Defense Base Act Compensation Blog

The Modern Day DBA Casualty

Congressman Announces Plan to Reform US System to Care for Injured Civilian Contractors

Posted by defensebaseactcomp on September 9, 2009

by T. Christian Miller, ProPublica – September 9, 2009 5:20 pm EDT
Rep. Elijah Cummings (Mark Wilson/Getty Images)
Rep. Elijah Cummings (Mark Wilson/Getty Images)

Rep. Elijah Cummings, D-Md., said Wednesday that he will introduce legislation later this year to improve the delivery of medical care to civilian contractors injured while working with the military in Iraq and Afghanistan.

Cummings declined to provide details about his proposal but said he hoped it would reduce the $300 million a year paid by defense contractors to insurance companies.

“The system is broken, and the insurance companies have reaped the benefits,” said Cummings, who pushed for hearings [1] earlier this year after investigations [2] by ProPublica, ABC News and the Los Angeles Times found that insurance carriers routinely denied claims by injured contractors.

A new study released today found that insurance carriers charge defense contractors far higher rates in war zones to cover routine injuries and accidents. That baffles congressional officials, who have noted that the government separately pays for all war-related injuries to civilian contractors. Why, they ask, should it cost significantly more to insure an employee in Iraq against a slip or fall then one in Tunisia?

“The industry report underscores the need for major reforms of a very expensive and broken system that ostensibly is designed to help private contract workers in places like Iraq and Afghanistan,” Sen. Bernie Saunders, I-Vt., said in a statement. “Insurance companies such as A.I.G. should not make unjustifiable profits by overcharging the U.S. government for basic workers compensation. During the June congressional oversight hearing, I pressed the Pentagon and the Department of Labor to make the necessary reforms so wounded workers get the support they deserve. The Pentagon has said that the recommendations will be on my desk next week and I will take a hard look at their ideas.”

The study by insurance broker Aon Corp. was an anonymous survey involving 18 defense contractors which purchase the specialized workers compensation policies required under a federal law known as the Defense Base Act [3]. Most of the firms said they were charged higher rates for workers compensation insurance in Iraq and Afghanistan than for comparable workers hired in other foreign countries.

In some cases, defense companies in Iraq and Afghanistan paid more than double for the insurance, which covers medical costs and disability benefits for injured civilians. One defense firm paid 18 percent of its payroll for insurance — meaning that the company had to spend $18,000 to purchase a single worker’s compensation policy for an employee making $100,000 a year.

The cost of such policies became controversial after 9/11, when rates skyrocketed as civilian contractors flooded into Iraq and Afghanistan. An arm of troubled insurance giant AIG, recently renamed Chartis, sold the bulk of the policies, turning an obscure and lightly regulated insurance line into a billion-dollar business.

Taxpayers ultimately pay for the insurance as part of the cost of federal contracts.

Congressional investigators and government auditors have accused AIG and other carriers of exploiting a market with limited competition to overcharge for the insurance, pointing to profit margins as high as 40 percent on some policies [4]. Insurance firms, however, have said that higher premiums reflect heightened risks of routine injury in Iraq and Afghanistan.

The Aon study found that AIG continued to control “significant” market share, but was facing increased competition from ACE Group and Zurich Financial Services Group. Aon concluded that “key factors” driving rates included things such as market competition, the type of work performed by employees and local conditions.

Charlie Skinner, the Aon managing director in charge of the market survey, noted that Iraq’s roads are in poor shape after six years of war, raising the possibility of more road accidents. The survey did not directly examine, however, whether underwriters factored in war hazards in determining policy rates. “You might need to talk to underwriters to drill into that. We don’t get inside their rating models,” Skinner said.

The study, the largest of its kind to date, mirrors earlier findings by the GAO and the House Committee on Oversight and Government Reform. It comes as the Defense Department prepares later this fall to release recommendations on ways to overhaul the system.

One option under consideration would replace private insurance with government insurance — a potential blow to Aon and other firms in the industry. Skinner said Aon had contributed “factual” material to the Defense Department, but he declined to say whether the firm had recommended a course of action.

“As in most insurance and risk management decisions, there’s often not a black and white answer,” he said.

Cummings said the new legislation would “create some cost containment and improve the care for the brave men and women assisting the military.”

Aon Defense Industry Report 2009

5 Responses to “Congressman Announces Plan to Reform US System to Care for Injured Civilian Contractors”

  1. daffodils said

    Good for Rep. Cummings; but the main issue is not how much AIG/CNA overcharge the gov but rather that they routinely delay and deny legitimate claims through perjury and obstruction of justice with devastating consequences for injured war contractors and their families.

    The department of labor is complicit in this corrupt state of affairs.
    They know very well that one of AIG’s prime whores, one Dr John Dorland Griffiths who testified in numerous cases against civilian contractors, is in fact a proven fraud but are deliberately dragging out the case of ST v KBR/SEI to keep this highly incriminating evidence out of open court for others to use.

    To this day, the administrative law judges still credit “DR” (Death) Griffiths although he had his sidekick change the scores on psychological testing among other more sinister moves to deny suicidal and mentally ill war survivors their meager workman’s comp.

    HOW on earth have we come to be this way?
    Why have you given up, or do you all perhaps got a better plan than just endlessly blogging about this court-sanctioned criminality – I for one sure hope so.

  2. There is a disappointing lack of concern over the DBA Casualties who are currently having their lives ruined by our Department of Labor, CNA, AIG, and greedy lawyers.
    The Aon report was strictly regarding DBA insurance costs and had nothing to do with the implementation and abuse to the injured contractors. They would not be the ones to admit to that much less report on it.
    The committee investigating the abuses to the injured contractors is still working and hopefully back in DC this week.
    Time is not on our side though.
    While Mr. Cummings and the Dod concern themselves with the governments finances the injured contractors bills aren’t being paid, the medical is not being provided which is worsening disabilities, their children are suffering, they are losing their homes, they have no life insurance or medical insurance……
    Yes, how on earth have we come to be this way?

  3. Barry said

    I love and admire the fact that this blog administrator and everyone posting comments and articles here are so in touch with the whole truth, and readily step forward when what the government presents as a solution falls far short of the true resolution of insurance companies heinous destruction of so many lives.

    I am thankful for Rep. Elijah Cummings actions, at the same time it is one small step because volumes of books could be written about the DOL and DOJ’s extreme failures to protect injured war zone contractors and American workers in general.

  4. Krash said

    Thanks to Rep Elijah Cummings for stepping up and at least trying to get things changed.

    But in the meantime, we the injured contractors, are still not getting care, medical treatments, psychological treatment, disability pay, etc. We are losing our homes, marriages, children all because of a corrupt insurance company!!!!

    I understand that it will take time to change policy but just what are we supposed to do while that is being decided. How many more are we going to lose to suicide because of untreated PTSD? How many more are going to wait so long for their treatment/surgery that they will no longer be able to be rehabilitated for any type of work? How long will we have to wait to get the determinations that we cannot be “fixed”? How long do we have to wait to collect disability pay after the ALJ determines that we truly are disabled?

    DoL has already admitted that the regulations are outdated. AIG is still consistently denying benefits. How long to we have to keep waiting? How long before someone actually tracks the number of post-theater contractor suicide deaths.

    The VA has numbers of suicides committed after returning from the theater and not getting proper PTSD treatment. At least the vets get the option for treatment, we don’t. Our PTSD cases are still being denied.

    The amount of money spent on legal fees, to deny benefits that have already been paid for, far exceeds the cost of the actual treatment when the symptoms first show up.

    When is someone going to actually go after AIG, CNA and the other insurance companies. Doesn’t the government now own 80% of AIG? Why can’t we get our claims approved? Why can’t we get our disability payments? When the government can answer some of these questions then maybe the changes will made.

    Until then I will continue to follow the work being done and help my fellow injured contractors find information and/or attorneys that will help them with their DBA claims.

  5. defensebaseactcomp said

    Anonymous but knowledgeable commentor:
    It’s a long way from introducing a bill to getting it passed, but they need to start somewhere and at least the Congressman is doing something about it which is more than I can say for the rest of his colleagues.

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