Legion testifies on VA life insurance programs

The American Legion's Legislative Division Assistant Director Jeff Steele testified at a House Committee on Veterans’ Affairs Subcommittee on Disability Assistance and Memorial Affairs hearing on April 25 regarding the Department of Veterans Affairs (VA) management of life insurance programs for servicemembers and veterans.

“The Government became a self-insurer because private insurance companies were unwilling to assume the unpredictable risks associated with war,” Steele said. “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.”

The VA currently administers six life insurance programs, four closed and two open to new issues, according to Steele. The closed programs cover veterans who served during World Wars I, II and the Korean conflict eras. They are the United States Government Life Insurance program; the National Service Life Insurance program; the Veterans Special Life Insurance program; and the Veterans Reopened Insurance program. The open programs are Service-Disabled Veterans Insurance and Veterans Mortgage Life Insurance, both cover severely disabled veterans.

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 programs are the Servicemembers Group Life Insurance and the Veterans Group Life Insurance. They provide coverage to members of the uniformed armed services, reservists, and post-Vietnam veterans and their families.

Service-Disabled Veterans Insurance (SDVI)

The SDVI program started in 1951, and as of February 2018, it presently has about 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. A related Supplemental SDVI 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.

“These policies are issued for a maximum face value of $10,000,” Steele said. “This amount has not been increased in almost six decades. By comparison, $10,000 in 1951, would be worth around $90,000 today adjusting for inflation.”

Fundamentally, SDVI cannot be compared to available private insurance policies because most of the veteran policyholders have serious disabilities which render them uninsurable in the private sector, according to Steele’s written testimony. These programs, unlike most of the closed mature insurance program, 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.

“For many severely disabled veterans, SDVI is the only life insurance coverage available to them,” Steele said. “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.”

Enacting legislation that updates a 77-year-old table of mortality would provide immediate relief to an unnecessary burden on veterans, according to Steele. Updating the established mortality table to a more current table could effectively reduce premiums between 30 and 40 percent.

“Legislation sponsored by Rep. Stevan Pearce has been introduced in this Congress, H.R. 4146: the Disabled Veterans Life Insurance Act of 2017, that would remedy many of the 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,” Steele said.

Veterans Mortgage Life Insurance (VMLI)

The VMLI program insures about 2,601 veterans with up to a maximum of $200,000 in mortgage coverage. However, many veterans are still unable to access the VLMI because of stringent and outdated criteria, according to Steele. 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,” Steele said in his written testimony. “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.”

Servicemembers' Group Life Insurance (SGLI) and Veterans' Group Life Insurance (VGLI)

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, but administered by the Office of Servicemembers’ Group Life Insurance (OSGLI), part of Prudential’s Insurance Division and is located in Roseland, N.J.

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 VGLI program or to a permanent plan of insurance with one of the participating commercial insurance companies.

“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,” Steele said.

Servicemembers' Group Life Insurance Traumatic Injury Protection (TSGLI)

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 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 GAO (U.S. Government Accountability Office) report found that fewer than 63 percent of claims filed for traumatic brain injury were approved,” Steele said. “GAO further found that the program lacked consistency across branches and lacked assurances that decisions about benefit payments were accurate.”

According to the 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,” Steele said. “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 learned that the military services are not consistently applying the proper burden of proof.”