Client Life Events: Changes in Marital Status

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If your client has recently gotten married or will be married soon, they’re likely filled with excitement about this big milestone! They’re planning their wedding, the honeymoon, and looking forward to marriage with their new life partner. Because of all the joy and excitement, financial planning is probably one of the last things on their mind. Even further from their mind is health insurance. But, as you know, both are important considerations when someone gets married. Clients who are getting married need to consider that they’ll likely have a change in income, changes in how they file taxes, they’ll need to determine which spouse’s health insurance they should go on, and the list goes on. Similarly, someone who’s married but becomes divorced or widowed will face the same decisions and changes. 

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Once clients realize they have a lot of financial and healthcare planning decisions to make after their marital status changes, they might feel overwhelmed. But the good news is that you, the financial advisor, can provide them with an action plan and some relief by guiding them through their options. To help you do that, we’re going to go over health insurance options and healthcare planning decisions that need to be made when someone has a change in marital status.

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Recently Married Clients

Employer-Sponsored Health Insurance

If your client and their spouse both have employer-sponsored health insurance, they’ll want to sit down and compare plans to see which options fit best with their individual needs. Getting married is considered a trigger for Special Enrollment Periods, so neither spouse will have to wait until their employer’s open enrollment period. 

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When deciding between plans, your client and their spouse will want to answer the following questions:

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• Do we have similar health needs? 

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• If the answer is yes, they can pick the same health plan based on the other criteria below. If they answer no, they may need to stick with their individual employer-sponsored health plans to ensure they can stay in-network with their preferred doctors, continue to see in-network specialists, etc.

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• Are our current doctors and specialists all in the same network in any of our plan options? If not, are we OK finding new doctors and specialists?

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• Are our current pharmacies in-network? If not, are we OK switching to one that is?

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• Are our current prescription medications in-network? If not, what are our options?

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• What’s our maximum for out-of-pocket expenses?

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• Are either of us comfortable with needing a referral from a primary care doctor to see a specialist? Or would we rather be able to see a specialist whenever we want to?

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• How much are we willing to pay in monthly premiums?

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• Would we prefer to have a higher monthly premium but a lower cost for individual medical services received, or would we prefer to pay less each month in premiums, but have a higher cost responsibility when we receive medical care? 

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• Do we have any preferences for insurance carriers?

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• Are we expecting any large medical events in the next year? Such as a planned surgery? 

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It’s important to note that many employers don’t subsidize the premiums for spousal coverage, and not all employers offer coverage for anyone other than the employee. This is especially true for smaller employers. But, if this is an option, evaluating provider networks, fixed costs, and maximum exposure is an important analysis to undertake for recently married clients.

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The Marketplace

If your client and their spouse don’t have access to employer-sponsored health insurance and aren’t Medicare eligible yet, their best option is likely going to be a Marketplace plan. The “Marketplace” or “Exchange” is an online platform where individuals and families can shop for and enroll in health insurance plans that are Affordable Care Act-compliant. Insurance plans offered through the Marketplace must be qualified health plans, meaning the plans must be offered by a state-licensed health insurance issuer and meet certain standard requirements. For example, plans must guarantee ten essential health benefits, which include prescription drugs, emergency services, and maternity care. Most importantly, when enrolling in a qualified plan, the only criteria that can be used to determine your coverage eligibility are your age, your sex, and your smoking status. You cannot be denied for pre-existing conditions, which is still a big misconception today, along with clients thinking they don’t “qualify” based on their income while there is no income requirement to enroll.

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Typically the only time you can enroll in a Marketplace plan is during Open Enrollment, but getting married qualifies for a Special Enrollment Period.

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A Marketplace plan is a great option for healthcare coverage thanks to premium tax credits. Premium tax credits (PTCs) are a type of sliding scale subsidy that reduces the amount clients pay monthly for individual or family health plans purchased through the Marketplace. The American Rescue Plan Act of 2021 was signed by President Biden on March 11, 2021, and allowed, for the first time, individuals with annual income 400% above the FPL to be eligible for APTC. States such as California, Massachusetts, New Jersey, and Vermont have enacted state-level subsidies that help out specific populations, too. Currently, the expansion will last until 2025. To be eligible, clients must be enrolled through a Marketplace plan, have U.S. citizenship or legal residency, file federal income tax returns, and must not qualify for other programs such as Medicaid and Medicare.

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When choosing a Marketplace plan, your client and their spouse will want to ask themselves the same questions as the ones in the previous section.

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Recently Widowed or Divorced Clients

Employer-Sponsored Health Insurance

If your client is employed and was on their spouse’s employer-sponsored health insurance plan and they become widowed or divorced, they might qualify to enroll in their own employer’s health insurance. They’ll need to reach out to their HR department and let them know about their situation to see if they qualify for a Special Enrollment Period. Otherwise, they’ll need to wait until their employer’s annual open enrollment period. 

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If your client doesn’t have access to employer-sponsored health insurance and isn’t yet 65, a Marketplace plan will likely be their best option. However, if they’re going to be 65 soon, COBRA could be a good option to bridge that gap until they are eligible for Medicare.

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If your client is 65 and enrolled in Medicare, changes in marital status do not affect their Medicare coverage, but might affect the income bracket they are placed in due to a change in tax filing status and annual income.

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The Marketplace

Typically, the only time you can enroll in a Marketplace plan is during Open Enrollment, but getting widowed or divorced qualifies for a Special Enrollment Period. However, it’s worth noting that if your client is widowed or divorced, they only qualify for a Special Enrollment Period if becoming widowed or divorced causes them to lose health coverage. For example, if your client was on their own employer’s health insurance and they got divorced, they don’t qualify for a Special Enrollment Period because the divorce didn’t cause a loss of health coverage for them.

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As mentioned earlier, a Marketplace plan can be an excellent choice for healthcare coverage thanks to PTCs.

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Below is a list of questions you can ask your client to help them determine which Marketplace plans are the right fit for their needs and preferences:

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• Are my current doctors and specialists in the plan’s network?

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• Is my current pharmacy in-network?

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• Are my current prescription medications in-network?

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• What’s my maximum for out-of-pocket expenses?

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• Am I comfortable with needing a referral from my primary care doctor to see a specialist? Or would I rather be able to see a specialist whenever I want to?

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• How much am I willing to pay in monthly premiums?

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• Would I prefer to have a higher monthly premium but a lower cost for individual medical services received, or would I prefer to pay less each month in premiums, but have a higher cost responsibility when I receive medical care? 

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• Do I have any preferences for insurance carriers?

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• Am I expecting any large medical events in the next year? Such as a planned surgery? 

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• Should I enroll in a high-deductible plan and contribute to an HSA?

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COBRA

COBRA (the Consolidated Omnibus Budget Reconciliation Act) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods under certain circumstances — including divorce and death. If your client received health insurance through their spouse’s employer-sponsored health insurance, they qualify for COBRA coverage that can last up to 36 months if their spouse passes away or they get divorced.

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COBRA is a great option for anyone who wants to keep the exact same coverage, but the caveat is that it’s expensive. This is because your client pays the entire premium (plus a 2% administration fee) whereas before, their former spouse’s employer likely paid a portion of their monthly costs. It may be less expensive, however, than a Marketplace plan in the case of family coverage, but often isn’t for a single individual. This can also be a good option if your client anticipates that they will secure alternative health coverage quickly, or if they’ve already significantly contributed towards their deductible and/or out-of-pocket maximum.

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Final Thoughts

Changes in marital status can greatly impact your client's overall financial plan. It can decrease or increase their income, change their tax-filing status, change how they receive healthcare coverage, and potentially increase or decrease their healthcare costs. As a financial advisor, it’s your responsibility to ensure their financial plan and goals are disrupted as little as possible. But a way to go above and beyond, and make sure your client stays with you for years to come, is to also help relieve any anxiety and stress they feel about all the financial and healthcare decisions they have to make after getting married, widowed, or divorced. 

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One of the ways to reduce anxiety and serve clients in a truly comprehensive way is to help them identify which healthcare coverage option makes the most sense for them when they’ve had a change in marital status. Doing so will not only ensure your client has one less thing to worry about but will also create a more accurate, comprehensive financial plan.

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