouse’s employer’s plan, the plan administrator should provide you with an initial COBRA disclosure explaining your rights under COBRA and how the law operates.
Once a divorce is finalized, either spouse must notify the employer’s plan administrator of this in writing within 60 days of the divorce’s finalization. Within 14 days after receiving this notification, if you are the ex-spouse who was receiving coverage through your ex-spouse, you will be mailed a COBRA notice. This notice will again inform you of your rights to continued coverage under COBRA and how you can exercise these rights.
Receipt of this notice starts a 60-day review period. During this period, you can elect whether you wish to continue coverage under COBRA or if you would like the coverage to terminate. You must comply with the instructions to accept COBRA coverage, and you must do so within the 60-day period. You may change your mind about accepting coverage as often as you like within that period, but you may not change your mind after the period has passed. So if Mary initially declines coverage after receiving notification from John’s employer, she may change her mind and accept coverage under COBRA so long as she does so within that 60-day period. Once that 60-day period has passed, Mary can no longer accept coverage under COBRA. And if Mary fails to respond to the notice at all, her silence is treated as a declination of coverage.
Once you accept coverage, you may discontinue coverage at any time. Once that coverage is discontinued, however, you may not begin COBRA coverage again. So if Mary decides after 6 months she no longer needs COBRA coverage but tries to change her mind a few months later, she will not be able to resume COBRA coverage.
Make Health Insurance a Priority During a Divorce
In today’s society, having good health insurance is a must. That is why it is important to discuss health insurance when you discuss other divorce-related matters like property division and child custody. Depending on your situation, you may be entitled to some measure of spousal support to enable you to continue health insurance coverage while a divorce is pending and for some time after the divorce is finalized. To borrow from the example above, if John always paid the $200 per month premium for Mary’s coverage, Mary can ask that he continue to do so while the divorce is pending and for a period of time after the divorce is finalized to give Mary an opportunity to provide for her own coverage. By talking about who provides you with health insurance early, your attorney can formulate a strategy or strategies to enable you to continue that plan.
The end of your marriage does not need to mean the immediate end of your health insurance plan if you receive your insurance through your ex-spouse’s employer. While a divorce is a situation in which your health insurance coverage would be terminated, you may be entitled to have that coverage continue for up to 36 months following the finalization of the divorce.
COBRA allows individuals who received coverage through their ex-spouse’s employer to continue this coverage for a period of time provided that that person pays the full premium of the coverage. Not all health insurance plans are eligible for COBRA coverage, however. Specifically, if the employer employs fewer than 20 workers, COBRA coverage is not available. Similarly, if the employer is the federal government or a religious organization, COBRA will not apply to allow the coverage to continue.
To continue coverage under COBRA, you must first actually be covered under your spouse’s employer’s plan prior to the divorce. You are not eligible to begin coverage under COBRA after the divorce is finalized if you were not actually covered before the divorce. Once the divorce is finalized, the plan administrator must be notified. He or she will send you information about how to accept COBRA coverage, its cost, and your rights under COBRA. You will then have 60 days from the date of the notice to make your decision regarding COBRA coverage. Although you can change your mind as often as you want during those 60 days, you may not elect coverage after that period has past. You may cancel your COBRA coverage at any time.
By discussing health insurance with your attorney at Ayo and Iken as part of your divorce consultation, your attorney may be able to help you obtain spousal support that can help pay part of your COBRA premium while the divorce is pending and for a period of time after the divorce is finalized.