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Divorce May Present Health Insurance Challenges for Ex-Spouses

Cristina Fuentes, a senior financial advisor with Ameriprise Financial Services, Inc., recently wrote an article for the San Gabriel Valley Tribune in which she considers the issue of insurance coverage and how divorcing couples can ensure that they are adequately covered once the divorce is finalized.

One of the issues Ms. Fuentes discusses is health insurance coverage. Health insurance coverage often presents major challenges for divorced couples, particularly the financially weaker party. Once a divorce is final, a spouse’s work related health insurance plan will not cover their ex-spouse.

Fortunately, children may still be covered under a work-related health plan until age 26 under federal health care reform law. But divorce can often be messy, and if a spouse covering their family under a work-related policy leaves the marriage with anger and resentment, he or she may choose to make matters more difficult by removing his or her ex-spouse and children from coverage. Depending on the divorcing parties and their goals, this is potentially a point on which negotiations can be made in the course of planning a divorce.

Should an ex-spouse and the children find themselves out of health insurance, the ex-spouse may secure coverage by obtaining it through their employer or by purchasing private coverage. Private coverage will be more expensive. Further, it is wise for an uncovered divorcing spouse to obtain health coverage as soon as possible after losing coverage under their ex-spouses plan, as this will make it easier to obtain going forward.

Another option for an ex-spouse is to seek coverage through their ex-spouse’s health plan under the Consolidated Omnibus Budget Reconciliation Act (COBRA). According to the U.S. Department of Labor, COBRA allows former spouses and dependent children to secure temporary continuation of health coverage at group rates under the ex-spouses plan for up to 36 months. This option, while generally more expensive than regular rates, will be less expensive than private coverage. Under COBRA, an ex-spouse has 60 days to notify the plan administrator of their loss of coverage within 60 days after divorce or legal separation.

In our next post, we’ll look briefly at how life insurance and disability policies figure into planning a divorce.

Source: San Gabriel Valley Tribune, “Divorce adds fuel to changes in insurance coverage,” Cristina Fuentes, 10 Jan 2011.