by Kathryn M. Grigg
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Although employers may want to avoid the uncomfortable topic with employees, you can’t avoid your legal obligations to an employee’s former spouse postdivorce. For a period of time after a divorce, you’re required to offer health insurance continuation and conversion benefits to an employee’s former spouse and dependents. Here’s a summary of your obligations, deadlines, costs, and responsibilities after Cupid’s arrow loses its zing.
Legal framework
Federal law and some states’ laws offer an employee’s former spouse the option to continue group health coverage for a period of time after the divorce. COBRA, which is federal law, generally applies to group plans covering more than 20 employees, group plans sponsored by state and local governments, and self-funded health insurance plans. COBRA offers 36 months of continued coverage after the divorce. If an employer is subject to both state and federal law, the two time periods run concurrently.
Employers aren’t required to subsidize or contribute to the former spouse’s premium rates for any continuation or conversion coverage. A former spouse would have to pay 102 percent (under federal law) of the normal premium to remain on a group policy. For an individual policy, the former spouse’s premium rate would be determined based on the rates applicable to the age and class of the risks for each person to be covered and the type and amount of coverage provided, with no contribution from the employer.
As a result, continuation or conversion is often a more expensive option for the former spouse than obtaining coverage elsewhere. That’s especially true with the implementation of the Affordable Care Act (ACA). Regardless of the small number of former spouses who actually elect continuation or conversion coverage, employers are still required to provide written notification of those options directly to the former spouse following a divorce.
Date of divorce
While the divorce is pending but before it’s granted, there is typically a temporary court order in place to prevent the employee from removing his spouse from any employer-sponsored health insurance plan. Therefore, you shouldn’t expect to make any changes in an employee’s health insurance coverage merely because he is in the midst of a divorce. The termination of coverage for the nonemployee spouse will not occur until the judgment of divorce is officially granted.
Notification requirements
Under federal law, the plan administrator must be notified within 60 days after the judgment of divorce is granted. You should reasonably expect that employees may need assistance contacting the plan administrator. The plan administrator then has 14 days to notify the former spouse of her continuation options.
Election to continue group coverage
Under federal law, the former spouse has 60 days after receiving the notification from the plan administrator in which to elect continuation of coverage. The plan must permit payment for continuation coverage during the period preceding the election so that the former spouse can be assured of no gaps in coverage. The former spouse must make the payment within 45 days after the election. Coverage must continue without interruption and may not terminate for 36 months unless:
- The former spouse fails to make timely payment.
- The employer ceases to maintain any group health plan.
- The former spouse begins coverage under another group plan.
- The former spouse becomes entitled to Medicare benefits.
- The former spouse engages in conduct that would justify the termination of coverage of a similarly situated participant (e.g., fraud).
Bottom line
You must pay special attention when you’re notified of an employee’s divorce. Notice that the divorce has been officially granted (not merely that it’s pending) triggers a deadline by which the employee’s former spouse must receive written notice of her continuation or conversion options for group or individual plans. If the former spouse makes a timely election, take care to ensure that there are no gaps in coverage.
Although you aren’t responsible for any share of the premium costs for the former spouse’s plan, be prepared for the burden of administrative costs and time.
Kathryn Grigg is an attorney with Axley Brynelson, LLP in the Madison, Wisconsin, office. She may be contacted at kgrigg@axley.com.