All Things Family Law

Discussion of all things related to family law from an Indiana divorce attorney.

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“Obamacare” / PPACA & Indiana Divorce Law

Summary: Under the PPACA, every individual, regardless of marital status, will be required to obtain individual health care coverage.  This represents a drastic change from the nation’s previous health care practices and requirements. While the enactment of the PPACA will inevitably result in major changes in the health insurance industry, the PPACA may also have a profound effect on the institution of marriage in the United States.  Indeed, the incentive to marry solely to obtain health care coverage will seemingly be eliminated. Conversely, particular provisions of the PPACA, especially those allowing low-income individuals to obtain tax reductions in order to pay for health insurance, may actually incentivize certain individuals to abstain from marriage or seek divorce. Furthermore, certain provisions of the PPACA may also have an effect on child support and spousal maintenance payments.  

1.      Overview of the PPACA

The Patient Protection and Affordable Care Act (PPACA), commonly referred to as Obamacare or the Affordable Care Act (ACA), is a United States federal statute signed into law on March 23, 2010. Together with the Health Care and Education Reconciliation Act, it represents the most significant regulatory overhaul of the country's healthcare system since the passage of Medicare and Medicaid in 1965. The PPACA aims to increase the quality and affordability of health insurance, lower the uninsured rate by expanding public and private insurance coverage, and reduce the costs of health care for individuals and the government. It provides a number of mechanisms—including mandates, subsidies, and insurance exchanges—to increase coverage and affordability. The law also requires insurance companies to cover all applicants within new minimum standards and offer the same rates regardless of pre-existing conditions or sex. On June 28, 2012, the United States Supreme Court upheld the constitutionality of most of the PPACA in the case National Federation of Independent Business v. Sebelius. However, the Court held that states cannot be forced to participate in the ACA's Medicaid expansion under penalty of losing their current Medicaid funding.

How does the PPACA change the nation’s current health care system?

Notable Changes

  • Health plans cannot drop your coverage when you develop an illness or medical condition.
  • You may cover your children on your group health policy up to age 26.
  • You or your children will not be denied coverage based on a pre-existing condition.
  • Your plan cannot impose annual or lifetime dollar limits for essential health benefits.

Citation: http://tulsafamilylaw.wordpress.com/2012/07/05/obamacare-and-divorce-its-still-complicated/

How will this affect individuals?

Under the legislation, most Americans will have to have insurance by 2014 or pay a penalty. The penalty would start at $95, or up to 1 percent of income, whichever is greater, and rise to $695, or 2.5 percent of income, by 2016. This is the individual limit; families have a limit of $2,085 or 2.5 percent of household income, whichever is greater. Some people can be exempted from the insurance requirement, called an individual mandate, because of financial hardship or religious beliefs.

How can you obtain coverage under the PPACA?

If not covered by an employer plan, people must either get health insurance on their own, pay a penalty on their income tax, or qualify for an exemption.

States, or the federal government by default, will set up health insurance exchanges.  These exchanges will outline the competing health insurance plans available to you, and the premium for coverage.

The exchange will also offer calculators to figure cost-sharing reductions and premium tax credits available depending on your income and coverage.

Citation: http://tulsafamilylaw.wordpress.com/2012/07/05/obamacare-and-divorce-its-still-complicated/

2.      The PPACA and Divorce

Theme: The PPACA will likely mean the end of “Insurance Marriages” and may lead to increased divorce rates, as certain spouses may be eligible for larger tax deductions as individuals rather than as members of a married couple.

What is an “Insurance Marriage” and why will the PPACA likely eliminate such marriages?

What is an Insurance Marriage? Formerly, it was hypothesized that some individuals married solely for the purpose of obtaining affordable health care coverage.  For example, a woman who had several pre-existing conditions might not have been able to obtain reasonably priced health care insurance. A possible solution to the woman’s problem would be marrying a man who had an employer providing premium health care insurance and relatively no cost.  These marriages, whereby one of the spouses would be afforded previously unavailable coverage through marrying the other, better insured spouse, were colloquially referred to as “Insurance Marriages.”

According to a 2008 New York Times article, one in ten couples cite health insurance as a primary reason they get married to begin with. It is also a reason many couples stay married even when perhaps they would prefer to divorce.

Citation: http://greenwich.patch.com/groups/divorce-information-nows-blog/p/bp--does-obamacare-about-divorce

In 2008, 7% of couples who married reported doing so primarily for the insurance benefits.

Citation: http://jezebel.com/5922206/obamacare-one-less-reason-to-get-married (citing Kaiser Family Foundation)

See also: http://abcnews.go.com/Business/CareerManagement/story?id=5379923&page=1#.T-3QsytYuA0

Why does the PPACA mean the end of Insurance Marriages? Beginning in 2014, if not covered by an employer plan, individuals will be required to either get health insurance on their own or pay a penalty on their income tax. However, under the PPACA, health care insurance will be more available and affordable to those who may have previously struggled to afford or obtain health care insurance for any number of reasons (sex, pre-existing conditions, low-income, etc.).  

To return to the example above, the woman who previously had trouble finding affordable health care because of her preexisting conditions will no longer need to marry the man whose employer provides premium health care insurance. Instead,  because the PPACA prevents health care insurers from prejudicing against those with pre-existing conditions, and because there will be a variety of methods to obtain coverage, the woman will likely be able to obtain more reasonably priced coverage as an individual. 

“Any way you slice it, the Supreme Court's ruling on the Affordable Care Act is the death knell for the Insurance Wedding, that sometimes secret, often hasty legal leap a desperate couple will make when one party has great insurance and the other has weird chest pains.”

http://jezebel.com/5922206/obamacare-one-less-reason-to-get-married

Will the PPCA have any effect on divorce rates in the United States?

Possibly. Just as certain individuals will no longer need to marry solely to find affordable health care insurance, those same individuals will no longer need to stay in relationships or delay divorces in order to have reasonably priced health care coverage.

Obama’s signature legislative achievement creates such a powerful “financial deterrent” to marriage that even one former Obama administration official warns that Obamacare will increase the divorce rate among lower-income families.

Citation: http://dailycaller.com/2013/02/14/obamacare-undermines-marriage/

Why will the PPACA potentially led to an increasing amount of divorces?

“Health insurance premium credits in the new law are linked not directly to income, but to the poverty line, resulting in a particularly steep marriage penalty for low-income Americans. With $10,890 as the poverty line for one person and an additional $3,820 for a spouse, marriage means less government help with health insurance.”

Citation: House Oversight and Governmental Reform Committee http://oversight.house.gov/wp-content/uploads/2012/01/10-27-11_Obamacares_Subsidies_and_Tax_Distribution_Final.pdf

See also: http://lonelyconservative.com/2011/10/will-obamacare-encourage-divorce/

“Consider a low-income American supporting a family of four deciding whether to take a part-time job that pays $36,000 a year or a full-time job that pays $42,000 a year. According to my research, accepting the higher-paying job could result in the family losing over $10,000 a year in health-care subsidies. . . . Consider a couple with children in which one of the parents earns most of the family's income. If the couple marries, the family would lose thousands of dollars of subsidies that could otherwise be used to pay for health insurance for the children and the lower-income spouse. If the couple is already married, divorce may be their only option for obtaining affordable insurance for their children and the lower-income parent.”

Citation: Wall Street Journal http://online.wsj.com/article/SB10001424052970203335504578086702676417058.html

Spouses, who may have previously been disinclined or wary of getting a divorce to a fear of a lack of available coverage, may now feel empowered by the availability of other health care options. Thus, divorce rates could rise, as fewer people will be staying together, or putting off divorce, solely to retain health care coverage.

“But thanks to Obamacare, women may not have to keep relying on insurance plans that are only available through their husbands — something that will help women who choose to remain unmarried, women who seek a divorce, and LGBT women who live in states where they cannot legally marry. By requiring that all employers provide their workers with insurance, preventing insurance providers from charging women more than men for the same medical care, and expanding the eligibility levels for the Medicaid program, the health reform law actually represents a step toward ensuring that women’s ability to have insurance isn’t impacted by women’s ability to get married.”

Citation: http://thinkprogress.org/health/2012/11/15/1196801/obamacare-women-divorce/

But with the passage of the Affordable Care Act, aka Obamacare, the need to marry for health care coverage and the divorce health care penalty are expected to diminish

Citation: http://greenwich.patch.com/groups/divorce-information-nows-blog/p/bp--does-obamacare-about-divorce

3.      Options under the PPACA for Divorcing Spouses

What were the options available to divorced spouses before the PPACA?

COBRA coverage for former spouses provides continuation of health insurance for up to 36 months, and then purchasing health care insurance privately or via new employment group plans, or having no health insurance.    

Citation: http://tulsafamilylaw.wordpress.com/2012/07/05/obamacare-and-divorce-its-still-complicated/

What options will be available under the PPACA?

Whenever a couple divorces, providing health insurance for a spouse who will no longer be covered under a family health insurance plan is always an issue. Full implementation of the Affordable Care Act, or “Obamacare” provides new health care coverage options. A divorced spouse will have to make the following choices regarding health insurance (citation: http://www.kreisenderle.com/2013/07/09/the-impact-of-obamacare-on-health-insurance-coverage-for-ex-spouses-in-divorce/):

COBRA coverage for former spouses provides continuation of health insurance for up to 36 months. COBRA is more expensive than the employer-subsidized premiums, but at least it is continuation of existing coverage. One of the former risks of COBRA was the chance that the ex-spouse will acquire a health issue during those 36 months that could be defined as a pre-existing condition when he or she applies for other health insurance to replace the COBRA coverage (though, under the PPACA, insurers cannot discriminate/refuse to provide coverage based on pre-existing conditions, so, maybe just mention that it was a former concern that is no longer prevalent?). Another risk is that with ObamaCare, the COBRA option may not be available for some families. If the employers do not provide health care coverage (choosing instead to pay the fine associated with the employer mandate- which we see is now becoming more common ex: Kroger, UPS), the employers will not have to offer COBRA continued coverage.

Citation: http://www.aicpa.org/Publications/Newsletters/WealthInsider/2010/jun17/Pages/HealthcareReformandDivorce.aspx?action=print

The costs of choosing to continue coverage under a spouse’s plan by electing COBRA have made this option for most divorced spouses obsolete. Although COBRA remains an option, most will find it cheaper to purchase individual health insurance through the state health insurance exchanges.

http://www.kreisenderle.com/2013/07/09/the-impact-of-obamacare-on-health-insurance-coverage-for-ex-spouses-in-divorce/

Remember, there is now a “mandate” that was approved by the Supreme Court in Sebelius requiring most individuals to obtain health care insurance. See above figures for estimated value of the penalty associated with remaining uninsured.

The Medicaid expansion provisions of Obamacare are optional, after National Federation of Independent Business v. Sebelius, as states cannot be forced to participate in Medicaid. If Indiana opts to expand Medicaid coverage, beginning in 2014, Medicaid will be available to all adults with incomes at or below 133 percent of poverty (about $15,282 for an individual in 2013), whether they have dependent children or not. Therefore, a spousal support award to a stay at home spouse may disqualify him or her from the benefits of Medicaid expansion, if the Indiana legislature acts to implement Medicaid expansion.

See http://www.govhealthit.com/news/6-states-medicaid-expansion-aca-hix-limbo for details about the Medicaid expansion debate in Indiana.

Employers may increasingly choose to offer only limited health care coverage or may choose to pay the fee required by the employer mandate, as that may be the cheaper option.

Kroger, UPS, and other businesses are now beginning to cut health insurance coverage to employees’ spouses.

Some companies have blamed uncertainty over the costs of Obamacare for recent cuts to employee benefits, but others say the changes are part of a trend that began long before the new health care law came along.

Local Indiana Effect:  Kroger said the creation of insurance exchanges through the new health care law made the elimination of spousal coverage more palatable; spouses now have another option for coverage.

Citation: http://www.indystar.com/article/20130908/BUSINESS/309080030

State-based purchasing pools, also called exchanges, will be available in 2014 for individuals and small businesses to choose their plans. It is intended that these exchanges will allow purchasing power similar to that of employees of large companies.

Citation: http://www.aicpa.org/Publications/Newsletters/WealthInsider/2010/jun17/Pages/HealthcareReformandDivorce.aspx?action=print

While those who receive health insurance coverage through their employers can continue doing so, individuals without access to employer plans can participate in Exchanges to be established by each state by 2014. Those in lower income brackets would qualify for refundable tax credits to help pay for the cost of participating in these Exchanges. The consequence of many of these measures is that individuals without access to employer plans will have more affordable health care options than they do currently.

Citation: http://greenwich.patch.com/groups/divorce-information-nows-blog/p/bp--does-obamacare-about-divorce

Obamacare also provides health insurance premium tax credits to help an individual offset a significant portion of his or her health insurance premiums. The health insurance premium tax credits are available if health insurance is purchased from a health insurance exchange, and the individual’s income is between $14,500 and $44,000. Secondly, a former spouse may also be eligible for a premium tax credit if he or she has an offer of coverage through employment, and the plan requires he or she to pay more than 9.5 percent of their household income to purchase the insurance, OR if the employer sponsored plan pays less than 60% of the costs of covered benefits. Unlike traditional tax credits, those who qualify will not have to pay taxes or even wait to have their taxes filed before receiving the tax credit. The tax credit will be available to pay the premium at the time the person enrolls in a plan.

Citation: http://www.kreisenderle.com/2013/07/09/the-impact-of-obamacare-on-health-insurance-coverage-for-ex-spouses-in-divorce/

4.      Child Support and the PPACA

What affect will the PPACA have, if any, on child support?

As aforementioned, the PPACA requires the extension of health care coverage to dependent children until the age of 26.

SEC. 2714  [42 U.S.C. 300gg–14]. EXTENSION OF DEPENDENT COVERAGE.

‘‘(a) IN GENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage that provides dependent coverage of children shall continue to make such coverage available for an adult child until the child turns 26 years of age. Nothing in this section shall require a health plan or a health insurance issuer described in the preceding sentence to make coverage available for a child of a child receiving dependent coverage.”

It appears that although some provisions of former health care coverage plans will be grandfathered in, despite being contradictory of the PPACA’s new requirements, it does not appear that any age provision in a previous health care insurance plan may be grandfathered.

Under the Affordable Care Act, current health plans that existed at the time the Act was signed were “grandfathered” into the Act. This was meant to allow people to maintain the insurance coverage they already possessed. Under the Act, grandfathered health plans are exempted from certain requirements that the Act imposed. For example, grandfathered health plans are not required to impose limits on out-of-pocket costs for their users. New plans are required to provide their participants with “essential health benefits,” as determined by the Secretary of Health and Human Services; grandfathered health plans are not subject to these requirements. However, certain requirements do apply alike to the new plans and the grandfathered health plans. These include extending the age of dependent children to age 26.

Citation: Cornell Law Blog http://blog.law.cornell.edu/healthcarecases/category/glossary/

Why is the extension of health care to dependent children until the age of 26 relevant to child support?

Because the PPACA will now require health care insurance companies to extend coverage to children until they reach the age of 26, it is possible that such a provision may have an effect on cases like Kolmetz in the future, whereby spouses will be obligated to provide child support, in the form of health care insurance payments, until their children reach the age of 26. A spouse’s obligation to continue health insurance payments until their child is 26 will likely depend on the specific language of the property settlement agreement or the final decree, but the Kolmetz decision indicates how the PPACA may affect child support payments.

In Indiana, health care costs are often included in post-secondary education expense orders.  Expect to deal with the PPACA costs in post-secondary education orders. 

In Indiana, the PPACA may help drive down the costs associated with spousal support orders.  As COBRA will not be the only option for divorcing spouses.  The PPACA will undoubtedly effect the calculations used to determine spousal maintenance orders. 

Citation: Albo and Oblon, LLP http://www.albo-oblon.com/does-obamacare-extend-fathers-child-support-obligation/

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