With all the decisions women need to make in a divorce, one that's often overlooked or underestimated is what to do about health insurance.
Women face this dilemma more often than men because they're more likely to be covered under their husbands' policies than the other way around.
If a couple decides to divorce, suddenly being covered is no longer just about renewing an employer-sponsored health plan. It likely will mean comparing plans and undergoing physical exams. If you have a pre-existing condition, new insurance may be extremely expensive or even completely out of reach.
A study by University of Michigan researchers indicates that losing health insurance is common among divorcing women and that the effect can be long-lasting. Lead researcher Bridget Lavelle, a doctoral candidate, studied 11 years of census data and found that one-fourth of married women are insured through their husbands' employers. The study also found 16 percent of women will lose their health insurance within six months of a divorce and live without it, on average, for another two years.
“We’ve known for a long time that many women experience financial decline after divorce, but now we know that a good number are losing health insurance at the same time. This has a good chance to compound the economic consequences of divorce and also put women’s health at risk,” Lavelle says.
The health risk comes when women avoid procedures and checkups because they fret over paying the bills. For some who fall through the cracks entirely and can’t find affordable insurance, the fear that a major accident or illness could bankrupt them adds stress on top of avoiding regular checkups.
Those most likely to fall through the cracks are women who make too much to qualify for government-backed Medicaid but not enough to buy private insurance on their own, Lavelle says. And you don’t have to make much to knock yourself out of Medicaid consideration.
“A single woman with two children would need to earn less than about $16,000 per year to qualify for Medicaid in many states,” Lavelle says.
In shopping for coverage, some women turn to COBRA. That’s the federal program that lets you keep insurance, no matter what your health status is, after leaving a job or, in most states, after leaving a marriage that provided coverage. “But COBRA premiums average between $400 and $500 per month for individual coverage, which many divorced women can’t afford,” Lavelle says.
However, it’s a myth that COBRA always is the most expensive option for people who've lost other coverage, says Jim Morrison, president of Morrison Insurance Services in Carlsbad, Calif. That may be the case for people in their 20s and 30s, “but for someone in their 40s, 50s, 60s … it might not be a bad deal,” he says. Also, COBRA (Consolidated Omnibus Budget Reconciliation Act) will maintain the benefits you’re used to, rather than starting with a new, bare-bones policy.
Besides COBRA, which usually is offered for a window of up to 36 monthsfrom the day a divorce is finalized, major-risk medical pools are available, but these expensive state-based plans should be a last resort.
If they do go with private coverage, women may need to lower their expectations, as the level of coverage they enjoyed under their husbands' plans would become more expensive, Morrison says. However, women needing a cheaper plan now can change to a better plan when they get back on their feet.
Timing is everything
If the current federal health care reform law remains intact, women will have better options for health insurance effective Jan. 2, 1014. On that date, women will be able to get health insurance without being penalized for pre-existing conditions. Right now, even minor conditions can keep you from getting a new policy, Morrison says.
Another change under the health care law: Medicaid will cover more people. Right now, the thresholds for Medicaid differ in every state, but the average is 90 percent of the federal poverty level, which in 2011 was $20,115. Health care reform will raise that to 133 percent of the federal poverty level, which was $29,725 in 2011 for a family of four.
“There appears to be hope on the horizon,” Morrison says.
Knowing that health insurance will change under the federal law means advisers are discussing with their clients whether they may want to use COBRA to bridge an insurance gap until then. Also, some experts are recommending legal separation for couples instead of divorce when the cost of insurance for the wife insured would be extremely high. The separation could last until health care reform kicks in or even longer if neither spouse wants to remarry.
“Most companies will recognize the couple as still being married, and then insurance benefits won’t go away,” says Michelle Elowski, an attorney at Divorce Attorneys for Women (DAWN) in Michigan.
The time for a divorcing woman to weigh health care options is before negotiating a divorce settlement, Elowski says. If a woman is looking at getting $1,500 in support from the spouse and then will have to pay $700 to keep her insurance, that should be figured into settlement negotiations. Something else to factor in: health care inflation.
Morrison says that whatever health insurance choices divorcing women are considering, they should seek help from a divorce attorney, tax professional or insurance professional.
“Half the time I send (people) to COBRA because that’s the best solution for them, and I don’t get paid for that,” Morrison says. “It’s not like it will cost them a lot of money to have a conversation with a good, solid insurance professional. It’s a minefield for insurance professionals, and we deal with it every day. It’s got to be worse for people who don’t deal with it on a regular basis.”