Health insurance is the most important kind of insurance coverage a person carries. There are more bankruptcies because of medical bills than from any other cause.
This is an extremely important financial issue for couples facing divorce. Securing health insurance coverage for both spouses, and any children, is clearly something that should be included in a divorce settlement.
Health insurance becomes a particularly critical issue if one spouse and/or the children were insured on one of the spouse’s plans while they were married. Following divorce, that coverage will end unless specific steps are taken and spelled out in the divorce decree.
1. If the uninsured spouse secures full-time employment after the divorce, and can secure group insurance coverage, this is by far the most economical kind of health insurance to get. This is because the employing company will subsidize the cost, usually paying 2/3 to 3/4 of the cost. Average cost is about $250/month depending on the features of coverage and the number of family members covered. Higher deductibles result in lower premiums.
2. If a spouse is retraining for months or years following divorce and will not be employed full-time, or is not able to work full-time, the Affordable Care Act (ACA) — available at www.healthcare.gov — offers several plan choices for health insurance coverage from major providers.
The ACA includes numerous provisions, the most important of which include:
- Guaranteed issue: requires that policies must be issued in spite of any medical condition with the same premium to the same age, sex and geographical location. Tobacco is the exception to the level premiums.
- There are subsidies to people with low income, applying for incomes up to $45,960 for an individual, or $94,200 for a family of four. The credits will be sent directly to the insurer every month. The inclusion of the mandate increases the size and diversity of those insured, spreading out the risk in a sustainable manner.
- The ACA eliminates lifetime limits on medical expenses. No longer can a person reach the limit and be forced into bankruptcy.
- Prohibits insurers from dropping your coverage or raising your premiums if you get sick.
- The ACA caps annual out-of-pocket medical expenses up to $6,400 for individuals and $12,800 for families. This should effectively eliminate the over 600,000 bankruptcies in the U. S. each year due to medical expenses.
- Four tiers of coverage are included: Bronze, silver, gold and platinum. All offer the same set of essential benefits. But, the out-of-pocket costs will differ, with bronze plans having the lowest monthly premiums and higher-out-of-pocket costs and vice versa for the platinum plans.
The percentage of care that plans will cover are, on average:
60% — Bronze
70% — Silver
80% — Gold
90% — Platinum
If the separated spouse prefers to keep the insurance coverage that a spouse provided before their divorce, and assuming the spouse works for a company with more than 20 employees, the separated spouse is entitled to COBRA coverage for up to 36 months. But, the former spouse’s company is under no obligation to subsidize the cost, and can add up to a 5 percent administrative fee. Estimated cost of COBRA coverage can be between $500 and $750, or more per month. COBRA coverage may be a good choice as temporary coverage until a job with benefits is secured by the separated spouse.
Because each divorce is unique with its own set of circumstances, this article is designed to provide readers with a general overview of the issues discussed, and is not a substitute for legal or financial representation. For immediate assistance, call 832-858-0099.