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HEALTH INSURANCE – DIVORCE – REPLACEMENT COST

In divorce actions, attorneys quickly ascertain the present cash value of the Employee Spouse's Retirement Benefits. This determination is integral to the worth of the marital estate.

Often Overlooked, in this process is the fact that the Non-Employee Spouse is likely to lose the health insurance that was provided to her or him during the marriage. Now the Non-Employee Spouse must seek to replace this lost marital asset.

The intent of this article is to present to the family attorney a valuation issue that could merit your attention.

Upon Divorce What is the Replacement Cost of the Lost Health Insurance of the Non-Employee Spouse?

Consider the following.

Jane's Date of Birth October 1, 1972

Jane Pacaro Divorces on October 1, 2014

Jane's Age 42

Monthly COBRA Cost $530.75 [1]

Medicare Eligibility Age 65

At the end of Jane's 36 months of COBRA health insurance coverage, she must replace it with an Individual Health Insurance Policy. In the conclusions that follow a Health Insurance cost progression of 4% was used. Thus, Jane at age 45 requires as much as 20 years of Individual Health Insurance Coverage. [2] Should this cost be recognized in the divorce negotiations?

What is the Replacement Cost of Jane's Individual Health Insurance Policy? [3]

The result given was based on an interest rate assumption of 3.26% and a cost of coverage annual increase rate of 7.27%. [4]

The Replacement Cost of Jane's Individual Health Insurance coverage from the time of divorce up to Medicare eligibility is: $192,711.42.

The present cash value can be more or less, depending on the specifics of your matter and the assumed duration of the Replacement Period.

Who shall be deemed responsible for this cost?



[1] Upon divorce the former spouse has a COBRA conversion right with the Employee's firm for 36 months.

[2] From age 45 up to Medicare Eligibility at age 65.

[3] The calculations relied in part on data and statistics provided by The Kaiser Family Foundation and Health Research and Educational Trust.

[4] 30 Year T-Bond Rate for month of September 2014 and National Conference of State Legislatures (HEALTH INSURANCE: PREMIUMS AND INCREASES).