Health insurance and benefits after separation: what you lose, when, and how to replace it

Benefits are the settlement issue people forget until the pharmacy declines the card. Every workplace plan has rules about who counts as a dependant and when coverage ends, and those rules, not your separation agreement, decide whether your prescriptions are covered next month. Find out now.

Canada

What is at stake

Provincial health insurance covers hospital and physician care for every resident and is not affected by your marital status. What changes is extended health: prescriptions, dental, vision, paramedical services like physiotherapy and counselling, and often life and disability insurance, all typically provided through one spouse's employer.

When coverage ends

Most group plans define a spouse as a person married to the member or living with them in a conjugal relationship. Many plans end spousal coverage at divorce; a significant number end it at separation, or after a period of separation, because the definition requires cohabitation. Some allow a separated spouse to remain covered if the member keeps them enrolled and the plan permits it. The only way to know is to ask the plan administrator or read the booklet, and to ask specifically about separation, not just divorce.

Children

Children remain eligible dependants regardless of the parents' status, and can usually be covered under both parents' plans, with coordination of benefits. Which parent's plan is primary depends on the children's residence and the parents' birthdays under the standard coordination rules. Keeping children on both plans maximises coverage and is worth writing into the agreement.

Putting it in the agreement

• The member spouse keeps the other covered for as long as the plan allows, and gives notice before coverage ends.
• The member keeps the children covered while eligible, and provides claim information to the other parent.
• Out-of-pocket medical and dental costs for the children are Section 7 expenses shared in proportion to income, net of insurance.
• Where a spouse loses coverage and cannot replace it affordably, the cost of replacement coverage is factored into spousal support.

Replacing coverage

Individual extended health plans are available from the major insurers, and several offer guaranteed-acceptance conversion plans for people leaving a group plan, usually if applied for within 60 days of losing coverage. Price it before you settle. Employer coverage through your own job, if you have one, is usually cheaper.

United States

What is at stake

Primary health insurance. For a spouse covered under the other's employer plan, divorce is a loss of coverage that has to be replaced at once, and the cost can run to several hundred dollars a month or more.

When coverage ends

Divorce is a qualifying life event that ends a former spouse's eligibility under an employer plan, generally at the end of the month of the decree, though some plans end it sooner. Legal separation without divorce often preserves coverage, which is one reason some couples choose it. Separation alone, without a decree, usually does not affect coverage. Check the plan.

COBRA

Under COBRA, a former spouse of an employee at a company with 20 or more employees can continue the same coverage for up to 36 months after divorce, but at the full premium plus up to 2 percent, with no employer contribution. Notice must be given to the plan within 60 days of the divorce. It is expensive, but it bridges the gap, particularly for someone with ongoing treatment who cannot risk a change of network. Many states have "mini-COBRA" laws for smaller employers.

The marketplace and Medicaid

Losing coverage through divorce opens a special enrolment period on the ACA marketplace, typically 60 days. Premium subsidies depend on the new household income, which for a lower-earning former spouse may be substantially lower than the marital income, making marketplace coverage affordable. Medicaid eligibility may also change. Compare COBRA against marketplace options before choosing.

Children

Children remain eligible on either parent's plan. Decrees routinely order one or both parents to maintain the children's health insurance and allocate uncovered costs. Federal law provides for a Qualified Medical Child Support Order requiring a plan to cover a child even if the employee parent objects. Note who will claim the children as dependants for tax purposes, because it interacts with marketplace subsidies.

Putting it in the decree

• Which parent covers the children, and a requirement to keep coverage while it is available at reasonable cost
• Allocation of premiums and uncovered medical, dental, vision and mental health costs
• A COBRA or replacement coverage contribution for the former spouse, either as a stated amount or built into alimony
• Life and disability insurance obligations, with proof requirements; see life insurance as support security
• Health savings account and flexible spending account balances, which are marital property

Timing your divorce for coverage

In both countries, a spouse in the middle of treatment or waiting on a surgery may want to delay the final divorce until coverage can be replaced without a gap. Because the separation agreement can be signed and even filed before the divorce is granted, timing the decree is a legitimate and common strategy. Raise it with your lawyer rather than discovering it after the decree.

Checklist

1. Get the plan booklet and ask the administrator: when does spousal coverage end on separation, and on divorce?
2. List every benefit either of you has: health, dental, vision, life, disability, EAP, HSA or FSA.
3. Price replacement coverage for the spouse who will lose it.
4. Decide which plan covers the children and how uncovered costs are shared.
5. Write all of it into the agreement, with notice obligations.

This guide is legal information, not legal advice, and it is written for a general audience across Canada and the United States. Family law is provincial and state-based and changes over time. Before you rely on anything here for your own situation, confirm it with a qualified family lawyer in your province or state. FairWell can connect you with one through the professional directory.