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Drop your ex from your health insurance plan

Getting divorced? One of the many consequences is that you could lose your health insurance.

Say you get your health insurance through your spouse's employer. Many spouses do.

Once you are divorced, your spouse must notify his company's health insurance company of the change and drop you from the plan. Gary W. Jurney, president of Kainos Partners in Jersey Village, Texas, explains, "If the employee's health plan specifies that spouses are eligible for coverage, once the employee is legally divorced, the ex-spouse would no longer be eligible."

However, you can stay on your spouse's plan while you are legally separated, says Matthew Tassey, past chairman of the Life and Health Insurance Foundation for Education (LIFE).

Give notice of divorce within 30 days

If you change your marital status, you are required to give your health plan notice in a "timely manner," Tassey says. Timely is usually within 30 days. "That's the standard in the industry," he says.

Dropping spouse from health planOnce your divorce is final, the ex-spouse's coverage is likely terminated immediately. "However, some plans will let you stay on until the end of the month following the date of the divorce," Tassey notes.

If you're the spouse with health insurance through work, you want to tell your health plan of your divorce because it could lower your premiums, Tassey says. Coverage for an "employee plus spouse" is usually more per month than coverage for an individual.

Eligible for COBRA

If there's good news here, Tassey says, it's that a divorce qualifies you for COBRA -- temporary continuation of your health care coverage under the same plan at group rates. COBRA was drafted by the federal government in 1986 to provide temporary health coverage for individuals who lose their health insurance for specific reasons. Divorce is one of the qualifying reasons. You can stay on COBRA for up to 36 months if you lose health coverage as the result of a divorce.

You must be given notice of your eligibility for COBRA within 14 days of your divorce. You have up to 60 days to decide whether you want COBRA coverage. Should you opt for COBRA coverage, you have 45 days to pay the initial premium.

However, going on COBRA means that you'll be buying your ex-spouse's group health plan with no premium contributions from the employer. You'll pay the full bill yourself, plus up to 2 percent additional for administrative fees.

If you have a health plan available through your own workplace, it may be less expensive to switch.

If an employee fails to notify an employer of a divorce, the employee or former spouse could risk losing the opportunity to opt for health care coverage under COBRA, says Susan Sonkin, compliance specialist for EBS Capstone insurance brokers in Newton, Mass.

Rules different in Massachusetts

The rules are somewhat different in Massachusetts and a few other states, Sonkin says. "In Massachusetts, we have an insurance rule that says fully insured plans must continue to offer the former spouse coverage as if the divorce had not taken place," she explains.

The former spouse may remain eligible for coverage on the employed spouse's plan for no additional premium until either spouse remarries or the employed spouse loses his or her eligibility, Sonkin says. The employed spouse loses eligibility for the plan if he or she changes employers or dies. Also, the former spouse may not be eligible for coverage if the couple's divorce decree states the spouse doesn't have to provide his/her ex with health insurance coverage.

Employers in Massachusetts don't have to contribute to the cost of health insurance for an ex-spouse, but many do, Sonkin notes.

More options for health insurance shopping

Starting in October, under the Affordable Care Act, people who lose their health insurance will be able to research their options through health insurance marketplaces. Coverage can begin Jan. 1, 2014.

"One good thing about health care reform is that you will have more options than what you have today," Tassey says. Tassey suspects that as a result of reform fewer people will opt for COBRA because they will be able to more easily find more options elsewhere.

Repaying health insurance benefits

There are good reasons to notify your employer of your divorce once it's final. If you don't, you could face repercussions.

First, you could be liable for any benefits the health plan pays for your ex.

"If you don't tell them and there is a claim, the insurance company can try and recover the cost of the claim from you," Tassey says. Legally, you would have to reimburse your health plan.

Jurney confirms, "Your ex-spouse will become liable for all medical expenses from the date of the divorce unless he or she opts for continued coverage through COBRA."

Second, there could be tax implications. An ex's coverage can't be paid for with pre-tax dollars. "The value of the health coverage provided to the ex-spouse is taxable to the employee, to the extent it is not paid for with post-tax dollars," says Sonkin.

Some benefits remain

Not all is lost when you get divorced. Tassey says if you and your ex had been contributing to a health savings account, your ex still may be able to use his or her share of the money in that account to pay health care premiums or for qualified health care expenses.

Also, even though your ex-spouse is no longer eligible for your health plan, your children are.

More from Beth Orenstein here

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