Reservists called to active duty and their families immediately face many personal financial problems, most of which must be resolved quickly if the reservist will go overseas.
The question that comes to me most frequently is: "What about my company-supplied health and accident insurance? Will I still be covered and will my family still be covered?"
Active reservists automatically are covered by the military health plan. They also can enroll their dependents in a separate health plan -- the Civilian Health and Medical Program of Uniform Services (CHAMPUS).
To answer your questions about this and other insurance matters I called for help from attorney Eli J. Warach, senior vice president, Maxwell Macmillan/Prentice Hall, Inc.
According to Warach, CHAMPUS coverage is effective from the date active duty begins. And because CHAMPUS is free, it's likely that many employees will elect it for their dependents. (The deductibles are $50 per person and $100 per family. The plan pays 80 percent.)
The Internal Revenue Service has announced that employers are prohibited from terminating health insurance coverage for military reservists called to the Middle East. The announcement dispelled rumors that the IRS would allow employers to terminate health coverage for those reservists or dependents who become covered under a federally sponsored health plan.
Under the Consolidated Omnibus Reconciliation Act (COBRA) of 1985, an employer providing health insurance benefits to employees must make alternative coverage available for employees and their dependents who lose coverage as a result of termination or reduction in work hours. Generally, the employer may end coverage when the individual signs on to another group health plan.
The IRS now makes it clear: Military plans are not group health plans for purposes of the COBRA cutoff rule. It excludes a plan provided by a federal or other governmental entity from the definition of "group health plan."
The IRS also says an employer may voluntarily maintain coverage without having to offer reservists or their family members a COBRA election. Employer contributions for the cost of that coverage will continue to be tax-free to the reservist. If the employer does not voluntarily continue coverage, the reservist must be given a chance to choose continued coverage.
Whether the health plan continues automatically or through COBRA, there are different clauses that come into play. And remember, the employee's situation is a lot different from that of his or her dependents.
An employee-reservist has coverage that provides complete and free medical care. As a result, most employer plans include some exclusions. These are intended to prevent double coverage.
The employer plan may exclude coverage for injuries caused by acts of war, declared or undeclared, or for services provided directly by the federal government. However, dependents not in the war zone are not subject to "war injury." Where the plan excludes coverage while the employee is on active duty, the dependents will be able to elect COBRA continuation coverage.
Federal law also provides that CHAMPUS is secondary to private health care coverage that the dependents may have. This holds true even for inpatient services provided directly by a federal government hospital. CHAMPUS will bill the plan for the hospital services provided.
In cases where company coverage terminates while the employee is on active duty, the employer under the law will have to reinstate coverage for the employee and his or her dependents when the employee returns to work.
The courts have gone further and have applied the "escalator principle" to the reinstatement of health plans. Returning employees are treated as if they had been on the job all the time.
Now let's look at group-term life insurance. Coverage under a group-term plan may be terminated, but, in many cases, that's the only coverage an employee has. The employee may exercise his or her right to convert the group coverage to an individual contract within a specified time period.
Conversion costs are usually expensive. However, if coverage is not maintained, the employee-reservist may feel he has no alternative.
There's an up-to-the-minute and courteous government information program that you should know about. The National Committee for Employer Support of the Guard and Reserve is funded by the U.S. Department of Defense. These astute government people will answer your questions about the reserve call-up and its implications. Warach reports they are knowledgeable and helpful. Call them toll-free at (800) 336-4590.
FRIDAY: Status of employee benefits for reservists called to duty