Health care reform has been a hot topic as of late, as many Americans passionately debate the merits of the drastic changes being proposed by our current President and where we as a country will ultimately end up on this issue. With that in mind and on the heels of last night’s presidential speech on the issue, now is a good time to review the role of health insurance after a divorce, since non-employee spouses are often understandably concerned about how they will pay for their medical bills and those of the dependent children.
In a typical situation, one spouse has "family" insurance coverage obtained through his or her employer, providing coverage for themselves and their dependents. While that spouse may continue to provide coverage for the children once a divorce occurs, the other spouse may no longer be covered because they are now legally independent from the employed spouse. The insurance company will therefore simply not allow such an arrangement to take place. During the divorce process itself, however, the insurance policy may continue to cover the other spouse.
After the divorce, what options does the non-covered spouse have? One option is enrolling in the health insurance policy of their own employer if they are employed. Another is purchasing an independent health insurance policy. What if neither of these options are viable? The answer lies in federal and New Jersey "COBRA" laws. The option is not permanent and is often more costly, but it provides an equal level of health insurance coverage to that existing during the marriage under the covered spouse’s policy. This entry will provide a general overview of federal law, with greater specifics as to New Jersey’s "mini-COBRA" law regarding continuing health coverage – N.J.S.A. 17B:27A-27. For an interesting analysis of the "mini-COBRA" law recently passed in Pennsylvania, see Mark Ashton’s excellent blog post on this topic.
The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) allows qualified beneficiaries (including a spouse and/or dependent children) the ability to elect to continue group health insurance coverage at the same level immediately preceding the divorce for up to 36 months following the divorce. A "group health plan" under the federal law can only apply to businesses with 20 or more employees, thereby excluding coverage to smaller businesses.
New Jersey’s law generally, with some exceptions, steps in where COBRA does not apply where an employer has less than 20 employees. New Jersey small employers, defined as having 2-50 employees, that have a New Jersey health benefits plan to cover employees are subject to the State law under N.J.S.A. 17B:27A-27, unless they are already covered by COBRA. In fact, small employers not subject to COBRA are required to offer continuation coverage to qualified beneficiaries. The employer, however, must still be in business and still offering health insurance coverage to its employees for coverage. Further, there can be no conditions or discrimination in providing continuation coverage based on lack of evidence as to insurability.
Notably, New Jersey’s definition of "spouse" under the continuation law includes domestic partners (as defined by law) if the employer elected to include coverage for domestic partners, and partners in a civil union (as defined by law). Interesting is how civil union partners can elect for coverage under the State law, even if the small employer is covered by COBRA. For existing beneficiaries to be covered, however, that person must have been on the plan at the time of the qualifying event, such as the divorce. Further, employers are not required to notify a spouse or dependent of their continuation rights at the time of the divorce. The spouse or dependent child must make a "written election" for the continuation coverage within 30 days of the divorce.
Worth noting is the President’s signing into law earlier this year of the American Recovery and Reinvestment Act of 2009 (ARRA), tailored to help people with continuation coverage in this difficult economic environment. What ARRA does is reduce premiums and provide additional election opportunities for the continuation of health benefits under COBRA, which are also being provided by New Jersey under its own law. Generally, the law allows eligible individuals to pay only 35% of the COBRA or New Jersey continuation premium, with no obligation towards the remaining 65%, which will be paid by the insurance carrier and subsequently reimbursed to the carrier by the government. These reductions, however, only apply to periods of health coverage beginning on or after February 17, 2009 and lasts for up to 9 months.
Thus, there are options for the non-covered spouse. While the COBRA option is typically a short-term, typically more costly alternative, it provides the same level of coverage that the spouse had prior to the divorce and certainly provides the non-covered spouse with time to obtain other coverage for the long-term.
EDITOR’S NOTE: AFTER A DIVORCE, TYPICALLY ONE OR BOTH PARTY’S WILL BE REQUIRED TO COVER THE CHILDREN ON THEIR HEALTH INSURANCE. WHILE IN THE PAST, IT WAS NOT UNCOMMON FOR BOTH PARENTS TO COVER THE CHILDREN TO MAXIMIZE COVERAGE. HOWEVER, THE SKYROCKETING COSTS OF INSURANCE MAKE THIS IMPRACTICAL. THAT SAID, THE COST OF THE HEALTH INSURANCE FOR THE CHILDREN IS APPORTIONED BETWEEN THE PARTIES IN THE CHILD SUPPORT GUIDELINES.
AS TO INSURANCE FOR A SPOUSE, MOST SETTLEMENT AGREEMENTS SAY THAT THE SPOUSE SHALL BE ENTITLED TO OPT FOR COBRA OR EQUIVALENT COVERAGE, IF AVAILABLE, AT THEIR OWN EXPENSE. TO THE DEPENDENT SPOUSE, IN THEORY IN THE PERFECT WORLD, THE COST OF HEALTH INSURANCE SHOULD BE A CONSIDERATION IN ALIMONY CALCULUS. THOUGH YOU HEAR LITIGANT’S SAY THAT THEY WANT HEALTH INSURANCE COVERAGE FOR LIFE AS PART OF THEIR SETTLEMENT, THIS IS NOT A TYPICAL RESOLUTION.
ALSO, I HAVE HEARD SOME PEOPLE WITH BUSINESSES WANT TO KEEP THE SPOUSE ON THE BUSINESSES’ INSURANCE, OSTENSIBLY EITHER AS THEIR SPOUSE OR AS AN EMPLOYEE. THIS COULD BE CONSIDERED A FRAUD AND COVERAGE COULD LATER BE DENIED. ERIC S. SOLOTOFF