I am asked frequently what happens to health insurance as a result of divorce. My usual response is that once the judgment of divorce is entered if you were receiving health insurance benefits through your spouse, you will lose your right to receive this coverage in the future unless you elect to receive COBRA coverage.
In fact, the disclosure of the above facts has been formalized in Domestic Relations Law §177 which provides that prior to accepting and entering as a judgment any stipulated agreement between the parties in an action for divorce, the judge shall ensure that there is a provision in such agreement relating to the health care coverage of each individual. Such statement shall either (a) provide for the future coverage of the individual; or (b) state that the individual is aware that he or she will no longer be covered by his or her spouse’s health insurance plan and that the individual will be responsible for his or her own health insurance coverage. Every agreement accepted by the court must contain a specific statement, signed by each party, to ensure that the provisions of this subdivision are adhered to.
At the same time, since in most situations, the health insurance is tied to one or both spouses’ employment, the Domestic Relations Law did not provide any formal way to include the loss of health insurance coverage into either maintenance or equitable distribution calculations. This is about to change. Effective September 21, 2009, an additional subsection of Domestic Relations Law §236 will be going into effect and will require the trial court to consider the loss of health insurance coverage as a factor in fashioning equitable distribution and maintenance awards. Specifically, the new statute will provide as follows:
AN ACT to amend the domestic relations law, in relation to maintenance
and equitable distribution of marital property
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
1 Section 1. Subparagraphs 5, 6, 7, 8, 9, 10, 11, 12 and 13 of para-
2 graph d of subdivision 5 of part B of section 236 of the domestic
3 relations law, subparagraph 13 as renumbered by chapter 884 of the laws
4 of 1986, are renumbered subparagraphs 6, 7, 8, 9, 10, 11, 12, 13 and 14,
5 and a new subparagraph 5 is added to read as follows:
6 (5) THE LOSS OF HEALTH INSURANCE BENEFITS UPON DISSOLUTION OF THE
8 S 2. Subparagraph 10 of paragraph a of subdivision 6 of part B of
9 section 236 of the domestic relations law, as amended by chapter 884 of
10 the laws of 1986, is amended to read as follows:
11 (10) any transfer or encumbrance made in contemplation of a matrimoni-
12 al action without fair consideration; [and]
13 S 3. Subparagraph 11 of paragraph a of subdivision 6 of part B of
14 section 236 of the domestic relations law is renumbered subparagraph 12
15 and a new subparagraph 11 is added to read as follows:
16 (11) THE LOSS OF HEALTH INSURANCE BENEFITS UPON DISSOLUTION OF THE
17 MARRIAGE; AND
18 S 4. This act shall take effect on the sixtieth day after it shall
19 have become a law and shall apply to any action or proceeding commenced
20 on or after such effective date.
EXPLANATION–Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
The bill memo provided the following justification for the bill:
The Equitable Distribution and Maintenance factors have not been updated much since their introduction close to 30 years ago. While the loss of health insurance was not one of the factors added at the time, in light of the health care crisis and rising costs of access to health insurance, loss of health insurance is a critical factor that should be considered by courts in making determinations relating to equitable distribution and maintenance. The impact of a divorce can be challenging for families and the added loss of health insurance can be financially devastating. The proposal in this bill, to add loss of health insurance as a factor to be considered for equitable distribution and maintenance determinations, is essential to address the realities of our current times. This legislation is intended to promote the health, safety, and financial stability of the parties post-divorce.
I believe that the above will be a helpful addition to the Domestic Relations Law since, as a divorce lawyer, I have dealt frequently with situations where the parties who wanted to be divorced could not do so, solely due to the fact that the loss of health insurance coverage would be devastating to one of the parties. In those situations, I have counseled clients to enter into separation agreements and the parties would live pursuant to such agreements without getting divorced for very significant periods of time. This allowed for the retention of employer-provided health care coverage. While I am happy to see the changes to the Domestic Relations Law §236, at the same time, this provision may be a paper tiger primarily due to the cost of obtaining health insurance coverage on the open market.
As a result of the new provisions, divorce attorneys will have to carefully review the issues related to their client's health insurance coverage, the availability of replacement coverage and its costs, and the likely impact of those issues on maintenance and equitable distribution.
I should note one more thing related to the issues discussed above. Effective on October 11, 2009, Domestic Relations Law § 177 has been repealed and replaced by Domestic Relations Law §255. The new statute, while mostly similar, adds additional procedural requirements that need to be complied with, sometimes as early as the time of service. Domestic Relations Law §255, subdivision 1 provides that prior to signing a judgment of divorce or separation, or a judgment annulling a marriage or declaring the nullity of a void marriage, the court must ensure that both parties have been notified, at such time and by such means as the court determines, that once the judgment is signed, a party thereto may or may not be eligible to be covered under the other party’s health insurance plan, depending on the terms of the plan. In the case of a defaulting defendant, service upon the defendant, simultaneous with the service of the summons, of a notice indicating that once the judgment is signed, a party thereto may or may not be eligible to be covered under the other party’s health insurance plan, depending on the terms of the plan, shall be deemed sufficient notice to a defaulting defendant.
Domestic Relations Law §255, subdivision 2 provides that if the parties have entered into a stipulation of settlement or agreement, on or after its effective date, resolving all of the issues between the parties, the stipulation of settlement or agreement must contain a provision relating to the health care coverage of each party. The provision must either: (a) provide for the future coverage of each party, or (b) state that each party is aware that he or she will no longer be covered by the other party’s health insurance plan and that each party shall be responsible for his or her own health insurance coverage, and may be entitled to purchase health insurance on his or her own through a COBRA option, if available. The requirements subdivision 2 may not be waived by either party or counsel. In the event that it is not complied with, the court must require compliance and may grant a thirty-day continuance to afford the parties an opportunity to procure their own health insurance coverage.