A: You have a legal right to buy
coverage in your ex-spouse's group health plan for 36 months after the divorce.
Your divorce settlement should address the question of who pays for it.
The law giving you this right is the federal Consolidated
Omnibus Budget Reconciliation Act, better known as COBRA. It requires companies
with 20 or more employees to make health coverage available for purchase at
group rates to their former employees, and to their employees' dependents who’ve become ineligible
for coverage.
If you lose your health insurance because you've been laid-off -- or you no longer qualify for employer-subsidized coverage because your hours have been cut -- COBRA lets you stay in the insurance plan for an additional 18 months. And COBRA lets you continue your coverage for up to 36 months if you no longer qualify as a dependent because of a divorce or a birthday. (Many policies only cover children as dependents up to age 19, for example.)
The good news is that because this
is group coverage, you can’t be turned down for it regardless of your health.
The bad news is that COBRA coverage
is expensive: You’ll pay both the employer
and the employee’s share of the premium, plus up to 2% for administrative costs.
You should make sure that your divorce
settlement includes an agreement about how this cost will be paid.
If your ex-husband pays your COBRA
premiums, for example, the divorce settlement can state that the payments are
to be treated as alimony. That would
make them tax-deductible to him, and taxable income to you.
But if the divorce settlement is
properly drafted, you could claim them as a deductible medical expense
(assuming you itemize deductions), because it's being paid for your health
insurance, says Alan E. Weiner, tax partner emeritus at Holtz Rubenstein
Reminick in Melville, New York.
Make sure you find
out the deadline to apply for COBRA.
The application deadline is usually
60 days after you become ineligible for group coverage because of job loss or
divorce. You usually have up to 45 additional days to make the first premium
payment.
For example, if your group coverage
officially terminated on June 30, your COBRA application deadline would be
August 29 -- and as long as you applied by that deadline, your insurance through COBRA would be retroactive to July 1. Your deadline for making the first premium payment under COBRA would be October
15 – but if you waited until then to make the first payment, it would have to cover the cost of your coverage since July 1.
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