COBRA (not the snake) and other insurance decisions in a divorce

The two most argued-about components of a divorce are kids and property. Compared to kids and money, health insurance is a subject that is often overlooked. Sometimes, it does not even come up until it is too late! Making a mistake on planning for post-divorce health insurance can cost you thousands of dollars in out of pocket expenses and fines. If you are currently getting your insurance through your spouse’s employer, after the divorce you will not be on your ex-spouse’s employee policy. You will need to get your own health insurance. The sooner you have the details figured out, the better.

What are your options? There are three ways to go.

Consider COBRA.

COBRA insurance allows you to keep the coverage you get through your ex-spouse’s plan. The benefit of choosing to pursue COBRA coverage is that you get to keep your old policy: same hospital, same doctor, same pharmacy. However, that comes at a cost.

• COBRA insurance does not kick in automatically. You have to apply for COBRA and pay for it yourself – in some cases, that can mean paying up to 102% of your pre-divorce premium cost.
• There is a limit to the maximum length of coverage (depending on what gives rise to COBRA coverage, it could be 18 or 36 months). When the qualifying event is a divorce, the typical limit is 36 months (although Medicare eligibility can impact that). Remember that a plan provider can choose to offer extended eligibility beyond what is required by the government.
• It your responsibility to notify the plan administrator about the divorce in order for your to qualify for COBRA coverage. The exact time limits are dependent on the plan, but never less than 60 days starting from the date of divorce, the date on which you would lose coverage under the plan, or the date when you are informed of your responsibility to notify the plan – whichever happens latest. As you can tell, the technical details can get complex, so be sure to speak with the plan administrator to understand the procedure and the key dates.
• Employers with fewer than 20 employees are not subject to COBRA laws. They can choose to provide group continuation coverage, but are not required to do so.

If you are considering pursuing the COBRA route, be sure to investigate your costs and make note of key deadlines so that you don’t miss the notification window. Also, remember that you will eventually have to search for a different option once you have reached the maximum duration period (expiration date).

Sign up for coverage through your own employer.

This path may be less expensive than COBRA; it can also be longer lasting (i.e. there is not maximum length of coverage as there is with COBRA). If you are currently employed, begin by evaluating the health insurance plans available through your employer. Estimate your monthly costs (premium plus any out of pocket expenses like co-payments and co-insurance). Be sure to include them in your budget projections. If you are planning to work but you have not yet been hired, estimate these costs and include them in your post-divorce budget.

Buy your coverage directly from an insurance company or the health insurance

marketplace.

If getting coverage through your employer or through COBRA are not viable options for you, consider shopping for a plan on your own. Many insurance companies will sell you a plan directly. Exploring your choices on your state’s health insurance marketplace is also a possibility. You will be allowed to shop for a plan outside of the standard open enrollment period because a divorce is a “qualifying life event”. For some people, there is also a third option of buying insurance through a professional or trade organization. As with other big decisions, be sure to investigate all possibilities and do not disqualify any paths too quickly.

Insurance decisions in a divorce

What about the kids? You and your spouse will have to work out the details of whose plan the kids go under and who is responsible for medical expenses and insurance premiums. According to the Affordable Care Act, children can stay on a parent’s health insurance plan until age 26. Check with a family law attorney for other critical details.

Note: Create more health insurance options by beginning your research early in the process. It takes time to get quotes from insurers, line up paperwork and compare healthcare costs under different scenarios. Don’t let yourself get bitten by delaying your decisions.

Image source: http://s.newsweek.com/sites/www.newsweek.com/files/2015/09/04/cobra.jpg