When Harry Left Sally: Employers’ Obligation to Offer Insurance Post-Divorce
Although employers may want to avoid this 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.
Both state and federal law offer an employee’s former spouse the option to continue group health coverage for a period of time after the divorce. State law generally applies to group or individual policies issued to employers of any size. 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. State law requires continued coverage for up to 18 months after the divorce; COBRA offers 36 months of coverage. If an employer is subject to both state and federal law, the two time periods run concurrently. For that reason, you should be prepared to apply the more stringent standards set forth in COBRA.
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 either 100 percent (under state law) or 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
In Wisconsin, a couple is officially divorced when a court grants a judgment of divorce. That cannot occur until at least 120 days after the divorce action is initiated, and it usually takes much longer than that. The couple is still considered to be legally married during the pendency of the 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.
Under state law, once an employer receives notice (usually from the employee or her attorney) that the judgment of divorce has been officially granted by the court, the employer has only five days to provide the former spouse with written notification of the right to continue group or individual coverage or to convert to individual coverage. The notice can be sent directly to the former spouse’s home address.
The written notice should include the cost of the premiums and the manner, place, and time in which the payments must be made. If the employee has an individual policy, notice to the former spouse should be given at least 30 days before her coverage would otherwise terminate.
If federal law applies, 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 state law, if the former spouse elects to continue group coverage and makes payment within 30 days after receiving the written notice, coverage for the former spouse and any dependents must continue without interruption. Coverage may not terminate for 18 months unless one of the following occurs:
- The former spouse moves out of state.
- The former spouse fails to make timely payment of the required premium.
- The employee is no longer eligible for coverage under any group policy
- The former spouse becomes eligible for similar coverage under another group policy.
Premium payments for continued group coverage are paid by the former spouse to the employer. The employer is responsible for collecting and paying the premiums to the insurer.
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).
Continuation/Conversion of Individual Coverage
Alternatively, the former spouse may have the option under state law to remain on, or convert to, an individual policy available from the employer. If the former spouse pays the first premium for individual coverage within 30 days after receiving notice from the employer, the individual policy will take effect immediately upon the former spouse’s termination of coverage under the employee’s policy, to prevent any gaps in coverage.
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.
This article was featured in the February 2014 issue of the Wisconsin Employment Law Letter, which is edited by Attorney Timothy Barber and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.
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