Research · 7 min read
What Happens to Health Coverage During Military Leave
A separate federal statute governs an employer health plan when someone leaves for uniformed service. It sets an outer period, a price ceiling that changes at thirty-one days, and a reinstatement rule that bars waiting periods on return.
Key takeaways
- A plan must permit an employee absent for uniformed service to elect to continue coverage, for the lesser of 24 months from the start of the absence or the day after a failure to return or apply to return.
- The price ceiling is 102 percent of the full premium, except that service of less than thirty-one days limits the charge to the regular employee share, if any.
- The statute and the regulation word the thirty-one-day line differently — less than 31 days, and fewer than 31 days against 31 or more — and both are printed here.
- Where an employee had no chance to elect, the regulation requires retroactive reinstatement of uninterrupted coverage on election and payment, with no administrative reinstatement costs.
- On reemployment, an exclusion or waiting period may not be imposed if none would have applied had coverage not been terminated by reason of the service.
- The single exception covers illnesses or injuries the Secretary of Veterans Affairs determines were incurred in or aggravated during service, and only that Secretary or a representative may make the determination.
Answer first: the plan must let the person elect to keep the coverage
The Uniformed Services Employment and Reemployment Rights Act contains a health-plan section of its own. Where a person, or the person's dependents, has coverage under a health plan in connection with the person's position of employment — including a group health plan as defined in the retirement income security statute — and the person is absent from that position by reason of service in the uniformed services, the plan shall provide that the person may elect to continue such coverage.
The regulation states the same duty from the plan's side. If the employee has coverage under a health plan in connection with his or her employment, the plan must permit the employee to elect to continue the coverage, for a period described in the rule.
The maximum period is defined as the lesser of two things. One is the 24-month period beginning on the date on which the person's absence begins. The other is the day after the date on which the person fails to apply for or return to a position of employment, as determined under the statute's reemployment application deadlines.
The regulation phrases the second limb the same way: the period beginning on the date the absence for the purpose of performing service begins, and ending on the date on which the employee fails to return from service or apply for a position of employment as provided in the reemployment sections.
So the coverage right is not open-ended in either direction. It runs out at two years, or earlier if the person does not come back or apply to come back within the applicable window.
What it costs, and the line at thirty-one days
The price is capped, and the cap changes depending on how long the service is.
The statute says a person who elects to continue health-plan coverage may be required to pay not more than 102 percent of the full premium under the plan, determined in the same manner as the applicable premium under the continuation-coverage provision of the tax code, associated with such coverage for the employer's other employees. It then adds the exception: in the case of a person who performs service in the uniformed services for less than 31 days, such person may not be required to pay more than the employee share, if any, for such coverage.
The regulation states the same rule in two paragraphs, and uses slightly different words for the same boundary. If the employee performs service for fewer than 31 days, he or she cannot be required to pay more than the regular employee share, if any. If the employee performs service for 31 or more days, he or she may be required to pay no more than 102 percent of the full premium under the plan, which the regulation describes as the employer's share plus the employee's share, plus 2 percent for administrative costs.
Both texts are printed here rather than reconciled into one phrasing, because they are the two authoritative statements of the same line.
On mechanics, the statute is silent and the regulation says so. USERRA does not specify requirements for methods of paying for continuing coverage, and health plan administrators may develop reasonable procedures for payment, consistent with the terms of the plan. The same is true of how the election is made: USERRA does not specify requirements for electing continuing coverage, and administrators may develop reasonable requirements addressing how it may be elected, consistent with the plan's terms and with the Act's exceptions to the advance-notice requirement.
The regulation gives one worked limit on what reasonable means there. The employee cannot be precluded from electing continuing coverage under circumstances where it is impossible or unreasonable for him or her to make a timely election.
What happens when notice or election or payment is missed
The regulation devotes a full section to this, and it turns on three variables: whether the employee is excused from giving advance notice of service, whether the plan has established reasonable election rules, and whether it has established reasonable payment rules.
Where an employee leaves for uniformed service without giving advance notice, the plan administrator may cancel coverage upon departure. But where the failure to give notice was excused under the statute because it was impossible, unreasonable, or precluded by military necessity, the administrator must reinstate coverage retroactively upon the employee's election and payment of all unpaid amounts due, and the employee must incur no administrative reinstatement costs. The regulation adds a precondition: to qualify for an exception to the requirement of timely election, an employee must first be excused from giving notice of service under the statute.
Where notice was given but no election was made, for a period of service exceeding thirty days, the administrator may cancel coverage on departure but must reinstate it without administrative reinstatement costs under two stated conditions. If the plan has developed reasonable rules about the election period, it must permit retroactive reinstatement of uninterrupted coverage to the date of departure where the employee elects and pays all unpaid amounts within the plan's periods. If the plan has not developed such rules, it must permit retroactive reinstatement to the date of departure upon election and payment at any time during the maximum continuation period.
Where an election was made but payment was not timely, the regulation permits administrators to adopt reasonable rules allowing cancellation of coverage.
Twice in that section the regulation points at the general continuation-coverage regime as a model. Where health plans are also covered by that regime, it may be reasonable for an administrator to adopt compliant rules regarding election, and separately regarding payment, as long as those rules do not conflict with any provision of USERRA or the rule.
Reinstatement on return, and the exclusion that does not survive it
The reinstatement provision is the part of this statute that does work no other rule does.
Where coverage under a health plan was terminated by reason of service in the uniformed services, an exclusion or waiting period may not be imposed in connection with the reinstatement of that coverage upon reemployment, if an exclusion or waiting period would not have been imposed had coverage not been terminated as a result of the service. The statute states that this applies to the person who is reemployed and to any individual covered by the plan by reason of the reinstatement of that person's coverage.
The regulation states the same rule and makes the dependent point explicit at the front: if health plan coverage for the employee or a dependent was terminated by reason of service in the uniformed services, that coverage must be reinstated upon reemployment.
There is one exception, and it is narrow and procedurally specific. A plan may impose an exclusion or waiting period as to illnesses or injuries determined by the Secretary of Veterans Affairs to have been incurred in, or aggravated during, performance of service in the uniformed services. The regulation adds the limit that matters: that determination may only be made by the Secretary of Veterans Affairs or his or her representative. Other coverage — for injuries or illnesses that are not service-related, or for dependents where dependent coverage exists — must be reinstated.
On timing, the regulation says the employer must reinstate coverage upon request at reemployment, and that USERRA permits but does not require the employer to allow the employee to delay reinstatement until a date later than the date of reemployment.
The edges: which plans, what the statute does not require, and multiemployer arrangements
The scope is broader than the retirement income security statute's own reach. The regulation says USERRA covers group health plans as that statute defines them, and applies both to plans subject to it and to plans that are not, such as those sponsored by state or local governments or by religious organizations for their employees.
The definition of a health plan is functional rather than formal: an insurance policy or contract, medical or hospital service agreement, membership or subscription contract, or arrangement under which the employee's health services are provided or the expenses of those services are paid.
Two things the statute does not do are worth stating plainly, because the regulation states them. USERRA does not require the employer to establish a health plan where there is no health plan coverage in connection with the employment, or, where there is a plan, to provide any particular type of coverage. And it does not require the employer to permit the employee to initiate new health plan coverage at the beginning of a period of service if he or she did not previously have such coverage.
For multiemployer plans, both texts allocate liability the same way. Liability for employer contributions and benefits arising under these provisions must be allocated as the plan sponsor provides; if the sponsor does not provide, to the last employer employing the person before the service; and if that employer is no longer functional, to the plan.
The regulation adds a section for multiemployer plans that provide coverage through a health benefits account system — arrangements it says are commonly called dollar bank, credit bank or hour bank plans. An employee with a positive balance who elects to continue coverage may either expend the account balance during the absence in lieu of paying for continuation, or pay for continuation in order to keep the balance intact and resume using it on reemployment. If the balance becomes depleted during the applicable period, the employee must be permitted, at their option, to continue coverage by paying. On reemployment the plan must provide immediate reinstatement, but may require the employee to pay the cost of coverage until they earn the credits necessary to sustain continued coverage. The regulation adds that employers or plan administrators providing such plans should counsel employees of these options.
Sources
- 38 U.S.C. 4317 — Health plansThe requirement that a plan provide for an election to continue coverage where a person with employment-connected coverage is absent by reason of service in the uniformed services; the maximum period stated as the lesser of the 24-month period beginning on the date the absence begins or the day after failure to apply for or return to a position of employment; the 102 percent cap determined in the same manner as the applicable premium under the tax code's continuation-coverage provision, and the exception limiting a person serving less than 31 days to the employee share; the multiemployer allocation rule; and the reinstatement provision barring exclusions and waiting periods on reemployment, its extension to individuals covered by reason of the reinstatement, and the narrow exception for illnesses or injuries determined by the Secretary of Veterans Affairs to have been incurred in or aggravated during service.
- 20 CFR Part 1002, Subpart D — Health Plan Coverage, §§ 1002.163 through 1002.171The functional definition of a health plan; the statement that USERRA covers group health plans as defined in the retirement income security statute and applies both to plans subject to it and to plans that are not, including those sponsored by state or local governments or religious organizations; the continuation requirement and its two limbs; the statements that USERRA does not require an employer to establish a plan, to provide any particular type of coverage, or to permit an employee to initiate new coverage at the start of service; the absence of specified election and payment mechanics and the reasonable-rules allowance, including the limit that an employee cannot be precluded from electing where a timely election is impossible or unreasonable; the fewer-than-31-days and 31-or-more-days payment rules and the description of 102 percent as employer share plus employee share plus 2 percent for administrative costs; the three failure scenarios in § 1002.167 including retroactive reinstatement without administrative reinstatement costs and the two references to adopting compliant rules from the general continuation-coverage regime; the reinstatement rule and the Secretary of Veterans Affairs exception including that only that Secretary or a representative may make the determination; the statement that reinstatement is required upon request at reemployment and that delay is permitted but not required; the multiemployer allocation rule; and the health benefits account system provisions including the two employee options, the depletion rule, the immediate reinstatement requirement with the credit-earning proviso, and the counseling instruction.
Frequently asked questions
How long can coverage be continued during uniformed service?
The statute sets the maximum as the lesser of the 24-month period beginning on the date the absence begins, or the day after the date on which the person fails to apply for or return to a position of employment as determined under the reemployment deadlines. The regulation states the same two limbs.
What can the plan charge?
The statute says a person who elects to continue coverage may be required to pay not more than 102 percent of the full premium, except that a person performing service for less than 31 days may not be required to pay more than the employee share, if any. The regulation words the same line as fewer than 31 days for the employee share, and 31 or more days for the 102 percent figure, which it describes as employer share plus employee share plus 2 percent for administrative costs.
What if no election was made before leaving?
The regulation addresses three situations. Where no advance notice of service was given, coverage may be canceled on departure — but where the failure to give notice was excused as impossible, unreasonable or precluded by military necessity, coverage must be reinstated retroactively upon election and payment of amounts due, with no administrative reinstatement costs. Where notice was given but no election made, retroactive reinstatement to the date of departure is required on election and payment, within the plan's reasonable rules or, absent such rules, at any time during the maximum period.
Can a waiting period be applied on return?
Not where coverage was terminated by reason of the service, if a waiting period or exclusion would not have applied had coverage not been terminated. The statute extends that protection to the reemployed person and to any individual covered by reason of the reinstatement of that person's coverage.
Is there an exception to that reinstatement rule?
One. A plan may impose an exclusion or waiting period as to illnesses or injuries determined by the Secretary of Veterans Affairs to have been incurred in, or aggravated during, performance of service. The regulation says that determination may only be made by the Secretary of Veterans Affairs or a representative, and that other coverage must be reinstated.
Does this force an employer to offer a plan?
No. The regulation says USERRA does not require the employer to establish a health plan where none exists in connection with the employment, or to provide any particular type of coverage where one does, and does not require the employer to let an employee initiate new coverage at the start of a period of service if they did not previously have it.