Health Insurance After Divorce

When negotiating the terms of your divorce agreement, it is important to understand how your current health insurance will be affected by the divorce. There are two types of plans; insured and self-insured. An insured plan is one in which the employer pays an insurance company or HMO, which accepts the risk of paying claims. A self-insured plan is one in which the employer accepts the risk of paying the claims. To find out whether you have an insured or self-insured plan contact your company’s HR department and ask for the Summary Plan Description (SPD). Within the SPD it will say what type of plan you have.

Self-insured plans are exempt from Massachusetts insurance laws. This means that the employer is no longer responsible for covering the ex-spouse. Under the Employee Retirement Income Security Act of 1974 (ERISA), the ex-spouse is allowed to stay on the spouses’ insurance plan for a maximum of 36 months. The ex-spouse may be charged up to 102% of the employers’ cost.

Insured plans are governed by Massachusetts General Laws c. 175 § 110I, which provides that the employer must continue health insurance coverage for the ex-spouse. Unfortunately, it is generally accepted that ERISA preempts Massachusetts law and allows the employer to pass on the additional cost of the difference between the individual and family plan to the employee. The cost difference is generally substantial and must be taken into account when drafting a divorce agreement.

The bottom line is that prior to reaching a divorce agreement is it necessary to understand the potential health insurance costs  in order to incorporate future health insurance expenses into an equitable distribution of assets.