The Affordable Care Act for Separated Parents

The 2014 implementation of the Affordable Care Act is a significant change of our laws. The Act will have particular effects on the healthcare expenses and relationships of parents who are no longer together yet share the support responsibilities of their children.

Starting in 2014 this new law creates both a risk and an opportunity for these parents. Parents who are well-advised, think through the consequences and are proactive in addressing potential problems will suffer less stress and save money.

Background
Most separated parents have the rights and responsibilities for their children governed by a divorce decree, custody order, or child support order. Each of these court orders specify which parent is to provide the medical insurance for the parents’ shared children and how to divide healthcare expenses. The healthcare specifications in court orders are very important as parents spend thousands of dollars each year for health insurance premiums, deductibles, co-pays, and non-covered medical expenses.

Prior to the Affordable Care Act, the options for medical insurance were usually limited to the offerings of employers of shared parents and the state’s Medical Assistance program. When not cost prohibitive, private medical insurance plans were used by the self-employed.

In October 2013 the state’s healthcare exchange opened, permitting parents to chose from a variety of private medical insurance plans offered by many companies. Under the Affordable Care Act these plans will no longer be so cost prohibitive but rather they will be “Affordable.”

The trade off for the lower rates provided under the Act is that all citizens will be mandated to have medical insurance. The maintenance of a policy will be proved each year as a part of each person’s federal tax returns. Those who cannot prove they had medical insurance the prior year will incur a financial penalty at tax time for noncompliance.

The Risks
The difficulty some separated parents may encounter comes from court orders where the custodial parent is not the one whose medical insurance plan covers the children.

Under the Act the parent who claims the dependency exemption for the minor children is the parent whom the IRS will look to for proof that those children were medically insured during the prior year. Thus if the custodial parent is the parent who claims the children on their taxes (as is the majority of the cases either because the court order was silent on the issue or the exemption was assigned by the court order to the custodial parent), they will have to have the other parent provide them the documentation of coverage.

For some parents this type of communication and cooperation will be problematic and will require a court order that specifies a deadline for the provision of these documents. For other parents there will be unfortunate surprises when it is revealed that the coverage did not exist or was dropped. In high-conflict relationships between separated parents the issues of medical insurance coverage and tax penalties will likely drive them back to court.

The Opportunity
Separated parents have a couple of opportunities under the Act to significantly reduce the amount of money they each pay for medical insurance for the children.

First of all, separated parents will now have more medical insurance plans available to insure their children. No longer will they be limited to just what their employers offer; the exchange will offer more plans of comparable coverage at lower premiums. Admittedly, the sharing of premiums by some employers will still leave those plans to be the best options for some parents, but the market option exists for many whose employers’ offerings leave much to be desired.

Secondly, there are tax credits, depending on family size and income levels, available to offset the expense of private plans. There are also income-based subsidies to reduce out-of-pocket costs such as co-pays.

These tax credits will increase insurance options for many separated parents. Instead of having the higher earner provide the insurance because it was available through their employer, many separated parents will find that they can have the same coverage through the lower earning parent’s purchase of a private plan once the tax credit is taken into account.

In order to take advantage of these opportunities separated parents will need to work together and with both a CPA and an attorney so that the changes can be made. The amount of money that parents spend on healthcare is so considerable that there is reason to be excited by the savings that may come from these opportunities.

Conclusion
For these health insurance matters, as with many of the legal matters regarding the children of separated parents, it is wise for parents to each do their homework to know as much as they can. It is also good for them to communicate with each other to share what they learn so they can effectively co-parent. And with these changes to our healthcare that go into effect in 2014, it will also be wise for parents to speak with their attorneys and CPAs as soon as any issues arise. Effective communication will go a long way toward minimizing the risk and maximizing the opportunities of the Affordable Care Act.