Couples who divorce should pay particular attention to maintaining health insurance coverage after their split – for both parties, as well as for any children affected.
Health Insurance After Divorce
If you’re considering or going through a divorce, it’s important to understand your options.
This guide is designed to help simplify the process, and provide important information for you to consider. Let’s take a closer look at some of the things you should know.
Employer-Sponsored Plans
If you’re currently employed, and you would lose your coverage after your divorce, your first step should be to check if you can enroll in your employer’s health insurance plan.
Most employers offer a special enrollment period for major life events, like divorce.
These plans often offer a range of coverage options. So you would need to review them to find one that best suits your needs. Compare the cost of premiums, deductibles, and co-pays against other options.
Group health plans through your employer may be more affordable because the company helps pay some of the cost. In other cases, you may be better off lining up your own health insurance coverage, taking advantage of potential subsidies under the Affordable Care Act.
And if you are in good health and don’t qualify for an ACA subsidy, or only a small one, you may be better off dropping traditional health insurance altogether and joining a health sharing community.
This blog post will look at each of these options in turn, and explore the advantages and disadvantages of each one.
COBRA Coverage
If you’re recently divorced, or divorce is imminent, and you’re covered under your spouse’s employer-sponsored health insurance, Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage is an option to consider.
Who Can Use COBRA Coverage?
Nationwide you are eligible for COBRA coverage if your ex-spouse’s employer has at least 20 employees. Some states – ones that have so-called “Mini-COBRA” laws – extend the COBRA requirement to smaller companies.
COBRA is also an option if your spouse was covered under your work plan, and you must continue to provide health insurance for your ex-spouse after a divorce.
Under COBRA, you can continue the same health insurance coverage you had while married, and you can extend coverage up to 18 months following a divorce. Again, some states have “mini-COBRA” laws that allow you to extend this coverage for even longer, should you choose to do so.
Typically, you have 60 days after your divorce is final to elect COBRA coverage??. Otherwise you will lose this option.
COBRA Advantages
- Familiarity. Many people stay with their employer’s plan simply because they’re familiar with it. This can be an expensive mistake.
- Deductibles. If you have already incurred significant medical expenses earlier in your plan year, you will retain credit for any amounts you’ve already paid toward your deductible. If you change plans, you will likely have to start over, and pay the entire new deductible before your new plan will begin to pay benefits.
- Same physician/provider network. If you change plans, your network of authorized physicians and providers may change, too. Some people stay with their employer plan for this reason, even though buying their own Affordable Care Act-qualified plan may be cheaper.
COBRA Disadvantages
- Cost. COBRA plans don’t qualify for subsidies under the Affordable Care Act. Employers typically don’t continue to subsidize COBRA continuation coverage, either.
When you take COBRA coverage, you must pay the full premium, with no subsidies, and no employer contribution. You’ll also typically have to pay a small administrative surcharge as well.
Unless your deductible is a serious issue for you, most people are better off purchasing an Affordable Care Act policy via the individual market, or joining a health sharing plan.Consulting with a health insurance advisor can help you navigate your choices more effectively.
Compare Pricing on the Best Insurance Plans Available
Health Insurance Marketplace
Under the Affordable Care Act (ACA), also known as “Obamacare,” you can opt for plans through the Health Insurance Marketplace if you don’t have access to an affordable health insurance plan through your employer.
This option is even better if you qualify for subsidies that are designed to make health insurance plans more affordable.
Under the Affordable Care Act, divorce qualifies you for a special enrollment period, allowing you to enroll in a Marketplace plan outside the usual open enrollment period.
Who Qualifies for Health Insurance Subsidies?
Your eligibility for a subsidy is mainly determined by your household income.
Generally, if your income falls between $14,580 to $58,320 for an individual, or $30,000 to $120,000 for a family of four??, you would qualify.
But a special provision in the Inflation Reduction Act?? allows you to qualify if the cost of a benchmark Marketplace plan exceeds 8.5% of your income through 2025.
Currently, around 80% of households that don’t have access to an employer plan qualify for at least some subsidy.
Additionally, you must live in the United States, be a U.S. citizen or national living in the U.S., and not be incarcerated?? in order to qualify for a premium subsidy.
You won’t be eligible for an Obamacare subsidy if your employer offers an affordable health insurance plan meeting minimum coverage standards, if you are eligible for Medicaid, Children’s Health Insurance Program (CHIP), or Medicare Part A.
However, simply being eligible for COBRA, and not taking it, won’t disqualify you from receiving a subsidy under the Affordable Care Act.
To shop around, compare plans, and get quotes from the best health insurance plans available in your state, click here, and make an appointment with your These platforms guide you through the process, including how to calculate your household income and select the right plan.
Trained professionals are available to help you find a plan that fits your new financial situation and health needs after a divorce, and to assist in completing the enrollment process.
Health Sharing Plans and Divorce
Health sharing plans can be a great option for divorcing couples in the right circumstances.
Health sharing is an affordable alternative to traditional health insurance. It’s not insurance. Rather, health sharing plans are non-profit associations of like-minded, health-conscious people who band together to help share the medical expenses of fellow plan members and families.
Health sharing plans don’t qualify for Affordable Care Act subsidies.
But thanks to their streamlined, efficient cost structure, health sharing plans typically cost around half of what a comparable traditional health insurance plan would cost on the open market without a subsidy.
Note: Many divorce decrees stipulate that one party maintains health insurance coverage for the other. Since health sharing is not insurance, a health sharing plan alone would not meet the insurance requirement.
But compared to the unsubsidized cost of a traditional Marketplace ACA-qualified health insurance plan, the cost savings of switching to a health sharing plan can be so significant that it may be worthwhile to negotiate an arrangement to pay for an ex-spouse’s health sharing plan instead.
In return, part of the difference can be added to alimony or otherwise accounted for in the disposition of marital assets, resulting in a win-win solution for both parties.
Health sharing works best for those who are in good health and who have no significant pre-existing conditions. This is because health sharing plans typically impose a waiting period before they will share costs related to pre-existing conditions.
It also works best if the plan member doesn’t qualify for a significant subsidy under the Affordable Care Act.
If the divorcing party has any pre-existing conditions that may require ongoing care at the time of the divorce, or if he or she would receive a significant subsidy for purchasing an ACA-qualified plan available on the Marketplace, then it may make more sense to go with the traditional health insurance solution.
Note: While health sharing plans typically do include cost sharing for pregnancy and childbirth costs, many plans do not share these costs for unmarried women.
Medicaid
In some cases, a divorce may significantly reduce your income, and leave a single parent eligible for Medicaid.
Medicaid eligibility varies significantly across states. For instance, in some states, the income limit for a family of three can be as high as $76,070, while in others, it may be considerably lower??.
The Children’s Health Insurance Program (CHIP) provides health coverage to eligible children, often with higher income limits than Medicaid. This can be a crucial resource for single parent families whose income may be too high for Medicaid but who still need assistance.
Knowing if you now qualify for Medicaid is important for getting low-cost health care for your family. Check the rules for your state and talk to a Medicaid specialist to get the right info for your situation.
State-Specific Health Insurance Programs
Each state has its own official health insurance Marketplace with plans that are all ACA-compliant.
These Marketplaces primarily serve individuals and families who are uninsured, self-employed, employed by a small business without health benefits, or retired before age 65??.
In many states, individuals eligible for Medicaid can use the Marketplace to enroll in Medicaid or determine their eligibility??.
Several states offer their own health insurance subsidies in addition to federal subsidies. For example, California, Colorado, Connecticut, Maryland, New Jersey, New Mexico, Massachusetts, Vermont, and Washington each have unique subsidy programs based on income levels and other criteria??.
New York, Minnesota, and soon Oregon, offer Basic Health programs (BHPs) that provide comprehensive coverage with free or very low premiums for eligible residents??.
Washington, Colorado, and Nevada have partnered with private insurers to offer modified public option plans, which aim to provide good affordable programs??.
Consult with a health insurance specialist in your state to help you navigate these options more effectively.
Income and Tax Considerations
Since personal health insurance is tax-deductible, all things being equal, it makes more sense for the individual in the higher income tax bracket to pay health insurance premiums.
Another option is for the party in the higher tax bracket to pay additional alimony sufficient to pay the ex-spouse’s health insurance premiums. This way, the benefit of the alimony deduction goes to the party in the higher tax bracket.
The alimony is then taxed at the lower tax bracket, and the party in the lower tax bracket potentially retains eligibility for a subsidy under the ACA.
A smart divorce attorney can negotiate a win-win solution, adjusting alimony payments to account for the tax deduction, resulting in more net after-tax income for both parties.
Compare Pricing on the Best HealthShare Plans Available
Consult a Specialist
Going through a major life change such as a divorce is a very complicated and emotional time.
You’ve got a lot on your plate, but there’s no need to go it alone!
Seeking the assistance of a specialist can significantly ease your burden during this time of transition. Make an appointment with a health insurance specialist who can provide personalized guidance and help you make the best decisions for your family.
For Further Reading: Special Enrollment Periods: What You Need to Know | How Much Money Can Health Sharing Save? | How Health Insurance Subsidies Work
