Your Divorce and Your Health [Insurance]
Health care coverage – or lack thereof – may be one of the most daunting issues facing divorcing couples. Fortunately, this is an area where facts diminish fear. This is why I have co-authored this article with health care expert Derek Spencer.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is based on a federal law that gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time. Under certain circumstances called “qualifying events,” such as divorce, someone can maintain his or her health insurance coverage through an employer-based plan without direct affiliation with that employer. In the case of divorce, the “qualified beneficiary” (i.e. the non-employee spouse), can maintain health coverage through an ex-spouse’s (i.e. “direct beneficiary”) health insurance plan at the ex’s place of work.
There are two sets of laws that govern the rules of continuation of coverage: Federal COBRA and New Jersey State Continuation. Federal COBRA governs continuation of coverage for employers with 20 or more employees, while New Jersey State Continuation covers employers with less than 20 employees. Fortunately, both sets of laws are similar.
In order to avail yourself of this benefit, it is critical that you report the qualifying event such as a divorce, to your Human Resources and/or the plan administrator, within 60 days of when the Judgment of Divorce is granted. Once informed, the Human Resources Dept or plan administrator will send a notice to the qualified beneficiary within 14 days. Upon receipt and careful review of the notice, the qualified beneficiary may wish to contact their mediator, attorney, or other trusted professional for assistance in reviewing the form(s) and taking the required follow-up actions. A person has 30 days in which to secure NJ state continuation, or 60 days to secure Federal (i.e. COBRA) continuation. Timing is critical.
You can inadvertently waive your rights to coverage if you do not adhere to the strict time frame allocated.
Currently both Federal COBRA and New Jersey State Continuation allow an individual to keep health insurance coverage through an ex-spouse’s policy at work for up to 36 months (three years). Keep in mind that this individual will be responsible for up to 102% of the insurance premium for his or her coverage. If this spouse is also responsible for covering any children, the premium payments can increase substantially. Many times this cost is the determining factor in whether a continuation of coverage situation occurs or not. If the cost is too high, an individual may choose to explore alternatives. A health insurance professional is a great resource in examining options and assisting in comparing different plans. While health insurance through an employer still tends to be the most affordable and comprehensive option, when that is not available, plans for individuals, families and groups can be purchased directly through many insurance companies.
Note: Failure to report your divorce to the insurance company in an effort to maintain the marital coverage is considered insurance fraud.
This is a complex and confusing issue. Don’t let your lack of knowledge or discomfort with the subject matter, inhibit you from taking timely action. As always, while moving through this process, seek help early and often.