When contemplating divorce, one of the first issues that need to be addressed is how your health insurance needs will be fulfilled after your case is over, particularly if you are a non-working spouse . If your husband is employed by a larger corporation or has a group health insurance plan that is required to be covered by COBRA, then you will be allowed continuous coverage for at least three years from the date the divorce is finalized. However, the costs of COBRA coverage are generally substantially greater than what an individual pays as an employee for the same coverage. When creating a budget for your new life, you will need to carefully consider whether it makes sense to stay on the health insurance plan of your former spouse or try to find alternative coverage on your own. If you’re faced with a situation where you have pre-existing conditions that may limit your ability to purchase new health insurance, then you may have no choice but to stay on the former spouse’s plan. Under COBRA, you are allowed a guaranteed purchase after your three year COBRA benefits have expired. Again, the rates for this guaranteed purchase will likely be far higher than what you would have paid under the employer plan or the COBRA rates. In many cases, these guaranteed options have premiums well in excess of $1,000 per month. With some careful shopping, many healthy individuals should be able to obtain health insurance at substantially lower rates than those offered by COBRA plans. You should consult with your financial advisor about the various types of insurance you may qualify for. There may also be some tax-saving strategies that can be attached to your health insurance plan which could save you additional funds.
In evaluating all of your options, it’s important to have the facts. You should ask your husband’s employer for the COBRA rates on their health insurance plan and confirm with them that you do have a guaranteed purchase option when the COBRA option expires at the end of the three year period of time. Some self-funded plans are not required to offer a guaranteed purchase option.
As a side note, the new health care legislation under The Patient Protection and Affordable Care Act (“Obamacare”) should provide guaranteed coverage, even for those with pre-existing conditions as early as 2014. Unfortunately, this doesn’t help you if you’re contemplating divorce today, and there’s certainly no assurance that by the time these provisions are scheduled to be implemented in 2014, that the legislation will still be in force.
Cary Stamp is a CERTIFIED FINANCIAL PLANNER™ practitioner and Certified Divorce Financial Analyst™, Cary specializes in helping women make empowering choices before and after a divorce. He has a broad depth of experience in divorce litigation support, investment management, tax strategies, and estate planning.