Divorce Without Going Broke
By Janet Bouma, Certified Divorce Financial Analyst

COBRA & Health Insurance Coverage Post-Divorce

Health insurance is an issue that needs to be dealt with at the beginning of the divorce process, so that by the time the divorce is final, you will know what coverage is available to you and how much it will cost. The goal is to maintain good coverage without any gaps!

If you are a spouse who is employed and currently covered under your employer group plan, you will continue to receive benefits for yourself, and your children-- if retaining coverage for your children is something that has been discussed and negotiated. But if your spouse is currently covered on your plan, that coverage stops as of date of divorce. Continuing coverage is something that he/she needs to look into; again, not two weeks prior to your divorce being final—the sooner the better, and let me explain why.

Let's use the example of a 56 year old wife, currently covered under her husband's employer group plan; their children are grown. Probably the Wife and Husband have both heard of COBRA, and feel that for now, COBRA will cover the Wife. Wife relies on COBRA and that is the extent of the health insurance planning that she does.

What exactly is COBRA? COBRA stands for Consolidated Omnibus Budget Reconciliation ACT of 1986. It is federal legislation which applies to employers with 20 or more employees. It is a temporary mechanism for continuing GROUP coverage after divorce for up to 36 months. Because COBRA coverage is temporary and often expensive, health coverage planning must extend beyond the COBRA coverage, or possibly not even include COBRA coverage.

The following are situations where spouses may not have an immediate need for healthcare coverage planning:

  • Spouse enjoys stable employment with coverage through work
  • Spouse has a good individual policy in place.
  • Spouse is self-employed or a business owner and can obtain coverage through his/her business.
  • Spouse is 62 and older and can a COBRA election can take him/her to age 65 and to Medicare eligibility.
  • Spouse is already on Medicare.
  • Spouse has plans to remarry and will be covered under new spouse's plan.

Now let's return to our example: Wife does not fit into any of the above categories; she has an immediate need for health insurance. What are the problems with her relying on COBRA?

  • Again, COBRA is temporary.

  • The Group through which coverage is extended may go out of business.
  • Divorced spouse may want to move to an area of the country where the coverage is virtually by useless.
  • Spouse may contract cancer or another disease, and be unable to convert to an individual policy after the 36 months pf COBRA ends.
  • Small practices (medical/legal) are not eligible for COBRA benefits.

If, in our example, Wife is planning on working and her new company offers benefits which will take her to age 65, she would consider that possibility. If not, she needs to determine if she qualifies for COBRA and private individual coverage. She then needs to decide which choice is best for her.

Let's talk about the difference between Group Coverage and Private Coverage.

Group coverage:

  • A benefit of employment.
  • Not medically underwritten.
  • Pre-existing condition exclusions are not imposed, if continuous group coverage maintained.

  • In many states, sole proprietor can obtain coverage as group of one,
  • Often more expensive than individual coverage in private marketplace; often includes rich drug and dental benefits.

Private Individual Coverage:

  • Medially underwritten.
  • Rarely cancelled except due to non-payment of premiums.
  • Company may go out of business, stop providing coverage in a state, or close a group to new enrollment.

Back to our example: Wife needs coverage post-divorce, Should she rely on COBRA for 3 years and then look for private individual coverage and then look into private insurance, or should she attempt to procure individual coverage now? When you delay getting your private insurance, you run the risk of being denied due to a pre-existing condition that you got in the interim, or you may be denied from the get-go due to a current pre-existing condition—perhaps taking a medication for depression during divorce.

There are as many situations as there are spouses, and, as in every divorce article I write, the solution lies in the individual PLAN. You need to plan ahead for continuing your health insurance coverage—not only how you're going to get it, where you're going to get it, but also-- how much is it going to cost? If the only coverage you can get will cost you $600 per month, or $7,200 per year, that will have a significant impact on your monthly cash flow expenses. Will you need help in paying for the cost?

Making sure you make good informed financial decisions in the divorce litigation process or in divorce mediation-- is our job. Call us to help you plan before your divorce is final.

Janet Bouma is a Certified Divorce Financial Analyst, Regional Director for the Institute for Divorce Financial Analysts, a fully licensed Financial Advisor for over 20 years, and a trained Family Mediator, specializing in the equitable distribution process of divorce. Ms. Bouma is a frequent guest host on "Dealing With Divorce," KQV AM 1410 on your dial, Thursdays at 8PM. She is the managing member of J. Bouma & Associates, LLC, with offices in Avalon and Upper St. Clair. You can reach Janet by phone: 412-347-0384 or by email: JanetBouma@BoumaDivorceSolutions.com to schedule a consultation, or to find out the time and location of her next Preparation for Divorce financial seminar.

RETURN
© by J. Bouma & Associates, LLC