There are many issues in a divorce case, from determining child custody, spousal support, valuation of assets, and distribution of the marital property and debts. In cases where a party has been providing health coverage to the children and spouse through an employer based plan, the usual arrangement is that that spouse continue to provide that coverage despite the divorce.

 

Actually, once you file for a Boston divorce or anywhere in Massachusetts, the court will automatically enter a restraining order preventing either party from removing their spouse and children from health care coverage if there is a health care plan providing such coverage.

 

Massachusetts law requires that a judge in a divorce case who is issuing an order for spousal or child support determine whether the paying spouse has health coverage for the ex-spouse and children. If one exists, then the court will issue an order including a provision that the spouse-employee continue coverage. In cases where the parties are in agreement and there is a health care plan where the ex-spouse remains eligible for coverage, the parties generally agree to allow for the arrangement to continue. In some cases, the ex-spouse will pay the difference between family and individual coverage under the employer’s plan.

 

As a covered spouse, you remain on your ex-spouse’s health plan as long as the insured spouse is a participant in a group plan or until you remarry, though the court judgment could require for your coverage to continue after the insured spouse remarries. Further, state law prohibits an insurer from charging an additional premium to cover the ex-spouse after divorce.

 

IRS Consequences

 

There is an odd quirk in the IRS Code, though, that treats the coverage provided to the ex-spouse as a benefit, taxable not to the recipient spouse but to the paying spouse or spouse-employee. Consequently, the paying spouse must pay income tax on the fair market value of the benefit bestowed, which is a different from the out-of-pocket cost or difference in payment between individual coverage and family coverage.

 

This is also a benefit to employers who can attribute income to their employees who have retained their ex-spouses on their health insurance plan. Consult with a divorce lawyer regarding all tax issues pertaining to a divorce.

 

What if the Spouse’s Health Care Plan is Self-Insured?

 

If your spouse has a health care plan that is self-insured, however, then the insurer decides whether the ex-spouse is covered. In many cases, the insurer will opt to deny further coverage since the employer retains the financial risk for all medical claims. If so, the court cannot force the spouse or the insurer to maintain coverage.

 

You do have the option of COBRA, a federal program that allows you to continue group health care coverage for up to 36 months, though you must pay the entire premium. Federal COBRA only applies to companies with 20 or more employees while Massachusetts has a mini-COBRA covering smaller companies of 2 to 19 workers.

 

You can also review health care plans under Massachusetts Health Connector.

 

For divorcing couples with no access to group health insurance and there is a spousal or child support order, the court has to determine if other non-group coverage is available at a reasonable cost. If so, the paying or obligor spouse may have to buy such a policy for the spouse.

 

In cases like these, it is always wise to consult with a divorce lawyer who can explain the divorce and health care plan laws in Massachusetts and the IRS consequences. It is essential that you plan the payment details pertaining to health care coverage before you submit a separation agreement.

 

Doug Lovenberg is a Boston divorce attorney who can explain to you the intricacies of Massachusetts divorce law and the tax ramifications. He can help you plan to prevent confusion and anxiety over your health care coverage and arrange for how payments are to be made. For all of your divorce and family law questions, call Doug Lovenberg today.