4 ways Obamacare can affect a divorce
Tamara E. Holmes
Most married couples plan to stay together forever, but according to the American Psychological Association, between 40 and 50 percent of married couples in the USA get a divorce. If you're one of them, determining child custody and divvying up financial assets are likely on the top of your list of issues to hash out. But health insurance -- particularly under the Affordable Care Act -- shouldn't be too far behind.
When it comes to health insurance, divorcing couples run into a problem if both parties were on one employer-sponsored insurance plan, says David Gamage, assistant professor at University of California Berkeley School of Law. Most employers simply don't subsidize the health insurance of an ex-spouse. So the ex-spouse who is no longer covered must get a new health insurance plan. If that ex-spouse works for an employer who offers health insurance coverage, he or she can simply sign up for health insurance at work. If not, the ex-spouse must find insurance elsewhere, which has not always been an easy task.
However, health care reform brings with it some solutions. Here's how Obamacare may affect you if you're going through a divorce.
4 ways Obamacare can affect a divorce
1. It provides coverage for those with chronic illnesses.
In the past, health insurance companies could deny coverage to those with preexisting conditions such as cancer, HIV/AIDS, and even obesity and pregnancy. So if a person with a chronic illness got a divorce, he might have found himself unable to get insurance outside of his ex-spouse's company plan. Out of concern for the welfare of both parties, "that was one of the reasons that people considered doing a legal separation instead of getting a divorce," says Mark Baer, a family law attorney based in Pasadena, Calif.
However, the Affordable Care Act makes it illegal to refuse coverage based on pre-existing conditions, so fewer couples might have to exercise that action.
2. It provides another alternative to COBRA.
Divorcees who were no longer eligible for health insurance under their ex-spouse's company-sponsored plan have been able to keep the same benefits temporarily under The Consolidated Omnibus Budget Reconciliation Act (COBRA) since 1986. However, they had to foot the bill themselves. For many, that was a costly proposition. According to the Henry J. Kaiser Family Foundation, the average annual premium for employer-sponsored health insurance in 2013 was $5,884 for an individual. Under COBRA, the ex-spouse could be required to pay up to 102 percent of the cost of the plan. For those who were unemployed or didn't have health coverage through their jobs, this might have been the best option in the past. However, today, divorcees may get less expensive coverage through the health insurance exchanges.
While there's a limited general-enrollment period for health insurance under the health insurance exchanges (in 2014, it ends March 31), you can enroll at other times of the year during a special enrollment period if you've experienced a qualifying life event, such as a divorce, marriage or birth of a child.
3. It may save you money on health care expenses.
One of the criticisms surrounding the Affordable Care Act has been the additional cost it places on marriage. Under Obamacare, middle- and lower-income Americans can qualify for subsidies if they meet certain requirements. Generally speaking, an individual making up to $45,960 and a family of two with income up to $62,040 will qualify for subsidies. However, the burden of cost is heavier on a two-person family than on two single people.
If each spouse makes $40,000, they would have a joint income of $80,000 and wouldn't qualify for a subsidy while married. Yet, each of those individuals would qualify for subsidies after they divorced. As a result, there is a financial benefit to getting a divorce if couples are already having problems. Because the subsidies don't apply to higher-income individuals, this primarily affects lower- and middle-income families, Gamage says.
Some experts scoff at whether any couple would use the ability to qualify for subsidies as a sole reason to part ways. "I don't know what kind of financial position a couple would have to be in for that to be the only reason they divorce," Baer says.
4. It may save a higher-earning spouse money on alimony.Sometimes, in a divorce, the spouse who was the breadwinner must pay alimony -- a monthly stipend -- to help the other spouse with living expenses. The cost of the receiving spouse's monthly expenses helps determine how much alimony is awarded. In other words, the more money the receiving spouse needs to live, the higher the alimony may be. If the receiving spouse is able to qualify for subsidies under the Affordable Care Act and pay less for health insurance, the spouse charged with alimony can make the argument that the alimony should be lower, as well, Baer says.