FAQ: Can an employee remove their spouse from coverage during open enrollment in anticipation of a divorce?
January 7, 2020
An employee may be allowed to drop their spouse from coverage during open enrollment; however, the employee should follow any court orders in place, and the employer should be mindful of the fact that there are COBRA implications when the employee does this in anticipation of divorce.
First, it’s important to note that divorcing spouses who provide health coverage to the soon-to-be ex-spouse are often ordered not to terminate that coverage until the divorce is finalized. Some state laws even require this continuation. Even in situations where an individual cancels their spouse’s coverage before they have filed for divorce, the court could seek to require the individual to either reinstate the coverage or pay for the spouse’s medical care. So the employee should discuss their desire to terminate the spouse’s coverage during open enrollment with their legal counsel or the court in which they are filing for divorce.
Second, when an employee’s spouse is covered by an employer’s health plan, the spouse is eligible for continued coverage through COBRA when a triggering event occurs, such as when the employee and the spouse divorce. As background, COBRA is required when qualified beneficiaries experience a loss of coverage due to a COBRA-triggering event. Those rules generally mean that qualified beneficiaries are only eligible for coverage if they had coverage on the day before the event. However, when a person who has coverage loses that coverage in anticipation of a triggering event, such as a divorce, the loss is disregarded in determining whether the event causes a loss of coverage. In other words, for purposes of determining whether the spouse qualifies for COBRA and when COBRA coverage starts, the spouse is treated as if they had coverage on the day before the triggering event even though they were dropped during open enrollment.
Upon receipt of notice of the divorce between the employee that dropped the coverage and their spouse, a benefit plan that is subject to COBRA must make COBRA coverage available to the divorced spouse as of the date of the divorce. This means the employer should send the COBRA election notice to the divorced spouse so that they can elect COBRA if they so choose.
So, the employee could presumably be free to drop the spouse during open enrollment as long as any court orders do not stipulate otherwise. It would be best for them to discuss their desire with legal counsel, though. Additionally, in anticipation of divorce there are COBRA issues to be mindful of. The client should consult with outside counsel regarding any additional issues that may arise in this situation, including possible disputes with the insurance carrier regarding the eligibility of the spouse for COBRA.