health insurance post-divorce

[Guest Linnea]

Maybe I'm barking up the wrong tree but has

anyone ever heard of this?

A divorcing friend of mine was told by her

company benefits person and by a representative of Blue Cross and Blue Shield

that if there were a court order associated

with the divorce, she could

be maintained on her husband's health

insurance at the regular family (pre-divorce)

rate until either party remarried. (Not COBRA, in other words). Her

attorney had never heard of this and neither

has mine.

I am also getting divorced and contacted my

husband's benefits dept. They were hedging

(told me to do research through the

internet and contact attornies) and I'm not sure if this is because they

didn't know about this or because this is the best-kept insurance secret of the decade, or because it's completely off the wall to think this could be true.

They said something about a QDRO but

my reseraches thus far suggest that QDRO's

apply to pension plans.

Does anyone know anything about this? Your

input would be most appreciated!

[Brigid Anderson]

The reason you haven't gotten a clear answer from your contacts or research is because there probably isn't one. I haven't seen a case dealing with a divorce decree that required an ex-spouse to be maintained under a health plan but, in pre-QMCSO days, there were lots of cases where dependent children were the subject of such orders. These orders are creatures of state law and I’d say most courts find them preempted (although even that’s not a sure bet anymore … see the recent 9th Circuit case, Emard v. Hughes Aircraft Co., 1998 U.S. App. LEXIS 20294, where the court found California’s community property law not preempted when applied to a life insurance plan).

There continue to be cases dealing with orders requiring children to be maintained post-divorce as life insurance beneficiaries, i.e., in non-group health plans to which QMCSOs don't apply. Your research says that QDROs don't apply to non-pension plans and I agree. But several courts have shoe-horned these life insurance plan orders into the QDRO rules and enforced them as such. See, e.g., Metropolitan Life Ins. Co. v. Wheaton, 42 F.3d 180, 18 EBC 2661 (7th Cir. 1994). Other courts had applied federal common law to achieve the same result. Equitable Life Assurance Society of the U.S. v. Crysler, 66 F.3d 934 (8th Cir. 1995).

Now, an order requiring that a ex-spouse be treated as a spouse raises issues not raised by an order dealing with children. Children are still children after divorce and probably continue to fit a plan’s definition of dependent. So an order that they remain covered doesn’t require the plan to provide something that it ordinarily doesn’t. Requiring coverage of an ex-spouse is quite different. I'm surprised that Blue Cross doesn't fight such orders on "slippery slope" grounds--if an order can require that, why can’t it require continued coverage of the ex-spouse even after the employee remarries?

Moreover, as your message indicates, COBRA applies here. Many of the courts that grapple with these kinds of orders are influenced by the fact that ERISA doesn’t say much about these issues on the non-pension side of things. However, in this case, the ex-spouse can remain covered under the plan pursuant to COBRA. I think that would influence a court to conclude that COBRA is the exclusive method of continuing coverage particularly given that Congress wrote the QMCSO rules so as not to cover ex-spouses. A divorce court could certainly place the financial burden of paying the COBRA premiums on the employee if that was the goal. Of course, that would raise interesting enforcement issues in the event he or she missed a premium thus causing the COBRA coverage to lapse. But that’s another story…

Depending on the state that you are in, there may be state insurance law rules or court decisions that form the basis for the Blue Cross policy you describe--as a state licensed insurer they remain subject to all these laws. This, of course, isn’t legal advice and I haven’t done any specific research on your particular question.

Its an interesting issue though. If its convenient, please let me know what else you find out.

Regards,

Brigid Anderson, Esq.

Senior Editor,

Employee Benefits Institute of America, LLC

&

Co-author, ERISA Compliance for Health

& Welfare Plans (EBIA 1992-1998)

206-546-6810

banderson@ebia.com

[KIP KRAUS]

What Brigid says has been my experience from a Benefits Manager's perspective. However, I have worked for an employer who allowed ex-spouses to remain on the medical plans until age 65 or until the employee or ex-spouse remarried. This liberal a policy, I might add, is not very prevalent among employer health plans.

If this is the policy of you or your friend's company it should be described in their Summary Plan Description (SPD). If you or your friend are currently covered as a spouse, ask the company benfits person for a copy of the SPD.

Unlessd you see it in writing, I wouldn't rely on word-of-mouth from the employer or the insurer.

[Brigid Anderson]

After I posted my earlier message on this subject, I mentioned your question to my colleague (and, okay, boss), Tom McCormick. He immediately knew of a case. Look at Cellilli v. Cellilli, 939 F. Supp. 72 (D. Mass. 1996), where the court found a state continuation coverage law (that required ex-spouse coverage when ordered by a divorce decree) not preempted when applied to an HMO. It said the HMO was indistinguishable from an insurer for purposes of the preemption analysis. As with so many preemption situations, the pivotal fact is whether the law is being applied to an insurer, on the one hand, or to an employer or its self-funded plan, on the other. In your situation, Blue Cross is probably subject to such a state law. I don't know where you're writing from. Maybe it is this same Massachusetts law.

Regards again,

Brigid Anderson, Esq.

[Guest Ray Goetz]

I would add that if an employer agrees to provide continuing coverage to a former spouse, and the coverage is "subsidized" (that is, it is worth more than the person is charged), it would appear that the exclusion from income that normally applies for employer provided health benefits would no longer apply, and the employee or the former spouse, or both, would then have some added taxable income.

[Guest nb]

My question is how do you extend eligibility to a non employee, non spouse? With the court orders I've seen the employee may be required to obtain or pay for health benefits for ex spouse. But no where does it say that the employer must cover the ex spouse. When divorce is final, we would offer COBRA continuation to the ex spouse only.

[Sheila K]

Boy, this ones been kicking around for a long time. However, it seems to me that some common sense would tell us this: A divorce decree is binding only on the petitioner and respondent. If one is ordered to pay a credit card bill, the other one is still liable. It would seem to me that the court would be taking a lot of heat if they began mandating this type of coverage and using the divorce decree to "order" coverage. The more likely response is that one or the other spouse would be ordered to pay for the ex-spouse.

[Brigid Anderson]

I agree that a divorce court could not properly order an employer or plan to pay for the health plan coverage of an ex-spouse. However, I disagree that a divorce decree binds only the divorcing spouses. A state court dealing with a divorce will consider itself as having power over any person or entity in its jurisdiction. It may order the employee to pay for coverage of his or her ex-spouse. By necessity, such an order at least implicitly also requires the employer-health plan to provide the coverage even though the plan may not by its terms extend coverage to ex-spouses. That is where the issue comes in: whether the plan is subject to the state court order and state law or whether the order and state law are preempted by ERISA.

[Guest Linnea]

Well, this is what happened: my attorney

called an employee benefits attorney in

my state - New Jersey. This attorney said

that there was nothing in the New Jersey

law that would force an employer to pay for

my health insurance post-divorce, even if

ordered by the court. Meanwhile, my friend

followed up with her employee benefits person

who, it turned out, admitted that maybe she

had made a mistake.

I have, however, now heard of three such cases in the State of Massachusetts. I don't

totally understand this issue but I am

assuming that this means that getting an

effective court order to be covered under

an ex-spouse's health insurance depends on

what state you live in and I'm out of luck.

Thank you everyone for all your helpful

comments, that have been very useful and

supportive, in my quest for the answer to

my question!