Proposed reform of the US Defense Base Act insurance programme would create a captive insurer to cover defence contractor employees.
Elijah Cummings, who is the US Representative for the State of Maryland’s 7th congressional district, proposed the Defense Base Act Insurance Improvement Act of 2012 to the House Oversight and Government Reform Committee, of which he is the ranking member, on 6 June.
The Defense Base Act, which was enacted in 1941, requires defence contractors to purchase workers’ compensation insurance for employees who work overseas from private insurance companies.
This allows contractors and insurance companies to negotiate their own rates.
A 2009 US Pentagon study found that $250 million a year could be saved if a government self-insurance programme was used instead of the existing one.
The study said: “In the long run, the self-insurance alternative may have the greatest potential for minimising Defense Base Act insurance costs, and it has several administrative and compliance advantages as well.”
A House Oversight and Government Reform Committee investigation also found that insurance companies providing insurance under the Defense Base Act in Iraq and Afghanistan have made underwriting profits that are significantly higher than those of traditional workers’ compensation insurers, according to the 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.”
Cummings’s bill would make the Departments of Defense and Labor establish a self-insurance programme in which the government would pay directly for medical and disability benefits.
The Departments of Defense and Labor would have 12 months from enactment of the bill to implement a captive insurance programme.
