Impact of the ACA on Family Law Cases
Megan E. Watson, The Legal Intelligencer (online)
Lately, my email inbox has been inundated with CLE and webinar offerings on the Affordable Care Act (ACA). Most focus on an employer’s obligation. As a family lawyer, issues of health insurance arise almost daily in our cases. I was quite thankful to attend the Philadelphia Bar Association’s Family Law Section’s meeting Feb. 2, which focused on the impact of the ACA on family law cases.
Staff attorneys Ann Bacharach and Joline Price from the Pennsylvania Health Law Project led the presentation. When looking for health insurance for children, there are three options to choose from, other than private insurance through employment: medical assistance, CHIP (Children’s Health Insurance Program) and the marketplace exchange. A child’s eligibility for any option is dependent on income guidelines but whose income to use when applying differs in each option.
For medical assistance and CHIP, the income of the household where the child resides controls. For the marketplace exchange, the income of the individual claiming the dependency exemption controls. However, “household” is defined by who claims the child as a dependency exemption on taxes. For this reason, it becomes very important to consider the implication of an agreement that designates which party claims the dependency exemption.
If the parent who is the primary custodian claims the child on his or her taxes, then that household is the tax household. In that case, the custodial parent can apply for medical assistance or CHIP or seek coverage in the marketplace exchange, all dependent on the amount of household income. Children ages 6 to 19 qualify for medical assistance if the household income is up to 133 percent of the federal poverty level. Children qualify for free or reduced-cost CHIP if the household income is between 133 percent and 200 percent of the federal poverty level and they will qualify for CHIP, at full cost, if the household income is between 200 percent and 314 percent. Any household over 314 percent of the federal poverty level can apply through the marketplace, although the tax credits for obtaining coverage through the marketplace decrease as household income increases.
However, if the non-custodial parent claims the child on his or her taxes, only the non-custodial parent can apply for coverage in the marketplace. The reason eligibility for coverage through the marketplace rests with the parent who claims the child is because the financial break for obtaining the coverage through the marketplace, i.e., the tax credits, would apply on the taxes of the person who claims the child. Tax credits are available for taxpayers whose income is up to 400 percent of the federal poverty level. These tax credits are not available if the taxpayer can get health insurance through his or her employer, even if an individual chooses not to take the employers’ coverage, or if a party files married filing separately (except in situations of domestic violence).
If the non-custodial parent claims the child on his or her taxes, the custodial parent can apply for medical assistance or CHIP if his or her household income is within the ranges identified above. In this scenario, the household is defined as the parent(s), step-parent(s), sibling(s), and step-sibling(s) living with the child. If the child lives with someone other than a parent and/or someone other than a parent claims the child on taxes, the household is also defined as the parent(s), step-parent(s), sibling(s), and step-sibling(s) living with the child.
This delineation should certainly be considered when, for example, you are negotiating who claims the children on federal income taxes in a child support context or who is identified as the primary custodial parent in a custody context.
With medical assistance, it is possible and permissible for a child to be covered by medical assistance as well as private insurance (for example, custodial parent has no income and can qualify for medical assistance, but non- custodial parent also covers the child through his employer-sponsored plan). In contrast, with CHIP, a child cannot also be covered under a private plan.
So let’s look at how it applies in certain situations:
· In a “typical” custody scenario, if the dad has primary custody, the mom has partial custody, and the dad claims the children on his taxes, the dad can apply for medical assistance, CHIP, or coverage through the marketplace depending on the household income. The household income will include his income, that of the children and that of his new spouse, should there be one.
· In another “typical” scenario, if the mom has primary custody, the dad has partial custody, but the dad claims the children on his taxes because the mom either does not work or because the dad gets a bigger financial benefit and the parties agreed, the mom can apply for medical assistance and CHIP but not coverage through the marketplace. In this scenario, if the mom does not work, or has a household income within the ranges identified above, she can apply for medical assistance and CHIP. However, if she is remarried and her new husband makes enough income that the household income exceeds the ranges identified above, the mom will not qualify for medical assistance or CHIP and the mom cannot apply for coverage through the marketplace.
· If the grandparents have custody of the children, the household for income purposes includes the children, their step-siblings and their parents or step-parents if they also live with them. If it is only the children and the grandparents living in the house, the household income is only the income of the children. Therefore, the grandparents can apply for medical assistance and CHIP. If the grandparents claim the children, they can also apply for insurance through the marketplace. The fact that the parents claim the children on taxes does not impact the grandparents’ ability to apply for medical assistance or CHIP.
Therefore, when negotiating child dependency exemptions, health insurance and even custody, a practitioner must take into consideration the impact of those decisions on a child’s ability to be covered by these different insurance programs. No longer should an attorney quickly agree to alternating the dependency exemption, as that complicates these issues even further. Instead, an attorney should discuss with his or her client what the options are for coverage, most particularly in cases where the client does not have coverage through employment. Even if the other party has coverage through his or her employer, an attorney should be cognizant of the ability to also cover the children with medical assistance or of the possibility that the other parent may lose coverage.
For more information, feel free to check out the Pennsylvania Health Law Project website at http://www.phlp.org.
Reprinted with permission from the MARCH 2, 2015 issue of THE LEGAL INTELLIGENCER (online). © 2015 ALM Media Properties, LLC. Further duplication without permission is prohibited. All Rights Reserved.
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