Cummings Introduces Legislation to Reform Defense Base Act Insurance Program
Washington, DC— Today, Rep. Elijah E. Cummings, Ranking Member on the House Oversight and Government Reform Committee, introduced H.R. 2129, The Defense Base Act Insurance Improvement Act, which would save taxpayers huge sums of money by transitioning the existing workers’ compensation insurance system for overseas government contractors away from private sector insurance companies to a federal self-insurance program.
Original co-sponsors of the legislation are Reps. John F. Tierney, Ranking Member of the Subcommittee on National Security, Homeland Defense and Foreign Operations, and Carol Shea-Porter, a member of the House Armed Services Committee.
“There is absolutely no reason American taxpayers should be lining the pockets of private insurance companies,” said Cummings. “This bill would save billions of dollars while improving the ability of contractor employees who risk their lives in war zones to obtain the medical care and support they deserve.”
"This is a common-sense bill that would save the American taxpayers billions of dollars," said Tierney. "We are paying too much to private insurance companies who are reaping enormous benefits, while audits show workers overseas aren't getting the care and support they deserve. It's time to fix this program."
“This is common sense legislation that would save taxpayers millions of dollars each year,” Shea-Porter said. “Instead of giving away cushy contracts to multi-billion dollar insurance corporations, we should use these savings to pay down our deficit or invest in job creation.”
According to a 2009 Pentagon study, Congress could save as much as $250 million a year by transitioning the existing Defense Base Act (DBA) insurance program to a government self-insurance program. The study found: “In the long run, the self-insurance alternative may have the greatest potential for minimizing DBA insurance costs, and it has several administrative and compliance advantages as well.”
President Obama’s Fiscal Year 2014 Budget proposal includes a provision to replace the current Defense Base Act program with a new Government-wide benefit program named “the Overseas Contractors Compensation Act.” In doing so, the White House recognized that “under the program's current structure, the cost of DBA insurance which agencies pay through individual contracts exceed actual benefit by a significant margin.” The proposal emphasized “the need for a more efficient approach to the Defense Base Act.”
Indeed, the existing system has been a boondoggle for private insurance companies, who have reaped enormous profits under the program. According to an Oversight Committee investigation, insurance companies providing DBA insurance in Iraq and Afghanistan made enormous underwriting profits that are significantly higher than those of traditional workers’ compensation insurers.
The bill would set a six month deadline for the Departments of Defense and Labor to develop an implementation strategy to transition to a self-insurance program, and it would require the strategy to be executed within a year of the bill’s enactment.
In addition to cost concerns, the current system has failed to ensure that all injured workers obtain health care services, disability payments, or death benefits they and their families deserve. An analysis by ProPublica found that private insurance companies had denied about 44% of serious injury claims and about 60% of claims by employees suffering psychological damage such as post-traumatic stress disorder. At the request of Congressman Cummings, the Domestic Policy Subcommittee held a hearing in 2009 to evaluate these findings, which confirmed that the Defense Base Act is in desperate need of reform.