Over half of all Americans receive health insurance coverage through their employer. Though they have their differences, many insurance policies offer some combination of health, vision, and dental benefits at a partially subsidized rate. Many employers offer so-called “family plans” that extend coverage beyond the employee to his or her spouse and dependent children. A common question parents often ask during the estate planning process what happens to the dependents’ health insurance coverage if the policy-holder passes away unexpectedly.
For many people, the answer depends on the language of the health insurance plan itself. A careful reading of the plan may provide information about whether dependents may continue their coverage at a subsidized rate and if so, for how long. Being familiar with your policy can help prevent your family from encountering some big surprises during a period of grieving.
Federal law does provide some protection for dependents from losing access to existing coverage altogether. The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires that group health plans continue to offer coverage for up to 36 months for a plan’s dependents in the event of the death of a covered spouse or parent.
If the dependent parent has survived, he or she may make the COBRA election on behalf of him/herself and for the children. If both parents have passed, the guardian appointed in the will or emergency temporary guardianship may make the COBRA election on behalf of the surviving children. It is important to note that COBRA coverage can be prohibitively expensive, as the deceased parent’s employer is not obligated to continue subsidizing the coverage. The unsubsidized rate may be thousands more that the employee had been paying for coverage.
If COBRA is not an option or the surviving parent or guardian doesn’t choose to elect COBRA in a timely fashion, you must look to the protections of your state’s insurance law to determine whether coverage can continue. In some states, private insurers must continue coverage for up to 39 weeks following the death or until the children become eligible for benefits under another plan, whichever happens first.
The most likely scenario might be for the surviving children’s guardian to make a COBRA or state-specific election as soon as possible, at least until the children could obtain coverage under their guardian’s plan. Bear in mind that subsidies available to dependent family members may be affected by your legacy planning. Always consult a qualified estate planner for if you need more information about your specific family circumstances.