People Are Stalling Their Divorce So They Don't Lose Health Care

The health care uncertainty in Washington, D.C. is causing some separating couples to press pause on their divorces, financial planners and divorce attorneys say.

“We don’t know what will be in place, what it will cost, and if you can even get it,” says Lili A. Vasileff, founder and president of Divorce and Money Matters, an independent financial advisory firm based in Greenwich, Ct. Vasileff has two sets of clients, both couples in their 50s with pre-existing conditions, who are considering postponing their divorce for now amid the uncertainty.

Indeed, some couples have put their divorces on ice until there’s more clarity out of Washington, D.C . For some, that means staying married and entering into a post-nuptial agreement that leaves them legally together but spells out the separation of assets and terms of a possible future divorce. For others, that means finalizing divorce papers but holding off on sending them to the courts for processing. A decade ago, it was common for couples to get a legal separation instead of a divorce if they wanted a spouse to retain coverage. But that avenue has largely closed, as companies no longer allow a legally separated spouse to stay on their employer plan, says Andrew Vaughn, a Chicago divorce attorney and founder of NuVorce.

Congressional Republican leaders have been working for months to repeal and replace the Affordable Care Act (ACA). The law, which took full effect in 2014, eased the sting of divorce for those who were losing coverage under a spouse’s policy: it guaranteed coverage to everyone on the individual market, regardless of their health, and it prohibited insurers from charging more to people with pre-existing conditions. In a study from 2012, before the ACA took full effect, University of Michigan researchers found about 115,000 women lose their private health insurance every year in the wake of divorce.

Because this country is one of the only developed nations where coverage is tied to employment and, often, marital status, health insurance has always been a factor in American divorces. Even before President Donald Trump’s election last November threatened the future of the ACA, couples with a non-working spouse in the midst of chemotherapy tended to stick together for fear of upending treatment, says John Slowiaczek, president of the American Academy of Matrimonial Lawyers.

Fearing a Return to the Old Days

Divorced spouses have long been entitled to remain on their ex’s plan for up to three years of continued coverage under COBRA. After those benefits run out, they’re on their own. Before the ACA, that often meant trying to find coverage on an individual market that in most states discriminated against people with pre-existing conditions, charging them more for coverage or even denying them outright.

“Divorced women who were taking a medication for depression, or who were in therapy, were kicked out,” says Maura Carley, founder and president of Healthcare Navigation, a Darien, Ct.-based firm offering independent health insurance consulting services. That’s no longer the case.

Yet if passed, the Better Care Reconciliation Act, as the Senate’s replacement bill is called, could mean a return to the old days. There are several drafts of the bill circulating, and further changes could come during the debate process, so it’s unclear which version lawmakers might take up in a vote that could come as early as this week. One includes an amendment that would allow insurers to disregard ACA patient protections in some plans as long as they also offered a plan that was ACA-compliant. Premiums for the compliant plans would soar, experts predict, since only higher-cost consumers with pre-existing conditions would pick them.

But even without that amendment, the proposed legislation would discriminate against those with pre-existing conditions in a backdoor way, by allowing states to narrow the list of benefits that insurers must cover. Premiums for policies that covered services considered non-essential, such as mental health or maternity, could become “extremely expensive” in states that narrowed their requirements, according to the nonpartisan Congressional Budget Office.

Budgeting for Health Care Post-Divorce

In this climate, it’s hard to predict what premiums might look like in the coming years. But since the cost of health insurance often factors into the calculation of alimony, also known as spousal support or maintenance, attorneys must make their best estimate.

When budgeting for health care costs post-divorce, people often forget about their deductible, says Michelle Smith, CEO of Smith Financial Strategies Group in New York City and a certified divorce financial analyst. Deductibles for the benchmark plan could top $10,000 in 2026 under the latest version of Better Care Reconciliation Act, according to the CBO — a huge line item to overlook. Smith also looks at two years' worth of her clients' explanations of benefits to get a more granular look at their health care expenditures for budgeting purposes.

People going onto COBRA now will come off it in the middle of the next presidential election cycle. No matter what happens in Congress in the coming weeks, health care will likely remain a hot button issue, especially for those looking to split. “Who knows what safety net will be there?” Smith says.