Health Insurance and Divorce: Plan and Don’t Lose Your You-Know-What (You Know. Your Coverage.)

Nearly every divorce is fraught with its share of awkward conversations about money. But in the whirlwind of discussing issues like child support, alimony, and equitable distribution, one item is often overlooked: health insurance. Specifically, what are you going to do about health insurance if your soon-to-be-ex currently covers you? Health insurance and divorce go hand-in-hand in many cases.

If you were covered by your spouse’s employment-based health insurance, a court can order your spouse to maintain your coverage until the divorce is finalized. However, this train will roll to a stop once your divorce is final. Given the substantial, if not downright burdensome, costs of health care, insurance is a non-negotiable line item in your budget. As such, even if you are confident that you will enter a settlement with your spouse, it is still wise to examine your coverage options should things go awry. After all, the last thing you want is a coverage gap or a massive out-of-pocket payment on top of your divorce-related stress.

Here we’ve compiled a list of the four most common coverage options, with a few important caveats about each. For more information or if you are having a hard time figuring out which choice is best for you, don’t hesitate to contact your divorce attorney. Health insurance and divorce issues can become complicated fast, and you don’t have to figure them out alone.

Option #1: COBRA

“COBRA” conjures a lot of images, but it’s not just a creature you’d never want to face. It is a federal program that allows you to continue your health insurance coverage under your spouse’s work-related policy. Generally, it lasts thirty-six months after your divorce is finalized, buying you time to work out your other options.

However, while COBRA allows for (reasonably) seamless continuity in coverage, it can be extremely expensive. Many insurance premiums are paid by employers. Under COBRA, you will pay the entire premium amount, plus a two percent administration fee.

The program also carries stringent and sometimes unforgiving rules. For example, you must notify the employer once your divorce is final (failing to do so could be considered insurance fraud). You additionally must enroll within sixty days to become eligible. If your first payment is late, you lose your right to COBRA completely. If any subsequent payment is late, you can risk permanently losing your coverage. Keep these caveats in mind when deciding whether COBRA is the right choice for you. Some clients opt to choose COBRA for a limited period while they seek other options.

A slightly lesser-known, but related option is state continuation coverage for smaller employers who are not covered by the federal COBRA laws. Under State Continuation guidelines, upon loss of eligible status (being married), dependents covered by the policy will also be able to continue coverage for eighteen months.

Option #2: Private Plans

Since divorce is considered a “major life event,” individuals can seek private coverage outside of the typical yearly open enrollment period. Private insurance plans tend to be more economical than COBRA.

A growing number of people are purchasing high-deductible health plans (HDHPs), along with health savings accounts (HSAs), in which pre-tax income is held to pay for the higher deductibles of an HDHP. As the name implies, HDHPs carry higher deductibles than traditional plans and tend to benefit those without any major health issues. While these plans often carry lower monthly premium payments, you are generally required to pay all expenses out-of-pocket until the deductible is met. It is worth taking time to consider your general baseline health before purchasing one of these plans: routine and minor medical issues can quickly become quite costly and leave you in a financial pinch.

Option #3: Coverage under the Affordable Care Act (ACA)

If you lack access to employer-funded insurance, COBRA, state continuation coverage, or an HDHP, consider coverage under ACA. These policies are sorted by metal tiers: bronze, silver, gold, and platinum. The tiers distinguish cost-sharing between purchaser and insurance provider.

Generally, the more cost incurred by the provider, the higher the premium. Bronze contains plans with higher deductibles and out-of-pocket costs but low premiums. Platinum plans carry higher premiums but cover most health care costs with few out-of-pocket expenses. Gold and silver fall in between.

Selecting a plan under ACA can seem daunting, but try taking a measured, methodical approach in reviewing each of your options to find the best plan for you. Also, you may enlist an insurance agent to help you sort out your options and your risk tolerance.

Option #4: Medicaid or Medicare

Medicaid provides health care coverage to qualifying low-income individuals and families. Medicare, on the other hand, serves people aged sixty-five and older who meet the eligibility requirements. In some cases, you can even qualify on a former spouse’s work record. Contact your local Medicaid or Medicare office to determine your eligibility for benefits.

Don’t Stop Here. Ask Questions. Seek Help. Cover Your Bases.

Health insurance and divorce are complicated. Though it is all too easy to do so, don’t let your health and well-being slide during your divorce. Your health–both physical and financial–is far too important to leave to chance. Every now and then, pick up your head and make sure you are well-positioned to care for yourself in your newly single life.

Reach out to your attorney or financial planner if you need additional guidance.