The (Unintended) Impact of the Affordable Care Act on Divorce

February 11, 2015Articles Texas Lawyer

"Reprinted with permission from the February 11 issue of Texas Lawyer. (c) 2015 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved."

Health insurance used to keep couples together. Now, the Affordable Care Act may give spouses a reason to part ways.

Historically, a divorce could have a dramatic impact on health care coverage, particularly for people who relied on an employed spouse for health insurance. The reality of losing health insurance prevented some spouses from pursuing divorce, and in other cases a divorce would result in a loss of coverage, often for years. Now that a year has passed, ACA and its health insurance exchanges have had an impact on the divorce dynamic. Spouses may no longer be dependent upon breadwinner spouses' employer-provided health insurance coverage. And, in some cases, given ACA-provided subsidies, combined insurance costs may be lower if a couple divorces. Here are five ways in which ACA might change divorce.

1. A benefit to the previously dependent spouse. It is now easier for older, unemployed or otherwise uninsurable people to secure health insurance, as a result of the ACA. Before the ACA, securing health insurance independently could be a difficult, expensive and sometimes impossible proposition. Spouses with preexisting conditions might have avoided thoughts of divorce—or pursuit of divorce—for fear of losing coverage. Before the ADA, a breadwinner spouse would obtain health insurance through employment that would cover children under the age of 18 and his or her other spouse, whether that spouse was self-employed, staying home to raise the children or disabled.

After divorce, the nonemployed spouse would have to obtain insurance independently, as she or he would no longer be eligible for coverage under the breadwinner's old policy, except temporarily through the Consolidated Omnibus Budget Reconciliation Act.

Obtaining private insurance was no simple task. A previously dependent spouse who was not able to obtain employment due to age, health or lack of job history was virtually uninsurable because most health insurance is provided through employment. The ACA changed this dynamic by providing a path and options for coverage for previously dependent spouses. Individuals can now secure coverage—at different benefit levels and costs—regardless of their employment status and preexisting conditions. An individual who divorces can also enroll in health coverage outside the ACA's open enrollment period because the ACA identifies divorce as a "change-in-life event."

2. Changing the negotiations. Before the ACA, negotiations over the division of community property could be affected by health care costs. The previously dependent, or uninsurable, spouse might have needed to maximize liquidity to cover anticipated out-of-pocket health care costs. This could mean the difference between staying in a house and moving, or otherwise relinquishing illiquid assets. Under the ACA, such a spouse can participate in the health insurance exchange to secure coverage, which levels the playing field with respect to divvying the marital estate.

The ACA also impacts settlement negotiations regarding children's expenses following high school graduation. While Texas does not legally require a parent to support a college-aged child, the reality is that many parents anticipate that they will be financially supporting their children during this time. As such, college costs, including the payment of health care expenses, are often points of negotiation between divorcing spouses. The ACA's provisions allowing insureds to keep children on family policies through age 26 gives more certainty to the divorcing parties with respect to the health-related costs that might be incurred in the future, as well as the availability of insurance for the adult child.

3. Potential effects on spousal maintenance claims. In Texas, a spouse who lacks sufficient resources to meet minimum reasonable needs after divorce may qualify for spousal maintenance. These minimum reasonable needs include health care costs, which can be significant if the spouse has a physical or mental disability. For example, in situations in which one spouse anticipates short or long-term medical care, those anticipated costs could be taken into account when determining whether the spouse who needs care qualifies to receive spousal maintenance, and, if so, the amount of the spousal maintenance award. The availability of health insurance through the ACA may be a factor in evaluating the viability of spousal maintenance claims. Additionally, now that the ACA is available, a spouse obligated to pay spousal maintenance might seek to modify prior awards that were based on health care costs.

4. Impact on women. While not unique to divorced women, historically health insurance premiums for women were more costly than those for men. The ACA has precluded that practice.

5. Unintended consequences. Some pundits and economists, upon evaluating the subsidies available to lower and middle-income couples, have suggested that the ACA could, given its parameters, actually encourage divorce. Under the ACA, in general, households with incomes from 100 percent to 400 percent of the poverty level are eligible for subsidies on their health insurance premiums paid through the ACA. Some couples in this income range would pay lower overall health insurance premiums if they divorced and the lower-income ex-spouse was responsible for health coverage for herself or himself and any children. This result of the subsidy rules is similar to the marriage penalty for certain couples who file income taxes jointly.

In sum, the ACA has dramatically changed the marital playing field by instituting health care changes that, in turn, may in some cases provide financial incentive for couples to consider divorce as a possibility. This unintended consequence is certainly a legal and socio-economic issue to track as the ADA becomes more institutionalized in American society.

"Reprinted with permission from the February 11 issue of Texas Lawyer. (c) 2015 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.”