Child's Healthcare after Divorce
Although each state has its own set of rules unique to the custody and care of children, all states require divorced parents to provide adequate financial support for their children. And although the calculation of what amounts to adequate child support varies by state, both state and federal law require parents to provide healthcare coverage for their dependent children.
There are several ways family law courts have historically gone about deciding which parent is responsible for providing healthcare insurance for children. In addition, courts must also decide how to divide out-of-pocket costs. These costs include co-pays and deductibles and healthcare expenses that are not covered by insurance.
Certain state and federal laws are in place to make sure children have healthcare coverage. Also, the Patient Protection and Affordable Care Act (ACA), sometimes referred to as Obamacare, has mandates that affect the way parents are required to provide healthcare coverage for their children.
General requirements for providing health insurance for children of divorce
Family law courts in all states will order parents to pay for the medical and dental expenses of their children. The court order may be based on an agreement the parents put together themselves. If the parents cannot agree on a plan, the court will review their individual financial statements and make orders according to their individual financial capability. The most common court orders involving health insurance coverage include:
- Requiring non-custodial parents who are employed to maintain their children on their employer-provided health insurance plan.
- If the parent is not provided insurance through his or her employer, then an affordable private plan must be purchased that covers the children.
- If neither parent can afford health insurance, the child may qualify for healthcare under a state Medicaid or CHIP program.
- Depending on the financial situation of each parent, one parent may be required to pay all medical expenses, such as co-pays, deductibles and non-covered expenses, in addition to health insurance premiums. The court may also order the expenses to be divided between the parties on a percentage basis based on their income.
- If both parents have health insurance through employment, one plan will be designated as primary and the other secondary. The secondary insurance will pay the amount still outstanding after the primary insurance pays.
- If the parent who has been ordered to provide health insurance fails to do so, that parent will be responsible for paying all healthcare costs that would have been covered under the insurance plan.
Effects of the ACA on health insurance requirements for divorced parents
The ACA that went into effect Jan. 1, 2014, has provisions that affect how divorced parents provide health insurance for their children. The main provisions that may affect parents and courts in the provision of healthcare coverage for their children include:
1. The parent who claims the children on his or her income tax return as dependents is the one required to provide proof of health insurance with the return.
Impact: It is generally the custodial parent who claims the children as dependents and the non-custodial parent who is required to pay for the health insurance. There may be communication problems between the two and if the non-custodial parent has not complied with the order and has failed to provide the insurance, the custodial parent will be the one to pay the penalty.
2. The employer may not have the most affordable healthcare plan, in which case the parent may have to use the exchanges to purchase a more affordable plan. The custodial parent may be able to buy a more affordable plan than the parent who is ordered to purchase the insurance.
Impact: There are laws in place to require employer health plans to comply with any child support court orders regarding health insurance and medical costs. For example, under the Qualified Medical Child Support Order (QMCSO), the employer of a parent who has a court order requiring that parent to provide health insurance must follow certain rules. For example, the employer must communicate any change in benefits to the custodial parent and be certain that parent knows how to file claims. If insurance is purchased on the exchange, QMCSOs will not apply.
3. The ACA requires the insurance purchased to be "affordable."
Impact: Most states also have a definition for "affordable" in relation to the purchase of health insurance for children of divorce. There may be a conflict in the two definitions. There seems to be a conflict in whether the term applies to the custodial parent or the parent who is ordered to purchase the insurance.
4. All insurance companies must now cover pre-existing conditions.
Impact: In the past, if a child had a pre-existing condition that was covered under an effective health insurance plan, courts would order that plan to be maintained. This avoided the risk of the child's not being accepted for coverage by a different plan. This is no longer a concern because coverage cannot be denied on the basis of a pre-existing condition.
State laws, the federal mandate and the best interest of their children require parents to provide health insurance for their offspring. To do this in the most efficient and economical way, parents need to get as much information as they can about the law and the best plans available. If parents can communicate about this issue, they can minimize their risk for incurring tax penalties and maximize the well-being of their children.