Family budgets are as unique as the spouses that create them. Often a budget is created after a careful consideration of the family’s needs and the family’s income and takes into consideration ways to maximize the family’s limited resources – to get the most “bang for the family’s buck,” so to speak. One particularly expensive part of the family’s budget relates to health insurance. It is quite common for families to obtain their health insurance through a working spouse’s employer, especially where the other spouse does not work.
This arrangement can cause problems, however, when spouses who adopt such an arrangement divorce. Where one spouse’s employer provides a health insurance plan that covers both of the spouses, the covered spouse’s coverage (that is, the coverage of the spouse not employed by the employer providing coverage) typically ends after a divorce. An ex-spouse generally has no obligation to provide continuing healthcare coverage for the other party.
This can be particularly distressing for the party who typically received his or her healthcare coverage through the other party’s employer. Luckily for these parties, because of COBRA they may be permitted to continue the health insurance plans they enjoyed while married.
What is COBRA?
COBRA is an acronym that stands for the Consolidated Omnibus Budget Reconciliation Act. This act (passed into law in 1986) allows workers and their families to keep health insurance in situations where they would otherwise lose their coverage. For instance, suppose that John works for a company that offers health insurance to its employees. John takes advantage of this benefit and enrolls in health insurance through his employer. After a period of time, however, John is let go from the company. Normally, in this situation, John’s health insurance coverage would terminate once he leaves the company. COBRA, however, may allow John to continue the same health insurance plan he enjoyed while employed for a period of time.
Or suppose that John’s wife Mary gets her health insurance through John’s employer. If the two of them were to divorce, typically Mary’s health insurance coverage would end and she would need to find her own health insurance. However, COBRA may allow Mary to continue receiving the same health insurance plan she received while married to John.
COBRA covers group health plans provided by employers who employ at least 20 workers. The plans covered by COBRA include those provided by private employers like corporations, partnerships, and other business entities as well as plans provided by state and local governments. However, not all employers’ health insurance plans are covered by COBRA. Specifically, plans provided by the federal government and some religious institutions are not covered by COBRA. This means that if a divorcing spouse gets his or her health insurance through the other party’s employer and that employer is the federal government or a church, the divorcing spouse may not be able to have his or her health insurance continue past a divorce.
Health insurance provided under COBRA is not cheap. While many employers pay some (if not all) of the health insurance premiums for an employee and his or her family, employers are under no such obligation when it comes to COBRA. A spouse wishing to continue his or her healthcare coverage under COBRA must do so at his or her own expense. For instance, assume that Mary was able to obtain health insurance through John’s employer at a cost of $200. The full price for a single-person healthcare plan through John’s employer is $750, of which John’s employer pays $500. If Mary elects to continue her healthcare plan following her divorce with John, she may very well have to pay $750 per month to maintain that coverage. Failure to pay a premium when due can result in the termination of COBRA benefits.
Health insurance provided under COBRA does not last indefinitely, either. Usually a party can obtain health insurance under COBRA for a maximum of 36 months. After this time, the covered individual must find other health insurance to remain covered.
Finally, if a spouse elects to retain health insurance under COBRA, any changes to the plan that the employer makes will affect the spouse obtaining insurance under COBRA. Similarly, any choices that non-COBRA insurance beneficiaries are able to make (for example, during open enrollment) can be made by the COBRA-covered ex-spouse as well.
What Happens to My Health Insurance After a Divorce?
In order to have one’s health insurance continue beyond a divorce, it is first necessary to ensure one is enrolled in his or her spouse’s employer-provided health insurance plan. There is no possibility for obtaining COBRA coverage if the spouse does not enroll in his or her spouse’s employer-provided health insurance plan while the two are still married. At the time the spouse becomes initially covered under his or her spouse’s employer’s plan, the health plan administrator will provide an initial COBRA notice that details COBRA rights and how the COBRA law operates.
After a divorce is finalized, either spouse must notify the administrator for the health care plan within 60 days. After receiving notification of the divorce, the plan administrator will mail the non-employee spouse a notice within fourteen days of learning of the change in marital status. The notice will contain information for the non-employee spouse about how to make an election and continue healthcare coverage under COBRA. Once the notice is provided, the non-employee spouse will have 60 days to decide whether to continue his or her healthcare coverage under COBRA or whether to decline the coverage.
A COBRA-eligible individual can change his or her mind about accepting COBRA coverage so long as he or she does so within the 60-day window. If he or she makes no decision during that 60-day window, then the COBRA-eligible individual will not be able to obtain COBRA benefits. So if Mary receives a COBRA notice in the mail and a week later declines COBRA coverage, she still has the remainder of 60 days within which to change her mind and notify the health plan administrator that she does in fact want coverage under COBRA. If she waits too long to answer, though, she will not be able to change her mind and apply for COBRA coverage.
In today’s society, having a good health insurance plan is a must. While it is possible to obtain an individual health insurance plan on the open market, it is often preferable for individuals to obtain health insurance through their employer. Oftentimes, a married couple can obtain high-quality health insurance at a reasonable price through one of the spouse’s employers.
When parties divorce and one of the spouses receives his or her health insurance through the other party’s employer’s plan, the non-employee spouse must decide whether to take advantage of benefits available under COBRA. COBRA allows individuals who are losing their employer-provided health insurance certain benefits, including the ability to continue being covered under their present plan for a period of up to 36 months. This can give the non-employee spouse sufficient time to secure an alternate health insurance plan.
COBRA benefits allow the non-employee spouse to continue with their familiar health insurance plan and benefit from (or be harmed by) any changes in that health plan following the divorce. If the deductible changes for the employee plans, a COBRA plan’s deductible will also change. If employees are able to make certain elections in their coverage each year, COBRA-covered individuals will be entitled to make those elections as well.
In order for a divorcing spouse to be eligible for COBRA benefits, the individual must have been on the other party’s employer-provided health plan while the two of them were married. Not only this, but the employer must have more than 20 employees and not be the federal government (or an agency thereof) or a religious institution.
COBRA benefits come at a cost. First, COBRA benefits are temporary and not designed to last indefinitely. There is no renewal of benefits under COBRA after the 36-month period has elapsed. Second, the non-employee ex-spouse is responsible for the full cost of his or her health plan under COBRA. Even if the employer pays a portion (or all) of an employee’s health plan, this benefit will not apply to a COBRA-covered individual. This can make coverage under COBRA expensive. Not only this, a COBRA-covered individual who misses even a single premium payment may have his or her benefits terminated immediately.
In order to take advantage of COBRA benefits, the non-employee spouse should notify the other party’s employer within 60 days of the divorce being finalized. The plan administrator will then prepare a COBRA notice and send it to the non-employee spouse. That non-employee spouse then has 60 days from the date of the COBRA notice to decide whether to sign up for COBRA benefits or whether to decline them. Once those 60 days have elapsed, the non-employee spouse is bound by his or her decision. If the non-employee spouse makes no decision during those 60 days, it is presumed he or she did not want COBRA benefits.