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109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    109-177

======================================================================



 
      SERVICEMEMBERS' GROUP LIFE INSURANCE ENHANCEMENT ACT OF 2005

                                _______
                                

 July 20, 2005.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Buyer, from the Committee on Veterans' Affairs, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3200]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Veterans' Affairs, to whom was referred 
the bill (H.R. 3200) to amend title 38, United States Code, to 
enhance the Servicemembers' Group Life Insurance programs, and 
for other purposes, having considered the same, report 
favorably thereon without amendment and recommend that the bill 
do pass.

                              Introduction

    On April 13, 2005, Honorable Rick Renzi, Honorable 
Christopher H. Smith, Honorable J.D. Hayworth, and Honorable 
Walter B. Jones introduced H.R. 1618, the Wounded Warrior 
Servicemembers Group Disability Insurance Act of 2005, which 
would establish a group disability insurance benefit for 
members of the armed services who incur certain severe 
disabilities.
    On June 16, 2005, the Subcommittee on Disability Assistance 
and Memorial Affairs held a hearing on draft legislation to 
amend the Servicemembers' Group Life Insurance (SGLI) program; 
the Traumatic Injury Protection provisions in Public Law 109-
13; and H.R. 1618, the Wounded Warrior Servicemembers Group 
Disability Insurance Act of 2005.
    On July 11, 2005, the Chairman and Ranking Member of the 
Subcommittee on Disability Assistance and Memorial Affairs, 
Honorable Jeff Miller and Honorable Shelley Berkley, 
respectively, introduced H.R. 3200, the Servicemembers' Group 
Life Insurance Enhancement Act of 2005, which would enhance the 
Servicemembers' Group Life Insurance program.
    On July 13, 2005, the Subcommittee on Disability Assistance 
and Memorial Affairs met and ordered H.R. 3200 reported 
favorably to the full Committee by unanimous voice vote.
    On July 14, 2005, the full Committee met and ordered H.R. 
3200 reported favorably to the House by unanimous voice vote.

                      Summary of the Reported Bill

    H.R. 3200 would:
    1. Effective August 31, 2005, repeal section 1012 of Public 
Law 109-13, the Emergency Supplemental Appropriations Act for 
Defense, the Global War on Terror, and Tsunami Relief, 2005, 
which expires on September 30, 2005. Section 1012 of the 
Supplemental makes changes to the Servicemembers' and Veterans' 
Group Life Insurance programs (SGLI and VGLI, respectively) 
operated by the Department of Veterans Affairs;
    2. Increase from $250,000 to $400,000 the automatic maximum 
in coverage under the Servicemembers' Group Life Insurance 
(SGLI) and Veterans' Group Life Insurance (VGLI) programs;
    3. Require the service Secretary concerned to notify in 
writing the member's spouse or, if the member is unmarried, the 
next of kin, if the member elects not to enroll in SGLI or 
elects an amount less than the maximum amount. When an 
unmarried member marries, the service Secretary concerned would 
be required to notify the servicemembers' spouse as to whether 
the member is insured under SGLI, or insured at an amount less 
than the maximum;
    4. Require the service Secretary concerned to notify in 
writing the spouse of a servicemember when someone other than 
the spouse or child is designated as the policy beneficiary. 
When an unmarried servicemember marries, the Secretary 
concerned would notify the spouse if the servicemember 
designates someone other than the spouse or child as the policy 
beneficiary;
    5. Increase the increments of SGLI coverage a servicemember 
may elect from $10,000 to $50,000; and
    6. Permit a servicemember to decline participation in the 
Traumatic Injury Protection program provided by section 1032 of 
Public Law 109-13, the Emergency Supplemental Appropriations 
Act for Defense, the Global War on Terror, and Tsunami Relief, 
2005. If a servicemember who has declined traumatic injury 
protection coverage wishes to enroll at a later date, the 
servicemember could elect coverage upon written application, 
proof of good health, and compliance with such other terms as 
the Secretary may require.

                       Background and Discussion

    On February 14, 2005, the Administration submitted to 
Congress an emergency supplemental appropriation request for 
the fiscal year ending September 30, 2005, which the House 
considered as H.R. 1268, the Emergency Supplemental 
Appropriations Act for Defense, the Global War on Terror, and 
Tsunami Relief, 2005. The bill was subsequently enacted as 
Public Law 109-13, and contained the following amendments to 
the SGLI authorizations in chapter 19 of title 38, United 
States Code:
    1. Increased the maximum SGLI and VGLI coverage amounts 
from $250,000 to $400,000;
    2. Increased the increments of election of SGLI coverage 
from $10,000 to $50,000;
    3. Provided $150,000 in coverage for a servicemember who 
died of wounds, injuries or illnesses incurred while serving in 
a combat operation or zone of combat or who dies as the direct 
result of an injury or illness incurred or aggravated while 
serving in combat;
    4. Provided that premiums attributable to $150,000 of 
coverage may, at the service Secretary's discretion, be paid 
directly by the Secretary or by reimbursement to a 
servicemember serving in an operation or area of combat;
    5. Prohibited married servicemembers from electing life 
insurance coverage in an amount less than the maximum, or 
decline coverage altogether, without the written consent of the 
spouse;
    6. Required DOD to notify the designated beneficiary or 
next of kin of a single servicemember if he or she elects less 
than the maximum coverage; and
    7. Required written notification to a married 
servicemember's spouse in order for the servicemember to modify 
the beneficiaries designated by the servicemember.
    No hearings were held regarding the SGLI and VGLI 
provisions of H.R. 1268. However, on March 6, 2005, the 
Veterans' Affairs Subcommittee on Disability Assistance and 
Memorial Affairs held a roundtable briefing on these provisions 
with officials from the Department of Veterans Affairs, the 
Department of Defense, and private sector insurance 
representatives.
    H.R. 1268, as amended, was reported by the Committee on 
Appropriations on March 11, 2005, and passed the House on March 
16, 2005, without hearings on the SGLI or VGLI provisions of 
the bill. On May 5, 2005, the House passed the conference 
report accompanying H.R. 1268, as amended, and it was signed 
into law on May 11, 2005 (Public Law 109-13). The provisions 
making changes to the Servicemembers' Group and Veterans' Group 
Life Insurance programs are effective September 1, 2005, and 
expire on September 30, 2005.
    Section 1032 of Public Law 109-13, included a new Traumatic 
Injury Protection program for servicemembers enrolled in SGLI. 
This program provides financial assistance in amounts from 
$25,000 to $100,000 to servicemembers who suffer certain 
traumatic injuries, similar to dismemberment insurance in the 
private sector. Traumatic injury protection is mandatory for 
servicemembers who elect SGLI coverage, with premiums paid by 
the servicemember. Costs attributable to extra hazards 
(increased losses in wartime above peacetime rates) are 
reimbursed to the SGLI program by the Department of Defense in 
the same manner as SGLI extra hazards are reimbursed. A 
determination of eligibility for payment of the benefit is made 
by the Secretary of Defense. The new Traumatic Injury 
Protection program authorization will be effective December 1, 
2005 for all members but is retroactive to October 7, 2001, for 
qualifying losses that are a direct result of injuries incurred 
in Operation Enduring Freedom and Operation Iraqi Freedom.
    Repealer.--Section 2 of the bill would repeal section 1012 
of division A of the Emergency Supplemental Appropriations Act 
for Defense, the Global War on Terror, and Tsunami Relief, 2005 
(Public Law 109-13). Section 1012 amended sections 1967, 1969, 
1970, and 1977 of title 38, United States Code. The provisions 
in section 1012 expire on September 30, 2005. To ease the 
administrative burden on the Departments of Defense and 
Veterans Affairs, the Committee intends that H.R. 3200 replace 
existing authority established in section 1012 of Public Law 
109-13 prior to its effective date.
    Increase from $250,000 to $400,000 in automatic maximum 
coverage under Servicemembers' Group Life Insurance and 
Veterans' Group Life Insurance.--Section 3 of the bill would 
make permanent the increase in maximum coverage allowable under 
SGLI and VGLI from $250,000 to $400,000. In response to recent 
concerns raised by servicemembers and the survivors of 
servicemembers killed in the War on Terror, Congress increased 
the maximum insurance coverage to $400,000 in Public Law 109-
13; however, this increase expires on September 30, 2005.
    The VA administers six types of life insurance policies and 
supervises two programs for the benefit of servicemembers, 
veterans, and their families. The purpose of these programs is 
to provide affordable life insurance to servicemembers and 
veterans who, given the inherent risks of military service, may 
not be otherwise insurable in the commercial insurance 
industry. Ninety-eight percent of all active duty personnel, 
including mobilized reservists, participate in the SGLI 
program. As of July 2005, all but 45 servicemembers who died in 
Operation Enduring Freedom and Operation Iraqi Freedom were 
covered for the maximum amount.
    Congress regularly reviews the SGLI and VGLI programs to 
ensure that servicemembers and veterans are provided adequate 
coverage options. The last increase occurred in Public Law 106-
419, when the maximum SGLI coverage was increased from $200,000 
to $250,000, effective April 1, 2001.
    Notification to member's spouses or next of kin of certain 
elections under the Servicemembers' Group Life Insurance 
Program.--Section 4 of the bill would require the military 
service Secretary concerned to notify, in writing, a married 
servicemember's spouse, or unmarried servicemember's next of 
kin, of an election (1) not to be insured, (2) to be insured 
for an amount less than the maximum, or (3) to increase 
coverage if not insured or insured for an amount less than the 
maximum. Section 4 of the bill would also require the Secretary 
concerned to notify, in writing, the spouse of a married 
servicemember if the servicemember designated anyone other than 
the spouse or child of the member as the beneficiary. When a 
servicemember marries, the Secretary concerned would be 
required to notify the new spouse whether the servicemember is 
insured under SGLI, and if so insured, whether the 
servicemember has elected less than the maximum amount of 
coverage and whether the servicemember has designated someone 
other than the member's spouse or child as the policy 
beneficiary.
    Finally, section 4 of the bill would provide that written 
notification under this section shall consist of a good faith 
effort by the service Secretary concerned to provide the 
required information to the servicemember's spouse or other 
person at the last known address of the spouse or next of kin. 
The Secretary would be required to provide notification at the 
last address of the spouse or other person in the records of 
the Secretary. The Committee does not expect the Secretary to 
undertake a search for addresses of the spouse or next of kin 
beyond the information contained in the service department's 
own records. Failure of the Secretary concerned to provide 
notification would not affect the validity of any life 
insurance election or designation.
    Section 1012 of Public Law 109-13 amended the SGLI program 
to provide that a married servicemember may not decline SGLI 
coverage or elect an amount less than the maximum without the 
written consent of the servicemember's spouse. Section 1012 
also requires notification to the beneficiary or designated 
next of kin when an unmarried servicemember declines SGLI 
coverage or elects an amount less than the maximum. Finally, 
section 1012 of Public Law 109-13 provides that a servicemember 
may not modify his or her beneficiary designation without 
providing written notification to the spouse.
    The Committee does not support providing a spouse ``veto'' 
authority over life insurance elections. Public Law 109-13 
mandates spousal consent even in cases where the spouses are 
estranged, as long as the couple remains legally married. Life 
insurance is fundamentally a contract. Requiring the consent of 
the spouse, who is not a party to the contract, to the 
servicemember's decision concerning whether to enter into a 
contract is inconsistent with the principles of life insurance 
contracts. Additionally, the Committee is concerned that the 
spousal notification requirement of section 1012 of Public Law 
109-13 might discourage the servicemember from designating his 
or her children as beneficiaries if the current spouse does not 
concur with the servicemembers' election. Finally, requiring 
spousal concurrence of the servicemember's decision would in 
effect make SGLI a voluntary program for single servicemembers 
and an involuntary program for married servicemembers.
    Recent reports of servicemembers failing to communicate 
with their spouse or next of kin concerning their life 
insurance coverage or lack thereof, and thus leaving surviving 
spouses or families without the financial security provided by 
life insurance, have prompted congressional action. A letter 
from the Secretary concerned notifying the spouse or next of 
kin of the servicemember's coverage election is the preferable 
way of ensuring that the spouse or beneficiary is informed 
about this important financial decision, while preserving the 
individual right of the servicemember to make decisions about 
life insurance coverage, the amount of coverage, the 
beneficiary or beneficiaries, and from whom to purchase it.
    Increments of insurance that may be elected.--Section 5 of 
the bill would make permanent the increments of SGLI coverage 
allowable from $10,000 to $50,000. Prior to Public Law 109-13, 
the amount of insurance elected by a servicemember had to be 
evenly divisible by $10,000. With the increased amount of 
insurance available under the bill, the Committee intends to 
relieve the administrative burden of small increments in 
insurance elections. Reduced administrative burdens lower the 
cost of the program and keep down the premium rates for the 
servicemember.
    Authority to elect the new traumatic injury protection 
program.--Section 6 of the bill would amend the Traumatic 
Injury Protection program to permit a servicemember to elect in 
writing not to be covered under this program. The servicemember 
who declines coverage would be able to elect coverage at a 
later date upon written application, but coverage would apply 
only with respect to injuries occurring after a subsequent 
election. In any case, the servicemember would be required to 
be insured under Servicemembers' Group Life Insurance to 
participate in Traumatic Injury Protection.
    Public Law 109-13 added a new section 1980A to chapter 19 
of title 38, United States Code, Traumatic Injury Protection. 
The Traumatic Injury Protection program is designed to provide 
financial assistance to servicemembers during their recovery 
period from a serious service-related traumatic injury. The 
traumatic injury coverage will pay servicemembers between 
$25,000 and $100,000, depending on the severity of the injury, 
at a rate to be determined by the Secretary of Veterans 
Affairs. The servicemember pays a monthly premium for this 
additional coverage and, under current law, participation is 
mandatory. The Committee notes testimony of the Wounded Warrior 
Project before the Veterans' Affairs Subcommittee on Disability 
Assistance and Memorial Affairs on June 16, 2005, regarding 
this new program, ``This coverage * * * give[s] all active duty 
servicemembers the ability to protect themselves and their 
families * * * should they suffer a life altering injury.'' The 
Committee is dedicated to ensuring that our servicemembers have 
a variety of insurance options to assist them in planning for 
the future.

                      Section-by-Section Analysis

    Section 1 of the bill would provide that this Act may be 
cited as the ``Servicemembers'' Group Life Insurance 
Enhancement Act of 2005''.
    Section 2 of the bill would, effective August 31, 2005, 
repeal section 1012 of division A of the Emergency Supplemental 
Appropriations Act for Defense, the Global War on Terror, and 
the Tsunami Relief, 2005 (Public Law 109-13; 119 Stat. 244), 
including the amendments made by that section, and sections 
1967, 1969, 1970, and 1977 of title 38, United States Code, 
shall be applied as if section 1012 of Public Law 109-13 had 
not been enacted.
    Section 3(a) of the bill would amend section 
1967(a)(3)(A)(i) and section 1967(d) of title 38, United States 
Code, by striking $250,000 and inserting $400,000.
    Section 3(b) of the bill would amend section 1977(a) of 
title 38, United States Code, by striking $250,000 and 
inserting $400,000.
    Section 3(c) of the bill would provide an effective date 
for the changes made by section 3(a) and 3(b) for deaths 
occurring on or after September 1, 2005.
    Section (4) of the bill would add a new subsection 
(f)(1)(A), effective September 1, 2005, to section 1967 of 
title 38, United States Code, to require the Secretary 
concerned to provide written notice to a member's spouse, or, 
if the member is unmarried, to the member's next of kin, in 
writing, whenever a member eligible for insurance executes a 
life insurance option.
    New section 1967(f)(1)(B) of title 38, United States Code, 
would specify the life insurance options that require 
notification under 1967(f)(1)(A) of title 38, United States 
Code: (i) an election not to be insured, (ii) an election for 
insurance in an amount that is less than the maximum amount, 
(iii) an application for insurance coverage or for a change in 
the amount of insurance coverage, and (iv) in the case of a 
married member, a designation under 1970(a) of title 38, United 
States Code, of any person other than the spouse or child of 
the member as the beneficiary of the member for any amount of 
insurance.
    New section 1967(f)(2) of title 38, United States Code, 
would provide that in the case of an unmarried member who is 
eligible for insurance marries, the Secretary concerned must 
notify the member's spouse in writing as to whether the member 
is insured. The notification would include: (A) if the amount 
of insurance is less than the maximum and (B) if the member has 
designated a beneficiary other than the spouse or a child of 
the member for any amount of insurance.
    New section 1967(f)(3)(A) of title 38, United States Code, 
would provide that notification of a spouse or any other person 
under paragraph (1) shall consist of a good faith effort to 
provide information to the spouse or other person at the last 
address of the spouse or other person in the records of the 
Secretary concerned.
    New section 1967(f)(3)(B) of title 38, United States Code, 
would provide that failure to notify, or to notify in a timely 
manner, would not affect the validity of any life insurance 
option referred to in (1)(B).
    Section 5(a) of the bill would amend subsection 
1967(a)(3)(B) of title 38, United States Code, to provide that 
a servicemember's life insurance election be evenly divisible 
by $50,000.
    Section 5(b) of the bill would make the amendment made by 
section 5(a) effective September 1, 2005.
    Section 6(a) of the bill would amend section 1980A of title 
38, United States Code, by adding a new paragraph (b) to permit 
a member to elect in writing not to be insured under section 
1980A of title 38, United States Code. If a member eligible for 
insurance under this section is not insured by reason of an 
election made, the member may thereafter elect to be insured 
upon written application by the member, proof of good health, 
and compliance with such other terms and conditions as may be 
prescribed by the Secretary. Insurance under this section upon 
such an election is effective upon the date of receipt by the 
Secretary of such application and shall apply only with respect 
to injuries incurred after that date. The Secretary would be 
required to prescribe by regulation conditions as to how and 
when elections shall be made, including limiting the time for 
such elections to an annual open season, for duration each year 
prescribed by the Secretary.
    Section 6(b) of the bill would provide an effective date 
for subsection (a) to take effect immediately after section 
1980A of title 38, United States Code, takes effect pursuant to 
section 1032(d)(1) of division A of the Emergency Supplemental 
Appropriations Act for Defense, the Global War on Terror, and 
Tsunami Relief, 2005 (Public Law 109-13; 119 Stat. 260).

                    Performance Goals and Objectives

    The reported bill would authorize life insurance program 
enhancements under laws administered by the Secretary of 
Veterans Affairs. The Department of Veterans Affairs' 
performance goals and objectives are established in annual 
performance plans and are subject to the Committee's regular 
oversight and evaluation by the U.S. Government Accountability 
Office. VA also publishes a performance and accountability 
report for each fiscal year.

             Statements of the Views of the Administration

                              ----------                              


Statement of Thomas Lastowka, Director, Department of Veterans Affairs 
  Regional Office and Insurance Center, Philadelphia, PA, Before the 
   Subcommittee on Disability Assistance and Memorial Affairs, House 
             Committee on Veterans' Affairs, June 16, 2005

    Mr. Chairman and Members of the Subcommittee, thank you for 
the opportunity to testify today on legislative items of 
interest to the Department of Veterans Affairs (VA). 
Accompanying me today is Stephen Wurtz, Deputy Assistant 
Director for Insurance.


                               H.R. 1618


    H.R. 1618, 109th Cong., the ``Wounded Warrior 
Servicemembers Group Disability Insurance Act of 2005,'' would 
create a Servicemembers' Group Disability Insurance program, 
which would provide an insurance benefit to servicemembers who 
incur certain severe disabilities. We do not support H.R. 1618 
because it would duplicate the intent of the recently passed 
Administration bill that permanently establishes the traumatic 
injury insurance provided under 38 U.S.C. Sec. 1980A, which was 
added to title 38, United States Code, by the ``Emergency 
Supplemental Appropriations Act for Defense, the Global War on 
Terror, and Tsunami Relief, 2005,'' Pub. L. No. 109-13, 
Sec. 1032, 119 Stat. 231.
    Section 2(a) of H.R. 1618 would add a new subchapter V to 
chapter 19 of title 38, United States Code. New section 1992(a) 
of title 38, United States Code, would authorize the Secretary 
of Veterans Affairs to purchase a group disability insurance 
policy or policies from one or more private insurance companies 
on behalf of members of the Armed Forces. New section 1993 
would provide automatic insurance in the amount of $50,000 for 
any person insured under Servicemembers' Group Life Insurance 
(SGLI), unless the servicemember elects in writing not to be 
insured under the new disability insurance program.
    Under new section 1994, any of the following disabilities 
would be a ``qualifying disability'' for which insurance 
coverage would be provided: (1) complete and permanent loss of 
movement of an extremity; (2) third-degree or higher burns 
affecting more than one square foot of the body; (3) entire, 
irrecoverable, and uncorrectable loss of sight of one or both 
eyes; (4) permanent loss of one hand, by severance at or above 
the wrist joint; (5) permanent loss of one foot, by severance 
at or above the ankle joint; (6) entire, irrecoverable, and 
uncorrectable loss of speech or hearing; and (7) any other 
disability specified by regulation.
    Under new section 1996(a), premiums for disability 
insurance coverage would be deducted from a servicemember's 
basic or other pay, less any costs traceable to the extra 
hazards of duty, which would be paid from the appropriation for 
active duty pay of the uniformed services. New section 1997(b) 
would require that insurance settlements under the program be 
made in a lump sum.
    Section 2(b) of H.R. 1618 would permit the Secretary to 
designate the effective date of the disability insurance but 
require that such date be not later than one year after the 
date of enactment.


          SERVICEMEMBERS' GROUP LIFE INSURANCE ENHANCEMENT ACT


    Section 2 of the draft ``Servicemembers' Group Life 
Insurance Enhancement Act of 2005'' would amend 38 U.S.C. 
Sec. 1967(a)(3)(A)(i) to increase the maximum amount of SGLI 
and Veterans' Group Life Insurance (VGLI) to $400,000, 
effective October 1, 2005, with respect to deaths occurring on 
or after that date. This provision would extend the increase to 
$400,000 made by section 1012 of Pub. L. No. 109-13, which will 
terminate on September 30, 2005. VA supports enactment of 
section 2 of this draft bill because it provides the 
opportunity for servicemembers to increase insurance protection 
for their families.
    Section 3 of this bill would, effective October 1, 2005, 
require the Secretary of the appropriate service department to 
notify in writing a servicemember's spouse or, if unmarried, 
the servicemember's next-of-kin whenever the servicemember: (1) 
declines SGLI coverage; (2) elects less than the maximum amount 
of SGLI coverage; (3) applies for SGLI coverage or for a change 
in the amount of such coverage; or (4) in the case of a married 
servicemember, designates someone other than his or her spouse 
or child as a beneficiary. Section 3 would also require, when 
an unmarried servicemember who is eligible for SGLI marries, 
that the Secretary of the appropriate service department notify 
the servicemember's spouse in writing as to whether the 
servicemember: (1) is insured under SGLI; (2) has elected less 
than the maximum amount of SGLI coverage; or (3) designated as 
a beneficiary a person other than the member's spouse or child. 
Failure to provide timely notification would not affect the 
validity of any option elected by the insured. Except for the 
effective date, section 3 is identical to section 5(b) of H.R. 
2046, 109th Cong., the ``Servicemembers' Health Insurance 
Protection Act of 2005,'' which the House of Representatives 
passed on May 23, 2005.
    Because this bill would not extend the current law that 
goes into effect September 1, 2005, but instead defines a new 
program that would start when the current program expires on 
September 30, 2005, there are a number of potentially difficult 
administrative challenges that would unnecessarily burden both 
servicemembers and the Government. For example, those members 
who elected less than the maximum coverage under current law 
and whose spouses consented would once again have to fill out 
the paperwork required to elect less than maximum coverage, and 
the Government would have to notify the spouse. The 
Administration would like to work with Congress to ensure that 
these issues are addressed.
    We note as well that, under 38 U.S.C. Sec. 1968(a)(1), SGLI 
coverage terminates 120 days after separation or release from 
active duty or active duty for training, unless the 
servicemember is totally disabled on that date, in which event 
SGLI coverage terminates one year after separation or release 
from active duty or active duty for training. Also, section 
1977(d) of title 38, United States Code, states that ``any 
designation of beneficiary or beneficiaries for [SGLI] filed 
with a uniformed service until changed, shall be considered a 
designation of beneficiary or beneficiaries for [VGLI], but not 
for more than sixty days after the effective date of the 
insured's [VGLI].'' It is unclear whether the notification 
provision of section 3 of the draft bill, which refers to a 
``member'' of a uniformed service, would apply to any change in 
beneficiary designation that a servicemember would make within 
the 120-day period after discharge but prior to cessation of 
SGLI coverage or that a VGLI insured would make within the 60-
day period referenced in section 1977(d). We also note that, if 
section 3 were applicable to VGLI beneficiary designations, it 
would be difficult to implement because OSGLI does not maintain 
data regarding a VGLI insured's marital status. We recommend 
that, if section 3 is enacted, it explain whether it is 
applicable to any change in beneficiary during these two 
periods of time.
    Section 4 would amend 38 U.S.C. Sec. 1967(a)(3)(B) to 
permit a servicemember to elect an amount of SGLI less than the 
maximum available provided the amount of coverage on the member 
is evenly divisible by $50,000, rather than $10,000, as 
currently provided by section 1967(a)(3)(B). This would 
simplify the administration of the SGLI program and would align 
with the proposal by the Administration.


                             TRAUMATIC SGLI


    Section 1032 of Pub. L. No. 109-13 created a program that 
provides an insurance benefit to servicemembers who incur 
traumatic injuries. The traumatic injury program provides 
automatic insurance for any SGLI insured who suffers a 
traumatic injury as prescribed by the Secretary of Veterans 
Affairs in collaboration with the Secretary of Defense. Under 
this program, payment will be made in accordance with a 
schedule prescribed by the Secretary of Veterans Affairs in 
collaboration with the Secretary of Defense based on the 
severity of the condition and in an amount that is not less 
than $25,000 and not more than $100,000. The maximum amount 
payable for all injuries resulting from the same traumatic 
event is $100,000, and if a servicemember suffers more than one 
loss as a result of a traumatic injury, payment will be made in 
accordance with the prescribed schedule for the single loss 
providing the highest payment. Premiums for disability 
insurance coverage will be deducted from a servicemember's 
basic or other pay, less any costs traceable to the extra 
hazards of duty. This benefit is effective on December 1, 2005; 
however, any servicemember experiencing a traumatic injury 
between October 7, 2001, and December 1, 2005, is eligible to 
receive the insurance benefit if the qualifying loss was a 
direct result of injuries incurred in Operation Enduring 
Freedom or Operation Iraqi Freedom.
    We welcome the addition of this valuable benefit to the 
package of SGLI benefits currently available to members of the 
uniformed services and their families. We believe this law will 
help to reduce the financial burden and mental strain on 
servicemembers and their families following a traumatic and 
often life-changing injury. Immediately following enactment of 
Pub. L. No. 109-13, the VA Insurance Service met with DOD and 
Prudential Insurance Company of America to discuss 
implementation of the new program. At this point, we do not 
know whether there are any issues that would need to be 
resolved through amendment to section 1032. We hope to be able 
to point out to the Subcommittee any such issues prior to the 
December 1, 2005, effective date of this legislation.

               Congressional Budget Office Cost Estimate

                                                     July 15, 2005.
Hon. Steve Buyer,
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3200, the 
Servicemembers' Group Life Insurance Enhancement Act of 2005.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Dwayne M. 
Wright.
            Sincerely,
                                               Douglas Holtz-Eakin.
    Enclosure.

H.R. 3200--Servicemembers' Group Life Insurance Enhancement Act of 2005

    Summary: H.R. 3200 would make permanent the authority in 
the Emergency Supplemental Appropriations Act for Defense, the 
Global War on Terror, and Tsunami Relief Act, 2005, that 
increased the maximum coverage under the Servicemembers' Group 
Life Insurance (SGLI) and the Veterans' Group Life Insurance 
(VGLI) programs. The bill also would allow those servicemembers 
who are insured under SGLI to opt out of the Traumatic Injury 
Protection Insurance portion of SGLI.
    CBO estimates that implementing this bill would cost $95 
million in 2006, and $199 million over the 2006-2010 period, 
assuming appropriation of the necessary amounts. Enacting H.R. 
3200 would not affect direct spending or revenues.
    H.R. 3200 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 3200 is shown in the following table. 
The costs of this legislation fall within budget function 050 
(national defense).

------------------------------------------------------------------------
                                      By fiscal year, in millions of
                                                 dollars--
                                 ---------------------------------------
                                   2006    2007    2008    2009    2010
------------------------------------------------------------------------
              CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level...      95      64      34       6       0
Estimated Outlays...............      95      64      34       6       0
------------------------------------------------------------------------

    Basis of Estimate: Section 2 would make permanent the 
current authority that increased the maximum coverage under 
SGLI from $250,000 to $400,000 for all servicemembers, 
effective September 1, 2004. That authority is currently in 
place only through fiscal year 2005.
    Under current law, the Department of Defense (DoD) is 
required to reimburse the Department of Veterans Affairs (VA) 
for the costs of benefit claims for deaths that exceed levels 
set by VA each year. VA calculates these levels based on 
mortality rates expected under peacetime conditions and refers 
to these costs as hazard costs. In 2004, DoD reimbursed VA $105 
million to cover these costs.
    For this estimate, CBO assumes that force levels in theater 
for Operating Enduring Freedom and Operation Iraqi Freedom for 
2006 will remain at levels expected for 2005 (about 200,000 
servicemembers) and then decline gradually over several years 
to about 50,000 by 2010. Based on that assumption regarding 
force levels, current death rates observed in those two 
operations, and information provided by DoD regarding the death 
rates for the remainder of the force, CBO estimates that DoD 
would need to reimburse VA for 640 claims in 2006. CBO also 
estimates that the number of claims exceeding VA levels would 
decline to about 40 by 2009 and that the number of claims for 
benefits would not exceed levels set by VA after 2009. Based on 
information from VA, CBO assumes that DoD would be responsible 
for reimbursing VA for the maximum benefit amount of $400,000 
per claim under this provision. Thus, CBO estimates that DoD 
would reimburse VA $95 million for hazard costs in 2006 and 
$199 million over the 2006-2009 period, subject to the 
availability of appropriated funds.
    Section 6 would allow servicemembers who are covered under 
SGLI, to opt out of Traumatic Injury Protection Insurance that 
is automatically added to a servicemember's SGLI coverage under 
current law. The Congress authorized Traumatic Injury 
Protection Insurance coverage under SGLI as part of the 
Emergency Supplemental Appropriations Act for Defense, the 
Global War on Terror, and Tsunami Relief Act, 2005. That 
coverage would provide up to a maximum of $100,000 for 
traumatic injuries (as defined through collaboration by VA and 
DoD) sustained to a servicemember. According to VA--the 
administrator of the SGLI program--servicemembers currently pay 
$26 a month for $400,000 of SGLI coverage. VA indicates that a 
servicemember's monthly premium for SGLI coverage will increase 
by $1 for Traumatic Injury Protection Insurance.
    VA indicates that 98 percent of servicemembers participate 
in SGLI and take out the maximum coverage. Under current law, 
DoD is required to pay the costs of any claims for Traumatic 
Injury Protection Insurance that exceed the level VA expects to 
be able to cover with premiums collected from servicemembers. 
If a significant number of servicemembers chose to opt out of 
Traumatic Injury Protection Insurance, VA would eventually 
adjust the premium amount to cover expected costs. In the near 
term, however, the amount of premiums collected might be 
insufficient and DoD would be required to pay the additional 
costs associated with paying servicemember claims.
    However, CBO expects that few servicemembers would opt out 
of the additional insurance coverage given the small 
incremental cost ($1 per month) for this insurance and the 
inability of servicemembers to predict when a traumatic injury 
could occur. Thus, CBO estimates that any near-term costs 
associated with implementing this provision would be 
insignificant.
    Intergovernmental and private-sector impact: H.R. 3200 
contains no intergovernmental or private-sector mandates as 
defined in the Unfunded Mandates Reform Act (UMRA) and would 
not affect the budgets of state, local, or tribal governments.
    Previous CBO estimate: On June 2, 2005, CBO transmitted a 
cost estimate for S. 1042, the National Defense Authorization 
Act for Fiscal Year 2006, as reported by the Senate Committee 
on Armed Services on May 17, 2004. Section 641 of S. 1042 is 
similar to section 2 of H.R. 3200 as both provisions would make 
permanent the authority to increase the maximum amount of SGLI 
coverage from $250,000 to $400,000. Section 641 of S. 1042 
would also direct DoD to pay the cost of premium payments for 
up to $150,000 of SGLI coverage for servicemembers serving in 
an operation or area that DoD designates as a combat operation 
or a zone of combat, whereas H.R. 3200 would not. Differences 
in the estimated costs reflect differences in the two versions 
of the legislation.
    Estimate prepared by: Federal Costs: Dwayne M. Wright. 
Impact on State, Local, and Tribal Governments: Melissa 
Merrell. Impact on the Private Sector: Joshua Lee.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                     Statement of Federal Mandates

    The preceding Congressional Budget Office cost estimate 
states that the bill contains no intergovernmental or private 
sector mandates as defined in the Unfunded Mandates Reform Act.

                 Statement of Constitutional Authority

    Pursuant to Article I, section 8 of the United States 
Constitution, the reported bill is authorized by Congress' 
power to ``provide for the common Defense and general Welfare 
of the United States.''

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

 EMERGENCY SUPPLEMENTAL APPROPRIATIONS ACT FOR DEFENSE, THE GLOBAL WAR 
ON TERROR, AND TSUNAMI RELIEF, 2005

           *       *       *       *       *       *       *



DIVISION A--EMERGENCY SUPPLEMENTAL APPROPRIATIONS ACT FOR DEFENSE, THE 
             GLOBAL WAR ON TERROR, AND TSUNAMI RELIEF, 2005

That the following sums are appropriated, out of any money in 
the Treasury not otherwise appropriated, for the fiscal year 
ending September 30, 2005, and for other purposes, namely:

                TITLE I--DEFENSE-RELATED APPROPRIATIONS


                    DEPARTMENT OF DEFENSE--MILITARY


MILITARY PERSONNEL

           *       *       *       *       *       *       *



GENERAL PROVISIONS, THIS TITLE

           *       *       *       *       *       *       *



                 [SERVICEMEMBERS' GROUP LIFE INSURANCE

  [Sec. 1012. (a) Increased Maximum Amount of Servicembers' 
Group Life Insurance.--Section 1967 of title 38, United States 
Code, is amended--
          [(1) in subsection (a)(3)(A), by striking clause (i) 
        and inserting the following new clause:
          [``(i) In the case of a member--
                  [``(I) $400,000 or such lesser amount as the 
                member may elect as provided in subparagraph 
                (B);
                  [``(II) in the case of a member covered by 
                subsection (e), the amount provided for or 
                elected by the member under subclause (I) plus 
                the additional amount of insurance provided for 
                the member by subsection (e); or
                  [``(III) in the case of a member covered by 
                subsection (e) who has made an election under 
                paragraph (2)(A) not to be insured under this 
                subchapter, the amount of insurance provided 
                for the member by subsection (e).''; and
          [(2) in subsection (d), by striking ``$250,000'' and 
        inserting ``$400,000''.
  [(b) Increments of Decreased Amounts Electable by Members.--
Subsection (a)(3)(B) of such section is amended by striking 
``member or spouse'' in the last sentence and inserting 
``member, be evenly divisible by $50,000 and, in the case of a 
member's spouse''.
  [(c) Additional Amount for Members Serving in Certain Areas 
or Operations.--
          [(1) Increased amount.--Section 1967 of such title is 
        further amended--
                  [(A) by redesignating subsection (e) as 
                subsection (f); and
                  [(B) by inserting after subsection (d) the 
                following new subsection (e):
  [``(e)(1) A member covered by this subsection is any member 
as follows:
          [``(A) Any member who dies as a result of one or more 
        wounds, injuries, or illnesses incurred while serving 
        in an operation or area that the Secretary designates, 
        in writing, as a combat operation or a zone of combat, 
        respectively, for purposes of this subsection.
          [``(B) Any member who formerly served in an operation 
        or area so designated and whose death is determined 
        (under regulations prescribed by the Secretary of 
        Defense) to be the direct result of injury or illness 
        incurred or aggravated while so serving.
  [``(2) The additional amount of insurance under this 
subchapter that is provided for a member by this subsection is 
$150,000, except that in a case in which the amount provided 
for or elected by the member under subsection (a)(3)(A)(i)(I) 
exceeds $250,000, the additional amount of insurance under this 
subchapter that is provided for the member by this subsection 
shall be reduced to such amount as is necessary to comply with 
the limitation in paragraph (3).
  [``(3) The total amount of insurance payable for a member 
under this subchapter may not exceed $400,000.
  [``(4) While a member is serving in an operation or area 
designated as described in paragraph (1), the cost of insurance 
of the member under this subchapter that is attributable to 
$150,000 of insurance coverage shall, at the election of the 
Secretary concerned--
          [``(A) be contributed as provided in section 
        1969(b)(2) of this title, rather through deduction or 
        withholding from the member's pay; or
          [``(B) if deducted or withheld from the member's pay, 
        be reimbursed to the member through such mechanism as 
        the Secretary concerned determines appropriate.''.
          [(2) Funding.--Section 1969(b) of such title is 
        amended--
                  [(A) by inserting ``(1)'' after ``(b)''; and
                  [(B) by adding at the end the following new 
                paragraph:
  [``(2) For each month for which a member insured under this 
subchapter is serving in an operation or area designated as 
described by paragraph (1)(A) of section 1967(e) of this title, 
there may, at the election of the Secretary concerned under 
paragraph (4)(A) of such section, be contributed from the 
appropriation made for active duty pay of the uniformed service 
concerned an amount determined by the Secretary and certified 
to the Secretary concerned to be the cost of Servicemembers' 
Group Life Insurance which is traceable to the cost of 
providing insurance for the member under section 1967 of this 
title in the amount of $150,000.''.
  [(d) Conforming Amendment.--Section 1967(a)(2)(A) of such 
title is amended by inserting before the period at the end the 
following: ``, except with respect to insurance provided under 
paragraph (3)(A)(i)(III)''.
  [(e) Coordination With VGLI.--Section 1977(a) of such title 
is amended--
          [(1) by striking ``$250,000'' each place it appears 
        and inserting ``$400,000''; and
          [(2) by adding at the end of paragraph (1) the 
        following new sentence: ``Any additional amount of 
        insurance provided a member under section 1967(e) of 
        this title may not be treated as an amount for which 
        Veterans' Group Life Insurance shall be issued under 
        this section.''.
  [(f) Requirements Regarding Elections of Members to Reduce or 
Decline Insurance.--Section 1967(a) of such title is further 
amended--
          [(1) in paragraph (2), by adding at the end the 
        following new subparagraph:
  [``(C) Pursuant to regulations prescribed by the Secretary of 
Defense, notice of an election of a member with a spouse not to 
be insured under this subchapter, or to be insured under this 
subchapter in an amount less than the maximum amount provided 
under paragraph (3)(A)(i)(I), shall be provided to the spouse 
of the member.''; and
          [(2) in paragraph (3)--
                  [(A) in the matter preceding clause (i), by 
                striking ``and (C)'' and inserting ``, (C), and 
                (D)''; and
                  [(B) by adding at the end the following new 
                subparagraphs:
  [``(D) A member with a spouse may not elect not to be insured 
under this subchapter, or to be insured under this subchapter 
in an amount less than the maximum amount provided under 
subparagraph (A)(i)(I), without the written consent of the 
spouse.
  [``(E) Whenever a member who is not married elects not to be 
insured under this subchapter, or to be insured under this 
subchapter in an amount less than the maximum amount provided 
for under subparagraph (A)(i)(I), the Secretary concerned shall 
provide a notice of such election to any person designated by 
the member as a beneficiary or designated as the member's next-
of-kin for the purpose of emergency notification, as determined 
under regulations prescribed by the Secretary of Defense.''.
  [(g) Requirement Regarding Redesignation of Beneficiaries.--
Section 1970 of such title is amended by adding at the end the 
following new subsection:
  [``(j) A member with a spouse may not modify the beneficiary 
or beneficiaries designated by the member under subsection (a) 
without providing written notice of such modification to the 
spouse.''.
  [(h) Effective Date.--This section and the amendments made by 
this section shall take effect on the first day of the first 
month that begins more than 90 days after the date of the 
enactment of this Act.
  [(i) Termination.--The amendments made by this section shall 
terminate on September 30, 2005. Effective on October 1, 2005, 
the provisions of sections 1967, 1969, 1970, and 1977 of title 
38, United States Code, as in effect on the day before the date 
of the enactment of this Act shall be revived.]

           *       *       *       *       *       *       *

                              ----------                              


TITLE 38, UNITED STATES CODE

           *       *       *       *       *       *       *



PART II--GENERAL BENEFITS

           *       *       *       *       *       *       *



CHAPTER 19--INSURANCE

           *       *       *       *       *       *       *



SUBCHAPTER III--SERVICEMEMBERS' GROUP LIFE INSURANCE

           *       *       *       *       *       *       *



Sec. 1967. Persons insured; amount

  (a)(1) * * *

           *       *       *       *       *       *       *

  (3)(A) Subject to subparagraphs (B) and (C), the amount for 
which a person is insured under this subchapter is as follows:
          (i) In the case of a member, [$250,000] $400,000.

           *       *       *       *       *       *       *

  (B) A member may elect in writing to be insured or to insure 
the member's spouse in an amount less than the amount provided 
for under subparagraph (A). The member may not elect to insure 
the member's child in an amount less than $10,000. The amount 
of insurance so elected shall, in the case of a [member or 
spouse] member, be evenly divisible by $50,000 and, in the case 
of a member's spouse,, be evenly divisible by $10,000.

           *       *       *       *       *       *       *

  (d) Whenever a member has the opportunity to make an election 
under subsection (a) not to be insured under this subchapter, 
or to be insured under this subchapter in an amount less than 
the maximum amount [of $250,000] in effect under paragraph 
(3)(A)(i) of that subsection, and at such other times 
periodically thereafter as the Secretary concerned considers 
appropriate, the Secretary concerned shall furnish to the 
member general information concerning life insurance. Such 
information shall include--
          (1) * * *

           *       *       *       *       *       *       *

  (f)(1)(A) Whenever a member who is eligible for insurance 
under this section executes a life insurance option specified 
in subparagraph (B), the Secretary concerned shall notify the 
member's spouse or, if the member is unmarried, the member's 
next of kin, in writing, of the execution of that option.
  (B) A life insurance option referred to in subparagraph (A) 
is any of the following:
          (i) An election under subsection (a)(2)(A) not to be 
        insured under this subchapter.
          (ii) An election under subsection (a)(3)(B) for 
        insurance of the member in an amount that is less than 
        the maximum amount provided under subsection 
        (a)(3)(A)(i).
          (iii) An application under subsection (c) for 
        insurance coverage under this subchapter or for a 
        change in the amount of such insurance coverage.
          (iv) In the case of a married member, a designation 
        under section 1970(a) of this title of any person other 
        than the spouse or a child of the member as the 
        beneficiary of the member for any amount of insurance 
        under this subchapter.
  (2) Whenever an unmarried member who is eligible for 
insurance under this section marries, the Secretary concerned 
shall notify the member's spouse in writing as to whether the 
member is insured under this subchapter. In the case of a 
member who is so insured, the Secretary shall include with such 
notification--
          (A) if the member has made an election described in 
        paragraph (1)(B)(ii), notice that the amount of such 
        insurance is less than the maximum amount provided 
        under subsection (a)(3)(A)(i); and
          (B) if the member has designated a beneficiary other 
        than the spouse or a child of the member for any amount 
        of such insurance, notice that such a designation has 
        been made.
  (3)(A) Notification of a spouse under paragraph (1) or (2), 
or of any other person under paragraph (1), for purposes of 
this subsection shall consist of a good faith effort to provide 
information to the spouse or other person at the last address 
of the spouse or other person in the records of the Secretary 
concerned.
  (B) Failure to provide such notification, or to provide such 
notification in a timely manner, does not affect the validity 
of any life insurance option referred to in paragraph (1)(B).

           *       *       *       *       *       *       *


Sec. 1977. Veterans' Group Life Insurance

  (a)(1) Veterans' Group Life Insurance shall be issued in the 
amounts specified in section 1967(a) of this title. In the case 
of any individual, the amount of Veterans' Group Life Insurance 
may not exceed the amount of Servicemembers' Group Life 
Insurance coverage continued in force after the expiration of 
the period of duty or travel under section 1967(b) or 1968(a) 
of this title. No person may carry a combined amount of 
Servicemembers' Group Life Insurance and Veterans' Group Life 
Insurance in excess of [$250,000] $400,000 at any one time.
  (2) If any person insured under Veterans' Group Life 
Insurance again becomes insured under Servicemembers' Group 
Life Insurance but dies before terminating or converting such 
person's Veterans' Group Insurance, Veterans' Group Life 
Insurance shall be payable only if such person is insured for 
less than [$250,000] $400,000 under Servicemembers' Group Life 
Insurance, and then only in an amount which, when added to the 
amount of Servicemembers' Group Life Insurance payable, does 
not exceed [$250,000] $400,000.

           *       *       *       *       *       *       *


Sec. 1980A. Traumatic injury protection

  (a) * * *
  (b)(1) * * *

           *       *       *       *       *       *       *

  (4)(A) A member may elect in writing not to be insured under 
this section.
  (B) If a member eligible for insurance under this section is 
not so insured by reason of an election made under subparagraph 
(A), the member may thereafter elect to be insured under this 
section upon written application by the member, proof of good 
health, and compliance with such other terms and conditions as 
may be prescribed by the Secretary. Insurance under this 
section upon such an election is effective upon the date of the 
receipt by the Secretary of such application and shall apply 
only with respect to injuries incurred after that date.
  (C) The Secretary shall prescribe by regulation conditions as 
to how and when elections under subparagraph (B) shall be made. 
Such regulations may include limiting the time for such 
elections to an annual open season, for a duration each year 
prescribed by the Secretary.

           *       *       *       *       *       *       *