[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
REVIEW OF VA'S LIFE INSURANCE PROGRAMS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL AFFAIRS
of the
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
WEDNESDAY, APRIL 25, 2018
__________
Serial No. 115-57
__________
Printed for the use of the Committee on Veterans' Affairs
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
35-470 WASHINGTON : 2019
COMMITTEE ON VETERANS' AFFAIRS
DAVID P. ROE, Tennessee, Chairman
GUS M. BILIRAKIS, Florida, Vice- TIM WALZ, Minnesota, Ranking
Chairman Member
MIKE COFFMAN, Colorado MARK TAKANO, California
BRAD R. WENSTRUP, Ohio JULIA BROWNLEY, California
AMATA COLEMAN RADEWAGEN, American ANN M. KUSTER, New Hampshire
Samoa BETO O'ROURKE, Texas
MIKE BOST, Illinois KATHLEEN RICE, New York
BRUCE POLIQUIN, Maine J. LUIS CORREA, California
NEAL DUNN, Florida KILILI SABLAN, Northern Mariana
JODEY ARRINGTON, Texas Islands
JOHN RUTHERFORD, Florida ELIZABETH ESTY, Connecticut
CLAY HIGGINS, Louisiana SCOTT PETERS, California
JACK BERGMAN, Michigan
JIM BANKS, Indiana
JENNIFFER GONZALEZ-COLON, Puerto
Rico
Jon Towers, Staff Director
Ray Kelley, Democratic Staff Director
SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL AFFAIRS
MIKE BOST, Illinois, Chairman
MIKE COFFMAN, Colorado ELIZABETH ESTY, Connecticut,
AMATA RADEWAGEN, America Samoa Ranking Member
JACK BERGMAN, Michigan JULIA BROWNLEY, California
JIM BANKS, Indiana KILILI SABLAN, Northern Mariana
Islands
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Veterans' Affairs are also
published in electronic form. The printed hearing record remains the
official version. Because electronic submissions are used to prepare
both printed and electronic versions of the hearing record, the process
of converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
----------
Wednesday, April 25, 2018
Page
Review Of VA's Life Insurance Programs........................... 1
OPENING STATEMENTS
Honorable Mike Bost, Chairman.................................... 1
Honorable Elizabeth Esty, Ranking Member......................... 3
Honorable Conor Lamb, Member, U.S. House of Representatives...... 4
WITNESSES
Mr. Robert Reynolds, Deputy Under Secretary for Disability
Assistance, Veterans Benefits Administration, U. S. Department
of Veterans Affairs............................................ 5
Prepared Statement........................................... 21
Accompanied by:
Mr. Vincent E. Markey, Director, Insurance Service, Veterans
Benefits Administration, U. S. Department of Veterans
Affairs
Mr. Jeff Steele, Assistant Director, National Legislative
Division, The American Legion.................................. 6
Prepared Statement........................................... 23
Mr. Ken Wiseman, Associate Director, National Legislative
Service, Veterans of Foreign Wars.............................. 8
Prepared Statement........................................... 28
REVIEW OF VA'S LIFE INSURANCE PROGRAMS
----------
Wednesday, April 25, 2018
U.S. House of Representatives,
Committee on Veterans' Affairs,
Subcommittee on Oversight
and Investigations,
Washington, D.C.
The Subcommittee met, pursuant to notice, at 2:30 p.m., in
Room 334, Cannon House Office Building, Hon. Mike Bost
[Chairman of the Subcommittee] presiding.
Present: Representatives Bost, Esty, Coffman, Banks, Lamb,
and Hunter.
OPENING STATEMENT OF MIKE BOST, CHAIRMAN
Mr. Bost. Good afternoon and welcome everyone. The hearing
for the Subcommittee on Disability Assistance and Memorial
Affairs will now come to order. And before we begin, I want to
welcome Conor Lamb from Pennsylvania to the hearing today and
say that I look forward to working with him when he officially
joins us on the Subcommittee. Mr. Lamb has not yet been
formally added to the Full Committee, so I ask unanimous
consent that Mr. Lamb be allowed to sit at the dais and ask
questions. Hearing no objection, so ordered.
Also we also have Representative Hunter joining us here
today. I'd ask unanimous consent for him to sit at the dais and
ask questions. Hearing no objection, so ordered.
Today, we are reviewing five of VA's life insurance
programs. These life insurance programs were created to meet
the unique needs of servicemembers and veterans. For example,
some active duty military may find it difficult to locate a
private insurer to cover them due to the nature of their
service. In other cases, private life insurers sometimes charge
high premiums or even deny coverage to veterans with service-
connected disabilities because they are high risk.
This is unfair to those serving our Nation because they
would like to be eligible for affordable, private insurance if
they were civilians. Therefore, the government needs to step in
and provide insurance coverage to protect the financial
security for the men and women who serve our Nation in uniform.
Now you can hear me better, can't you? All right. Today's
hearing will assess whether these government programs are
meeting the needs of veterans and servicemembers and inform any
potential future Subcommittee activity. In fiscal year 2017,
only four percent of the eligible veterans applied for service
disabled veterans insurance coverage, which indicates that
these programs may not provide the protection veterans need.
It is possible that many veterans prefer to use life
insurance through employers or private companies, but the low
participation rate may also be because VA is not providing
clear and helpful information to ensure that separating
military personnel and veterans with the service-connected
disabilities are aware of these benefits.
On the other hand, it may be some people do not use VA
programs because premiums are expensive and don't provide
effective coverage. For example, the SDVI program only offers
up to $10,000 of coverage, which is not enough to protect
veterans and their families. Moreover, unlike other VA
insurance programs, the SDVI premiums do not cover the cost of
the program. Last year, taxpayers paid $67.2 million of or 47
percent to make up for the funding shortfall of SDVI.
If the veterans are not satisfied with SDVI or other VA
insurance options, then we should find ways to provide veterans
with better or more financial and physically responsible
choices. In addition, to looking for ways to improve VA's
programs, this hearing will also look at VA's oversight of
these programs, including TSGLI. TSGLI provides benefits for
veterans who have suffered a loss due to traumatic injury, such
as TBI or losing a limb.
Recently, the department completed a 10 year review of
TSGLI program. I am looking forward to finding out if this
review will lead the department to make changes to improve the
program.
Finally, I am hoping to receive an update on VA's plans to
modernize a program including SGLI online enrollment system
which will allow servicemembers to manage their coverage
online. This would be a big improvement over submitting paper
forms that can easily be lost.
I want to thank our witnesses for being here today to
discuss a very important topic for our Nation's heroes. Before
I recognize our distinguished Ranking Member Ms. Esty for her
opening statement, I want to express my disappointment that the
DoD decided not to participate in today's hearing. This is the
second time that the DoD has refused to testify at one of our
Subcommittee hearings and I am hoping that this does not become
a customary response from DoD.
For this hearing, I invited DoD to provide views on high
rate of denials for TSGLI claims and I am frustrated because I
wanted the department to explain why the Armed Services denied
44 percent of TSGLI claims in fiscal year 2017. This denial
rate could be due to any number of factors, such as
applications not being eligible for--applicants not being
eligible for the benefits. However, we don't know whether this
is the reason.
I was hoping the DoD would provide insight as to whether
the servicemembers may not understand the TSGLI requirements or
if they may be inadvertently filing improper claims, or are the
Armed Services incorrectly denying benefits that servicemembers
are paying for? DoD's expertise would certainly have been
helpful here today as we consider these programs and any
improvements to them.
I do not want--I do want to thank everyone else for being
here today. I am looking forward to having this productive
discussion and now I will yield to Ranking Member Esty for her
opening statement.
OPENING STATEMENT OF ELIZABETH ESTY, RANKING MEMBER
Ms. Esty. Thank you, Mr. Chairman. And thank all of you for
joining us here today. And I, too, want to welcome our newest
colleague from Pennsylvania, Conor Lamb. I gave him a preview
at the gym this morning at 6:30, so he is totally ready to go.
We all work out together, so this is a very bipartisan
Committee.
I know that our work will be informed by the addition of
another veteran to our ranks and I want to recognize and thank
him for his willingness to hit the ground running and join us
here today, even though he is technically not a part of the
Committee yet, but we will rectify that soon.
Mr. Chairman, I want to thank you for scheduling this
important hearing today on the numerous life insurance programs
which provide essential financial protection to our
servicemembers, veterans, and their families.
It is my understanding that it has been nine years since
the Committee last checked on these programs. The service group
life insurance, SGLI, program, the veterans group life
insurance, VGLI, programs provide vital financial protections
for servicemembers and families. Military service to our
country places a heavy burden on their shoulders, both the
military and their families. And if tragedy does befall a
servicemember or a veteran, it is very important that they
should not have to worry about financial stability.
And I want to welcome our witnesses and thank all of you
for being here today to answer our questions. I would like to
hear about any studies or analysis that the VA has done
regarding life insurance coverage and monthly premiums. I am
particularly interested in whether the coverage maximum is
enough or too costly for veterans as they age and if changes
should be considered to enrollment periods.
In short, these programs may well be due for an update. And
if the analysis VA used to set rates and coverage are, in fact,
out of date with demographic and other changes, it is very
important that we have a new analysis using current actuarial
data. And I also want to hear about the service group life
insurance traumatic injury program, the TSGLI program, which
can be paid if a servicemember is significantly injured while
in active duty.
Concerns were raised in a GAO report a few years ago
regarding inconsistent processing of these claims. I have
questions about what VA has done since that report to improve
claims processing and ensure quality.
It is unfortunate, I share the Chairman's frustration that
the Department of Defense declined the invitation to join us
here today. Their impact on this critical program would be
valuable to this hearing and I hope they will be willing to
participate in the future and to respond to questions so that
we can all be on the same team and serve servicemembers and
veterans the way we are supposed to.
Our colleague, Mr. Kildee, has a bill H.R. 4055, the
Transparency for Wounded Warriors Act, to directly address this
concern about the TSGLI program. It would mandate that if a
TSGLI claim is denied, the secretary must provide the veteran
with a detailed legal analysis for the reason of the denial and
all of the information that the secretary relied on in making
that decision.
Servicemembers eligible for this program often faced years
of physical and psychological therapy after losing a limb or
suffering from a significant trauma. It should not take an act
of Congress for there to be--for them to receive accurate and
understandable decisions about their claims and the specific
reasons if their claims are denied. But it does appear that an
act of Congress is going to be needed in this case.
Finally, since it has been so long since DAMA has had a
hearing on the VA insurance programs, I want to say that if any
of our witnesses or anyone attending this hearing or anyone
watching it, if you have questions or concerns that we do not
raise in today's hearing, please contact us. All of us on this
Committee work hand in glove to try to improve things. So we
are asking the questions that have been raised with us and that
staff have been looking at, but we know there will be others
out there for those of you with intimate experience with this.
And we would like your help and support.
Mr. Chairman, I would like to yield a minute of my time to
Mr. Lamb for some opening remarks and to our witnesses if that
would be--if you would be amenable.
Mr. Bost. Mr. Lamb, you are recognized.
OPENING STATEMENT OF CONOR LAMB
Mr. Lamb. How about now? All right. Thank you very much to
both of you for giving me the time. I will have some questions
later, but for right now, I just wanted to say thank you for
welcoming me. Western Pennsylvania has one of the highest
concentrations of veterans of anywhere in the country. We are
very proud of that fact. And we are also very determined to
make sure that they get the best care possible in all ways,
whether it comes to insurance or the many other services that
the VA provides.
And so I will have my eye on that and I will listen closely
to what you gentlemen have to say today, thank you.
Ms. Esty. Again, thank you, Mr. Chairman. And I yield back.
Mr. Bost. Thank you, Ranking Member Esty. And I ask that
all Members waive their opening remarks as per the Committee's
custom. I want to welcome the witnesses here today who are
joining us this afternoon and thank them for taking the time to
be here.
Our first witness is Mr. Robert Reynolds, who is the Deputy
Under Secretary for Disability Assistance for VA. He is
accompanied by Vince E. Markey, the Director of Insurance
Service for VBA.
Testifying on behalf of the American Legion is Jeff Steele,
who is the Assistant Director of National Legislative Division.
And also joining us is Mr. Ken Wiseman, the Associate
Director of the National Legislative Services for the VFW. So
welcome to all of you. And I want to remind the witnesses that
your complete written statement will be entered into the
hearing record. Mr. Reynolds, you are now recognized for five
minutes.
STATEMENT OF ROBERT REYNOLDS
Mr. Reynolds. Thank you. Good afternoon, Chairman Bost,
Ranking Member Esty, and Members of the Subcommittee. Thank you
for the opportunity to appear before you today to discuss the
Department of Veterans Affairs' insurance program.
Our mission is to provide high value life insurance
benefits and services to our Nation's veterans, servicemembers,
and their families. For over 100 years, VA life insurance
programs have been providing these individuals with the peace
of mind and the financial security government life insurance
coverage affords. Currently, VA insurance programs provide life
insurance to nearly 6 million servicemembers, veterans, and
their families for over $1.2 trillion in insurance coverage.
Currently, there are 10 different programs in VA's life
insurance portfolio. Six of the programs are administered
directly by VA, while four programs are administered by
Prudential Insurance Company of America, with VA providing the
oversight. Overall, VA's life insurance programs remain in
sound financial condition and provide coverage exclusively to
disabled veterans. They are self-sustaining with the exception
of the Service-Disabled Veterans Insurance and the Veterans'
Mortgage Life Insurance programs. These programs are
independently audited each year with VA receiving favorable
results for the past 25 years.
In fiscal year 2017, VA returned almost $76 million in
dividends to policy holders, paid over $2 billion in death
claim and endowment benefits, and disbursed over $93 million in
policy loans and cash surrenders. In addition, over $30 million
was paid in traumatic injury protection benefits. In total,
over 95 percent of benefits disbursed and administrative
expenses spent were reimbursed by premium collections or
investment earnings.
Our most important performance measure is customer
satisfaction. In fiscal year 2017, over 94 percent of our
customers were satisfied or highly satisfied with the service
they received from VA. In addition to VA's customer
satisfaction score are other internal measures such as zero
percent toll-free blockage, 16 second average speed of answer,
1.4 percent abandoned call rate, and benefit disbursements paid
in 4.4 work days which compare favorably with the private
insurance industry.
In late 2014, VA initiated a comprehensive review of the
SGLI traumatic injury protection program, also known as TSGLI,
to assess proposals for program improvements, clarify complex
eligibility standards, and identify opportunities for
administrative and operational enhancements. This program
provides financial benefits to traumatically-injured
servicemembers to assist them with expenses incurred during
long periods of recovery and rehabilitation. As a result of
this review, VA is enhancing its education materials and
drafting a proposed rule to amend the TSGLI regulations, among
other efforts to enhance the program.
VA was pleased last year to introduce the SGLI Online
Enrollment System, or SOES, which allows active duty and
eligible Reserve and Guard members to manage their SGLI
coverage and Family SGLI coverage online. SOES replaces the
prior paper-based process and brings the SGLI program in line
with current industry best practices. VA collaborated with the
Department of Defense, the Defense Finance and Accounting
Service, the Defense Manpower Data Center, and the Uniformed
Services to develop SOES.
As of April 16 of this year, more than 927,000
servicemembers have confirmed and certified coverage in SOES.
VA remains committed to providing our Nation's heroes with life
insurance options that are equal or superior to those offered
by private insurance companies. We continually strive to meet
our customers' needs and provide services at a comparable cost
to industry standards.
To this end, in fiscal year 2017, we conducted over 200
interviews with veterans and veteran service officers across
the country to gain a deeper understanding of veterans' life
insurance needs. Mr. Chairman, this concludes my statement. I
would be pleased to answer any questions you or other Members
of the Subcommittee may have. Thank you very much.
[The prepared statement of Robert Reynolds appears in the
Appendix]
Mr. Bost. Thank you, Mr. Reynolds. Mr. Steele, you are
recognized for five minutes to give your statement.
STATEMENT OF JEFF STEELE
Mr. Steele. Chairman Bost, Ranking Member Esty, and
distinguished Members of this Subcommittee, on behalf of
National Commander Denise Rohan and the 2 million members of
the American Legion, we thank you for the opportunity to
testify regarding VA's life insurance programs today.
The American Legion has directly assisted veterans and
their dependents for over 40 years by providing a chief of
insurance activities as the VA insurance center in
Philadelphia. The American Legion's work in assisting these
individuals allows us to bring over four decades of experience
before this Subcommittee. A congressional oversight hearing on
VA's life insurance programs was last conducted in 2003, to our
best reckoning. We are thankful for Chairman Bost and Ranking
Member Esty's leadership in addressing this matter.
THE VA currently administers six life insurance programs:
four closed and four opened to new issues. In addition to the
life insurance programs directly operated by the VA, the
department also has general supervisory authority over four
other major government life insurance programs. VA has entered
into a group policy with Prudential Insurance Company of
America to administer these programs.
You have my written testimony, so in the time I have, I
will focus on TSGLI and SDVI. But as a matter of historic note,
2019 marks the 100th anniversary of the United States
Government life insurance program, or USGLI, just as it does
for the American Legion. The program was established to meet
the needs of World War I veterans and represented the first
foray into servicemember and veteran life insurance by the
Federal government. More than 4 million life insurance policies
were issued during World War I, and as of 2017, there were just
124 active policies remaining, with the policyholder's average
age of 95. What a history.
The government became a self-insurer because private
insurance companies were unwilling to assume the unpredictable
risks associated with war. Government became the largest life
insurer in the United States at the time with a coverage
provided by this program.
Regarding TSGLI, the program provides automatic traumatic
injury coverage to all servicemembers covered under SGLI. TSGLI
claims are adjudicated and decided by the military service
departments involved and not by VA.
A 2009 GAO report found that fewer than 63 percent of
claims filed for TBI were approved. GAO further found that the
program lacked consistency across branches and lacked
assurances that decisions about benefit payments were accurate.
According to the GAO report, VA's contractor created a claims
analyst position to work with VA and the branches of service to
review all incoming claims, to validate decisions, and develop
reports to assess consistency of claims decisions across the
branches of service.
The American Legion, in preparing for this testimony, found
that this claims analyst position is no longer active. This
raises the question of how VA is currently assessing
consistency and qualify of claims decisions. In addition, the
American Legion, in speaking with attorneys representing TSGLI
claimants has learned that the military services are not
consistently applying the proper burden of proof.
Regarding the SDVI program, these policies are issued for a
maximum face value of $10,000 and this amount has not been
increased in almost six decades. By comparison, $10,000 in 1951
would be worth around $95,000 today, adjusting for inflation.
For many severely disabled veterans, SDVI is the only life
insurance coverage available to them. Though other government
sponsored programs may have existed when the servicemember was
released from service, many veterans in their younger years may
not have had the foresight to take action on long-term
financial matters such as life insurance. Others simply cannot
afford to meet the cost of a policy at the time of separation.
Legislation sponsored by Representative Stevan Pearce has
been introduced in this Congress H.R. 4146, the Disabled
Veterans Life Insurance Act of 2017, that would remedy many of
these issues that currently exist with the SDVI program, such
as updating the antiquated mortality and annuity tables,
increasing the maximum benefit cap, and extending the
enrollment eligibility to 10 years.
In conclusion, VA's life insurance programs provide
valuable benefits and important financial security to
servicemembers, veterans, and their families given the
extraordinary risks involved in military service.
Mr. Chairman, this concludes my testimony. I am prepared to
take any questions you or the Subcommittee may have and I thank
you.
[The prepared statement of Jeff Steele appears in the
Appendix]
Mr. Bost. Thank you, Mr. Steele. Mr. Wiseman, you are
recognized for five minutes.
STATEMENT OF KEN WISEMAN
Mr. Wiseman. Thank you, Mr. Chairman. Chairman Bost,
Ranking Member Esty, and Members of the Subcommittee, on behalf
of the Veterans of Foreign Wars of the United States and it
auxiliary, thank you for the opportunity to provide our remarks
on the Department of Veterans Affairs insurance programs.
VA is responsible for several insurance programs and
provides a sense of financial security at a time when a family
is suffering from their loss of loved ones. The VFW has heard
from veterans the reasons they do not choose VA programs. So
while we see the value of these programs, we seek improvement
and oversight so their integrity and value are protected.
In general, process reform is something all insurance
programs could use. The VFW has learned of times when an estate
or trust could not receive the payout even if the deceased had
established an estate or trust. Programs that pay out at the
time of death for the servicemember or the veteran should be
able to pay out to an estate or trust.
Out of date contact information for a beneficiary makes it
hard to contact them and could delay payments, but this could
be corrected with better outreach. The VA could increase
exposure to insurance programs through the transition
counseling received by servicemembers leaving the military.
This would be a great way to ensure that contact information is
as current as possible and could also lead to more veterans
using these programs.
VGLI provides great coverage for a veteran needing larger
amounts of insurance protection. However, the rates and cost of
premiums must be something that compete with the private
market. A $200,000 policy would see premium increase of 1,875
percent over the age range of 29 to 69. This could lead to a
veteran not being able to afford coverage needed to ensure
financial security in their retirement years and difficult in
securing insurance from other sources due to service-connected
injuries.
Also of concern is the amount of time a veteran has to join
the program. Veterans may not consider the implications of
losing SGI when leaving service and their focus on transition
may not include getting coverage. Additionally, the VFW has
learned that a diagnosis of PTSD makes it difficult for
veterans to get coverage from other life insurance companies
and they may face higher premiums for smaller policies if they
can get coverage.
Knowing that VGLI does not consider service-connected
disabilities, the VFW supports an open ended enrollment period
to allow veterans to obtain coverage. SGLI provides insurance
to members of the military and pays out to surviving spouses
and families. Oversight of this program is a key concern for
the VFW.
In 2015, the VFW was party to a successful motion against
Prudential Insurance, requiring the documents related to a
class action lawsuit be unsealed. The lawsuit concerned the
method that Prudential used to make lump sum payments, which
was to place them in an investment account known as an alliance
account. Those receiving payments through the alliance account
alleged the breach of contract in violation of Federal law.
While the lawsuit has been settled, the VFW was concerned
that the alliance account option continues to be offered and
promoted on materials that beneficiaries receive. The law
states a lump sum payment of 36 equal payments are the only
allowed options, not an option that results in an investment.
The interest earned on this investment benefits Prudential and
the VFW objects to companies making money off of families who
have lost a loved one that made the supreme sacrifice for our
country.
TSGLI provides automatic, traumatic injury coverage to all
servicemembers covered under SGLI. The VFW urges a review of
the TSGLI for loss of fingers, excuse me. Currently, the loss
of four fingers or the thumb is the requirement for payment.
The loss of digits not only has an impact on dexterity and
complexity of tasks the person is able to perform, but also has
psychological and cosmetic impact.
The VFW recommends payment be allowed under TSGLI on a per
digit basis, a higher amount for the loss of four digits total
not including the thumb, and a payout for the loss of the
thumb. SDVI allows veterans to receive a disability rating,
even of zero percent, to secure life insurance. Each time new
conditions are added to the rating, they have a new opportunity
to join. However, the increase of a rating for an existing
diagnosis does not trigger the same opportunity.
The VFW calls on Congress to allow those veterans who
receive an increased rating for any reason to join SDVI.
Additional concerns include the amount of money provided by
SDVI as $10,000 is not an amount that reflects the current cost
of burial. Also, the current period in which a veteran can join
this program should be lengthened to allow veterans to make
decisions about their needs based on their life changes.
Because of these additional concerns with this program, the VFW
supports passage of H.R. 4146, the Disabled Veterans Insurance
Act of 2017, which would correct issues with SDVI.
Mr. Chairman, this concludes my testimony. I am prepared to
take any questions that you or the Subcommittee may have. Thank
you.
[The prepared statement of Ken Wiseman appears in the
Appendix]
Mr. Bost. Thank you, Mr. Wiseman. And I will begin the
questioning. And once again, thank you all for being here. Mr.
Reynolds, can you explain why you believe that VGLI and SDVI
programs have such low participation rate?
Mr. Reynolds. I will ask our Insurance Director, Vince
Markey, to respond on that. But from my point of view as well
is when I separated from service, that was not in my mind at
that point as a hard charging warrior to say, ``Do I need life
insurance?'' Right? And so, I think that is part of it and how
can we do further outreach. But, Vince, if you have anything
further to add.
Mr. Markey. Sure. As far as the--I think for the SDVI
program, the application rate is around four percent of those
eligible for SDVI. And I think some of the reasons are some of
the things that we talked about today. $10,000 worth of
insurance, the premiums are based on an old 1941 CSO table. So
they are typically three times more expensive than our VGLI
program. And also, there is a two-year limit to apply from the
time you get your service-connected disability, a new service-
connected disability. So there are time limits.
But I would say for SDVI, I don't know exactly why. We
haven't done a needs assessment, but I would think that they
would be the obvious reasons: both coverage and cost.
Mr. Bost. Okay.
Mr. Markey. For VGLI, VGLI's take rate in 2017 was 16 and a
half percent, which has improved dramatically in the last
couple of years. It was hovering around 8 percent around 2012
and 2013. We have done some marketing improvements for that
program and the rate has increased.
VGLI, as also was said, is not the insurance for everyone
coming out. You don't need insurance when you are younger. You
may be getting employer insurance. We are happy with the 16.5
percent. We hope to get a little bit better.
Mr. Bost. Right. Mr. Wiseman, you actually brought up in
your testimony some suggestions. Can you kind of expand on
those suggestions?
Mr. Wiseman. For SDVI, Mr. Chairman?
Mr. Bost. It is for both VGLI and SDVI.
Mr. Wiseman. Yes, sir. So for SDVI, one of the things that
the legislation that we endorsed, H.R. 4146, does it expands
out from 2 years to 10 years, that ability for the veteran to
enroll. That would allow for more education, more outreach,
changes in life, people graduate college, start families,
etcetera. It also increases the amount that the policy would
pay out and it allows for the adjustment of that so that the
policy stays current with times.
As you heard my counterparts say, it would be worth roughly
$95,000 today when you adjust for inflation. I am a customer of
both VGLI and SDVI and so those abilities for the veteran to be
able to choose their needs, creating options, not barriers,
that is our overall approach to this.
Mr. Bost. Mr. Steele, would you expand on any of those?
Mr. Steele. That covered it quite well.
Mr. Bost. Yes. And I have to--Mr. Reynolds, I agree with
you. It is not on your mind when you leave the service. You
have got a whole lot of things on your mind, but that is not--
unless you are a little older when you leave, then you might be
thinking of that.
So when we are at the rate of--and this, I will just go to
the panel--we are at the rate of $10,000 on the one and you say
that was the equivalent of 90,000, right, at that time. And
this is the first hearing we have had since 2003, I think this
is something that maybe as we start listening to everyone as we
move through this process, there is a reason we needed to have
this hearing.
Do you want, Mr. Reynolds, do you want to respond, I have
got one more minute here, to any of the suggestions on where do
you think the department sees this going and do you agree with
what the VSO's are expressing or--
Mr. Reynolds. So we would definitely need to take back and
look further at what they are proposing, but we are definitely
looking at this, as well, within VA and are trying to put a
plan together. Our plan is to have the plan presented to you in
the early part of June, as previously committed.
Mr. Bost. Okay. All right. Wonderful. That's the questions
I had, I will turn it over to the Ranking Member.
Ms. Esty. Thank you very much. And, again, thank you for
illuminating this subject for us. A quick discrete question and
then I really want to get into the meat of this. We have been
looking at a variety of different VA outreach to see if they
are 508 compliant for disabled. Is the SO System 508 compliant,
do you know? Because we are talking about folks who are
disabled here, right? So, anyone know?
Mr. Markey. I am not sure, I cannot answer whether it is
508 compliant. However, just to clarify, for the single online
enrollment system is for active duty policy holders. So it is
probably not, you know, the need for 508 compliance is not
there.
Ms. Esty. But I think as we are looking at online systems,
it is really important that we remember that they be 508
compliant. It is not just the law, but it is also the right
thing to do, we want to facilitate. Because that could be
family members and others who are accessing the system, and who
need to have access.
I want to return to this issue that you have all flagged,
which is the question about at separation. People have a lot of
other things on their mind. We spent a lot of time on this
Committee looking at that transition, and we do not get a warm
handoff, I hear it all the time in my district.
So I am looking at both for SGLI and VGLI, that why don't
we just flip the default, that default you are enrolled? Why
don't make the default for the first year you are enrolled at
whatever level you used to be at? And that gives the veteran
time to figure out where they are living, what they want to do,
do they have a job, does this make sense. And you could opt
out, but the default would be enrollment.
I look at particularly for VGLI, if you do not enroll
promptly, you have to go back through a medical exam. And
precisely the people who are most likely to fail that medical
exam are the people who are not going to be a good position to
be thinking clearly that actually they need to fill out this
paperwork and opt in.
So I would like you, for both those programs, to help us,
with your thought, like, what would happen if we just flipped
the presumption? Because we have seen what happened. You talk
about a 16 percent enrollment rate. If you look at on the
retirement program side, companies that have gone to default
enroll see enrollment in the 80s, 80 percent enroll if it is a
default enroll system.
And we know that is better for veterans. They have got
young children, they are making decisions, this is much smarter
for their long-term future, and we should, frankly, care about
that. We should be making it easy for them to make smarter
decisions, or at least give them the first year when they may
be busy with a lot of other things, just want to get home. So
love your thoughts on that.
Mr. Markey. Yes. One of the issues with the Veterans' Group
Life Insurance Program is that it must be self-supporting, it
does not get tax payer dollars or budget authority. For self-
enrollment, that would increase both the administrative costs
of the program because we would have to mail invites to all
separating servicemembers, and we would also have probably a
lot of adjudicative problems because if an individual, after
the first year if you say it is for free, first of all, that
would increase our death claims which is a cost.
And then we would have to start collecting premiums after
that. And there would be a gap between time that people did not
pay their premiums and thought they were covered. But I think
the main reason that--we have looked into this and I think the
main reason is the cost. And the only way to provide those
costs would be to increase premiums, under this current
construct, to increase premiums on our other policy holders.
Ms. Esty. So there would be no way to do a charge
automatically? I am just trying to figure out, because I
understand your point about providing it for free, is there a
way to do that at separation that would start that process? And
I frankly just do not know, but I think it is worth looking at,
having that default, and so maybe we can try to see whether
there's anything--so, I mean, I know they got a 120 days free,
so the question is, again, what is going to do right by our
veterans and get them to that point that they actually are
having the benefit of what these programs are. Maybe from the
VSOs, if you got thoughts on this?
Mr. Wiseman. Madam Ranking Member, the--I am accredited to
help veterans to their claims, and I always do a follow-up
appointment when the veteran gets their rating decision back.
You get your rating decision, and in the back there is a
mention of insurance policies, but then VA sends a separate
letter to talk about insurance.
When I get this veteran in front of me to discuss this, I
have their undivided attention. If we can put a more robust
mention or even merge the two letters together, that is an
option to catch the attention right there when you have the
veteran, saying this is your new rating, and by the way, you
are eligible for this as well.
Ms. Esty. Other thoughts maybe from the VA? Is that
something that you would be amenable to doing to have an
automatic--to have those paired letters, is that a possibility?
Mr. Reynolds. So, I mean, that is something we definitely
would need to look at. I am supportive of whatever we can do to
provide the best service to our servicemembers, veterans,
family members, and survivors. I mean, one of the things that
we have just recently done was undertake the complete redesign
of our transition assistance program earlier this month and we
have actually highlighted--I think that is one of the first
things now is the VGLI, so that they are aware about that
benefit before they separate service.
Ms. Esty. Thank you. And I am sorry I went over. Thank you.
Mr. Bost. Thank you, Ms. Esty. Mr. Coffman, you are
recognized for five minutes.
Mr. Coffman. Thank you, Mr. Chairman. As to the Veterans
Group Life Insurance, there was several years ago, in Denver,
Colorado, there was an issue concerning a veterans group life
insurance policy and an investigative reporter with Fox,
Channel 31 did a great job in looking into this, and the
veteran son, elderly veteran who had passed away, his son
reported this, and what a VA employee did, who was in some
manner taking care of this elderly veteran, was to fill out a
change in beneficiary and put his name on it.
And they had a handwriting expert look at it, engaged by
this investigative reporter, and it was not the handwriting,
the signature, of the elderly gentleman that passed away affirm
that. No action was taken against the VA employee who said he
had a relationship prior to--a prior relationship with the
elderly gentleman, which turned out not to be true. Would you
be opposed to a provision whereby VA employees, unless they are
related to the veteran, cannot be listed as beneficiaries? Just
so that we don't have like this occurring in the future. Mr.
Reynolds?
Mr. Reynolds. I do not know if I would be--I mean, it is
something I would definitely need to take back and look at to
see the ramifications. I mean, could it be a caregiver that has
been assigned, do you know, from--
Mr. Coffman. I believe it was a caregiver.
Mr. Reynolds. Right. I mean, you know, I have got battle
buddies that maybe have put me, even though I am VA employee,
as their caregiver, or something. And, you know, you do not
want to harm that type of relationship, you know. But if there
was a fraudulent activity, absolutely we need to take
accountability on that. But it is something we should
definitely--
Mr. Coffman. You know, I would like to know. I would like
for you to come back formally with a position on that, because
I fundamentally do not think that somebody in a position of
trust like that, and somebody who is vulnerable and elderly,
who happens to have a local--a son residing locally who did not
receive--who was the beneficiary and this individual change,
you know, the--very questionable. And so I think we that we
just ought to have some ethics here--
Mr. Reynolds. Agree.
Mr. Coffman[continued]. --and those ethics ought to be that
the caregivers are not the beneficiaries unless they were a
beneficiary prior to being the caregiver. And so let's have a
policy on that, and let's put it in law.
Mr. Reynolds. Okay.
Mr. Coffman. Thank you.
Mr. Reynolds. I am happy to take that back and bring it
back for the record.
Mr. Coffman. I yield back.
Mr. Bost. Mr. Lamb, you are recognized for five minutes.
Mr. Lamb. Thank you, Mr. Chairman. Either Mr. Reynolds or
Mr. Markey, can you tell me how many veterans are currently
enrolled in the U.S. Government Life Insurance Program, the
National Service Life Insurance Program, the Veterans Special
Life Insurance Program, and the Veterans Reopen Insurance
programs? I can repeat those if it was too many at once.
Mr. Markey. I'm familiar with the programs. We have about
577,000--I would have to go back and get you the exact number,
I do not have that number in front of me. But we do have--we do
keep very well track of how many veterans we have in each one
of those programs.
Mr. Lamb. Okay. Do you send annual statements of coverage
to the aging veterans to ensure that they and their families
know that they have coverage?
Mr. Markey. We send annual statements to all our policy
holders.
Mr. Lamb. To the policy holders?
Mr. Markey. In both the VGLI program and our VA life
insurance programs.
Mr. Lamb. Okay. I think we all agree servicemembers and
veterans deserve timely and accurate decisions from the VA. So
in the case of SGLI and TSGLI, can you detail how you are
working with DoD to improve and streamline the process for
these claims?
Mr. Markey. Well, I think SGLI works very efficiently, I do
not think that is an issue. We have [MV(1]looked into the TSGLI
program. We work very closely with the branches of service and
the Department of Defense on that program. For instance, we
have quarterly meetings with the branches of service, TSGLI
adjudicators. We have meetings with the medical experts who
approve those claims. The branches of service were fully
involved in our year ten review of the TSGLI program. So we do
work in concert with the Department of Defense on the program.
Mr. Lamb. Okay. Mr. Wiseman, for injured servicemembers
coming out of the military into civilian life, can you just
talk about the importance of the TSGLI program? Specifically,
do you think the current pay-outs are reflective of traumatic
injuries, their impact on future employment, and professional
life after the service?
Mr. Wiseman. Thank you, Congressman. The TSGLI program, as
I mentioned in the testimony, should look at the loss of
individual digits. And a great example is, if you are a
military police officer and you want to take that skill with
you in the civilian world and become a police officer, let's
say you have an injury that leads to the loss of your shooting
hand's index finger, you are not going to be able to qualify
with a weapon. And so that would impact your ability to
translate those skills.
If you worked in personnel and you go to get a human
resource job, it may involve a lot of typing, you use all ten
fingers to type. And so the loss of four fingers is
significant, but the loss of one digit could also have an
impact on your ability to transition to a new job.
Mr. Lamb. Absolutely. And, Mr. Steele, can you talk a
little bit about any feedback you have gotten from you
membership regarding the affordability of the VGLI policies,
especially for aging veterans as they get older?
Mr. Steele. Well, as you know, the premiums do increase
dramatically over time. So what I have been informed by my
colleagues at the insurance center is that often veterans will
decrease their amount of coverage so that they can lower their
premiums.
Now part of this is a function of life insurance. When you
are younger and you still have a family, a mortgage, debts, you
may want a $400,000, $700,000 worth of life insurance because
you have got a whole life ahead of yourself. If you die sooner
rather than later, you have got to cover that. The older you
get, the more of the debts that you have paid off, the less
life insurance you may necessarily need.
So it may make sense for veterans to decrease their amount
of coverage and decrease their premiums. And it may be
competitive with the private insurance, but I think some of it
is just a function of the fact that the program has to be self-
sustaining financially, so that is how the math works.
Mr. Lamb. Do you believe the current rate based on age is a
fair assessment? And are there any suggestions you have for
modernizing this aspect of the program?
Mr. Steele. Well, Congress would have to consider changing
the construct because if you are going to decrease the
premiums, the money has got to come from somewhere. And if it
is going to be self-sustaining, then it is coming from other
veterans. If you are going to decrease the premiums, it would
have to come from Congress.[KW2]
Mr. Lamb. Thank you.
Mr. Steele. If I understand correctly.[KW3]
Mr. Lamb. Yes. No, absolutely. Thank you. And, Mr.
Chairman, I yield the remainder ten seconds.
Mr. Bost. Thank you. Mr. Hunter, you are recognized.
Mr. Hunter. Thank you, Mr. Chairman. And I thank you,
Ranking Member Esty, for letting me be here. I am not on this
Committee, but I am on the Armed Services Committee, and I
chair the Coast Guard Subcommittee on Transportation. So I am a
member of all of your groups, this is very nice. I have never
had anybody sitting down there where I am a member of--I am a
veteran, so I burden the VA, and I am in the American Legion,
and the Veterans of Foreign Wars.
So here is my question, I guess, to start. You sign up for
SGLI when you are on active duty, but it is a VA benefit.
Explain that to me. Because I am trying to do--the reason I am
here right now is trying to do something on the Armed Services
Committee having to do with SGLI, and this Committee has
purview over that. So explain that, please, really quickly.
Mr. Steele. This is easy. All VA life insurance programs,
even SGLI, are covered under Title 38. So this jurisdiction--
this Subcommittee, this Committee, has jurisdiction over them
even though it is covering active duty servicemembers.
Mr. Hunter. Okay. So then here is my specific question. And
maybe that is the problem, because SGLIs were active duty
servicemembers, right? Not for veterans in any way unless you
transfer it to VGLI, or whatever the different terms are, which
I do not know because I am not on this Committee.
So if you go to Title 38, Part 2, Chapter 19, Subchapter 3
of the code that talks about SGLI, which I have right in front
of me, Paragraph 1 says this, ``If a member who is married and
who is eligible for insurance under this section makes an
election under the subsection,'' blah, blah, blah, ``not to be
insured, the secretary concerned shall notify the member's
spouse in writing of that election.''
So, Marine Corps Lieutenant Duncan Hunter, I opt out of
SGLI, I do not want it. I am not going to die, I am fine. By
law, the secretary has to notify my spouse. Okay? Let me read
down further. That is what you would think by reading that.
Here is the problem, Number 4, Paragraph 4, that was one, it
says the same thing in 2 and 3. If you change it, if you lower
SGLI, your spouse gets notified as well.
The last section, Section 4, ``A notification required by
this subsection is satisfied by a good faith effort to provide
the required information to the spouse at the last address,''
blah, blah, blah, ``but failure to provide a notification at
all required under this subsection in a timely manner does not
affect the validity of anything.'' Okay? So that is in there,
too.
So it says you must do it, the secretary must notify the
spouse. And then it says at the very bottom, just kidding. You
do not have to do any of that stuff we just said. That is a
problem. A lady named Theresa Jones, her husband died in San
Diego, she is in my district--she is not actually, but she is
there, no one else would help her on this because Prudential
said no, and the VA said no, and the Navy said no until we
shamed them and embarrassed them into doing the right thing.
And it was pure politics, because according to law they did not
have to pay her anything.
And he died while landing his helicopter on a moving
amphib. Right? So he died in the act of training on active
duty. They told her she is not going to get paid anything
because he opted out of his SGLI and never told her. That is
the crux of this. He opted out of his SGLI, she never knew,
they said, ``No, you get zero dollars.'' To her. Okay?
Her name is Theresa Jones in San Diego. She got paid but
all because we put it in the media and applied massive pressure
to Prudential, frankly. So what say you? What is the fix of
this? And why--this has got to be a VA fix, that part of the
law needs to change, right? The spouse should be notified,
period. Can you give me your thoughts?
Mr. Steele. Well, I am not familiar with that particular
circumstance, but I was just made aware of a new section in the
fiscal year 2019 NDAA that if a servicemember had elected not
to get SGLI or had taken a reduced amount, that if they were
mobilized to a combat zone they would automatically get re-
entered into SGLI at the maximum value, and then returned after
combat.
Mr. Hunter. That is good.
Mr. Steele. I think that is a good--
Mr. Hunter. But you still--
Mr. Steele. I think that is a good idea.
Mr. Hunter. But if you die in training?
Mr. Steele. So this--that is a very--
Mr. Hunter. So that does not help that, right? And I found
out--
Mr. Steele. It does not.
Mr. Hunter [continued]. --so this, by the way, this fix
passed voice vote through the Defense bill last year, and the
Senate pulled it out and referred it to the Judiciary Committee
in the Senate, for whatever reason. VA, you got anything here?
It is your fund, which I did not--I mean, we are active duty
guys, for some reason, but it is yours. So go ahead.
Mr. Reynolds. Correct. And insurance, SGLI, is just one of
the benefit that our men and women in uniform--
Mr. Hunter. So let's talk just about SGLI. For this one
moment, for this one case.
Mr. Reynolds. Okay.
Mr. Hunter. What do you think about having to notify the
spouse if a servicemember opts out of their life insurance?
Mr. Reynolds. So, for my understanding--and, Vince, I will
ask you if you know any other details--but I think--
Mr. Hunter. Just answer me that--I only got four seconds.
Do you think that the spouse of an active duty servicemember
should be notified if they opt out of their life insurance?
Mr. Reynolds. Yes.
Mr. Hunter. Thank you. I yield back.
Mr. Bost. Thank you. And I am going to go ahead, though I
do not have more questions, I know the Ranking Member has. We
are going to go one more round if need be. So, yep, you are now
recognized.
Ms. Esty. Thank you, Mr. Chairman. And I want to actually
follow up with my colleague from Transportation and
Infrastructure, Mr. Hunter, about couldn't we change that?
Maybe that's going to take an act of Congress to do that, to
say unless you get actual notice? Like the spouse has actually
received a notice. It is in place until there is an actual
notice achieved. And that those policies have to be honored
unless you can demonstrate that notice was actually received by
the spouse.
And I think that might be a way to change it. And then it
will be an incentive of everybody concerned to make sure that
notice is actually received. And I think it is very important
to say, like, we are just not actually going to let you opt out
when you are in active duty because that is irresponsible and
unfair to your family who will bear the burden if that happens.
So I think we should continue to work on this and find some
legislative fix. Fix is clearly that's an unacceptable
situation, and we should fix that. So if you have got thoughts
on that.
The two issues I had on my plate. One was this basic issue
about plain language, although it is related to my colleague,
Mr. Hunter's, issue. People should not have to go to law school
or be insurance executives to understand these notices, right?
We are working on this through the CHAPS program. So when I
know we are looking to have another convening of this
Committee, of the Subcommittee, later this year in June, could
you please bring copies of the notices on these, what you
actually send out? And maybe, Mr. Wiseman, you talked about, as
a VSO, you are looking at the two different--the rating--
Mr. Wiseman. Correct.
Ms. Esty [continued]. --level as well as the premium
notice. Let's bring them together and actually look at them, if
you could send them ahead of time. And maybe if anyone would be
so good as to think about what a combined notice might look
like, or how do you flag that in a letter, or you set it out in
a box in red, or something that it really grabs people's
attention. We are committed, everyone's committed to the goal,
but let's make it effective. Just as the notice is not
effective in that case. It really needs to be effective.
The other issue I wanted to raise was one we have heard
about, and that has to do with the TSGLI program when there are
these large pay-outs, particular if you say the full $100,000
pay-out. Frankly, there's some not good decision making or
opportunities to be preyed upon at that time.
Has there been any thought about any sort of financial
counseling, or advice for what often may be very young men or
women who have gone through this just horrific transformative,
catastrophic injury? And $100,000 may sound like a lot of
money, and they just may need some assistance. Or have you
thought about that, because we have heard some really heart-
wrenching stories and then, of course, remorse within a matter
of months of like, wow, that car that I can't drive looks
awfully pretty sitting there in the driveway, but I am never
going to be able to drive it, and that was maybe not a good
idea? So if folks have thoughts on that.
Mr. Wiseman. Yes, you are absolutely right. I think you hit
the nail on the head. Sometimes it is the buyer's remorse after
they spend the money on something. The military does provide
financial counseling to servicemembers, generally speaking. And
so that is something that is currently done. And when you get a
pay-out under VA programs for family members and whatnot, there
is an option that does exist for them to be able to login and
get some advice. In fact, part of their login name is their
claim number.
And so the VFW would be more than happy to support any type
of enhanced financial counseling that we can provide because
you are absolutely right, that is a monumental moment when you
are sitting there going, not only has your loved one passed,
now you are managing the family, and by the way, here's
$400,000. And so that is significant. We would be happy to work
with your office on better options.
Mr. Markey. Excuse me. As part of the information, we do
provide free financial counseling to beneficiaries of all the
SGLI programs, SGLI, TSGLI payments, VGLI payments. You can get
free counseling either through a limited counseling from
telephone interviews, or you can go and opt for a full, free
counseling service.
Ms. Esty. But tying both of these issues together, do
people receive notice say at a payout of 50,000 or higher? Is
there automatic notice with here is the information, you are
entitled to this, we urge you to avail yourself of this or
other financial counseling? It would seem that it may be
available, but it is quite different at the time of payout or
notice you're going to be getting one to say, reminder, here is
what you are entitled to, we would urge you to consider
accessing this.
So, again, I would ask you to--for our next hearing, if you
would consider what that might look like because, again, having
the program available but at a time when it is meaningful to
people, and that's a lot of the challenges we have. They are
wonderful programs, and wonderful VSOs, but people don't know
about it at the time they need to. Thank you. And thank you for
allowing me to do another round.
Mr. Bost. Mr. Lamb, do you have other questions?
Mr. Lamb. No, sir. Thank you.
Mr. Bost. All right, then. I want to thank all the
witnesses for being here again today. I said earlier that the
complete written statements of today's witnesses--first off,
one thing I forgot, do you need a closing statement?
Okay. As I said earlier then, the complete written
statements of today's witnesses will be entered into the
hearing record.
I also ask unanimous consent that all Members have five
legislative days to revise and extend their remarks and include
extraneous material. Hearing no objections, so ordered.
This hearing is now adjourned.
[Whereupon, at 3:27 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Prepared Statement of Robert Reynolds
Good morning Chairman Bost, Ranking Member Esty, and Members of the
Subcommittee. Thank you for the opportunity to appear before you today
to discuss the Department of Veterans Affairs (VA) Insurance Service
and the current state of our programs.
Currently, VA insurance programs provide life insurance to nearly
six million Servicemembers, Veterans, and their families for over $1.2
trillion in insurance coverage and include the following programs:
VA administers four insurance programs for World War I, World War
II and Korean era Veterans that chose to maintain their life insurance
after they left the service. The United States Government Life
Insurance (USGLI), National Service Life Insurance (NSLI), Veterans'
Reopened Insurance (VRI), and Veterans' Special Life Insurance (VSLI)
programs operate basically in the same manner. The maximum amount of
basic coverage available under any of these programs is $10,000. These
policies pay annual dividends and policyholders can purchase additional
protection by electing to use their dividends to buy paid up additional
(PUA) insurance. These programs are closed to new issues and are self-
sustaining.
Service Disabled Veterans' Insurance (S-DVI) was established on
April 25, 1951, and remains open to new issues. S-DVI is open to
Veterans separated from service, under other than dishonorable
conditions on or after April 25, 1951, who are approved for service-
connected disability ratings of zero percent or greater. Because S DVI
insures Veterans with service-connected disabilities at standard
premium rates, it requires an annual subsidy from budget
appropriations. S DVI policyholders who are eligible for waiver of
premiums can purchase up to an additional $30,000 in coverage at
standard rates, based on their current age. No waiver of premiums can
be granted on the supplemental coverage.
Veterans' Mortgage Life Insurance (VMLI) is mortgage protection
insurance that is available to Veterans who have received a Specially-
Adapted housing grant to help build, remodel or purchase a home, who
have the title to the home and are obligated under a mortgage on the
home, and who are younger than 70 years old. VMLI provides up to
$200,000 of decreasing term insurance which reduces as the mortgage
balance declines. It is payable only to the mortgage holder (i.e., a
bank or mortgage lender), not to a beneficiary. Because VMLI insures
Veterans with service-connected disabilities at standard premium rates,
it requires an annual subsidy from budget appropriations.
Servicemembers' Group Life Insurance (SGLI) provides automatic
coverage of $400,000 to active duty Servicemembers, reservists and
guard members, including the Coast Guard and uniformed members of the
Public Health Service and the National Oceanic and Atmospheric
Administration. Servicemembers can elect to reduce or decline the
coverage. The SGLI participation rate is 99 percent for active duty
Servicemembers and 92 percent for Reservists. SGLI coverage expires 120
days after separation, unless an extension of up to two years from
separation is granted for a total disability incurred in service.
Family SGLI provides term life insurance to the spouses and
dependent children of Servicemembers insured under SGLI. Family SGLI
provides a maximum of $100,000 of coverage for spouses and $10,000 for
dependent children. At the end of Policy Year 2017, 73 percent of
eligible spouses had Family SGLI coverage. All dependent children are
automatically covered and coverage cannot be declined.
SGLI Traumatic Injury Protection, or TSGLI, provides up to $100,000
of automatic traumatic injury coverage to all Servicemembers who
participate in the SGLI program. TSGLI provides a financial benefit to
traumatically-injured Servicemembers to assist them with expenses
incurred during long periods of recovery and rehabilitation. Since the
program began in 2005, $977 million has been paid to 17,700 injured
Servicemembers.
Veterans' Group Life Insurance (VGLI) allows separating
Servicemembers to continue their life insurance coverage after they
separate from service. VGLI is renewable for life with the ability to
convert to a commercial policy at any time. Separating members have 1
year and 120 days following separation to apply for VGLI, but if they
apply within the first 240 days, they do not have to answer any health
questions. If they apply between 241 days and 1 year and 120 days from
separation, they must meet health requirements to be approved.
Overall, VA's life insurance programs remain in sound financial
condition and are self-sustaining, with the exception of the S-DVI and
VMLI programs that provide coverage exclusively to disabled Veterans.
In Fiscal Year (FY) 2017, VA returned almost $76 million in dividends
to policyholders, paid over $2 billion in death claim and endowment
benefits, and disbursed over $93 million in policy loans and cash
surrenders. In addition, over $30 million was paid in traumatic injury
protection benefits. In total, over 95 percent of benefits disbursed
and administrative expenses spent were reimbursed by premium
collections or investment earnings.
Overview
Our mission is to provide high-value life insurance benefits and
services to our Nation's Veterans, Servicemembers, and their families.
For over 100 years, VA life insurance programs have been providing
Veterans, Servicemembers, and their families with the peace of mind and
the financial security government life insurance coverage affords.
As mentioned previously, there are 10 different programs in VA's
life insurance portfolio. Six of the programs are administered directly
by VA, while four programs are administered by Prudential Insurance
Company of America, with VA providing oversight. VA directly
administers six life insurance programs that cover approximately 558
thousand lives for over $7.8 billion in insurance coverage. Prudential
Life Insurance Company administers four different programs of
insurance, which provide coverage to over 2.2 million Servicemembers,
over 431 thousand Veterans, and nearly 2.8 million family members for
over $1.2 trillion in coverage.
Organizational Structure
VA Insurance Service operations, central office functions, and
information technology and programming support staff are co-located
with the Philadelphia Veterans Benefits Regional Office at the
Philadelphia Insurance Center. This integration of policy and operation
functions for VA's administered insurance programs provides for short
lines of communication from frontline employees through operations and
program managers. This in turn results in focused effort, teamwork, and
consistent service for our customers.
The Servicemembers' Group Life Insurance (SGLI) family of programs,
including Veterans' Group Life Insurance, is administered by Prudential
Insurance Company of America's Office of Servicemembers' Group Life
Insurance, in Roseland, New Jersey. VA provides oversight to these
programs.
Financial Status
All of VA's life insurance programs are independently audited each
year. The VA Office of the Inspector General has given VA's
administered programs an unqualified audit opinion for the last 26
years. For the last 6 years, the accounting firm of CliftonLarsonAllen
LLP has conducted the audit of Insurance Service's Chief Financial
Officer Statements through a contract with the VA Office of the
Inspector General. Prudential Insurance Company of America has
contracted annually with PricewaterhouseCoopers LLP for an audit of the
SGLI program since 1998. The program obtained favorable audits for
Policy Years 1998 through 2017.
Performance
Insurance Service's most important performance measure is customer
satisfaction. In FY 2017, 94.5 percent of our customers were satisfied
or highly satisfied with the service they received from VA. We obtain
these scores by sending out monthly surveys that encompass various
aspects of our customer interactions and services. In FY 17 we
delivered 4,270 surveys and received approximately 1,935 responses
representing a 45 percent return rate.
We periodically validate our survey results by participating in an
American Customer Satisfaction Index (ACSI) study to independently
review and measure customer satisfaction. ACSI is an independent survey
that benchmarks customer satisfaction for more than 300 companies and a
variety of services. In 2015, VA's life insurance programs received a
strong customer satisfaction score of 81 on a scale of 100 from the
ACSI. The aggregate customer service index score of 81 was higher than
the life insurance industry benchmark score of 77.
In addition to VA's customer satisfaction score, our other internal
measures such as zero percent toll-free blockage, 16 seconds average
speed of answer, 1.4 percent abandoned call rate, and benefit
disbursements paid in 4.4 workdays compare favorably with the private
insurance industry. Further, the VA Insurance Service Internal Controls
staff ensures the integrity of all financial disbursements in VA's
administered programs, with over 99.95 percent of over $1.2 billion in
payments made properly.
Enhancements
Traumatic Injury Protection Year-Ten Review
SGLI Traumatic Injury Protection (TSGLI) provides up to $100,000 of
automatic traumatic injury coverage to all Servicemembers who
participate in the SGLI program. TSGLI provides a financial benefit to
traumatically-injured Servicemembers to assist them with expenses
incurred during long periods of recovery and rehabilitation. Since the
program began in 2005, nearly $977 million has been paid to
approximately 17,700 injured Servicemembers.
In late 2014, VA initiated a comprehensive review of the program to
assess proposals for program improvements, clarify complex eligibility
standards, identify opportunities for administrative and operational
enhancements, and determine if the program is meeting its congressional
intent. We reviewed approximately 1,850 adjudicated claims, and
consulted with medical experts at 18 different military, VA, and
private medical facilities. As a result of this review, we are pursuing
revisions for some of the loss standards in the program. Specifically,
we are preparing enhancements to the TSGLI education materials and
drafting a proposed rule to amend the TSGLI regulations, among other
efforts to enhance the program.
SGLI Online Enrollment System (SOES)
VA was pleased last year to introduce SOES, which allows active
duty and eligible reserve and guard members to manage their SGLI
coverage and Family SGLI coverage online. SOES replaces the prior
paper-based process and brings the SGLI program in line with current
insurance industry best practices. It will allow our troops to have 24/
7 access to make changes to their life insurance coverage amount and
beneficiaries.
VA collaborated with the Department of Defense, the Defense Finance
and Accounting Service, the Defense Manpower Data Center, and the
uniformed services to develop SOES. The system is being rolled out to
the branches of service. Last year, Navy was the first to implement
SOES in April, followed by Air Force in August and Army in October.
Later this year, SOES will be rolled out to the Marine Corps, Coast
Guard, and the National Oceanic and Atmospheric Administration. As of
March 12, 2018, more than 796,000 service members have confirmed and
certified coverage in SOES.
Meeting Veterans Needs
VA's Insurance Service remains committed to providing our Nation's
heroes with life insurance options that are equal or superior to those
offered by private insurance companies. We continually strive to meet
our customers' needs and provide services at a comparable cost to
industry standards. To this end, in FY 2017, we conducted over 200
interviews with Veterans and Veterans Service Officers across the
country to gain a deeper understanding of Veterans' life insurance
needs. Survey findings show that statutory eligibility criteria and
application deadlines associated with VA's disabled Veterans' life
insurance programs are preventing some disabled Veterans from obtaining
life insurance coverage through VA. Our research also shows that some
disabled Veterans wish to purchase more life insurance from VA than
they are currently eligible for under existing VA programs.
Closing Remarks
Mr. Chairman, thank you for your continued support of our programs
and for this opportunity to address the Subcommittee today. This
concludes my statement. I would be pleased to answer any questions you
or other Members of the Subcommittee may have.
Prepared Statement of Jeff Steele
Chairman Bost, Ranking Member Esty and distinguished members of the
Subcommittee; on behalf of National Commander Denise H. Rohan and the 2
million members of The American Legion, we thank you for the
opportunity to testify regarding the Department of Veterans Affairs
(VA) Life Insurance Programs. The American Legion is the largest
veterans service organization, representing nearly one-hundred years of
resolutions-based and grassroots advocacy.
The American Legion has directly assisted veterans and their
dependents for the past 40 years by providing a Chief of Insurance
Activities at the VA Insurance Center in Philadelphia. The American
Legion's work in assisting these individuals allows us to bring over
four decades of experience before this Subcommittee.
A congressional oversight hearing on VA's life insurance programs
was last conducted in 2003. We are thankful for Chairman Bost and
Ranking Member Esty's leadership in addressing this matter. Current
programs are outdated and impose an unnecessary burden on veteran
policyholders. The table of mortality has not been updated in over 75
years, benefits are still measured in 1951 dollars, and service-
disabled veterans are unable to access adequate supplemental insurance
due to current statutory limitations. Further, servicemembers who
submit a claim via the Servicemembers' Group Life Insurance Traumatic
Injury Protection (TSGLI) often experience denials because their claim
is processed utilizing an incorrect burden of proof.
Background
The VA currently administers six life insurance programs, four
closed and two open to new issues. The four are the United States
Government Life Insurance (USGLI) program; the National Service Life
Insurance (NSLI) program; the Veterans Special Life Insurance (VSLI)
program; and the Veterans Reopened Insurance (VRI) program, which
covers veterans who served during World Wars I, II, and the Korean
Conflict eras. The two open ones are the Service-Disabled Veterans
Insurance (S-DVI) program and the Veterans Mortgage Life Insurance
(VMLI) program, which covers severely disabled veterans.
The closed programs are mature with steadily declining amounts of
policies due to natural demographics and aging population. As of
November 2017, there are approximately 360,000 active policies, a
decline from six million during the 1970's and early 1980's. \1\
---------------------------------------------------------------------------
\1\ https://www.va.gov/oig/pubs/VAOIG-17-01219-24.pdf, pg. 84.
---------------------------------------------------------------------------
In addition to the life insurance programs directly operated by the
VA, the department also has general supervisory authority over two
other major government life insurance programs. These are the
Servicemembers Group Life Insurance (SGLI) and the Veterans Group Life
Insurance (VGLI) programs, which provides coverage to members of the
uniformed armed services, reservists, and post-Vietnam veterans and
their families. All SGLI insureds are automatically covered under the
Servicemembers' Group Life Insurance Traumatic Injury Protection
(TSGLI) program, which provides for insurance payments to veterans who
suffer a serious traumatic injury in service. VA has entered into a
group policy with the Prudential Insurance Company of America to
administer these programs.
As a matter of historic note, 2019 marks the 100th anniversary of
USGLI, just as it does for the American Legion. The program was
established to meet the needs of World War I veterans, but remained
open to servicemembers and veterans with service before October 8,
1940. More than four million life insurance policies had been issued
during WWI. \2\ The program was closed to new issues on April 25, 1951.
---------------------------------------------------------------------------
\2\ https://www.investopedia.com/terms/u/united-states-government-
life-insurance-usgli.asp
---------------------------------------------------------------------------
As of 2017, there were just 124 active policies remaining, with the
policy holder's average age of 95. \3\ Since January 1, 1983, all USGLI
policies have been paid-up, with no further premiums becoming due.
Annual dividends are still paid on these policies. \4\
---------------------------------------------------------------------------
\3\ https://www.va.gov/oig/pubs/VAOIG-17-01219-24.pdf, pg. 84.
\4\ https://www.investopedia.com/terms/u/united-states-government-
life-insurance-usgli.asp
---------------------------------------------------------------------------
The Government became a self-insurer because private insurance
companies were unwilling to assume the unpredictable risks associated
with war. The Government became the largest life insurer in the United
States at the time with the coverage provided by this program. \5\
---------------------------------------------------------------------------
\5\ Paul H. Douglas, ``The War Risk Insurance Act,'' Journal of
Political Economy 26, no. 5 (May, 1918): 461-483. http://
www.disabilitymuseum.org/dhm/lib/detail.html?id=3008&&page=all
---------------------------------------------------------------------------
SGLI and VGLI
Servicemembers' Group Life Insurance (SGLI) is low-cost term
insurance for members of the uniformed services. SGLI coverage is
available in $50,000 increments up to the maximum amount of $400,000.
Servicemembers are automatically insured for the maximum coverage
amount of $400,000 unless they decline coverage or elect a reduced
amount.
The SGLI program, through a group policy issued by the Prudential
Insurance Company of America, provides low-cost term insurance
protection to servicemembers. It is supervised by the VA Regional
Office and Insurance Center located in Philadelphia, PA, but
administered by the Office of Servicemembers' Group Life Insurance
(OSGLI), part of Prudential's Insurance Division and is located in
Roseland, New Jersey.
SGLI members have two options available to them upon release from
service. They can convert their full-time SGLI coverage to renewable
term insurance under the Veterans' Group Life Insurance (VGLI) program
or to a permanent plan of insurance with one of the participating
commercial insurance companies.
These insurance issues are solely group term insurance without
dividends, disability benefits, or diverse types of permanent plans
with equity values such as the individual policy contracts contained in
VA's directly administered programs. As of February 2018, SGLI provided
about 5 million active duty and reserve personnel, spouses and
dependents with life insurance coverage, while VGLI covered roughly
431,000 veterans. \6\ The OSGLI center processes several thousand death
claims annually with minimal other transactions due to the very limited
nature of the coverage as group term insurance only. Currently, claims
arising from military operations in the Middle East and Central Asia
are processed within a week from the time the last required document is
received at OSGLI.
---------------------------------------------------------------------------
\6\ https://www.va.gov/oig/pubs/VAOIG-17-01219-24.pdf, pg. 84.
---------------------------------------------------------------------------
VGLI began in 1974, with a retroactive open provision back to 1970.
However, from 1965 to 1969, veterans leaving service had only 120 days
to convert their SGLI to a private plan of insurance with a
participating commercial company or coverage was lost. Until 1992, VGLI
was initially a five year non-renewable term policy, at the end of
which a veteran had to convert to a private plan of insurance with a
participating commercial company or coverage expired.
Today, in order to convert from a SGLI to a VGLI policy, a veteran
must apply within one year and 120 days from discharge from active
military service. A servicemember who submits an application within 120
days of their discharge isn't required to submit evidence of good
health. No doctor's examination is required as long as the application
for conversion is made within this timeframe. Should a servicemember
wish to apply for the conversion after the 120 day period, however,
they will be required to submit evidence of good health via a doctor's
examination.
VGLI has several advantages over a civilian life insurance policy
because if the veteran applies within 120 days of leaving active duty
they will not be required to take a physical or make a statement of
health. In addition, if they apply to VGLI directly after leaving the
service and within the 120 day window, VGLI premium rates are only
based on age, and not health, gender, smoker or non-smoker, or other
factors. If the veteran has health factors that may preclude them from
life insurance eligibility, then they should strongly consider VGLI.
VGLI also has no membership or enrollment fees.
There are disadvantages to converting SGLI to VGLI, however. The
maximum amount of life insurance coverage a veteran may convert to VGLI
is limited to the maximum amount of coverage they had under SGLI. While
guaranteed acceptance is convenient, it comes at a cost. VGLI rates are
affordable for younger veterans, but maintaining this coverage becomes
quite expensive in later years. This is because the only factor
determining VGLI premiums is age. The result is that a $400,000 policy
costing only $32 monthly for someone age 29 or younger increases
significantly every five years. By age 75, that premium reaches a
staggering $1,840 per month. Additionally, VGLI only offers term life
insurance. This means the policy has a death benefit only, without
building any cash value as an investment. \7\
---------------------------------------------------------------------------
\7\ https://www.nerdwallet.com/blog/insurance/best-life-insurance-
policy-veterans/
---------------------------------------------------------------------------
Overall, The American Legion sees the SGLI/VGLI programs as being
generally adequate, given its present funding mandates, for providing
an affordable, at ages below 65, crucial life insurance benefit for
active duty personnel, their families, and the veteran community.
TSGLI
Servicemembers' Group Life Insurance Traumatic Injury Protection
(TSGLI) provides automatic traumatic injury coverage to all
servicemembers covered under the SGLI program. It provides short-term
financial assistance to severely injured servicemembers and veterans to
assist them in their recovery from traumatic injuries. TSGLI is not
only for combat injuries, but provides insurance coverage for injuries
incurred on or off duty. The program helps injured servicemembers and
their families alleviate financial burdens with a payment ranging from
$25,000 to $100,000.
TSGLI became effective December 1, 2005 and currently provides
traumatic injury coverage as per a published schedule of losses caused
by such physical injuries. On November 26, 2008, VA issued new
regulations because of extensive reviews to expand the TSGLI schedule
of losses and the time involved. Additions to the TSGLI schedule
included expansion of definitions for total and permanent loss of
sight, hearing, speech, and various types of paralysis. Other additions
included certain types of amputation, limb salvage, facial
reconstruction, burns, injuries resulting from authorized use of
controlled substances and traumatic brain injury effects.
TSGLI claims are adjudicated and decided by the military service
department involved, and not by VA. The VA insurance website contains
the application forms, schedule of losses and service department
addresses for claims submittals and points of contact. The appeals
process for TSGLI claim denials is also outside the purview of VA.
TSGLI procedures allow up to three notices of disagreement on claim
denials for administrative reviews, or the pursuit of the claim in
Federal district court.
A 2009 U.S. Government Accountability Office (GAO) study found that
the VA approved fewer than 63% of claims filed for a traumatic brain
injury. The GAO further found that the program lacked consistency
across branches and lacked assurances that decisions about benefit
payments were accurate. \8\
---------------------------------------------------------------------------
\8\ GAO-09-108: Published: Jan 29, 2009. https://www.gao.gov/
products/GAO-09-108
---------------------------------------------------------------------------
GAO made a recommendation for action. The first was that ``to
improve management of the TSGLI and ensure that all injured
servicemembers receive accurate, consistent, and timely treatment, the
Secretary of VA should work with the Secretary of Defense and the
branches of service to implement a systematic quality assurance review
process to help ensure that TSGLI benefit decisions are accurate and
consistent within and across the services.''
The GAO report webpage currently shows the recommendation closed
and implemented commenting that:
The Department of Veterans Affairs (VA) has taken a two-pronged
approach to implementing this recommendation. First, VA's contractor,
the Office of Servicemembers' Group Life Insurance, created a claims
analyst position. This analyst works with VA and the branches of
service to review all incoming claims to validate decisions and develop
reports to assess consistency of claims decisions across the branches
of service. These reports identify opportunities for training needs and
changes to the claims process. As of March 2010, the analysis of claims
has resulted in two training sessions for the branches of service on a
range of topics, including the consistency and quality of claims
decisions. \9\
---------------------------------------------------------------------------
\9\ https://www.gao.gov/products/GAO-09-108
---------------------------------------------------------------------------
The American Legion, in preparing for this testimony, found that
this claims analyst position is no longer active. This raises the
question of how VA is currently assessing consistency and quality of
claims decisions.
In addition, The American Legion, in speaking with attorneys
representing TSGLI claimants, has been told that the military services
are not consistently applying the proper burden of proof. An example
can be found in Yearwood v. United States of America (2015). In this
case, the Court found that the military service appeals body ``required
the plaintiff to prove his assertion by a preponderance of the
evidence, rather than merely by substantial evidence, and in so doing,
erroneously reversed the burden of proof by failing to give the
plaintiff the benefit of the doubt as required by Sec. 5107(b).'' \10\
---------------------------------------------------------------------------
\10\ https://law.justia.com/cases/federal/district-courts/alabama/
alndce/5:2014cv01599/152631/19/. Pages 22-23.
---------------------------------------------------------------------------
S-DVI
The Service-Disabled Veterans Insurance (S-DVI) program started in
1951 and as of February 2018 presently has some 275,000 active polices.
The current policy provides for a maximum coverage of $10,000 with a
premium waiver provision for veterans under 65 unable to attain gainful
employment. To be eligible for coverage, a veteran must apply within
two years of having been rated by VA for a new service-connected
disability, must be in good health except for those disabilities that
have been rated service-connected, and must have been released from
active duty on or after April 25, 1951.
There is a related Supplemental S-DVI program allowing veterans an
additional $30,000 in coverage only if the basic S-DVI is in force and
the veteran is under the age of 65. The veteran must apply within one
year of the premium waiver being granted on their basic S-DVI policy.
Under the current policy, there is no premium waiver provision for
Supplemental S-DVI. The VA Insurance Center advises veterans who have
been granted a disability premium waiver on the basic S-DVI and who are
under age 65 about the Supplemental S-DVI option. This notification is
included in the premium waiver grant notification letter for basic S-
DVI, but this is a one-time mailing.
Fundamentally, S-DVI cannot be compared to any available private
insurance policy as most of the veteran policyholders have serious
disabilities which render them uninsurable in the private sector. These
programs, unlike most of the closed mature insurance program mentioned
earlier, are subsidized by Federal funds appropriated by Congress.
These subsidies are an effort by Congress to ensure that the most
vulnerable veterans do not fall through the cracks.
Recommendations for S-DVI
Current rates for both S-DVI and supplemental S-DVI provide the
same per one thousand dollars of coverage per month. However, plans and
premium rates are based on an outdated 1941 Commissioners Standard
Ordinary (CSO) Table of Mortality. The use of the 1941 CSO Table of
Mortality in turn provides expensive premiums and causes an undue
burden on veteran policy holders that can be remedied by congressional
legislation.
Enacting legislation that updates a 77 year old table of mortality
would provide immediate relief to an unnecessary burden on veterans.
Updating the established mortality table to a more current table could
effectively reduce premiums between 30% and 40%. It is important to
note that some veteran policyholders utilize their VA disability
compensation to meet the obligations of their premiums. These veterans
are the most vulnerable and therefore depend on their VA disability
compensation to pay for much more than just their immediate living
necessities.
The current $10,000 maximum coverage limit for S-DVI dates from
1951 when the purchasing power equivalent of $10,000 today is some
$95,000 according to the Bureau of Labor Statistics, equivalent to an
858% increase in the Consumer Price Index (CPI). This practice is
obsolete and constitutes a gross inequity to the service-disabled
veteran community. The level of coverage should be increased to an
appropriate amount consonant with today's economic realities.
Further, many veterans applying for S-DVI or supplemental S-DVI are
denied coverage because they fall outside the present statutory time
limit for applying. A veteran is eligible to apply for S-DVI within two
years from the date of their last original service-connected rating.
Yet, any increase in rating for already service-connected disabilities
is not defined as falling within the purview of being original claims.
The American Legion encourages this Subcommittee and the 115th
Congress to consider an extension of the S-DVI eligibility period and
the inclusion of rating increases as meeting eligibility criteria.
Election for enrollment for coverage under Supplemental S-DVI must be
made within a year of being granted a premium waiver. However,
notifications are made via a one-time letter included in the mailing
stating that the policyholder has been granted a premium waiver on
their original S-DVI. It has been The American Legion's experience that
veterans, not infrequently, have no recollection of receiving this
notification. This is due in part to either their medical conditions,
their inability to understand the notification, or misplacing the
letter at the time of receipt, therefore missing the opportunity to
enroll. The American Legion recommends the VA send veterans eligible
for Supplemental S-DVI a reminder two to three months before the
expiration of their one-year enrollment period. \11\
---------------------------------------------------------------------------
\11\ The American Legion Resolution No. 249 (Sept. 2016): Amend the
Eligibility Requirements and Extend the Eligibility Time Period for
Service-Disabled Veterans Insurance
---------------------------------------------------------------------------
For many severely disabled veterans, S-DVI is the only life
insurance coverage available to them. Though other government-sponsored
programs may have existed when the servicemember was released from
service, many veterans in their younger years may not have the
foresight to take action on long-term financial matters, such as life
insurance. Others simply cannot afford to meet the costs of a policy at
the time of separation. Legislation has been introduced in the current
Congress, H.R. 4146: the Disabled Veterans' Life Insurance Act of 2017,
that would remedy many of the issues that currently exist with S-DVI
program, such as updating the antiquated mortality and annuity tables,
increasing the maximum benefit cap, and extending the enrollment
eligibility to 10 years. \12\
---------------------------------------------------------------------------
\12\ https://pearce.house.gov/press-release/pearce-introduces-
veterans%E2%80%99-life-insurance-bill
---------------------------------------------------------------------------
VMLI
The Veterans Mortgage Life Insurance (VMLI) program insures about
2,601 veterans with up to a maximum of $200,000 in mortgage coverage.
The National Association of Insurance Commissioners approved the use of
the 2001 Commissioners Standard Mortality Table as the new mortality
standard for life insurance. As such, in October 2006 the VA Secretary
implemented the use of the 2001 table rather than the previous 1958
table. By doing so, VA was able to reduce premiums for the program an
average of 37%. However, many veterans are still unable to access the
VLMI because of stringent and outdated criteria. Currently, only those
individuals who qualify for special adapted housing grants and who are
under the age of 70 can participate in VMLI. It is The American
Legion's experience that many of the individuals with service-connected
conditions have injuries of greater severity than those included in the
current criteria. The American Legion has adopted a resolution urging
Congress to extend this program to include veterans who are rated by VA
as permanently and totally disabled rather than only those who qualify
for VA special adapted housing grants. \13\
---------------------------------------------------------------------------
\13\ The American Legion Resolution No. 120 (Sept. 2016): Extend
Department of Veterans Affairs Mortgage Protection Life Insurance to
Service Connected Veterans Who are Permanently and Totally Disabled
---------------------------------------------------------------------------
Conclusion
As always, The American Legion thanks this Subcommittee for the
opportunity to elucidate the position of the 2 million veteran members
of this organization. For additional information regarding this
testimony, please contact Assistant Director of the Legislative
Division, Jeff Steele, at (202) 861-2700 or [email protected].
Prepared Statement of Ken Wiseman
Chairman Bost, Ranking Member Etsy and members of the Subcommittee,
on behalf of the Veterans of Foreign Wars of the United States (VFW)
and its Auxiliary, thank you for the opportunity to provide our remarks
on the Department of Veterans Affairs (VA) insurance programs.
VA is responsible for several insurance programs that total more
than $1.2 trillion in value. These programs provide a sense of
financial security at a time when a family is suffering from the loss
of their loved one. The VFW has insurance programs for our members and
we hear reasons why veterans do not choose VA-managed programs when
they purchase coverage from VFW-sponsored programs. The VFW was also
involved in the lawsuit against the Prudential Insurance Company of
America to ensure the program delivers the intended product to our
Nation's bravest men and women. We seek improvement and oversight of
these programs so their integrity and value are protected. So, while
these programs are an amazing opportunity for veterans who may have
difficulty in securing a policy otherwise, the VFW has recommendations
to improve them.
In general, process reform is something all insurance programs
could use. The VFW has learned of times when an estate or trust could
not receive the payout even if the deceased had established an estate
or trust. Programs that pay out at the time of death for the service
member or the veteran should be able to pay to a trust or estate,
depending on what the veteran or service member has established. Also
of concern is ensuring that payments to beneficiaries are made in a way
that the beneficiary can access as quickly as possible, thus avoiding
delays in times when the money may be badly needed.
The need to locate a person who is listed as a beneficiary can be
difficult if the contact information for the person is not up to date
and could be the reason for delayed payment, but this could be
corrected with better outreach. While efforts to inform the eligible
veterans may never result in 100 percent enrollment in a program, VA
could increase exposure to insurance programs through the transition
counseling received by service members leaving the military. This would
be a great way to ensure that contact information is as current as
possible and could also lead to more veterans using these programs.
Veterans Group Life Insurance (VGLI)
VGLI is known to serve those veterans who have left the military
and transitioned from Servicemembers' Group Life Insurance (SGLI). The
VFW sees the value of this program especially when considering the
payout options a veteran has and how they can adjust those amounts as
their needs in life change. However, there are ways this program could
be improved.
The rates for this program must be more competitive with the
private sector as VGLI premiums increase dramatically when the veteran
ages. A $200,000 plan would see premium increases of 1,875 percent over
the age range leading to Social Security eligibility (minimum age 29
and below to maximum age 65-69). There is a nearly 39 percent increase
just in the bracket of age 65-69 compared to the next lower age
bracket. This could lead to a veteran not being able to afford the
insurance amounts they need to ensure financial security in their
retirement years, and difficulty in securing life insurance from other
sources due to service-connected disabilities and other health
problems. Considering the manner in which insurance works, more
enrollees in VGLI could lead to lower monthly premiums. This is another
example of why increased outreach could be a positive thing for all VA-
managed insurance programs.
The VFW is concerned with the amount of time a veteran has to join
this program. Currently, a veteran has 1 year and 120 days from their
date of discharge to enroll in VGLI and can avoid answering health
questions if enrolled within 240 days of discharge. The VFW is
concerned that many veterans may not consider the implications of
losing SGLI when leaving service and their focus on transition may not
include getting VGLI coverage. Additionally, the VFW has learned from
veterans who sought coverage through our insurance program that a
diagnosis of PTSD makes it difficult for veterans to get coverage from
other life insurance companies, and they may have to pay higher
premiums for smaller policies if they can get coverage. Knowing that a
veteran with a service-connected disability rating from VA will not
have that disability considered when obtaining VGLI coverage, the VFW
supports an open-ended enrollment period to allow a veteran to obtain
coverage under VGLI.
Servicemembers' Group Life Insurance (SGLI)
The program that provides life insurance to members of the military
pays out the policy to those surviving spouses and families at the time
of death of the service member. Oversight of this program is a key
concern for the VFW. In 2015, the VFW was party to a successful motion
against Prudential Insurance Company of America requiring the documents
related to a class action lawsuit to be unsealed.
The lawsuit concerned the method that Prudential used to make lump
sum payments, which was to place them in an investment account known as
an ``Alliance Account.'' For those who received payments through
Alliance Accounts, this was an alleged breach of contract and violation
of Federal law concerning the approved method of paying the lump sum
option. While the lawsuit has been settled, the VFW is concerned that
the Alliance Account option continues to be offered and promoted on
materials that beneficiaries receive. The United States Code prescribes
the manner in which payments may be made. A lump sum payment and 36
equal payments are the only two options, not an option which results in
an investment. The interest earned on this investment benefits
Prudential as a company, and the VFW objects to companies profiting off
the surviving families who have recently had a loved one make the
ultimate sacrifice for their country.
Ensuring that our military service members have access to
affordable life insurance remains a top priority for the Department of
Defense (DoD), and to the VFW. The work done by those in the military
would place them in a position where coverage from another company
would likely be unavailable or would cost an exorbitant amount that
would be unaffordable to those in uniform. Additionally, with
congressional oversight and management by the military, those who
likely have no other experience selecting insurance coverage would be
able to receive coverage without fear of being taken advantage of from
an outside source. Congress and DoD have the responsibility to ensure
our service members are provided with a life insurance option that
remains not only equitable, but is also protected from the unscrupulous
business practices commonly seen in the civilian market.
SGLI Traumatic Injury Protection Program (TSGLI)
TSGLI provides automatic traumatic injury coverage to all service
members covered under the SGLI program. The VFW urges a review of the
TSGLI payout for loss of fingers. Currently, the loss of four fingers
or the thumb is the requirement for payment. The VFW sees that the loss
of digits not only has an impact on dexterity and complexity of tasks
the person is able to perform, but also the psychological and cosmetic
impact. The VFW recommends payment be allowed under TSGLI on a ``per
digit'' basis--a higher amount for the loss of four digits total not
including the thumb--and a payout for the loss of the thumb.
Service-Disabled Veterans Insurance (S-DVI)
This program, which allows a service-connected disabled veteran to
have life insurance, is a cornerstone of the earned benefits package
provided by VA. While the health conditions caused by military service
may make it difficult or even impossible for certain veterans to secure
life insurance on the open market, this program allows for those
veterans to have an option that is affordable. However, the VFW sees
areas where this program could be improved.
Currently, veterans who receive a disability rating, even a zero
percent rating, are able to join this program. Each time new conditions
are added to the rating, they have a new opportunity to join. However,
the increase of a rating for an existing diagnosis does not trigger the
same opportunity. The VFW calls on Congress to allow those veterans who
receive an increased rating to join S-DVI.
Additional concerns include the amount of money provided by S-DVI.
Ten thousand dollars is not an amount that reflects the current cost of
a burial and could leave a family unable to pay for final arrangements.
Also, the period of time during which a veteran can join this program
--currently two years after the disability rating is granted--should be
lengthened to allow veterans to make decisions about their needs based
on life changes, not during a short period of time immediately after
receiving a disability rating. Because of our concerns with this
program outlined in this paragraph, the VFW supports passage of H.R.
4146, the Disabled Veterans Life Insurance Act of 2017, which would
correct all of these issues.
In conclusion, the VA's insurance programs must continue to exist,
but the VFW would like to see them improved. Their improvement provides
a greater sense of peace to service members, veterans, and their
families during what is a trying time in life.
Mr. Chairman, this concludes my testimony. I am prepared to take
any questions you or the Subcommittee members may have.