What health insurance options do I have after divorce?

By Marcia B. Kraus, CFP, CPA, CDFA
September 28, 2010
IL FAQ/Financial Issues

Once you are divorced, you will no longer be eligible for coverage as a dependent on your spouse’s policy. There are, however, a number of options open to you.

  • Your spouse’s group health plan may have an option to convert from group health coverage to an individual policy. Check with the HR Department to see if this is an option and what it would cover and cost.

  • Both federal and Illinois laws make provision for divorcing spouses who are covered under their spouse’s health insurance plan at work to continue the exact same plan at their own cost. Under federal law, (COBRA), which generally applies to group health plans maintained by employers with at least 20 employees, you will probably be required to pay the FULL COST of the coverage, plus a 2% administrative charge. It is available in divorce situations for 36 months. Illinois law (SHIRA) also offers ex-spouses the right to continue coverage, but does not apply to health plans sponsored by self-insured employers or union plans. For former spouses under age 55, coverage is available for two years at the full (unsubsidized) insurance cost. For former spouses age 55 or older, coverage is available until Medicare eligibility.

  • If you are currently employed and your employer offers a health insurance plan, you might reconsider it. Normally, you would have to wait until an open enrollment period, however, the divorce will probably give you a special enrollment opportunity.

  • You find a new job that offers health insurance. There may be timing issues associated with this alternative, particularly if you have any pre-existing health conditions, however, this does present the most economical and frequently the best alternative for coverage.

  • You may purchase an individual health insurance policy. You are likely to be subject to medical underwriting and your health history will be of major significance. By 2014, insurance companies will no longer be able to refuse you coverage for pre-existing conditions, however, at this time, with certain limitations, they can.

  • Illinois Comprehensive Health Insurance Plan (ICHIP) is an alternative if you have been turned down by a commercial insurance company because of pre-existing health conditions. Premiums are established by law at from 125%-150% of the average rates charged individuals for comparable coverage by the largest insurance companies in Illinois.

  • The Health Care Reform Act offers another alternative for individuals who have been without health insurance for six months or more. Premiums are set by law to be less than those for ICHIP, however, they will still be substantially more than the group coverage. More alternatives will come into play in 2014.

Marcia B. Kraus, CFP, CPA, CDFA, formally heads Divorce Financial Strategies, an independent firm in Naperville, IL. She provided advice for clients dealing with the financial issues in and after divorce.

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September 28, 2010
Categories:  FAQs

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