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.
What do we do if an employees fails to tell us? Some people don’t want employers to know about personal issues.
Dean,
Under COBRA/federal law, the employee or the beneficiary is responsible for notifying the group health plan of the divorce, not the employer. Group health plans are required under COBRA to have procedures in place for how employees/beneficiaries can provide this type of notice, including the time limit for providing the notice, and how/to whom the notice should be given, and what other information is required. These procedures must be disseminated to employees/spouses within the first 90 days of coverage. Group health plans can (and usually do) satisfy this requirement by including these procedures in the plan’s Summary Plan Description (SPD).
If a group health plan does not have these procedures in place, then beneficiaries are permitted to give notice (either orally or in writing) to the person that handles the employer’s employee benefits matters. That person must then forward the information to the group health plan.
Therefore, if the group health plan already disseminated a SPD to the employee/spouse which contains this information, then there is nothing more that the employer needs to do. However, if the SPD does not contain these procedures, then the employer should anticipate that the employee/beneficiary will provide notice directly to the employer, which then must be passed on to the group health plan.
Sometimes you may hear that an employee is going through a divorce via office chatter. Although the laws do not clearly define what constitutes official “notice” to the employer, my personal advice would be that an employer should not test the law by pretending they didn’t learn about the divorce. It would be more prudent for an employer who hears through the grapevine about a divorce to ask the employee. Or, to at least take the opportunity to remind the employee that the group health plan must be notified if/when a divorce occurs, and even refer the employee to the SPD.
I hope this helps,
Kathryn Grigg