Question: I am "almost divorced" and, had I not made a telephone call to my soon-to-be-ex-husband’s human resources department, I could have been up the creek and in jail for murdering my lawyer. I kept asking him about health insurance for myself and our three children from day one and he kept telling me that the children and I would be covered and not to worry. I am 46 and my children are 16, 13, and 11. I continued to worry, but didn’t do anything until now – one month before my final divorce hearing. Something told me that with all of the increased medical costs, I could be insurance poor. I found out on my own that I would be able to stay covered under my husband’s group plan for only three years, and then I would be on my own with no guarantee of premium. I am in good health now, but who knows what will happen in three years? What can I do at this late date?

Answer: Health insurance options at divorce are important but, as you have learned, generally overlooked by lawyers who either 1) don’t pay attention, or 2) don’t know. In today’s economic climate, ignoring important issues like health coverage is inexcusable.
In 1986, Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA), a law that gave certain former employees, retirees, spouses and dependent children the right to continue group health coverage at group rates for a temporary period of time. This law generally is geared toward employers having 20 or more employees. Although COBRA continuation coverage is beneficial to former spouses with health problems because they often cannot get other coverage, there are drawbacks for healthy former spouses, including uncontrollable escalation of premiums in the future, changes of coverage, the potential of employers going out of business, etc.

If you, as a former spouse, are in good health, we suggest that you explore not only individual health coverage but also a Medical Savings Account (MSA). Authorized by Congress, this special tax-sheltered savings account – much like an IRA – can be established in combination with a "high deductible," comparatively low-cost individual health insurance policy that will provide wide-ranging health coverage at low net cost. Here’s how it works:

Instead of purchasing high-premium health coverage with low deductibles and co-payments, you purchase a low-cost, high-deductible policy and save the difference in your MSA, which can be used to cover the smaller medical bills. Like a traditional IRA, the funds you deposit in your MSA are tax-deductible, yet you can use checks or even a debit card to pay your non-covered medical bills, like eyeglasses and dental expenses. What you don’t use can continue to grow tax-free to pay for future medical bills or even supplement your retirement.

We believe that the MSA is severely underutilized, especially by former spouses who are in good health but think they have no options other than COBRA continuation coverage. But be careful: Not all high- deductible policies will qualify you for the MSA plan. Make sure you deal with a knowledgeable insurance professional who will show you a policy that meets the criteria established by Congress. Although MSAs have been authorized through 2003, we don’t know how long they will last. So if you are in good health, are uninsured, and otherwise qualify, we suggest you take a hard look at this benefit.