Americans buy health insurance.
It’s making it simpler for unhappily married couples to uncouple.
Word is starting to spread among family law attorneys that in the post-ACA era, health insurance isn’t the binder it once was for holding bad marriages together.
With more options available on the market and preexisting conditions no longer an issue, people once reluctant to divorce for fear of losing health insurance coverage would do well to reconsider.
Since the ACA, “health insurance is not a good reason to stay married,” said Margaret Klaw, a partner in the Philadelphia firm of Berner Klaw & Watson. “You shouldn’t have to be married and maintain a fiction just to get health insurance.”
Klaw believes that the ACA is already significantly diminishing the value of health insurance as a negotiating tool. That’s because an attorney representing the spouse without coverage doesn’t have to swap something his or her client is entitled to – alimony or a percentage of assets – for health insurance. That was pretty standard practice in pre-ACA days.
“In the list of things that need to be addressed [in a divorce], health insurance is very important,” said Klaw, author of Keeping It Civil: The Case of the Pre-Nup and the Porsche & Other True Accounts from the Files of a Family Lawyer. “It becomes a major item. Now it’s way less and it’s not a driver anymore.”
How major was it? Let’s talk pre-ACA – before January 1. People absent from the work world long-term, over 50, or who had a preexisting condition were almost unemployable. And since most people received health insurance through an employer, that meant they were virtually uninsurable.
Sure, individual policies were sometimes available. But most were exorbitantly expensive, carried high deductibles, and could be canceled at will.
So staying married was one way to stay insured, especially for someone seriously ill or with a preexisting condition.
Several years ago, Klaw had a gravely ill client whose wife wanted a divorce. The wife’s job provided the family’s health insurance.
To keep her client covered, Klaw, with her client’s approval, offered major financial concessions if the woman would stay married for eight more years.
The woman agreed. The couple signed a divorce settlement that included a clause that said if the woman remarried within the eight-year time frame, she would continue to pay for her ex-husband’s health insurance.
“He had to make serious concessions to get that,” she said.
When divorce was inevitable, the only strategy left for an attorney was to trade a valuable asset for help with insurance.
“When you have people crying in your office about ‘what am I going to do for health insurance?’ the best thing you can do is extend it,” Klaw said. “And you have to pay.”
After many divorces, spouses received health insurance through the law known as COBRA. The cost of policies varied based on the employer. In all cases, the individual was responsible for paying the full cost of the insurance premium plus a fee of up to two percent. COBRA covered 36 months, after which anyone under 65 had to find an individual policy.
The same COBRA rules still apply today. The difference is that when COBRA runs out, people have more plans to choose from on the ACA marketplace.
“I’m telling people to get information from your spouse about COBRA,” Klaw said. “That way you know what COBRA is going to be and you can go on the [healthcare.gov] website and see what you can get and then make your decision based on that.”
Comparing COBRA and plans on the marketplace makes sense, says Joel Ario, a managing director at Manatt Health Care Solutions and former Pennsylvania Insurance Commissioner.
Dollar for dollar, COBRA may be a better buy for some people, especially those between 50 and 64 or people with health issues.
“If you’re younger, it may be wiser to go on the marketplace,” Ario said. “So someone younger may pay less on the market for the same or similar benefits they can get with COBRA, especially if they are going to receive a subsidy. But once you pass your mid-40s the difference is break-even. As you get into your 50s the prices on the ACA exchange get higher.”
Another benefit of COBRA is that policies usually offer good coverage with lower deductibles and co-pays.
“COBRA is probably a pretty good deal generally,” he said. “The main variable is if you want gold-or platinum-tier coverage, stick with COBRA.”