Navigating Health Insurance During Legal Separation in California

Examining Legal Separation in California

Legal separation is not divorce. Under California law, you will still be married to your spouse as long as you remain legally separated. In essence, you are still married, but living apart. The biggest difference in legal separation and divorce, other than not being divorced, is that California courts will not issue a decree of legal separation unless they have a valid reason for doing so. When it comes to divorce, the courts will simply grant it because you and your spouse want to end the marriage. Legal separation must be based on an identifiable cause such as irreconcilable differences. Other no-fault reasons include incurable insanity.
Legal separation is most commonly used by couples when one or both spouses are living outside the state or country due to military deployment. It is also used because of a lack of sufficient income to cover the expenses associated with a divorce. Rather than divorcing or moving out of state , many separating spouses still want to maintain the marital health benefits provided by TRICARE, which is available through military service and is often used when both spouses are in reserve or active duty. Most people are not eligible for TRICARE unless still legally married. Couples who do not wish to divorce each other will also use legal separation as an alternative.
Most of the time, couples that separate find it difficult to negotiate the division of property, debt and the custody of children. Although it is not necessary to file a legal separation agreement, most separating couples will use a mediator to help them resolve unmanageable conflicts. The court will then end all the legal separations once all of the identified issues have been managed.

Health Care Coverage During Legal Separation in California

Health Insurance Options During California Legal Separation
Beyond your family home and retirement accounts, one of the most unsettling implications of legal separation is what to do for health insurance. Whether you get coverage through your employer or via your spouse’s employer-based plan, your options can vary significantly once you take that first legal step toward a divorce. Luckily, there are options, and in many cases, they’re affordable and readily obtainable.
In California, a legal separation is just as enough of a trigger as a divorce to render your health insurance policy invalid. Both leave the court with an important decision: whether to extend your coverage or initiate a new plan. If you currently obtain coverage through your spouse’s employer, for instance, you may be forced to either pay directly into that plan, apply for a state-sponsored option, or seek coverage from your own employer — assuming you’re even eligible for a plan at your current job.
As an alternative, you might also be able to obtain a private policy. Although health insurance doesn’t come cheap, it’s frequently more affordable than the alternative, which is to continue on your spouse’s plan, only to get dropped when the time comes for your spouse to finalize his or her decision to leave the marriage.

Effects on Employer-Sponsored Health Care Coverage

The rules for employer-sponsored health insurance coverage generally apply to separated spouses in the same manner as they do to divorced spouses. If an employee is covered on a group medical plan, and the employer allows the employee’s spouse to be on the plan, it is likely that the spouse will be permitted to continue on the plan during legal separation. Certain limitations may apply.
If the employer has less than 20 employees, California law generally does not require continuation of group medical insurance after separation. On the other hand, if the employer has 20 or more employees, the Federal Consolidated Omnibus Budget Reconciliation Act (COBRA) applies. COBRA generally requires that the employer provide a written notice of the right to continuation of group medical insurance to the former spouse who is dependent on the covered employee.
If an employee spouse is covered by a plan that is exempt from COBRA, such as a plan covered by the Federal Employee Retirement Income Security Act (ERISA), for instance, then the employee must obtain a spouse coverage continuation application and premium schedule from the employer’s human resources or benefits department.

COBRA / Cal-COBRA Continuation Coverage

If you are the spouse who is the employee and if you are covered by your spouse’s employer’s health insurance, or self-insured plan, you and your children may be eligible to continue your health insurance coverage under COBRA (Consolidated Omnibus Budget Reconciliation Act) or Cal-COBRA until you become eligible for other coverage.
Under COBRA, people who have group health insurance coverage through their spouse’s employer have the right to continue that coverage after separation for an additional 36 months. To be eligible, you need to have been enrolled in the employer’s plan when the qualifying event occurred (which, in this case, is separation from your spouse), and coverage under the plan must still be active when the election is made.
The 1985 federal COBRA law requires continuing health coverage after a public or private employer terminates employment of an employee and the employee’s family members. However, California puts even more requirements on employers who provide benefits: California law requires that employers with more than 19 employees to offer continued group health coverage for spouses and dependents for up to 36 months after a legal separation and 18 months after divorce.
If your employer employs 2 through 19 people, you will be covered under Cal-COBRA. Cal-COBRA requires your spouse’s employer to provide continuation of coverage for up to 36 months for your dependents (children who were dependents on your spouse’s plan). In situations where the employer is not required to offer COBRA coverage, state law kicks in to provide it. No matter what the specific laws are, you will want to be aware of your rights. The more information you have access to, the better you will be able to protect your rights in a legal separation or divorce situation.
You must make an election within 60 days of receiving notice of your right to continue coverage. Generally, your former spouse’s employer must notify the carrier, who must notify you of your right to continue. You cannot elect to continue the coverage until you receive this notice. Coverage offered under COBRA typically costs substantially more than regular coverage.
You will have to pay the premium out of your own pocket. There is no community property credit for medical insurance in California. Because California law states that no spouse can be excluded from health insurance coverage solely due to divorce or separation. If the coverage is available, the cost of that coverage is a consideration in establishing the amount the other spouse must pay in spousal support.

Individual Health Insurance Marketplace

Few know, but even upon legal separation both spouses have an opportunity to purchase health care insurance on the individual market. While employers in California typically must allow legal separation of a spouse as a qualifying event that permits the covered spouse to maintain the group health plan, many employers will offer to continue coverage on their group health insurance plan for up to 36 months as a bridge until the employee seeks health care insurance from the open marketplace or Covered California.
With respect to the Affordable Care Act ("ACA") Covered California requires certain individuals to apply for coverage through Covered California. An individual without acceptable health insurance coverage who does not meet certain medical exceptions is required to pay a penalty known as an individual shared responsibility payment. United States citizens and nationals, lawful permanent residents and individuals lawfully present in the United States may enroll in health coverage through Covered California.
Covered California provides subsidized health care coverage to individuals with family household incomes between 138 and 400 percent of the federal poverty level. Third-party donations , contributions or payments made on behalf of someone else are not included in the family household income.
The Kaiser Family Foundation website contains an informative chart, which outlines the federal poverty guidelines by state. California has a median income at 341% of the federal poverty level or $59,686 for a family of four. An individual with a household income of $32,920 to $117,240 annually for a family of four will be eligible for subsidies to help pay for insurance, though some may not be subsidy eligible depending on what income is considered. The New York Times provides an interesting article explaining healthcare costs that sometimes do not count toward household income.
Thus, if a family of four separated in Los Angeles and the wife makes $45,000 per year pursuant to her employment, while the husband earns $58,000 per year as a result of an independent contractor assignment, the husband will not be eligible for insurance subsidies based on the total household yearly income of $110,000. Conversely, because the separation occurred during the tax year, the ex-spouses may designate themselves as separate tax households. In doing so, they will receive a married filing separately filing status, which in turn entitles the husband to a $7,500 exemption, that results in the husband being eligible for subsidies based on his individual annual income of $45,000.

Legal and Tax Concerns

In considering a California legal separation, many issues impact a couple’s decision, not the least of which are the financial implications of separating from a spouse. Health insurance specifically is both a legal and a financial concern. There are laws that specifically address insurance for a spouse upon separation from the other spouse.
If one spouse has health coverage through an employer-provided plan, then that spouse is protected by the federal law commonly referred to as and referred to as the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the California Continuation Benefits Replacement Act (Cal-COBRA). The legal takeaways from these acts are that your spouse and minor children have the right to health coverage under your employer’s policy for up to 18 months after the date of your separation. The catch, though, is that coverage will be more expensive if purchased through COBRA/Cal-COBRA than the same individual would pay if they were on the employer’s plan themselves.
For example, your employer may charge you a $400 monthly premium for coverage for you and your minor children through the family plan. But when your spouse and children continue under your employer’s plan through COBRA/Cal-COBRA coverage, the monthly premium could be nearly $800.00. Though there are situations where the reverse could be true and individuals could get insurance for less than their partner was paying before the separation; it is the exception and not the rule. Regardless, the idea behind COBRA/Cal-COBRA is that you can stay on the employer’s plan until you are able to find your own insurance on the open market. Having health insurance is not optional.
It’s also important to note that COBRA/Cal-COBRA benefits are not available in all cases. Circumstances that limit these benefits include: It is also important to recognize that when paying your COBRA/Cal-COBRA premiums you must pay all premiums that are due, even if you are often still covering part of the premium for your ex’s employer. Failing to pay the full amount puts your coverage at risk, and should you be in default of those premiums, you may lose your ability to enroll in any other policy for up to 18 months.
Clearly, California legal separation does not make sense for most couples if only because of the legal and financial implications of losing group coverage. You will want to get independent legal advice on how all of these factors play into your decision of whether legal separation or divorce is right for your situation.

Seeking Professional Help

The realm of health insurance during a legal separation can be both intricate and consequential. California law may necessitate specific provisions regarding health insurance coverage, alimony, or division of assets that impact how a person may access insurance immediately following the beginning of the legal separation. Moreover, there are ongoing obligations after a legal separation to maintain health insurance, and consult with a professional who is familiar with the most recent provisions of the particular health insurance must be accomplished to ensure that necessary forms are completed to ensure a change in health insurance coverage is fully accounted for with no errors.
Professional help from specialists in the health insurance field is not to be overlooked. However, what do the main health insurance experts do to help clients and what do they charge? Here are some people who might be able to help:

• Financial Advisors typically have a wealth of very useful knowledge and information about health insurance and obligations tied to assets, living arrangements , taxes and more. They can offer advice on how to best manage health insurance issues in the event of a legal separation, and what effects the separation may have on government subsidized programs, life insurance, and state and federal tax changes. Advisors typically charge on an hourly basis, or on a percentage of assets or investments.
• Life Insurance Specialists can help make sense of policies and determine whether one should be kept or dropped. They can offer recommendations and sometimes spend a great deal of time answering questions and finding the best deals on health insurance. Their services are often free (though they get a cut if you purchase their policies), but you likely won’t get a lot of technical or intricate information.
• Attorneys can be particularly useful in dealing with complex matters. They can help uncover issues that may be overlooked by insurance companies and financial experts and help you to avoid troublesome areas. Attorneys typically charge a fee based on the difficulty of the task and often require a retainer up front.