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Health Insurance Options At Divorce Are Important: Understanding COBRA
Jan L. Warner & Jan Collins



When Jack and I divorced, the last thing on my mind was health insurance. He worked at a large corporation and the family health benefits were terrific. But, to cut costs, the company began cutting benefits every year, which dug deeper and deeper into my budget. Now, the company is in bankruptcy, Jack is out of a job, and our health plan has been canceled. I have now developed diabetes. What can I do?

Sally and I had a very friendly divorce -- or at least it seemed to be better than most of them. She got the children. I got visitation. I paid support. And I agreed to keep up health insurance for her and the children. That was my mistake. It's not that she and the children aren't entitled -- but when she elected to continue the health coverage at my place of employment, the premium was less than $100 per month. Now, three years later, it's $450 per month, and rising. Neither of us anticipated this; I can't afford it; Sally has a health problem; and we're now in court to find a solution. Wasn't there something that could have been done to avoid this?

When we divorced, I was almost 55 years old, and in good health. Not knowing I had other options, I chose to stay on my husband's health coverage. I have since developed cancer, and now I'm told that when the 36 month continuation period ends, if I can convert the coverage, my premium will be more than my house payment. I just can't afford this. Where can I get affordable coverage? Without it, I'll be destitute and dependent on friends, family, charity, or the government.

When our daughter divorced, my wife and I helped her and the children financially until her support began coming in. She was doing OK until her ex-husband was killed in a hunting accident. There was no life insurance. She and the children get a little from Social Security, but she can't afford to support herself and the children or to continue their health insurance. Now my wife and I are using our retirement to help them -- and there's no end in sight. Why didn't someone tell her that she needed life insurance on him to protect herself and the children just in case this happened? I've had to take a part time job, but it doesn't pay much, and our bills are mounting.

When John and I divorced, everyone told me that the best thing to do was to continue on his health coverage. So I did. I never realized that I wouldn't be dealing with the insurance company, but, instead, with his employer. I pay my premiums to his employer. My medical claims information goes to his employer. And, since my ex-husband is the insured under the policy, my reimbursement checks are made payable to him, and I have a difficult time getting my money. Why didn't someone tell me this was going to happen?

Each year, more than 2 million people divorce -- and hundreds of thousands more separate to become next year's statistics. Not so long ago, health insurance was awarded by the courts almost as a matter of course. Not so long ago, the supporting spouse -- generally the husband -- not only supported the family, but also provided the health insurance. Not so long ago, health insurance at divorce was a "given." Not any more!

We hear and read about it every day: Health care costs in the United States are at crisis proportions. But, until it hits home, we say "It won't happen to me!" When you separate or divorce, it is more likely to happen to you than not. Here's why.

Since most family health coverage in the United States today is furnished by employers, the end of the marriage means, in most instances, the end of employer-provided health coverage for the family -- not just for the dependent spouse, but also for the children.

And, even if employer-provided health insurance continues, the premium cost is all but guaranteed to escalate to astronomical proportions -- sometimes more than a mortgage payment -- at the end of the 36 month continuation period.

To further complicate things, the divorce rates for women and men ages 55 and older are on the rise. And these Americans have more complex health coverage planning concerns than others because of retiree health care plans, Medicare, Medigap, and long-term care issues.

Termination of health coverage for healthy people is bad enough, but when people have pre-existing conditions or current problems, termination can be catastrophic.

Today, many depend on employer group health plans to provide coverage after divorce for dependent spouses and children. But, with job terminations and discontinuance of group health plans by employers, you must know your options -- and you may have at least several of them if you take the time to plan in advance.

Because of the far-reaching economic implications, health insurance planning should not become an adversarial issue at divorce. Health insurance coverage and planning are important to everyone: husband and wife, individually, as parents, and for the children.


COBRA stands for Consolidated Omnibus Budget Reconciliation Act of 1985. This federal law was enacted to stop health coverage lapses for "beneficiaries" that otherwise resulted when certain "qualifying events" occurred. Here, we are concerned with only two types of "beneficiaries" -- 1) non-employee spouses and 2) dependent children and only two types of "qualifying events" -- 1) Divorce or legal separation and 2) A dependent child ceasing to be a dependent under the terms of the employer's health plan.

You should remember that an employer who provides a health plan for employees -- but who had less than 20 qualifying employees during the prior year -- is not subject to COBRA requirements. This means that the employer is not required to offer continuing coverage to non-employee spouses or adult children under the federal provisions -- although there may be other limited continuation possiblities available to you.

Generally speaking, to be required to offer continuing coverage to non-employee spouses and adult children under these circumstances, the employer must have a group health plan for employees and more than 20 employees. If this is the case and a legal separation or divorce occurs, or a dependent child ceases to be a dependent, there can be continuing coverage if the non-employee spouse or adult child 1) properly exercises an election to continue coverage within certain time limits, 2) timely pays the first premium, and 3) continues to pay premiums in a timely fashion to the employer. Remember: When you make the COBRA election, you don't deal with the insurance company; you deal with your ex-spouse's employer.

So long as these rules are complied with, continuation coverage is effective back to the date of the divorce or separation and will continue for a maximum period of 36 months. The maximum continuation cost is 102% of premium unless the employer is self-insured. There are no new eligibility requirements or waiting periods to contend with; but, as you will soon see, there may be drawbacks to COBRA. That's why you should explore your other options, if any, before you make a final health insurance decision.

No question -- in some instances, COBRA can be a lifesaver -- such as when a spouse or child has a preexisting condition which would disqualify that person from getting other coverage; however, if the person faced with making the election is healthy, there may be other options that will better fit that person's long-range best health insurance interests.

For example, if continuation coverage is chosen, claims information about your personal health problems will continue to be available to your former spouse's employer. When you need claims forms, you will have to get them from your former spouse's employer. And, in many instances, reimbursement checks from the insurance company may be made payable to your former spouse. If these and other issues are not addressed -- and solved -- at the time of divorce or separation, you may find yourself back in court trying to solve them later.

Many people wait until the last minute when their options are limited. In making health insurance decisions, it's best to take a two-step approach as early in the process as possible:

First, compare coverage and cost between the current benefits of COBRA continuation, an individual policy (if available), and any conversion possiblities that might exist for you.

Then, if you have the time, inquire into the following important issues before you decide to either elect COBRA continuation or seek other coverage.

Here are some questions that need to be answered:

"Is the employer likely to discontinue the employee plan?"

"Is the employer likely to reduce benefits and increase co-insurance for all employees -- and therefore COBRA beneficiaries?"

"Is the employer in financial trouble and about to go bankrupt -- which could mean termination of the plan?"

"If I am in good health today, make the COBRA election, become ill, and the employer then terminates the plan, what coverage may be available and at what cost?"

"If I am in good health today, make the COBRA election, become ill, and the 36 month continuation period ends, what coverage may be available and at what cost?"

"How high will the premium go after 36 months if I choose continuation under the COBRA election?"

"What happens if the COBRA election is made and then my former spouse dies or is terminated from employment?"

"What if my spouse is covered by an HMO or self-funded employer plan. Is that plan subject to continuation under the COBRA election?"

"If a covered child becomes emancipated, is he or she entitled to continuation coverage? And, if so, to what age and under what conditions?"

"What if I make the election and remarry or move to another state?"

"Does COBRA apply to government or church employees?"

"Who should notify the employer of the divorce, legal separation, or a dependent child no longer being a dependent?"

What Does All This Mean?

To obtain new health coverage, you must either 1) go to work for a company that has a group plan, or 2) apply for individual coverage which may require that you be medically underwritten for current and past health history.

In either case, if you have a pre-existing condition, that condition might not be covered for years, if at all. In this instance, it may be best for you to exercise your COBRA option; however, here are some things you should consider doing early in the process to begin to inform and protect yourself:

Make sure health insurance stays on the "front burner" as a very important issue and is not relegated to a last minute "afterthought."

Obtain a copy of the existing group plan under which you are covered and read it so you will understand the coverage options you may be electing.

Get your health records from your doctor(s) as soon as possible.

Make sure that if you elect COBRA, you plan for increased premiums and less coverage and limits after 36 months.

Find out if your state has a high risk health insurance pool -- just in case you are turned down.

Remember: With a new policy, your preexisting conditions may be excluded for a term of years, excluded permanently, subject to increased premiums, or a combination of the above.

If you are the financially dependent spouse, it may be wise for you to try to negotiate sufficient additional support in order to offset the increases in premiums and reductions in benefits that will surely arrive. The last thing you need is to be without coverage when you most need it because you cannot afford to pay the premium or the non-covered costs.

In looking for other coverage, remember to check and compare deductibles and first dollar co-insurance. And make sure you have the funds to pay the premiums and the non-covered costs of health care, both now and should the economically dominant spouse die unexpectedly.

Low cost short term health policies are very limited. They are meant to cover a predictable period of time when you are between prior coverage and future on-going coverage.

Because "bare bones policies" are limited in benefits, they cost 25% and 40% less than traditional coverage.

Even if the employee's coverage is not subject to COBRA, there might be a law in your state that allows continuation coverage, regardless.

If you are the spouse of a governmental employee, you are probably entitled to a COBRA look-alike.

Individual coverage in lieu of COBRA usually makes sense and saves money for someone who is in good physical condition. But if there is any chance that your physical condition might prevent the you from obtaining new coverage, you should probably elect COBRA continuation coverage to solve your immediate needs and protect yourself. Then, you can begin to explore you options.

And remember: If you find better coverage than COBRA, there may be both medical underwriting and a waiting period for preexisting conditions. You can apply for the new insurance to start the clock running while keeping coverage under COBRA. Although this is an additional expense, depending on the circumstances, this may be a wise investment.

Children's health coverages are important for all the same reasons. They should continue without lapse, especially if any child has pre-existing health problems.

Find out what coverages have been available, what coverages will continue, and who will pay for them.

Be sure to find out for how long and under what conditions a child can continue to be covered as a dependent so that, when necessary, either a separate policy can be secured or, as a new adult, the child can exercise his or her COBRA election.

If a child has a disability, then it is essential to try to continue all coverages. If the parent who pays for the coverage dies, there are options through which the child's coverage can continue to be paid.

If You Are Age 50 Or Older, in addition to the complex health insurance issues described above, you must inform yourself about still more intricate questions: retiree health plans, Medicare, Medigap, and long-term care.

First, you should determine if the employer has a retiree health program for employees and dependents. And, if so, the next question to be answered is the likelihood that this benefit will be continued.

Second, you must understand coordination of the available plan, if any, with Medicare, the federal government's health insurance program for those of us who have reached age 65.

In reviewing Medicare benefits, you will find a number of coverage gaps when it comes to payment of hospital and doctor's bills -- thus Medigap policies. Since some Medigap policies duplicate coverage, be sure about what you are purchasing and its suitability to you and your circumstances.

Long-term care -- nursing home care or home health care -- contrary to the popular misconception, is, for the most part, not covered by major medical, Medicare, or Medigap insurance. Long-term care insurance may be attractive -- but look before you leap. Although some plans are excellent, these policies are expensive and many do not cover what you think they do.

And, depending on where you live and the laws of your state, documents called "advance directives" -- living wills and durable health care powers of attorney -- together with durable powers of attorney, at a minimum, are essential ingredients to appropriate health care planning that you should consider. Although forms for many of these documents are available, a co-ordinated plan is essential and you should confer with a lawyer who is knowledgable in this field.

Since your medical records are necessary to help you properly plan for your health insurance future, you should make every effort to get your medical records as soon as possible. And remember: When you apply for coverage, your medical records will be sent to the Medical Information Bureau. This means that if you have a condition that might be an obstacle, you can guard against being prejudiced by filing an application and getting turned down before you can try to rectify the situation.


REMEMBER: These materials are not intended to give you legal advice. Instead, to help you prepare yourself to deal with some of the practical questions that may arise about health insurance before, during, and after divorce and separation. Since the laws of each state are different, employer plans may vary, and each circumstance is different, there may be questions that relate to you which are not covered here. Do not make final decisions until after you have been fully informed and always rely on your lawyer.

These materials are copyrighted and reproduction, in whole or in part, in any form, is prohibited without the express written permission of Jan L. Warner, holder of these copyrights.

1997-2003, Flying Solo -- Post Office Box 11704, Columbia, South Carolina 29211.

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