Health insurance is a very important financial issue for couples facing divorce. Securing coverage for both spouses, and any children, is clearly something that should be researched, seriously considered and specifically outlined in a divorce settlement.
Health insurance becomes a particularly critical issue if one spouse and/or the children were insured on one of the spouse’s plan while they were married. Following divorce, that coverage will end unless specific steps are taken.
Here are some examples of how insurance coverage can be addressed in a divorce.
1) If one spouse is covered under the other's health insurance plan, one of the easiest solution is for the post-divorced, uninsured spouse to secure full-time employment with health insurance benefits. This is by far the most economical since most employers usually subsidizes the cost, paying 2/3 to 3/4 of the premium. Average cost can run $150 per month with low co-pays.
2) Securing individual health insurance is likely the next most economical if: a. the soon-to-be uninsured spouse expects to go back to college, or retrain for months or years in an effort to gain new skills in order to secure employment; or b. the spouse is not able to work full-time after the divorce, AND is in very good health. However, insurance companies are VERY picky about “preexisting” conditions (at least until 2014 when the health care legislation changes this). So, plan on shopping around and be sure to ask friends and family for recommendations. Often, an insurance broker can help with evaluating a number of insurers to find the most appropriate provider. Cost on average $300 - $800 per month without co-pays.
3) If the soon-to-be uninsured spouse has preexisting conditions and isn’t taking a full-time job, and if the insured spouse works for a company with more than 20 employees, the uninsured spouse is entitled to COBRA for up to 36 months. But, this can be pricey since the company doesn’t subsidize the cost and can add up to 5% administrative fee. Estimated cost will be between $350 and $700 or more per month.
4) The last resort is the “Texas health insurance Risk Pool”. Premiums are based on age, zip code, amount of deductible and smoker/non-smoker, etc. Preexisting conditions don’t matter. Costs are from $400 to $1,000 per month.
Whatever choice one makes, it is a good idea NEVER to leave a gap in coverage. This can prevent you from qualifying for individual coverage OR the high risk pool.
Join Patricia Barrett at one of the upcoming 2013 Guide to Good Divorce seminars in Houston on April 27, July 20 or September 28. For more information on divorce financial planning, visit Lifetime Planning.
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