Late-Life Divorce: Solving the Health Care Puzzle

Late-life divorce can present unique challenges, but health care coverage doesn't need to be one of them.

Health care is a major issue for anyone who is aging, but for people over 50 who find themselves in the midst of a divorce, health care coverage is front and center. This article addresses strategies for looking at the future and putting together the pieces of the health care puzzle if you're going through (or considering) a late-life divorce.

Begin Immediately

As soon as you know your marriage is ending, take steps to keep your existing health coverage in place and to look for replacement coverage. If you're concerned that your spouse may drop your employer-provided insurance or fail to pay premiums for your coverage, tell your attorney immediately so that the lawyer can act to assure that your insurance remains in place. If you know that you'll need private health insurance coverage when your divorce is finished, start the process immediately. It takes time to study the different policy options and apply for coverage. (For basic information on health care coverage, see Nolo's article Understanding Your Health Insurance Coverage.)

The least expensive type of health insurance is employer-provided group insurance. If you are covered through your own employment, you're lucky. If you are covered through your spouse's workplace, you may be entitled to COBRA coverage (discussed below). Otherwise, individual insurance is your starting point.

Individual Health Care Plans

There are many varieties of individual health care plans, including:

• expensive plans offering greater coverage
• lower-priced plans limiting hospital and physician access
• plans with no deductibles, no co-pays, no waiting periods
• umbrella plans with many health services (including dental, prescription, and vision)
• preferred provider plans (PPOs)
• HMO plans
• catastrophic plans, and
• mini-med plans (very limited coverage for those with preexisting conditions).

Where To Start. You can purchase individual health insurance through an insurance agent, an insurance company website, or a mass purchasing group such as a credit union, professional or trade association, or an organization like the American Association of Retired Persons (AARP). Consult with agents early so you'll learn terminology and options that will inform your independent search. Compare policies of the same type and offering the same benefits. Otherwise, price differences are meaningless. Here are some key insurance terms to help you choose the right plan:

• Deductibles - a specific amount you must pay before expense reimbursement begins. The higher the deductible, the lower the cost of the plan.
• Co-insurance or co-pay - the percentage split between the individual and the insurer of covered expenses (for example, the insurer pays 80% and the insured pays 20%). The lower the insurer's percentage, the lower the cost of the plan.
• Covered expense - an eligible expense, reimbursed in whole or in part. Some policies allow for payment of a "reasonable and customary charge" if the actual charge is higher than that, the insured person must pay the balance.

Cancellation and Renewal Coverage. Generally, once you are covered by private insurance, the carrier cannot arbitrarily cancel your health coverage. However, your insurance can be cancelled for:

• failure to pay premiums
• failure to disclose relevant medical information, or
• elimination of benefits

Look for non-cancellable, guaranteed renewable coverage. If you can't find that, try to get a "conditionally renewable" policy; this gives the company the right to cancel all policies in a particular category, but you can't be singled out for cancellation.

If you're re-evaluating your health care coverage because of a later-life divorce, but you don't think an individual health care plan is the right (or only) solution, there are other options available to you. Here's a look at a few.

Health Savings Accounts (HSAs)

You can make tax-deductible payments into a health savings account (HSA) opened at a bank, insurance company, or other government-approved company. Funds are used for qualified medical expenses at any time. Annual contributions are up to $3,000. If you're over 55, you can make an annual catch-up contribution up to $1,000. You must have a health insurance policy with a high deductible to use an HSA.

COBRA Coverage

COBRA (short for "Consolidated Omnibus Budget Reconciliation Act") is a set of laws that are important if you're covered through your spouse's employer. COBRA provides dependents (called "qualified beneficiaries" in COBRA-speak) up to 36 months of continued insurance coverage when certain events occur, including divorce. COBRA applies to employers with at least 20 employees, employee organizations (unions), and state and local governments. Federal employees are not covered by COBRA, but most have similar benefits. Check with the agency. For former spouses of military personnel, Tricare provides similar continuation insurance.

Ensuring COBRA Coverage. Within 60 days of the divorce or legal separation becoming final, a qualified beneficiary must notify the plan administrator of the divorce and the need for COBRA coverage. The employer's human relations department will know who the plan administrator is. Do this at the outset of your divorce so you can learn the cost and budget for post-divorce premiums. Once the divorce is final, you will receive a notice with instructions and time limits for electing coverage. Be sure your spouse's employer and the plan administrator always have your current address.

Coverage and Cost. COBRA coverage provides you the same coverage as other plan participants. You are responsible for paying the premium, which will be 102% of the plan's cost of providing your coverage and can only increase for you if everyone in the plan gets an increase. The first premium is due within 45 days after you elect coverage.

Termination of Coverage. COBRA coverage is time-limited and ends 36 months after the date of divorce, or:

• if premiums are not paid on time
• if the employer stops providing a group insurance plan, closes, or goes bankrupt
• if you obtain equivalent group coverage, or
• if you become eligible for Medicare after electing COBRA coverage.

Conversion Coverage. Some group plans provide an option for "conversion coverage" at the end of the 36-month COBRA period. This allows you to convert to an individual plan with the same insurance carrier without a medical evaluation. Premiums will be very high, but if you have a preexisting condition, the conversion option could be invaluable.

HIPAA Portability

HIPAA (short for a federal law called the "Health Insurance Portability and Accountability Act of 1996") gives you the right to purchase individual or group health insurance with no exclusion for preexisting medical conditions under some circumstances. Your right to insured care is portable you can take it with you as long as one of the following is true:

• You leave a job where you are covered by a group policy and go to another job that also offers a group plan.
• You lose group coverage and want to purchase individual insurance coverage.
• You have an individual policy and enroll in a new group health plan.

If you were uninsured for more than 62 days, you don't qualify for HIPAA protection unless your state's law extends this time period. All COBRA coverage must be exhausted before HIPAA guarantees access to individual coverage.

State Insurance Risk Pools

States insurance risk pools provide a safety net for those who can afford private health insurance but are denied coverage because of preexisting conditions. If you've tried unsuccessfully to find comprehensive health insurance at any price, explore an insurance pool as a temporary stop-gap. Premiums are high, and eligibility requirements exist. The Health Insurance Resource Center has risk pool information for each state at www.healthinsurance.org/risk_pools; you can also find information at the website of The National Association of State Comprehensive Health Insurance Plans, www.naschip.org.

Medicare

Medicare is the federal government's health insurance program for people 65 and older. Details about Medicare's Parts A, B, C, and D are available from the Social Security Administration at www.socialsecurity.gov/mediinfo.htm.

Supplemental (Medigap) Coverage

Medicare may pay for less than 50% of health care costs. Services not covered include: dental and vision care, hearing aids, long-term care, some preventive care, alternative medicine, and others. This is why private supplemental coverage is important. See "Individual Coverage" above; the same information applies to getting a supplemental policy when you're on Medicare, except the policy will be less expensive.

Medicaid

Medicaid is not a form of health insurance like Medicare. It is a public, state-run program that pays directly to health care providers and private health insurance companies acting as subcontractors. It is limited to hospital and medical services for people who meet income thresholds and eligibility group requirements. For more information on Medicaid visit the U.S. Department of Health and Human Services online at www.cms.hhs.gov/home/medicaid.asp.

Learn More About Late-Life Divorce

For in-depth information on all key issues related to late-life divorce, get Divorce After 50: Your Guide to the Unique Legal and Financial Challenges by Janice Green (Nolo).