The Affordable Care Act s Top Five Impacts on Divorcing Couples By Christian Badali The Pennsylvania Lawyer 38 May/June 2014
T he Patient Protection and Affordable Care Act, commonly known as the Affordable Care Act (ACA) or Obamacare, has ushered in the most significant regulatory change to health care in the United States since the Medicare and Medicaid programs were signed into law in 1965. On Oct. 1, 2013, the federal health insurance exchange and state-based exchanges were launched, allowing Americans and small businesses for the first time to purchase private insurance plans that went into effect on Jan. 1, 2014. Among the many benefits the ACA proposes to provide are lower-cost insurance for individuals, guaranteed coverage for individuals with pre-existing health conditions and subsidies for qualifying applicants. These radical changes to health care will certainly affect all citizens but especially those currently going through the divorce process or those recently divorced. Following are the top five issues that are likely to affect the divorce process and divorce/matrimonial attorneys. The Pennsylvania Lawyer 39 May/June 2014
1 Affordable Health Care Coverage for Dependent Women 2 Divorcing According to a 2012 study from the University of Michigan, approximately 115,000 women lose their private health insurance each year after a divorce. The study also found that many of these women stay uninsured for more than two years after their marriages end, facing high costs and limited options. It is believed that as many as one-quarter of all divorcing women who are no longer covered by their former husbands health coverage may remain without coverage for at least six months. Many of these uninsured women do not have jobs outside the home or do not have health insurance offered by their employers. While some have been able to take advantage of COBRA plans offered by the ex-spouse s employer, the duration of this coverage is limited, sometimes for only 36 months. Divorcing women who have lost their private health care due to divorce should have access to affordable health care insurance through the ACA. This would result in fewer divorcing woman having to go for such long periods without health care coverage. Women with Pre-existing Conditions In recent years older Americans have been getting divorced more than ever. The National Center for Family & Marriage Research at Bowling Green State University reports that one in four divorces now involve a couple age 50 or older, up from the 1990 rate of one in 10. Many women in this age group are at a tremendous disadvantage relative to their husbands, who usually have been working longer. Typically these women are the dependent spouses who are forced to find affordable coverage and are more vulnerable, especially if suffering from pre-existing health conditions. Under the previous system of health insurance in the United States, it was hard or even impossible for these women to get health coverage after divorce. Many times women in this situation were forced to forgo divorce or wait until they Under the previous system of health insurance in the United States, it was hard or even impossible [for older women] to get health coverage after divorce. reached the age at which they became eligible for coverage under Medicare. Once fully implemented the ACA will reduce the high cost of health insurance to divorcing spouses who do not have or will not otherwise be eligible for health insurance coverage through employers. Coverage will also now be fully accessible for everyone, even those with a pre-existing condition that might otherwise have prevented them from finding a reasonably priced health policy after divorce. Suddenly, these parties, especially women considering divorce who had been concerned that they might not be able to get health insurance or might be forced to pay an exorbitant amount for continuing health insurance coverage, may now be able to proceed with their divorces. The Pennsylvania Lawyer 40 May/June 2014
The ACA will reduce the high cost of health insurance to divorcing spouses who do not have or will not otherwise be eligible for health insurance coverage through employers. 3 Family Health Care Coverage and Child Support One of the more important aspects of the ACA is giving parents greater control over their children s health care, as described by the Obama administration. The new law ensures that children will no longer be excluded from health insurance for preexisting conditions and allows parents to maintain their children under the health coverage offered by a parent s employer until the age of 26. In their early years of employment many young adults are doing without health insurance coverage after college due to high costs or their having no viable options through their employers. Now, even if they have an offer of coverage through an employer but have not yet exercised that option for some reason, these young adults have the alternative of remaining on a parent s policy. Whereas this aspect of the law may ease some financial issues during the divorce process, it will likely create other areas of dispute. For example, consider this hypothetical situation: A payor spouse in New Jersey could be paying alimony and continuing child support for an undergraduate or even postgraduate child while applying for federal tax credits and possible contributions for health insurance costs from the former spouse who is receiving this support. This will likely complicate child support, which historically has involved a simple calculation of both parties incomes, and will lead to more discussion and debate over the amount of support to be paid in these types of cases. The Pennsylvania Lawyer 41 May/June 2014
Prepare for How Your Clients Lives Are Changing Whether it s divorcing couples, employee/employer relationships or Medicare questions, the Affordable Care Act (ACA) has already begun affecting your clients health care future. PBI focuses on the topics that matter most to you and your clients. This summer PBI will offer programs explaining how the ACA relates to policies and procedures followed by Medicare and employers. Be the first to know. Discover solutions to answer your clients questions and gain expertise to respond to trending legal issues. Be prepared. Join PBI this summer: July 2014 Employer s Obligations Under the Affordable Care Act August 2014 The Impact of the Affordable Care Act on Medicare To learn more: pbi.org 800-932-4637 Follow on Twitter @PBICLE for the latest legal updates 4 5 Impact on Alimony Calculation The ACA should have a significant impact on alimony calculation related to continuing health care. Health care costs for dependent spouses can prevent cases from settling or can often cause the divorce process to last much longer than would otherwise be necessary. With greater availability of health insurance at a more predictable, lower cost, the ACA should make it easier to calculate these costs when determining alimony payments. Because health insurance costs will be easily calculable and likely lower than the cost of health insurance before the ACA, this could lead to a higher number of cases settling and a shortened overall settlement time. Divorce and matrimonial attorneys will have more tools in their arsenal to make reasonable and agreeable proposals to their counterparts in these divorce cases and will likely not have to wait for the court to make a final determination regarding the dependent spouse s ongoing health insurance coverage. Different levels of coverage are available under the ACA (platinum, gold, silver and bronze). It is likely that this could lead to disputes about the level of coverage the payor spouse should be required to provide for the dependent spouse, resulting in challenging alimony agreements. Should the dependent spouse expect to be provided health insurance coverage similar to that which he or she had when married or will the dependent spouse be forced to settle for the lowest-level coverage (bronze) under the ACA? This is one of the important questions that courts may soon be expected to address, and it will have a big effect on alimony calculation. Federal Subsidies for Health Care Insurance Divorce and matrimonial attorneys can expect arguments with their opposition in determining who will get the government subsidies for health insurance, which is a key part of the ACA. Starting in 2014, some spouses who are not covered by health insurance through their employers are eligible for subsidies to assist them in purchasing insurance. Households at from 100 percent to 400 percent of the federal poverty level will be eligible for certain subsidies. So, for instance, a family consisting of a mother and three children reporting household income that is less than or equal to $94,200 would be eligible for a subsidy that would reduce the cost of insurance. Additionally, payor spouses may be eligible for these subsidies. As payors of alimony, they receive tax deductions for the alimony they are paying. If these deductions reduce their net income below the magic line of 400 percent of the poverty level, the payors would qualify for these same subsidies for the purchase of their own health insurance. Divorce and matrimonial attorneys need to educate themselves fully about the many available options that the ACA provides for clients. We must also be wary of the pitfalls and other problems that the ACA may cause for many of our cases and act accordingly. Christian Badali is a partner at the Norristown office of Weber Gallagher. He has extensive experience in areas of family and matrimonial law, including divorce, custody, alimony and spousal support, child support, equitable distribution and protection from abuse. He can be reached at 610-278-1518 or cbadali@wglaw.com. If you would like to comment on this article for publication in our next issue, please send an email to editor@pabar.org. The Pennsylvania Lawyer 42 May/June 2014