How Insurance Changes After Divorce Is Final

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Man and woman filling out insurance forms after a divorce.
During a divorce, insurance coverage may change.

During the process of ending a marriage, a person is facing many complex financial and legal issues that will affect his or her future for years to come. Divorce is overwhelming, and it’s easy to become overly focused on things such as property division and spousal support. While these are important matters, it is also prudent to consider insurance coverage and whether a divorce will change the protection a Texas reader has. 

One important consideration is what will happen to a person’s life insurance plan. This type of insurance coverage can have an important role in a non-earner’s future. This can be especially important if a former spouse passes away or is otherwise unable to make support payments. It may be possible to negotiate a fair agreement regarding a life insurance policy.

Many spouses often share health insurance benefits under one of their Texas employers in an employer-sponsored health plan. Joint plans typically make more financial sense. However, divorce may make it complicated for one or both parties to find new coverage that is affordable. The long-term goal would be to have separate insurance accounts. In the interim, the Consolidated Omnibus Budget Reconciliation Act (COBRA) gives the non-earning spouse up to three years to remain on the same plan with his or her ex-spouse.

The terms of a final divorce order will have implications for a person’s life for years to come. It is prudent to negotiate and discuss an agreement with a strong future in mind before the divorce is final. During this process, it is smart to consider insurance policy coverage changes after divorce and how to protect future interests.

How Long Does Health Insurance Last After Divorce?

The COBRA act allows a person to get policy coverage through their’s ex-spouse’s employer-sponsored health plan for up to 3 years or 36 months. The federal rule only applies if your ex-spouse’s employer has 20 or more employees. However, many states have similar rules for any employer with less than 20 employees.

The cost of your COBRA coverage must be within 102% of the combined total of a similar employee’s and employer’s health insurance plan contribution. Make sure to provide a copy of your divorce decree and COBRA notification to the health insurance company within 60 days. Otherwise, you will not be eligible for your ex-spouse’s health policy coverage after a divorce.

You might be able to get more affordable insurance policies and options if you are relatively healthy. This is because you need to pay all the monthly premiums yourself without the help of your employer if you maintain COBRA coverage. Make sure you are aware of the cost of the monthly premium you need to pay for COBRA coverage. However, it may be a good option while you find other insurance companies and new insurance policies available to you. These options can often be more affordable with better policy coverage.

You do not need to wait for the regular open enrollment period to sign up for a health plan with an insurance company under the Affordable Care Act or from the health insurance exchange in your state. You will qualify for the special enrollment period as the result of a divorce.

Can A Divorced Spouse Remain On Insurance?

An ex-spouse can remain on your health insurance and vice versa only if your health coverage is through COBRA. If you have a private health care plan (or Affordable Care Act plans), insurance companies do not need to keep an ex-spouse on the health insurance plan. The divorce court also cannot order them to do so.

Sometimes you can have one spouse with health insurance to pay alimony equal to the health insurance premium costs to the other spouse. This will form part of the divorce agreement. This may be a good option depending on the assets and income that ex-spouses have. If you will be eligible for Medicare soon, you may want to continue your policy coverage until you become eligible for a Medicare plan which can lower your costs.

If one spouse did not work and is heavily reliant on the health insurance provided by the other spouse’s employer, part of the divorce agreement may require you to maintain your spouse on the health insurance you already have for yourself and the children. This also applies to you if you are not the working spouse. You may be able to remain on your ex-spouse’s health insurance so you get some benefits from their policy coverage.

Medicare Considerations

If you are at least 62, you may get to qualify for Medicare benefits. Qualification is often based on your previous employment or the employment record of your ex-spouse. Medicare is a federal plan for people over 65 or for those with disabilities. The Social Security Administration states conditions you need to meet to qualify for Medicare on your ex-spouse’s record for divorced spouses. These include:

  • You are currently not married
  • Your marriage was for at least 10 years or more
  • Your ex-spouse is entitled to Social Security benefits
  • You would receive more benefit based on the record of your ex-spouse compared to your own record.

Who Pays Health Insurance After Divorce?

This question often comes up regarding the health insurance of children after divorce is final. Health insurance falls under child support arrangements in a divorce agreement.

In many instances, the spouse who already carries the health insurance of the children continues to do so. The other spouse may need to pay the former spouse some of the costs of healthcare policy coverage for the children. This is typically part of child support in a divorce.

If your children are under Medicaid, you and your former spouse must pay the government for the policy coverage. The federal government and states jointly fund Medicaid.

What Happens To Joint Life Insurance After Divorce?

As Texas is a community property state, any joint life insurance you purchased during the marriage would be considered as community property.

Term life insurance policies will be considered community property if income during the marriage was used to pay the most recent life insurance premium. A spouse generally may have the right to claim 50% of the benefit.

The value of whole life insurance or universal life insurance would be prorated according to the percentage of premiums paid with income earned during the marriage.

Other options include opting to cancel the joint life insurance plan. You may also ask the insurance company to convert it into individual life insurance policies. Make sure to speak to an insurance agent in your state to find out your options.

Texas law states that if a person has listed their spouse as a beneficiary under their life insurance policy, the ex-spouse may not claim any part of proceeds after a divorce unless:

  • The divorce decree states that the former spouse is the beneficiary of the policy
  • The person designates the former spouse as the beneficiary after the divorce decree has been issued
  • The former spouse is entrusted to receive the proceeds in trust for a child or a dependent

A divorce may have serious implications on your health and life coverage for the rest of your life. It’s important to consult an experienced attorney to advise you on your rights.

Want to find out more about your options and insurance changes in divorce? The experts at Sean Lynch have years of experience in family law in the state of Texas.

Contact us today for a no-cost case review.

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