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 (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 (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 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 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).
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