COBRA AND USERRA

Continuation Coverage

Prepared by: Debra L. Mackey

Johnston Barton Proctor & Powell LLP

Birmingham, AL

The war against terrorism has caused employers to focus on the requirements of the Uniformed Services Employment and Reemployment Rights Act of 1994, and rightly so. Although USERRA is an anti-discrimination statute, it also affords basic reemployment and employee benefit protections to employees engaged in military service. One of the benefit protections under USERRA affords employees on military leave health coverage continuation rights. These rights are very similar to continuation rights under COBRA. It has been said that COBRA and USERRA are two different laws giving two different rights to essentially the same benefit. Under both COBRA and USERRA, coverage may continue for up to 18 months, and the employee may be required to pay up to 102% of the premium cost. Despite the general similarity, there are many differences between them:

§ USERRA coverage may end before the expiration of the 18 month period if the employee fails to apply for or return to employment following military leave.

§ Under USERRA, an employer may not require an employee on military leave for less than 31 days to pay more than the employee’s normal share of the premium.

§ Unlike COBRA, USERRA does not contain an exception for church plans or employers employing fewer than 20 employees.

§ USERRA does not state that coverage ends due to the failure to pay the premium.

§ USERRA does not state that coverage ends when the beneficiary becomes covered by another group health plan.

§ USERRA does not contain rules governing notice, elections, or the timing thereof.

While USERRA could have simply incorporated the COBRA provisions by reference, it did not do so. As a result, there are many unanswered questions about how to implement the USERRA coverage continuation program and whether rules under COBRA should be applied under USERRA. There is no definitive answer, nor is there a “safe harbor” for applying COBRA rules to USERRA. Even so, the more detailed COBRA rules should not be ignored in USERRA administration.

An employee’s military service may or may not constitute a qualifying event under COBRA. If it does, not only must USERRA be complied with but COBRA must be complied with as well. An employer could provide the employee with a separate COBRA and USERRA package, leaving it to the employee to figure out under which statute he should elect coverage. Such a strict construction of the statute is probably unnecessary. Most employers seem to be taking a more practical approach toward solving the COBRA versus USERRA dilemma, applying the most employee-favored provisions of each statute and revising COBRA packages to be both COBRA and USERRA compliant.

Until guidance is issued or COBRA/USERRA cases are litigated, employers would be well advised to be generous and err on the side of the employee and employee’s dependents with respect to administering continuation coverage under USERRA.

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