In the case of the couple in which one spouse has employer-provided health insurance and the other does not, the employer-provided health insurance covers both spouses and the children. Divorce means the dependent spouse has to start looking for health insurance options. COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage for former spouses provides continuation of health insurance for up to 36 months (see sidebar). COBRA is more expensive than the employer-subsidized premiums, but at least it is continuation of existing coverage. One of the risks of COBRA is the chance that the ex-spouse will acquire a health issue during those 36 months that could be defined as a pre-existing condition when he or she applies for other health insurance to replace the COBRA coverage. Another risk is that with ObamaCare, the COBRA option may not be available for some families.
According to John C. Goodman, president and CEO of the National Center for Policy Analysis in a recently published piece on The Wall Street Journal Opinion page, employer-sponsored health insurance may become a thing of the past as employers calculate how much money they could save by dropping their employer-provided insurance and paying the fine of $2,000 per employee. Goodman cited AT&T, Caterpillar, John Deere and Verizon as calculating how much they could save by opting to pay the fine. “Companies are discovering that it’s cheaper to pay fines to the government than to cover workers.” If companies choose to pay the fine in lieu of providing the health insurance employee benefit, their employees would then have to decide whether to buy the government subsidized health insurance in the new health insurance exchange, purchase private insurance or pay a penalty on their income tax. The new health insurance exchanges and penalties begin in 2014. If the employers do not provide health care coverage, they will not have to offer COBRA continued coverage. On the other hand, if the dependent spouse obtains government subsidized health coverage, there will be no need for COBRA continued coverage in the first place.
Delayed Divorces Go Forward
Prior to the Health Care Reform Bill, uninsurable spouses in divorce faced a scary future without health insurance. Some couples put off their divorce so as to retain health insurance for the uninsurable spouse. One such couple, Jacki and Bob Marsh, stayed married but lived separately for several years due to this problem. In an interview with Huffington Post, they described how Jacki would have been unable to afford her pacemakers and her heart medication without Bob's health insurance. Bob turns 65 next month and his Medicare will not cover his separated wife.
Beginning in 2014, if not covered by an employer plan, individuals will be required to either get health insurance on their own or pay a penalty on their income tax. State-based purchasing pools, also called exchanges, will be available in 2014 for individuals and small businesses to choose their plans. It is intended that these exchanges will allow purchasing power similar to that of employees of large companies.
In the meantime, there will be a national high risk pool established this summer. This is in addition to the high risk pools already in place in 35 states. It is yet not clear how the national high risk pool will interface with the existing state high risk pools. The objective is helping those with pre-existing conditions to get coverage prior to the launch of the state-based purchasing pools (exchanges) in 2014. Yet to be answered are questions about premium cost, covered medical services, participating healthcare facilities and health care providers and how this national program will work with the existing state high risk pools.
For more complete information on the Act, read the AICPA Health Care Reform – What It Means for CPAs (PDF).
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Tracy B. Stewart, CPA, PFS, CFP, CDFA specializes in family law litigation support in Houston, Texas. She helps clients protect their wealth during property settlement negotiations. She is a member of the AICPA Personal Financial Planning and the Forensic and Valuation Services sections. Stewart is a board trustee for the Collaborative Law Institute of Texas as well as on the Executive Board of Texas Society of CPAs. You can contact her through www.texasdivorcecpa.com.
The AICPA’s Personal Financial Planning Section is the premier provider of information, tools, advocacy and guidance for CPAs who specialize in providing estate, tax, retirement, risk management and investment planning advice to individuals and closely held entities. The Personal Financial Planning Section is open to all Regular Members, Associate Members and Non-CPA Section Associate Members of the AICPA. If you are a CPA who wants to demonstrate your expertise in this subject matter, become a Personal Financial Specialist Credential holder. Visit www.aicpa.org/PFP to learn more.