Cummings Requests Congressional Hearing on AIG denying claims and the Department of Labor’s non enforcement

Cummings Requests Congressional Hearing on AIG Denying Claims for Civilians Injured in Iraq, Afghanistan

Washington, DC—Today, Congressman Elijah E. Cummings (D-Md.), a senior member of the House Committee on Oversight and Government Reform, sent a letter (text below) to Domestic Policy Subcommittee Chairman Dennis J. Kucinich (D-Ohio) requesting a hearing to examine a recent investigation by the Los Angeles Times, ABC News, and ProPublica. According to the investigation, AIG and other insurance companies have been unnecessarily denying and prolonging serious health insurance claims of civilian contractors who were injured or killed while participating in U.S. combat activities in Iraq and Afghanistan.

“The men and women who sacrifice their lives to protect our nation on the battlefield should be able to return to their families without having to wage another battle here at home to receive the health care they are more than entitled to receive,” Congressman Cummings said. “I was absolutely disgusted to read about the atrocities that individuals are being forced to endure as they attempt to get treatment for the injuries they received while serving our country.”

Under the Defense Base Act (DBA), contractors and subcontractors are required to purchase for employees working overseas insurance that covers medical care and disability payments for on-the-job injuries, as well as death benefits to the families of employees who are killed on the job. The costs of the insurance are built into the price of the contract between the contractor and the federal government.

The Department of Labor is designated by the law to administer the requirements of the DBA but has been unable to do an adequate job do to underfunding and increased claim volume. Further, the Department of Defense has not adopted a single-contract process for retaining an insurer under DBA, allowing insurance companies to inflate premium costs.

“There are clearly serious deficiencies in the health coverage of civilian employees who have been injured while working overseas to keep us safe here at home—costing not only the men and women who are being refused coverage for the treatment they need, but also for the American taxpayers who are footing the bill for their coverage,” Congressman Cummings said. “It is important that the Congress investigate this issue and take appropriate action to fix these problems.”

Specifically, Congressman Cummings would like a hearing to examine the DBA insurance practices at AIG, which handles the bulk of these claims, as well as the Department of Labor’s inability to enforce the requirements of DBA and the Pentagon’s development and implementation of the strategy required under the a provision included in the 2009 Duncan Hunter Defense Authorization Act to minimize insurance costs for the DOD and contractors.

The Text of the Letter:

April 21, 2009

 

The Honorable Dennis J. Kucinich

Chairman, Subcommittee on Domestic Policy

Oversight and Government Reform Committee

2445 Rayburn House Office Building

 

Dear Chairman Kucinich:

 

The Los Angeles Times, in conjunction with ABC News and ProPublica, reported on Friday, April 17, 2009, that the health insurance claims of civilian contractors who participated in military operations in Iraq and Afghanistan have been denied with unsettling frequency.[1] I write to request that the Domestic Policy Subcommittee of the Committee on Oversight and Government Reform hold a hearing to examine the issues detailed in the Los Angeles Times, ABC News,and ProPublica investigation.

 

Per the Defense Base Act (DBA), 42 U.S.C. 1651-1654, contractors and subcontractors are required to purchase workers’ compensation insurance for employees working overseas. The insurance purchased must cover medical care and disability payments for workers injured in the performance of job duties; it must also provide death benefits for the families of employees killed on the job. The costs of insurance premiums paid by the contracting firms are then built into the price of the contract between the contractor and the Federal Government.

 

Right now, there are more than 31,000 current and continuing civilian injury claims, as well as more than 1,400 claims for death benefits. The American International Group, Inc. (AIG) and other insurers have received some $1.5 billion in premium payments, while paying out $900 million in compensation and expenses. According to the article, AIG is the primary insurer retained by contracting firms, handling some 90 percent of civilian claims filed in the war zones in 2007.

 

The article goes on to describe the difficulty that claimants have encountered in receiving benefits for medical care and disability payments, as well as the challenges faced by the families of those killed in receiving death benefits. From prosthetic limbs to treatment for Post Traumatic Stress Disorder, the claimants have faced a “reject first and investigate later” mentality from the insurers.[2] In order to receive their legally mandated compensation, claimants often have to resort to mediation or litigation.

 

The Department of Labor (DOL) is the administrator of the DBA by statute. However, the article notes that because of underfunding and increasing claim volume, DOL has been unable to adequately enforce that: (1) contractors provide the mandatory coverage required under the DBA; and (2) insurers process the claims fairly and consistently.

 

Not only have claims been denied unfairly, but the contractors and insurers are able to operate with relative impunity. The Department of Defense (DOD), unlike the State Department and the Agency for International Development, has not adopted a competitive single-contract process for retaining an insurer under the DBA. Therefore, insurers are free to demand their own premium costs from contractors, with the taxpayers ultimately footing the bill. Further, in a September 28, 2007 report, the U.S. Army Audit Agency found AIG premiums to be “unreasonably high.”

 

As you are aware, the full committee on Oversight and Government Reform held a hearing on the DBA on May 15, 2008. The hearing examined taxpayer costs under the DBA, as well as the Pentagon’s failure to put appropriate controls on the program. As a result, the Duncan Hunter National Defense Authorization Act for FY2009 (P.L. 110-417) included a provision requiring the DOD to adopt an acquisition strategy that minimizes insurance costs for both the DOD and for contractors. The strategy was to include a competitive marketplace for the selection of insurers.

 

Despite our efforts to include the above constraints on the 2009 Defense authorization, the status quo remains. Regrettably, those most in need of assistance – the civilian employees injured while assisting our military – continue to face unnecessary delay and harm.

 

While AIG is not the only insurer providing this coverage, that firm handles the bulk of the claims. Over the last few months, AIG has engaged in a pattern of deception and reckless behavior with respect to taxpayer funds, and I am deeply disturbed that the firm may be withholding any payments contractually due to civilian contractors injured in Iraq or the families of civilian contractors killed in Iraq.

 

As mentioned at the outset of this letter, I am requesting a hearing of the Domestic Policy Subcommittee that could potentially examine the DBA insurance practices at AIG, DOL’s inability to enforce the requirements of the DBA, and the Pentagon’s development and implementation of the strategy required under the 2009 National Defense Authorization Act.

 

I thank you for your continued hard work to address the needs of all Americans, and I look forward to hearing from you.

 

Sincerely,

 

Elijah E. Cummings

Member of Congress