[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




 
 LEGISLATIVE HEARING ON H.R. 2379, H.R. 2713, H.R. 2774, AND H.R. 2968

=======================================================================

                                HEARING

                               before the

       SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL AFFAIRS

                                 of the

                   COMMITTEE ON ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 24, 2009

                               __________

                           Serial No. 111-31

                               __________

       Printed for the use of the Committee on Veterans' Affairs


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                     COMMITTEE ON VETERANS' AFFAIRS

                    BOB FILNER, California, Chairman

CORRINE BROWN, Florida               STEVE BUYER, Indiana, Ranking
VIC SNYDER, Arkansas                 CLIFF STEARNS, Florida
MICHAEL H. MICHAUD, Maine            JERRY MORAN, Kansas
STEPHANIE HERSETH SANDLIN, South     HENRY E. BROWN, Jr., South 
Dakota                               Carolina
HARRY E. MITCHELL, Arizona           JEFF MILLER, Florida
JOHN J. HALL, New York               JOHN BOOZMAN, Arkansas
DEBORAH L. HALVORSON, Illinois       BRIAN P. BILBRAY, California
THOMAS S.P. PERRIELLO, Virginia      DOUG LAMBORN, Colorado
HARRY TEAGUE, New Mexico             GUS M. BILIRAKIS, Florida
CIRO D. RODRIGUEZ, Texas             VERN BUCHANAN, Florida
JOE DONNELLY, Indiana                DAVID P. ROE, Tennessee
JERRY McNERNEY, California
ZACHARY T. SPACE, Ohio
TIMOTHY J. WALZ, Minnesota
JOHN H. ADLER, New Jersey
ANN KIRKPATRICK, Arizona
GLENN C. NYE, Virginia

                   Malcom A. Shorter, Staff Director

                                 ______

       SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL AFFAIRS

                    JOHN J. HALL, New York, Chairman

DEBORAH L. HALVORSON, Illinois       DOUG LAMBORN, Colorado, Ranking
JOE DONNELLY, Indiana                JEFF MILLER, Florida
CIRO D. RODRIGUEZ, Texas             BRIAN P. BILBRAY, California
ANN KIRKPATRICK, Arizona

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Veterans' Affairs are also 
published in electronic form. The printed hearing record remains the 
official version. Because electronic submissions are used to prepare 
both printed and electronic versions of the hearing record, the process 
of converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________

                             June 24, 2009

                                                                   Page
Legislative Hearing on H.R. 2379, H.R. 2713, H.R. 2774, and H.R. 
  2968...........................................................     1

                           OPENING STATEMENTS

Chairman John J. Hall............................................     1
    Prepared statement of Chairman Hall..........................    17
Hon. Doug Lamborn, Ranking Republican Member.....................     5
    Prepared statement of Congressman Lamborn....................    17

                               WITNESSES

U.S. Department of Veterans Affairs, Thomas M. Lastowka, 
  Director, Philadelphia Regional Office and Insurance Center, 
  Veterans Benefits Administration...............................    12
    Prepared statement of Mr. Lastowka...........................    23

Disabled American Veterans, John Wilson, Associate National 
  Legislative Director...........................................     9
    Prepared statement of Mr. Wilson.............................    21
Donnelly, Hon. Joe, a Representative in Congress from the State 
  of Indiana.....................................................     1
    Prepared statement of Congressman Donnelly...................    18
Halvorson, Hon. Deborah L., a Representative in Congress from the 
  State of Illinois..............................................     6
    Prepared statement of Congresswoman Halvorson................    19
Kirkpatrick, Hon. Ann, a Representative in Congress from the 
  State of Arizona...............................................    11
    Prepared statement of Congresswoman Kirkpatrick..............    20
Tragedy Assistance Program for Survivors, Inc., Washington, DC, 
  Bonnie Carroll, Chairman and Executive Director................     7
    Prepared statement of Ms. Carroll............................    20

                       SUBMISSIONS FOR THE RECORD

Buyer, Hon. Steve, a Representative in Congress from the State of 
  Indiana, statement.............................................    25
Paralyzed Veterans of America, statement.........................    25

                   MATERIAL SUBMITTED FOR THE RECORD

Post-Hearing Questions and Responses for the Record:
    Hon. John J. Hall, Chairman, Subcommittee on Disability 
      Assistance and Memorial Affairs, Committee on Veterans' 
      Affairs, to Bonnie Carroll, Chairman and Executive 
      Director, Tragedy Assistance Program for Survivors, letter 
      dated July 15, 2009, and response letter dated August 20, 
      2009.......................................................    27
    Hon. John J. Hall, Chairman, Subcommittee on Disability 
      Assistance and Memorial Affairs, Committee on Veterans' 
      Affairs, to Thomas M. Lastowka, Director, Philadelphia 
      Regional Office and Insurance Center, U.S. Department of 
      Veterans Affairs, letter dated July 15, 2009, and VA 
      responses..................................................    29


 LEGISLATIVE HEARING ON H.R. 2379, H.R. 2713, H.R. 2774, AND H.R. 2968

                              ----------                              


                        WEDNESDAY, JUNE 24, 2009

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
Subcommittee on Disability Assistance and Memorial Affairs,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 3:27 p.m., in 
Room 334, Cannon House Office Building, Hon. John Hall 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Hall, Halvorson, Donnelly, 
Kirkpatrick, and Lamborn.

               OPENING STATEMENT OF CHAIRMAN HALL

    Mr. Hall. Good afternoon, ladies and gentlemen. The 
Committee on Veterans' Affairs, Subcommittee on Disability 
Assistance and Memorial Affairs, Legislative Hearing on H.R. 
2379, H.R. 2713, H.R. 2774, and H.R. 2968 will now come to 
order.
    I would ask you to please rise for the Pledge of 
Allegiance. Flags are at both ends of the room.
    [Pledge of Allegiance.]
    Mr. Hall. Thank you.
    Today we will have testimony on these four pieces of 
legislation. As a courtesy to Congressman Donnelly, I will ask 
him first to speak on H.R. 2713, the ``Disabled Veterans Life 
Insurance Enhancement Act,'' which he sponsored, then I will 
give my opening statement and then we'll proceed to the rest of 
the bills.
    Mr. Donnelly, you are recognized.

 STATEMENT OF HON. JOE DONNELLY, A REPRESENTATIVE IN CONGRESS 
         FROM THE STATE OF INDIANA                    

    Mr. Donnelly. Thank you, Mr. Chairman. I greatly appreciate 
it.
    And to Chairman Hall and to Ranking Member Lamborn, who I 
am sure will be here a little bit later, I want to thank you 
for calling this legislative hearing and for the opportunity to 
speak on the need to enhance and update the Service-Disabled 
Veterans Insurance (S-DVI) Program. The life insurance policy 
offered to disabled veterans is badly out of date and, as a 
result, less than four percent of eligible veterans 
participate.
    I believe that life insurance speaks directly to President 
Lincoln's promise, to care for him who shall have borne the 
battle and for his widow and his orphan by providing financial 
assistance to families in the event of a veteran's death.
    However, Congress must recognize the importance of 
enhancing and updating life insurance for our service-connected 
disabled veterans and ensure that this policy better provides 
for the needs of participating veterans' families.
    The ``Disabled Veterans Life Insurance Enhancement Act'' 
would make long overdue changes to an existing life insurance 
program that covers veterans with service-connected 
disabilities. We have a responsibility to care for our veterans 
and their surviving loved ones, which is why I want to update 
the outdated life insurance program that currently covers our 
disabled servicemen and women.
    S-DVI was created in 1951 to provide life insurance to 
disabled veterans who, because of their service-connected 
disabilities, would be unable to obtain life insurance on the 
commercial market or would be required to pay especially high 
premiums.
    Veterans' groups have argued for years that the coverage is 
not enough, but efforts to increase the amount have not gained 
traction.
    In their annual Independent Budget, major veterans' groups 
support the idea of cutting premiums for the insurance and 
updating the mortality tables.
    The program started in 1951, but it used a 1941 mortality 
chart to set premiums and as a result, S-DVI is no longer 
competitive with commercial insurance.
    Currently, the policies are issued for a maximum face value 
of only $10,000, an amount that has not been updated for 58 
years.
    Additionally, the current mortality tables are almost 70 
years old. Tables now are based on the assumption that disabled 
vets die at an average of 58, which is no longer true given 
today's record.
    As life expectancy has significantly improved over the past 
60 years, commercial insurance companies have used up-to-date 
mortality tables. The newest table in general used by the 
insurance industry has premium rates roughly 50 percent lower 
than S-DVI rates.
    According to the veterans service officer from Elkhart 
County in my district, the average burial is about $6,500. If 
the disabled vet only has $10,000, that does not leave much for 
his loved ones.
    Mr. Chairman, veterans expect the same thing each of us do 
when we pay into a life insurance policy: the promise that when 
we pass, during that difficult time, our surviving loved ones 
are not burdened with not only the cost of the memorial and 
burial but other costs, day-to-day expenses, and the fear of 
how they will provide in the future.
    Unfortunately, that opportunity hardly exists with the 
current structure of S-DVI because the payment is capped at 
$10,000. Participating veterans are also denied the opportunity 
to purchase additional coverage through the program.
    This Act would enhance the S-DVI by increasing the maximum 
under base policies from $10,000 to $100,000 and offers an open 
period for eligible service-connected disabled veterans to 
apply if they are not currently enrolled.
    And while the $10,000 maximum coverage was part of the 
program from its 1951 start, the amount actually has not 
changed since the government first offered this kind of 
insurance in 1917.
    Put in perspective, according to the National Association 
of Insurance Commissioners, the average life insurance policy 
purchased in 2007 was $176,000.
    My legislation would direct the U.S. Department of Veterans 
Affairs (VA) to revise its premium schedule to reflect current 
mortality tables and increase the supplemental coverage for 
vets who have been rated 100-percent service-connected from 
$20,000 to $50,000. This bill has the support of the Disabled 
American Veterans (DAV).
    Since the S-DVI Program is not a fully self-supporting 
fund, it does require appropriations and, therefore, subsidies 
are expected to increase. Even though there are standard 
premium rates, for example, our 100-percent disabled veterans' 
base premiums are waived if they apply and are granted 
supplemental insurance. Keep in mind that these great American 
veterans have service-connected disabilities and are unable to 
obtain life insurance due to their conditions.
    I am aware expenses for this program will increase. But as 
Members of the Committee are aware, we must also increase our 
commitment to our disabled veterans who pay the price for their 
service and sacrifice.
    I am committed to fiscal responsibility and understand the 
necessary hurdles with Pay-As-You-Go rules. We are dedicated to 
pursuing the goal of updating S-DVI. We seek the support of my 
colleagues in doing something to bring this policy into the 
21st century, and we will work together to try and find the 
offsets for this program.
    Thank you very much for this chance to address the 
Subcommittee, Ranking Member Lamborn, Chairman Hall, and I want 
to thank you very much for your time.
    [The prepared statement of Congressman Donnelly appears 
on p. 18.]
    Mr. Hall. Thank you, Mr. Donnelly.
    I do have a few questions for you, but I know you are 
already late for another engagement.
    Mr. Donnelly. Go right ahead.
    Mr. Hall. Okay. Well, I will just briefly ask. The DAV has 
made two suggestions to amend your bill, which would allow an 
open enrollment and more choices for S-DVI levels of coverage.
    What do you think of those recommendations?
    Mr. Donnelly. We would be more than happy to work with the 
DAV and also with the Committee. We view this as a starting 
point, Mr. Chairman, and want to work with you and the Ranking 
Member in producing the best possible legislation.
    Mr. Hall. How did you determine the maximum benefit of 
$150,000 including base and supplemental coverage would be 
appropriate?
    Mr. Donnelly. What we tried to do is be reflective of the 
initial intention of the program adjusted for where we are in 
today's economy. Obviously, in 1951, it was $10,000. And what 
we tried to do is be reflective of the average life insurance 
policy today, which is at $176,000 and tried to have 
consideration of the costs as well that we face.
    And so that was the number we came up with. And, again, 
that is a number that we are more than happy to work with the 
Committee to find the most appropriate place.
    Mr. Hall. Lastly, the 3.5 percent participation rate is 
shockingly small. If Congress made the rates more equitable 
with the private sector, do you think more veterans would 
participate?
    Mr. Donnelly. We think we would see a significant increase. 
With a policy that is at $10,000, people just do not see it as 
really part of the solution of taking care of their family.
    Mr. Hall. Ranking Member Lamborn, would you like to ask 
some questions?
    Mr. Lamborn. No. But I do want to say that I support this 
legislation. I think that it is well-formed and I certainly 
look forward to tweaking it a little bit. I certainly support 
the thrust behind it and look forward to working together on 
it.
    Mr. Donnelly. Thank you, Ranking Member.
    And I will tell you what. We feel that the legislation can 
only become better as we work with you and the Chairman and the 
Committee.
    Mr. Hall. Thank you, Mr. Donnelly.
    Mr. Donnelly. Yes, sir. Thank you for your consideration as 
well.
    Mr. Hall. You are very welcome.
    I believe our other witnesses are, some of them are here 
and some of them will be here. I am sorry we were late once 
again. Procedural votes on the floor delayed us as you probably 
know.
    So we are considering H.R. 2379, H.R. 2713, H.R. 2774, and 
H.R. 2968. These measures are all critical and common-sense 
bills intended to ensure that our veterans and their families 
who have insurance related needs while they are living receive 
the full measure of benefit and that their survivors have ample 
replacement income to meet their needs.
    Additionally, these bills would allow veterans to make the 
necessary plans to ensure that their loved ones are provided 
for adequately and have financial security.
    All the bills are relatively noncontroversial. They would 
give veterans greater flexibility in their insurance choices 
and, consequently, greater peace of mind. I am happy to have 
them under consideration today.
    Specifically, H.R. 2379, the ``Veterans' Group Life 
Insurance Improvement Act of 2009,'' sponsored by Mr. Buyer, 
would allow veterans to purchase up to $400,000 of Veterans' 
Group Life Insurance (VGLI) coverage in $25,000 increments 
every 5 years until the age of 60, giving veterans greater 
options in their life insurance choices.
    Mr. Donnelly's bill, which we just heard about, would make 
long overdue updates and changes to the VA's Service-Disabled 
Veterans' Insurance Program, including increasing basic and 
supplemental coverage and updating the 1941 rate tables.
    The ``Families of Veterans Financial Security Act,'' H.R. 
2774, sponsored by Mrs. Halvorson, a freshman Member on this 
Committee, would make permanent the 2-year extension of the 
free Servicemembers' Group Life Insurance (SGLI) coverage 
period for servicemembers who are totally disabled on the date 
of their separation from active duty or Reserve status.
    And, lastly, H.R. 2968, sponsored by Mrs. Kirkpatrick, 
another freshman Member on this Committee, would amend the 
provision that allows a servicemember with SGLI or a veteran 
with VGLI who is terminally ill to get half of their SGLI or 
VGLI coverage while they are still alive by eliminating the 
discount rate that VA applies to this payment.
    This bill would make the policies consistent with the 
commercial insurance industry and provide significant benefit 
to servicemembers and veterans by not discounting and, hence, 
lowering these payments.
    I commend the Members for sponsoring these thoughtful 
measures and look forward to hearing from all of our witnesses 
on these bills. And I thank you for being here today.
    I now yield to Ranking Member Lamborn for his opening 
statement.
    [The prepared statement of Chairman Hall appears on p. 17.]

             OPENING STATEMENT OF HON. DOUG LAMBORN

    Mr. Lamborn. Thank you, Mr. Chairman, for holding this 
hearing to discuss the legislation before us.
    H.R. 2379, the ``Veterans' Group Life Insurance Improvement 
Act of 2009,'' was introduced by full Committee Ranking Member 
Steve Buyer and it would increase the amount of life insurance 
available to veterans.
    Veterans' Group Life Insurance provides veterans the 
ability to obtain a competitive life insurance policy for them 
and their family in post-military life.
    Under current law, separated servicemembers have up to 1 
year from discharge to convert their Servicemembers' Group Life 
Insurance policies to VGLI. And whatever level of coverage they 
select at that time is unchangeable.
    Many are young and do not see the need to carry a large 
amount of life insurance coverage. However, as they get older 
and have families, the need for additional coverage grows.
    This bill would allow veterans to purchase up to $400,000 
of VGLI coverage in $25,000 increments every 5 years until the 
age of 60. The cost of such increases in coverage will be 
offset by premiums veterans pay, so there is no direct cost to 
the government.
    The opportunity to allow our veterans greater flexibility 
in their life insurance choices without increasing the burden 
on taxpayers leaves little doubt as to whether H.R. 2379 is a 
worthy measure.
    I urge all members to cosponsor and support this 
legislation.
    I also want to thank my colleagues, Mrs. Halvorson and Mrs. 
Kirkpatrick and Mr. Donnelly, for introducing the other 
measures before us today. These bills would also make 
improvements to insurance benefits for veterans, and I want to 
note my support for them.
    I thank the Chair and the witnesses for their testimony and 
I yield back.
    [The prepared statement of Congressman Lamborn appears on 
p. 17.]
    Mr. Hall. Thank you, Congressman Lamborn.
    I would remind all panelists that your complete written 
statements have been made a part of the hearing record. Please 
limit your remarks so that we may have sufficient time for 
follow-up questions once everyone has heard the testimony.
    And since Mr. Buyer is not here, I do not believe he will 
be able to attend. I understand that he is otherwise tied up.
    But I am sure, Mr. Lamborn, if we need more description of 
the legislation, we can get it from our Ranking Member.
    Mr. Donnelly, we already heard from.
    Mrs. Halvorson, you are next and recognized for 5 minutes.

 STATEMENT OF HON. DEBORAH L. HALVORSON, A REPRESEN-TATIVE IN 
           CONGRESS FROM THE STATE OF ILLINOIS       

    Mrs. Halvorson. Thank you, Mr. Chairman, and good 
afternoon. Thank you so much for holding this hearing.
    And Ranking Member, Mr. Lamborn, and Members of the 
Subcommittee, thank you for allowing me to speak.
    I am excited to be here to discuss H.R. 2774, the 
``Families of Veterans Financial Security Act.'' H.R. 2774 
would make permanent the extension that totally disabled 
veterans currently receive from the Servicemembers' Group Life 
Insurance.
    SGLI is operated by the Department of Veterans Affairs and 
provides low-cost group life insurance to Members of the 
uniformed services.
    It was originally developed to make insurance benefits 
available for veterans and servicemembers who were not able to 
secure insurance from private companies due to the extra risk 
involved in military service or because of service-connected 
disability.
    Currently the SGLI disability extension allows 
servicemembers who are totally disabled at the time they are 
discharged to retain their SGLI coverage at no cost for up to 2 
years. This extension has guaranteed that the veterans that are 
in most need, the ones that are seriously disabled as a result 
of their service, are fully covered under the SGLI Program and 
will not lose their life insurance coverage.
    It has given military families the peace of mind that their 
financial security is strong so that they can worry about their 
loved ones and not the worst case scenario.
    Furthermore, the extension has provided additional time for 
VA to contact veterans and assist them with making informed 
decisions about what life insurance options are available after 
they are no longer eligible for the SGLI Program.
    Unfortunately, the SGLI extension is set to expire, 
potentially costing disabled veterans thousands of dollars. If 
allowed to expire, the extension would fall to only 18 months 
of coverage as opposed to the 24 that veterans currently 
receive.
    H.R. 2774 would make permanent the 24-month extension and 
allow veterans to continue to focus on what is most important, 
their rehabilitation and recovery.
    My bill maximizes the opportunity for disabled veterans who 
have limited or no opportunity of obtaining commercial 
insurance to obtain insurance coverage, insurance coverage that 
will provide financial security to the families of our wounded 
warriors.
    There is no cost to the government that is associated with 
this legislation as the SGLI Program will assume all costs.
    Thank you, Mr. Chairman and Members of the Subcommittee. I 
would be happy to address any questions that you or any of the 
other Members of the Committee would have for me.
    [The prepared statement of Congresswoman Halvorson appears 
on p. 19.]
    Mr. Hall. Thank you, Mrs. Halvorson.
    Mrs. Halvorson. I yield back.
    Mr. Hall. We do have some questions. I would like to ask, 
while it seems to make a lot of sense, of course, to 
permanently extend the coverage period for SGLI for 2 years, 
since servicemembers who are disabled are going through a very 
difficult and trying time, have you had any feedback from 
servicemembers or their families who have benefited from this 
coverage and what did they think?
    Mrs. Halvorson. Well, what I have heard, and we are talking 
here about service-related totally disabled veterans, and these 
are the veterans that often cannot find any other commercially 
offered insurance, and I have a Veterans Advisory Committee, 
and this is one of the things that came to my attention as 
something that they find very, very important as they are 
making these informed decisions with their family.
    Mr. Hall. Thank you.
    Mr. Lamborn, would you like to ask a question?
    Mr. Lamborn. No. Thank you for the opportunity. But I do 
want to just reiterate my support for this good measure and I 
am happy that I can support it. I commend the gentlelady for 
offering it.
    Mrs. Halvorson. Thank you, Mr. Lamborn.
    Mr. Hall. Thank you, Mr. Lamborn and Mrs. Halvorson.
    Since Mrs. Kirkpatrick is delayed, we will wait to hear 
from her and ask panel two to join us at the witness table.
    Bonnie Carroll, the Founder of the Tragedy Assistance 
Program for Survivors (TAPS), and John Wilson, the Associate 
National Legislative Director of Disabled American Veterans.
    Welcome, both of you. You know the routine by now. Your 
full statements, written statements are entered in the record 
and you may amend them or abridge them as you see fit.
    Ms. Carroll, you are now recognized for 5 minutes.

STATEMENTS OF BONNIE CARROLL, CHAIRMAN AND EXECUTIVE DIRECTOR, 
TRAGEDY ASSISTANCE PROGRAM FOR SURVIVORS, INC., WASHINGTON, DC; 
   AND JOHN WILSON, ASSOCIATE NATIONAL LEGISLATIVE DIRECTOR, 
                   DISABLED AMERICAN VETERANS

                  STATEMENT OF BONNIE CARROLL

    Ms. Carroll. Thank you, Mr. Chairman and distinguished 
Members of the Subcommittee.
    On behalf of the Tragedy Assistance Program for Survivors 
and the families of those who have died while serving in the 
Armed Forces, I am honored to have the opportunity to testify 
today.
    Thank you for the compassionate care this Committee has 
given our veterans and the surviving family members of our 
fallen warriors. Through your vigilance and prompt action on 
key legislation, you have ensured America is honoring those who 
have served and sacrificed for freedom.
    As the widow of a soldier killed in the Army National 
Guard, a Reserve officer of 26 years myself, former White House 
liaison for the Department of Veterans Affairs, Department of 
the Army Civilians Serving in Iraq, and member of the 
Department of Veterans Affairs Advisory Committee on Disability 
Compensation, and as the Executive Director of TAPS, I have 
seen the best of the services provided to our surviving 
families both in the public and private sectors. It is a 
privilege to offer my insight today.
    H.R. 2379, the ``Veterans' Group Life Insurance Improvement 
Act of 2009,'' brings parity to VGLI, matching the maximum 
benefit of $400,000 from the Servicemen's Group Life Insurance 
from which they are transferring this important benefit upon 
leaving military service and transitioning to veteran status.
    This is an important change to the VGLI because it gives 
additional flexibility to the veterans and increases their 
ability to provide for their families.
    As it currently stands, the S-DVI, the Service-Disabled 
Veterans Insurance, which offers a benefit to those who survive 
the death of a service-disabled veteran, is outdated and in 
dire need of improvement.
    As noted in honoring the call to duty, veterans' disability 
benefits in the 21st century, Congress explicitly intended to 
have S-DVI premiums hover close to the private sector's 
premiums for nondisabled individuals.
    The current $10,000 limit is far from the 2007 average life 
insurance policy of $176,000. Today, $10,000 barely covers the 
cost of the average funeral.
    By increasing the life insurance premium and life insurance 
maximum to $100,000, veterans are better able to provide 
financial support for their families after their death.
    When S-DVI was created in 1951, it based premiums on a 
mortality chart that was already a decade old. In the years 
following, the premiums have not been adjusted to incorporate 
changes in life expectancy, making premiums unnecessarily high 
for our veterans.
    We support the adjustment proposed in H.R. 2713, the 
``Families of Veterans Financial Security Act,'' which 
increases the time after separation from active duty from 18 
months to 2 years during which a servicemember can receive SGLI 
coverage, it is an important improvement to SGLI.
    TAPS supports this legislation and applauds the Committee's 
compassionate understanding of the challenges facing service-
disabled veterans and their families during this critical time.
    The greatness of a nation and its moral progress can be 
judged by the way its veterans and those who serve them are 
treated.
    Today's hearing and the legislation proposed makes strides 
toward improving the financial security of the surviving family 
members of our warriors.
    On behalf of the families of our fallen heroes and TAPS, I 
appreciate the dedication and commitment of the distinguished 
Members of the Subcommittee to protect, defend, restore, and 
improve the services provided to those who have served our 
Nation in peace and war and their families.
    Thank you for the opportunity to submit testimony on behalf 
of the surviving families.
    [The prepared statement of Ms. Carroll appears on p. 20.]
    Mr. Hall. Thank you, Ms. Carroll.
    Mr. Wilson, you are now recognized for 5 minutes.

                    STATEMENT OF JOHN WILSON

    Mr. Wilson. Thank you, Mr. Chairman.
    Mr. Chairman, Members of the Subcommittee, on behalf of the 
DAV, I am pleased to address the ``Disabled Veterans' Life 
Insurance Enhancement Act,'' H.R. 2713, which would amend Title 
38 U.S. Code to make certain improvements in the Service-
Disabled Veterans' Insurance Program of the VA.
    Specifically, this bill would provide for a 2-year period, 
beginning on the date of its enactment, during which a 
qualified veteran may submit an application for insurance 
despite the fact that such claimant's time limit for filing an 
application for service-disabled insurance may have expired.
    Further, H.R. 2713 would increase the maximum amount of 
protection from $10,000 to $100,000 and would increase the 
supplemental insurance for totally disabled veterans from 
$20,000 to $50,000.
    Finally, the bill would replace the Commissioner's 1941 
standard ordinary table of mortality with an appropriate and a 
current mortality table as selected by the Secretary.
    The four veterans service organizations (VSOs) of The 
Independent Budget have consistently stood behind the need to 
lower the premium schedule for Service-Disabled Veterans' 
Insurance or S-DVI, specifically advocating that the VA be 
authorized to charge lower premiums for S-DVI policies based on 
improved life expectancy under current mortality tables.
    Congress created the S-DVI Program to furnish disabled 
veterans' life insurance at standard rates because the service-
connected disabilities veterans have make it difficult for them 
to obtain commercial life insurance. If they obtain commercial 
life insurance, they are charged higher premiums.
    When this program began in 1951, its rates were based on 
mortality tables of that time and were competitive with 
commercial insurance. Commercial rates have since been lowered 
to reflect improved life expectancy.
    However, the VA has continued to base its rates on 
mortality tables from 1941. Consequently, S-DVI premiums are no 
longer competitive for the commercial insurance and, therefore, 
no longer provide the intended benefit.
    The current $10,000 maximum for life insurance under S-DVI 
does not adequately provide for the needs of survivors. When 
life insurance for veterans had its beginnings in the War Risk 
Insurance Program first made available to members of the Armed 
Forces in October 1917, coverage was limited to $10,000. A 
$10,000 life insurance policy that provided sufficiently for 
loss of income from the death of an insured in 1917 certainly 
does not do so in 2009.
    We would, however, propose two amendments for the 
Subcommittee's consideration. First, we would suggest the 
legislation be modified to provide an open-ended period for 
veterans to apply for Service-Disabled Veterans' Insurance 
which is consistent with the DAV's resolution number 16.
    Under the current program, service-connected disabled 
veterans are entitled to apply for S-DVI within 2 years from 
the date the VA grants service connection for any disability. 
Many eligible veterans, due to financial difficulties and 
problems associated with the adjustment to civilian life, do 
not apply for this insurance within the eligibility period.
    Many of the same disabled veterans are now prepared and can 
afford to purchase insurance, but are not able to purchase 
comparable insurance coverage in the private sector. The DAV 
seeks the enactment of legislation that would authorize an open 
period for eligible service-connected disabled veterans to 
apply for coverage under the S-DVI Program.
    Second, we would suggest legislative language be modified 
to allow veterans to choose the amounts of S-DVI coverage in 
increments of $10,000, up to a $100,000 maximum. This level of 
flexibility would allow them to structure the insurance 
coverage that best suits their financial and personal needs.
    Given the aforementioned references in The Independent 
Budget and DAV's resolution on this subject, we fully support 
this long overdue and beneficial legislation.
    We also extend our appreciation to Mr. Donnelly for 
introducing this important legislation that, if adopted, will 
ease the burden faced by so many that, up until now, have had 
no prospect for adequately providing for their families.
    We also applaud the efforts of every Member of this 
Subcommittee for their advocacy in this critical area.
    Regarding the ``Veterans' Group Life Insurance Improvement 
Act of 2009,'' H.R. 2379, the ``Families of Veterans Financial 
Security Act,'' H.R. 2774, and requiring the reduction in the 
amount of accelerated death benefits payable to certain 
terminally ill persons under ``Servicemembers' Group Life 
Insurance, Veterans' Group Life Insurance,'' H.R. 2968, the DAV 
has no resolutions on these issues. However, we have no 
opposition to their favorable consideration.
    This concludes my testimony, and I will be happy to answer 
any questions the Subcommittee may have.
    [The prepared statement of Mr. Wilson appears on p. 21.]
    Mr. Hall. Thank you, Mr. Wilson.
    Ms. Carroll, recognizing that hindsight is 20/20, what 
could VA do better or what could VA do to better ensure that 
veterans and their families understand their insurance program 
options before it is too late? How could or how should VA use 
its newly instituted Office of Survivors Assistance, 
established in Public Law 110-389, in this regard?
    Ms. Carroll. The Office of Survivors Assistance has become 
a primarily policy focused shop. There is an Office of 
Survivors Assistance in Veterans Benefits Administration (VBA) 
which is extremely active and is a day-to-day boots-on-the-
ground of the families.
    And I want to applaud the VA for that office in VBA which 
our organization works with on a daily basis. I really feel 
that the VA has done an outstanding job in providing assistance 
to our families and that office has done a tremendous job to 
support and educate families and handle any issues that have 
arisen.
    Mr. Hall. Mr. Wilson, currently, service-connected disabled 
vets are entitled to apply for service-disabled insurance, S-
DVI, within 2 years from the date that VA grants service-
connection.
    In your testimony on H.R. 2713, you recommend modifying the 
legislation to provide for an open-ended period for veterans to 
apply for S-DVI.
    How long would your proposed open-ended period be 
effective? Do you see it as truly open-ended or are you just 
thinking about a longer time?
    Mr. Wilson. We would see that as truly open-ended, yes, 
sir. As long as a veteran has the opportunity, would have the 
means and the financial wherewithal to apply, they should be 
able to do so. Circumstances may change over time. Employment 
may improve. Family situations may improve. We do not know.
    The concern we also have is in asking for an amendment to 
the proposed legislation, which, as I said before, we think 
this is excellent, an excellent bill, is that we understand 
there are some veterans who are in rural areas, perhaps urban 
areas who just do not have the income to manage the small 
premiums as they are right now for the $10,000 policy.
    We anticipate when these new mortality tables are reviewed 
and updated, then, in fact, premiums may go down, which will be 
a benefit. And we also believe that with lower premiums, the 
veterans should then be able to apply for larger amounts of 
insurance, but up to various increments to the $100,000 level 
and for an open-ended period.
    Mr. Hall. Thank you.
    Mrs. Kirkpatrick, would you like to ask questions of our 
second panel?
    Mrs. Kirkpatrick. Thank you, Chairman. I do not have any 
questions of this panel. Thank you.
    Mr. Hall. Well, I thank you both for your testimony and for 
your patience. You are excused. Our second panel is excused. 
Thank you for your patience and have a good day.
    Now, Mrs. Kirkpatrick, I would recognize you to speak on 
your legislation.

STATEMENT OF HON. ANN KIRKPATRICK, A REPRESENTATIVE IN CONGRESS 
           FROM THE STATE OF ARIZONA                 

    Mrs. Kirkpatrick. Thank you, Mr. Chairman. I appreciate 
this opportunity to put my comments on the record regarding my 
bill, H.R. 2968, which will be named the ``VGLI SGLI 
Accelerated Benefits Option Equity Act of 2009.''
    I introduced this bill with Republican Walter Jones of 
North Carolina to do just one thing: to make the group life 
insurance offered to veterans and servicemembers both fairer 
and more consistent with commercial life insurance.
    Under both Veterans' Groups Life Insurance and 
Servicemembers' Group Life Insurance, when a veteran or a 
servicemember is terminally ill, they can elect to receive up 
to half of their coverage while they are still alive. They can 
use this accelerated benefits option (ABO) to pay medical 
bills, improve their quality of life, or in any way they see 
it.
    However, current regulations require VGLI and SGLI to 
decrease the payout these veterans and servicemembers collect 
by a percentage based on the prevailing interest rates. In 
recent years, this has amounted to a decrease of as much as 
$6,000.
    By contrast, most commercial life insurance policies that 
allow ABO withdrawals do not decrease this payout to claimants. 
We can and must do better for our veterans.
    This simple, common-sense bipartisan bill removes this 
deduction so that we might better serve terminally ill veterans 
and servicemembers at the most financially vulnerable time for 
them and their families.
    Removing this deduction can be accomplished using the life 
insurance premiums veterans and servicemembers currently pay. 
This means that we can accomplish this important change without 
any additional cost to veterans, servicemembers, or taxpayers, 
and without PAYGO implications.
    Mr. Chairman, I appreciate again this opportunity to speak 
about H.R. 2968 and thank you for your consideration.
    [The prepared statement of Congresswoman Kirkpatrick 
appears on 20.]
    Mr. Hall. Thank you, Mrs. Kirkpatrick. I have two questions 
for you if you could answer them, please.
    First, have you had any feedback on how VA would go about 
determining eligibility for this benefit and, second, would a 
veteran have to be admitted to a hospice program, for instance?
    Mrs. Kirkpatrick. You know, I do not have information about 
either one of those questions, but we will research that and 
get an answer back to you.
    Mr. Hall. Okay. Thanks. And perhaps we will hear from our 
next panel about that as well. Thank you very much for being 
here and for this legislation which I believe would do a great 
service to our veterans.
    Mrs. Kirkpatrick. Thank you, Mr. Chairman.
    Mr. Hall. Now I would ask our third panel to join us at the 
witness table. Thomas M. Lastowka, Director of the VA Regional 
Office and Insurance Center, Veterans Benefits Administration, 
U.S. Department of Veterans Affairs, and Richard J. Hipolit, 
Assistant General Counsel of the Department of Veterans 
Affairs.
    Gentlemen, thank you for being here and thank you for your 
patience this afternoon. I would remind you as always that your 
written testimony is in the record, so feel free to deviate 
from it if you wish.
    Mr. Lastowka, you are recognized for 5 minutes, sir.

    STATEMENT OF THOMAS M. LASTOWKA, DIRECTOR, PHILADELPHIA 
    REGIONAL OFFICE AND INSURANCE CENTER, VETERANS BENEFITS 
     ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS; 
 ACCOMPANIED BY RICHARD J. HIPOLIT, ASSISTANT GENERAL COUNSEL, 
 OFFICE OF GENERAL COUNSEL, U.S. DEPARTMENT OF VETERANS AFFAIRS

    Mr. Lastowka. Thank you very much, Mr. Chairman.
    Mr. Chairman and Members of the Subcommittee, I appreciate 
the opportunity to appear before you today to discuss various 
legislative proposals pending in the 111th Congress that would 
impact the VA Life Insurance Programs.
    We are pleased to support much of the legislation that is 
part of the Subcommittee's agenda today.
    H.R. 2774 would make permanent the extension of the 
duration of the free coverage for totally disabled veterans in 
the Servicemembers' Group Life Insurance Program.
    At the end of the 2-year disability extension period, the 
individual's SGLI is automatically converted to VGLI, Veterans' 
Group Life Insurance, providing financial security for 
disabled-veterans and their families.
    Under current law, the extension period will be decreased 
to 18 months in 2011. Any costs associated with keeping the 
extension period at 2 years permanently would be absorbed by 
the SGLI Program. VA strongly supports H.R. 2774.
    H.R. 2379 would improve the VGLI Program by making a 
greater amount of life insurance available to the program's 
insured veterans.
    Currently, veterans can convert only the amount of SGLI 
they had at the time of their separation. This bill would 
permit veterans, including those with service-connected 
disabilities, to increase their VGLI by $25,000 every 5 years 
until age 60. Veterans could buy up to whatever the new 
existing SGLI coverage is, currently $400,000.
    Currently, 96 percent of those insured under VGLI have less 
than $400,000 coverage. Insured veterans in the VGLI program 
have expressed interest in obtaining more coverage. There is no 
cost to the government. The cost would be absorbed by the VGLI 
Program. VA strongly supports the enactment of H.R. 2379.
    H.R. 2968, would positively impact the benefit known as the 
accelerated benefit option or ABO. ABO allows terminally ill 
servicemembers insured by SGLI or VGLI to receive up to 50 
percent of the life insurance coverage prior to their death to 
use at their discretion.
    Unlike commercial versions of this benefit, the statute 
covering the ABO requires us to discount the amount of the 
payment that is reduced by the time value of money. This 
amendment would eliminate that requirement. Any cost would be 
absorbed by the program. VA strongly supports this proposal.
    H.R. 2713, Mr. Chairman, in our discussion with your staff, 
we understand what this legislation is intended to do. In our 
review, we think we have discovered some technical difficulties 
which would require some changes to do what the sponsor wants 
it to do, and we are prepared to discuss those with Committee 
staff.
    Nonetheless, though, we are prepared to testify on what we 
believe the legislation is trying to do. The legislation would 
provide for a 2-year open season to veterans who are otherwise 
eligible for S-DVI, but did not submit an application or 
premium payment within the current 2-year statutory period.
    The bill would require that S-DVI premiums be based on an 
updated mortality table. The maximum amount of S-DVI would be 
increased from $10,000 to $100,000 and the maximum supplemental 
S-DVI would increase from $20,000 to $50,000.
    VA opposes H.R. 2713 because it goes far beyond the 
appropriate and the legitimate policy goals normally associated 
with the VA life insurance programs the foremost which is to 
enable veterans to regain the opportunities to purchase life 
insurance they may have lost due to their military service.
    This bill would create a new and expensive program offering 
insurance policies far beyond what would be normally available 
to similarly situated civilians. Under this bill, many older 
veterans who are now totally disabled due to their service-
connected disabilities would be eligible for $100,000 of basic 
S-DVI and for the $50,000 S-DVI supplemental coverage. Because 
of the cost of this program, of these policies, and the 
disproportionate number of policyholders who would be in poor 
health when they apply, there would be a substantial annual 
appropriation needed to fund this program.
    We believe the combination of eligibility criteria and 
advancing age of the veterans covered by the legislation would 
create an expensive benefit and would be available to veterans 
in a rather haphazard fashion depending on their age, their 
employability status, decisions they made on insurance needs 
over the past 58 years, and on the sequencing of the veterans 
in developing getting service-connected and nonservice-
connected disabilities.
    We are unable to provide cost estimates at this time. We 
would like to submit them later in writing. But so far, we have 
determined that there would be substantial cost, quite possibly 
billions of dollars.
    For these reasons, VA opposes enactment of H.R. 2713.
    [The VA provided the cost estimate for H.R. 2713 in 
response to question #7 of the Post-Hearing Questions and 
Responses for the Record, which appear on p. 27.]
    Thank you, Mr. Chairman. I am open for questions.
    [The prepared statement of Mr. Lastowka appears on p. 23.]
    Mr. Hall. Thank you, Mr. Lastowka.
    H.R. 2379 would permit veterans with Veterans' Group Life 
Insurance coverage to increase their VGLI coverage once every 5 
years in increments up to $25,000.
    You mentioned that VA would prefer that each increase be in 
a single increment of 25,000. Why does VA prefer that the level 
of VGLI coverage be in those increments?
    Mr. Lastowka. We prefer that it be in those increments, Mr. 
Chairman, basically to keep down the administrative costs of 
the program. If our contractor, Prudential, can administer a 
simpler program, we believe we can keep the costs down, and 
that can be accomplished by insurance increases generally being 
issued in larger amounts rather than smaller amounts.
    Mr. Hall. Ms. Carroll noted during her testimony that 
premiums under VGLI increase every 5 years, unlike commercial 
policies available to veterans.
    Does this legislation then allow VGLI to compete with the 
private sector? Is it enough, in other words, to bring parity 
to the VGLI and SGLI programs?
    Mr. Lastowka. Mr. Chairman, VGLI is very competitive with 
commercial policies. In commercial insurance where you are 
selling a 5-year term product, all commercial insurers raise 
their premiums every 5 years.
    There are permanent plans of insurance offered which will 
have a single premium over the lifetime of the product, but 
those are generally much more expensive than term insurance.
    The concept in today's insurance industry is you buy 
insurance and you invest the rest. And term policies have 
become much more popular.
    Mr. Hall. What are the participation levels for the VGLI 
and SGLI programs?
    Mr. Lastowka. Right now, Mr. Chairman, for SGLI, it is 
close to 99 percent for active-duty servicemembers. For VGLI, I 
believe our conversion rate is in the 35 percent area. In the 
commercial equivalent where people are converting group 
policies to individual policies, that is generally under 2 
percent.
    I would like to confirm in writing the 35 percent figure I 
am giving you because I would not want to give you bad data, 
sir.
    Mr. Hall. Okay. Maybe you could do that, if you would get 
back to us in writing. Also, include whether you think that 
there is a disparity between the two, and would more parity 
between VGLI and SGLI be enough to decrease the attrition rate 
of SGLI/VGLI transfer.
    Mr. Lastowka. That is----
    Mr. Hall. You can respond to that in writing.
    Mr. Lastowka [continuing]. That in writing, okay.
    [The VA provided the information in the post-hearing 
questions and responses for the record, which appear on p. 29.]
    Mr. Hall. Ms. Carroll also mentioned that the VGLI price 
tag for a 75-year-old veteran is $20,520 per year.
    How could VA reduce this premium price? Would VGLI be more 
viable and self-sustaining if it had fixed premiums similar to 
some commercial insurance policies?
    Mr. Lastowka. Mr. Chairman, if we had a fixed premium, 
those fixed premiums at the younger age would be much higher. 
And I believe we would lose participation if we moved to a 
fixed premium.
    Generally, at older ages, insurance needs decrease as 
children have grown and have completed college already. And the 
best option at the higher ages is to reduce the amount of 
coverage which is generally consistent with the insurance needs 
of most Americans.
    Mr. Hall. The VSOs and Veterans Disability Benefits 
Commission express concerns over VA using a 1941 mortality 
table.
    Is there a reason why that has been continued all these 
years?
    Mr. Lastowka. If you were to design a new insurance 
program, Mr. Chairman, you would not use that table. 
Introducing it into a program that is now 58 years old becomes 
much more problematic and generally it is a much higher cost to 
the government if you would try to change that table at this 
point in time.
    Mr. Hall. Last, I would like to ask--we have more 
questions, but we will submit them in writing to you and ask 
you to get back to us--but according to your calculations, what 
would the cost be of enacting H.R. 2774? Do you have an 
estimate of that?
    Mr. Lastowka. H.R. 2774 is the change to the S-DVI 
Disability Extension?
    Mr. Hall. No, H.R. 2774.
    Mr. Lastowka. We have not finalized--oh, I am sorry, Mr. 
Chair. We do not believe there would be a cost to the 
government in doing that. That feature of the extension is 
already priced into the premiums for SGLI and so it would be no 
cost.
    Mr. Hall. How could or how should the VA use its newly 
instituted Office of Survivors Assistance, established in 
Public Law 110-389, in this regard?
    Mr. Lastowka. Mr. Chairman, first you have to let me brag a 
little bit about the VA's service to veterans.
    Mr. Hall. Go ahead. Yes, sir.
    Mr. Lastowka. Whenever a servicemember gets out of the 
service with a service-connected disability of 50 percent or 
more or if they soon receive a service connection of 50 percent 
or more by the VA, the insurance program contacts each 
individual personally. We generally try to do this by telephone 
and point out to them the advantage of switching to the VGLI.
    We have had a very high success rate with close to 100 
percent of those rated at 100 percent taking the VGLI coverage 
and over 60 percent overall. And so we are doing quite a good 
job.
    I think the VA's Office of Survivors Assistance by raising 
general awareness of what VA benefits are available will 
further increase those outreach efforts.
    Mr. Hall. We thank you. We will submit more questions in 
writing to you, sir. But thank you for being here today and 
testifying.
    Mr. Hipolit, I am sorry we did not have any questions 
directly for you.
    But also, we would like to thank the Paralyzed Veterans of 
America for submitting a statement for the record on these 
important bills.
    Thanks to our Members and Ranking Member Lamborn and 
Minority Counsel and everyone who is here today for your 
patience and your statements this afternoon. We value your 
insight and opinions and we will be moving ahead with tweaks, 
as Mr. Lamborn said, or amendments to some or all of these 
pieces of legislation and marking them up in the future.
    So thank you again, and this hearing stands adjourned.
    [Whereupon, at 4:14 p.m., the Subcommittee was adjourned.]



                            A P P E N D I X

                              ----------                              

           Prepared Statement of Hon. John J. Hall, Chairman,
       Subcommittee on Disability Assistance and Memorial Affairs

    Please rise for the Pledge of Allegiance.
    Good Afternoon. Today the Disability Assistance and Memorial 
Affairs Subcommittee of the House Committee on Veterans' Affairs will 
address four bills relating to insurance benefits for our veterans and 
servicemembers, H.R. 2379, H.R. 2713, H.R. 2774, and H.R. 2968.
    These measures are all critical and common sense bills intended to 
ensure that our veterans and their families who have insurance-related 
needs while they are living receive the full measure of the benefit--
and, that their survivors have ample replacement income to meet their 
needs. Additionally, these bills would allow veterans to make the 
necessary plans to ensure that their loved ones are provided for 
adequately and have financial security. All of the bills are relatively 
non-controversial, would give veterans greater flexibility in their 
insurance choices, and consequently greater peace of mind. I am happy 
to have them under consideration today.
    Specifically, the Veterans' Group life Insurance Improvement Act of 
2009, H.R. 2379, sponsored by Mr. Buyer, would allow veterans to 
purchase up to $400,000 of VGLI coverage in $25,000 increments every 5 
years until the age of 60--giving veterans greater options in their 
life insurance choices.
    The Disabled Veterans Life Insurance Enhancement Act, H.R. 2713, 
sponsored by Mr. Donnelly, would make long overdue updates and changes 
to the VA's Service Disabled Veterans' Insurance program, including 
increasing basic and supplemental coverage amounts and updating the 
1941 rate tables.
    The Families of Veterans Financial Security Act, H.R. 2774, 
sponsored by Ms. Halvorson, a freshman Member on this Committee, would 
make permanent the 2-year extension of the free SGLI coverage period 
for servicemembers who are totally disabled on the date of their 
separation from active duty or reserve status.
    Last, H.R. 2968, sponsored by Ms. Kirkpatrick, another freshman 
Member on this Committee, would amend the provision that allows a 
servicemember with SGLI or a veteran with VGLI who is terminally ill to 
get half of their SGLI or VGLI coverage while they are alive, by 
eliminating the discount rate that VA applies to this payment. This 
bill would make VA policies consistent with the commercial insurance 
industry and provide significant benefit to servicemembers and veterans 
by not discounting, hence lowering these payments.
    I commend the members for sponsoring these thoughtful measures. I 
look forward to hearing from all of our witnesses on these bills and I 
thank you all for being here today.
    I now yield to Ranking Member Lamborn for his opening statement.

                                 
  Prepared Statement of Hon. Doug Lamborn, Ranking Republican Member,
       Subcommittee on Disability Assistance and Memorial Affairs

    Thank you Mr. Chairman for holding this hearing to discuss the 
legislation before us.
    H.R. 2379, the Veterans Group Life Insurance Improvement Act of 
2009, was introduced by full Committee Ranking Member Steve Buyer, and 
it would increase the amount of life insurance available to veterans.
    Veterans Group Life Insurance (VGLI) provides veterans the ability 
to obtain a competitive life insurance policy for them and their family 
in post-military life.
    Under current law, separating servicemembers have up to 1 year from 
discharge to convert their Servicemembers Group Life Insurance policies 
to VGLI, and whatever level of coverage they select at that time is 
unchangeable.
    Many are young and don't see the need to carry a large amount of 
life insurance coverage.
    However, as they get older and acquire families, the need for 
additional coverage grows.
    This bill would allow veterans to purchase up to $400,000 of VGLI 
coverage in $25,000 increments, every 5 years, until the age of 60.
    The costs of such increases in coverage will be offset by premiums 
veterans pay, so there is no direct cost to the government.
    The opportunity to allow our veterans greater flexibility in their 
life insurance choices, without increasing the burden on taxpayers, 
leaves little doubt as to whether H.R. 2379 is a worthy measure.
    I urge all members to cosponsor and support this legislation.
    I thank my colleagues Ms. Halvorson, Ms. Kirkpatrick and Mr. 
Donnelly for introducing the other measures before us today.
    These bills would also make improvements to insurance benefits for 
veterans and I want to note my support for them.
    I thank the chair and the witnesses for their testimony, and I 
yield back.

                                 
                Prepared Statement of Hon. Joe Donnelly,
         a Representative in Congress from the State of Indiana

    Chairman Hall and Ranking Member Lamborn, thank you for calling 
this legislative hearing today and I thank you for this opportunity to 
speak on the need to enhance and update the Service-Disabled Veterans 
Insurance (S-DVI) program. The life insurance policy offered to 
disabled veterans is badly out of date and as a result less than 4 
percent of eligible veterans participate.
    I believe that life insurance speaks directly to President 
Lincoln's promise--``to care for him who shall have borne the battle 
and for his widow, and his orphan''--by providing financial assistance 
to families in the event of a veteran's death. However, Congress must 
recognize the importance of enhancing and updating life insurance for 
our service connected disabled veterans and ensure that this policy 
better provides for the needs of participating veteran's families.
    The Disabled Veterans Life Insurance Enhancement Act would make 
long overdue changes to an existing life insurance program that covers 
veterans with service-connected disabilities. We have a responsibility 
to care for our veterans and their surviving loved ones, which is why I 
want to update the outdated life insurance program that currently 
covers our disabled servicemen and women.
    S-DVI was created in 1951 to provide life insurance to disabled 
veterans who, because of their service-connected disabilities, would be 
unable to obtain life insurance on the commercial market or would be 
required to pay especially high premiums. Veterans groups have argued 
for years that the coverage isn't enough, but efforts to increase the 
amount have not gained traction in Congress. In their annual 
independent budget, major veterans groups support the idea of cutting 
premiums for the insurance and updating the mortality tables. The 
insurance program started in 1951 but used a 1941 mortality chart to 
set premiums and, as a result, S-DVI is no longer competitive with 
commercial insurance.
    Currently, S-DVI policies are issued for a maximum face amount of 
only $10,000, an amount that has not been updated for 58 years. 
Additionally, the current mortality tables are almost 70 years old. 
Tables now are based on the assumption that disabled vets die, on 
average, at age 58, which is no longer true given improvements in 
medicine, treatment and rehabilitation. Disabled veterans now are 
expected to live an average of 70 years. As life expectancy has 
significantly improved over the past sixty years, commercial insurance 
companies have begun utilizing more up-to-date mortality tables and are 
therefore able to offer lower premiums. The newest table in general use 
by the insurance industry has premium rates that are roughly 50 percent 
lower than the S-DVI rates.
    According to the Veterans Service Officer from Elkhart County in my 
district, Mr Gary Whitehead, ``The average burial is about $6,500. If 
that disabled vet only has $10,000, that doesn't leave much for his 
loved ones.''
    Mr. Chairman, veterans expect the same thing each of us do when we 
pay into a life insurance policy, the promise that when we pass, during 
that difficult time, our surviving loved ones are not burdened with not 
only the cost of a dignified memorial and burial, but also other costs, 
day-to-day expenses, and the fear of how they will provide for 
themselves in the future. Unfortunately, that opportunity hardly exists 
with the current structure of S-DVI because the maximum payment is 
capped at $10,000 and participating veterans are denied the opportunity 
to purchase additional coverage through the program.
    The Disabled Veterans Life Insurance Enhancement Act would enhance 
the S-DVI by increasing the maximum protection under base policies from 
$10,000 to $100,000 and offers an open period for eligible service-
connected disabled veterans to apply for coverage if they are not 
currently enrolled in the life insurance program. And while the $10,000 
maximum coverage was part of the S-DVI program from its 1951 start, the 
amount actually has not changed since the government first offered this 
kind of insurance in 1917. Put in perspective, according to the 
National Association of Insurance Commissioners, the average face 
amount of life insurance policies purchased in 2007 was $176,000.
    In addition, my legislation would direct the Department of Veterans 
Affairs to revise its premium schedule to reflect current mortality 
tables, and it would increase the supplemental coverage for veterans 
who have been rated 100 percent service-connected disabled from $20,000 
to $50,000. This bill has the support of the Disabled American 
Veterans.
    Since the S-DVI program is not a fully self-supporting fund it 
requires appropriations and therefore subsidies for the S-DVI are 
expected to increase. Even though there are standard premium rates--
there are certain conditions under which those premiums are waived--for 
example, our 100 percent disabled veteran's base premiums are waived if 
they apply and are granted supplemental insurance. Keep in mind that 
these great American veterans have service-connected disabilities and 
are unable to obtain life insurance due to their condition.
    I am aware that expenses for this program will increase, but as the 
Members of this Committee are aware, we must also increase our 
commitment to our disabled veterans who paid a hefty price with their 
service and sacrifice. As a Blue Dog, I am committed to fiscal 
responsibility, and I understand the necessary hurdles with pay-as-you-
go rules. But I am dedicated to pursuing the goal of updating S-DVI, 
and I seek support of my colleagues in doing something to bring this 
policy into the 21st century.
    Thank you very much for this chance to address the Subcommittee on 
this very important subject, and I am pleased to answer any questions 
you may have.

                                 
            Prepared Statement of Hon. Deborah L. Halvorson,
        a Representative in Congress from the State of Illinois

    Good afternoon. Chairman Hall: thank you for holding this hearing, 
Ranking Lamborn and Members of the Subcommittee: thank you for allowing 
me some time to speak.
    I am excited to be here to discuss H.R. 2774, the ``Families of 
Veterans Financial Security Act''. H.R. 2774 would make permanent the 
extension that totally disabled veterans currently receive from the 
Servicemembers' Group Life Insurance (SGLI).
    SGLI is operated by the Department of Veterans Affairs and provides 
low cost group life insurance to members of the Uniformed Services. It 
was originally developed to make insurance benefits available for 
veterans and servicemembers who weren't able to secure insurance from 
private companies due to the extra risks involved in military service, 
or because of a service connected disability.
    Currently, the SGLI Disability Extension allows servicemembers who 
are totally disabled at the time they are discharged to retain their 
SGLI coverage at no cost for up to 2 years. This extension has 
guaranteed that the veterans that are in most need, the ones that are 
seriously disabled as a result of their service, are fully covered 
under the SGLI program and won't lose their life insurance coverage. It 
has given military families the peace of mind that their financial 
security is still strong, so they can worry about their loved ones, and 
not the worst case scenario.
    Furthermore, the extension has provided additional time for VA to 
contact veterans and assist them with making informed decisions about 
what life insurance options are available after the SGLI program is no 
longer available to them.
    Unfortunately, the SGLI extension is set to expire--potentially 
costing disabled veterans thousands of dollars. If allowed to expire, 
the extension would fall to only 18 months of coverage, opposed to the 
24 that veterans currently receive.
    H.R. 2774 would make permanent the 24 month extension and allow 
veterans to continue to focus on what's most important, their 
rehabilitation and recovery. My bill maximizes the opportunity for 
disabled veterans, who have limited or no opportunity of obtaining 
commercial insurance, to obtain insurance coverage. Insurance coverage 
that will provide financial security to the families of our wounded 
warriors.
    There is no cost to the government that is associated with this 
legislation as the SGLI program will assume all costs.
    Thank you, Mr. Chairman and Members of the Subcommittee. I would be 
happy to address any questions you may have for me.

                                 
              Prepared Statement of Hon. Ann Kirkpatrick,
         a Representative in Congress from the State of Arizona

    Thank you Chairman Hall and Ranking Member Lamborn for the 
opportunity to address the Subcommittee on my bill--H.R. 2968, the 
VGLI/SGLI Accelerated Benefits Option Equity Act of 2009.
    I introduced this bill with Republican Walter Jones of North 
Carolina to do just one thing: to make the group life insurance offered 
to Veterans and servicemembers both fairer and more consistent with 
commercial life insurance.
    Under both Veterans Group Life Insurance and Servicemembers Group 
Life Insurance, when a Veteran or servicemember is terminally ill, they 
can elect to receive up to half of their coverage while they are still 
alive. They can use this accelerated benefits option (ABO) to pay 
medical bills, improve their quality of life, or in any way they see 
fit.
    However, current regulation requires VGLI and SGLI to decrease the 
payout these Veterans and servicemembers collect by a percentage based 
on prevailing interest rates. In recent years, this has amounted to a 
decrease of as much as $6,000.
    By contrast, most commercial life insurance policies that allow ABO 
withdrawals do not decrease this payout to claimants.
    We can and must do better.
    This simple, common sense, bi-partisan bill removes this deduction, 
so that we might better serve terminally ill Veterans and 
servicemembers at the most financially vulnerable time for them and 
their families.
    Removing this deduction can be accomplished using the life 
insurance premiums Veterans and servicemembers currently pay. This 
means that we can accomplish this important change without any 
additional cost to Veterans, servicemembers, or taxpayers, and without 
PAYGO implications.
    Mister Chairman and Ranking Member Lamborn, thank you again for the 
opportunity to speak about H.R. 2968 and thank you for your leadership. 
I stand ready to answer your questions.

                                 
                 Prepared Statement of Bonnie Carroll,
                    Chairman and Executive Director,
     Tragedy Assistance Program for Survivors, Inc., Washington, DC

    Mr. Chairman and distinguished Members of the Subcommittee:
    On behalf of the Tragedy Assistance Program for Survivors (TAPS) 
and the families of those who have died while serving in the Armed 
Forces, I am honored to have this opportunity to speak about H.R. 2379, 
the Veterans' Group Life Insurance Improvement Act of 2009; H.R. 2713, 
the Disabled Veterans Life Insurance Enhancement Act; and H.R. 2774, 
the Families of Veterans Financial Security Act, all of which address 
very important insurance issues to veterans and their families.
    Thank you for the compassionate care this Committee has given our 
veterans and the surviving military families of our fallen warriors. 
Through your vigilance and prompt action on key legislation, you have 
ensured America is honoring those who have served and sacrificed for 
freedom.
    When a servicemember joins the military community, not only does 
the member become part of the Armed Forces, but so does their family. 
If they are killed, the grieving spouse thus loses twice: her immediate 
loss of life partner, and also the extended military family and way of 
life which they have shared, regardless of the circumstances 
surrounding the death, whether in combat or in a peacetime duty status. 
It is the duty of all of us to ensure that they are well cared for.
    As the widow of a soldier killed in the Army National Guard, a 
Reserve commander who lost two of my airmen, Chief of Casualty 
Operations at HQ USAF Casualty Affairs, White House Liaison for the 
Department of Veterans Affairs, a Department of the Army civilian 
serving in Iraq, a member of the Department of Veterans' Affairs 
Advisory Committee on Disability Compensation and as the Executive 
Director of TAPS, I have seen the best of the services provided to our 
surviving families both in the public and private sectors. It is a 
privilege to offer my insight today.
    H.R. 2379 The Veterans' Group Life Insurance Improvement Act of 
2009 
    H.R. 2379, The Veterans' Group Life Insurance Improvement Act of 
2009, brings parity to the Veterans' Group Life Insurance (VGLI), 
matching the maximum benefit from the Serviceman's Group Life Insurance 
(SGLI) of $400,000 from which they are transferring this important 
benefit upon leaving military service and transitioning to veteran 
status. This is an important change to the VGLI because it gives 
additional flexibility to the veterans and increases their ability to 
provide for their families. Unlike some commercial policies available 
to military retirees that hold a fixed premium over the course of the 
policy, the premium for VGLI increases every 5 years. The Committee 
should take note that VGLI is expensive; the premium to be paid for 
VGLI should a veteran reach age 75 and still wish to maintain their 
VGLI coverage would be $20,520 per year.\1\
---------------------------------------------------------------------------
    \1\ Veterans' Group Life Insurance Rate Chart, SGL-75 Ed. 07/2008 
106-430-0508-200M
---------------------------------------------------------------------------
    H.R. 2713 The Disabled Veterans Life Insurance Enhancement Act
    In discussing H.R. 2713, I would like to begin by thanking Rep. 
Donnelly not only for his work on this legislation and his continued 
care for our Nation's warriors, but also recognize the tremendous 
support he has given one of our TAPS survivors, Nicholle McLochlin, and 
her children. Nicholle lost her husband, Sergeant Major Jeffrey 
McLochlin, a soldier in the Indiana Army National Guard and an Indiana 
State Trooper, on July 5, 2006, in Afghanistan. Your personal 
involvement in this family's tragedy has been a comfort to them, and we 
thank you for that.
    It is surviving family members and caregivers like Nicholle who 
deserve the best care our Nation can offer. As it currently stands, the 
Service-Disabled Veterans' Insurance (SDVI), which offers a benefit to 
those who survive the death of a service-disabled veteran, is outdated 
and in dire need of improvement. The changes proposed in H.R. 2713, the 
Disabled Veterans Life Insurance Enhancement Act, to SDVI include the 
following: increasing the maximum protection offered to $100,000; 
increasing the supplemental for totally disabled veterans to $50,000; 
providing an open enrollment season of 2 years for eligible veterans; 
and premiums based on current mortality tables. We support these 
improvements.
    As noted in Honoring the Call to Duty: Veterans' Disability 
Benefits in the 21st Century, ``Congress explicitly intended to have 
SDVI premiums hover close to the private sector's premiums for 
nondisabled individuals.'' The current $10,000 limit is far from the 
2007 average life insurance policy of $176,000 \2\. Today, $10,000 
barely covers the cost of the average funeral. By increasing the life 
insurance maximum to $100,000 veterans are better able to provide 
financial support for their families after their death.
---------------------------------------------------------------------------
    \2\ The National Association of Insurance Commissioners
---------------------------------------------------------------------------
    When SDVI was created in 1951, it based premiums on a mortality 
chart that was already a decade old. In the years following, the 
premiums have not been readjusted to incorporate changes in life 
expectancy, making premiums unnecessarily high for our veterans. We 
support these adjustments.
    H.R. 2774 The Families of Veterans Financial Security Act
    The Families of Veterans Financial Security Act, which increases 
the time after separation from active duty from eighteen months to 2 
years during which a servicemember can receive Servicemembers' Group 
Life Insurance (SGLI) coverage, is an important improvement to SGLI. 
TAPS supports this legislation and applauds the Committee's 
compassionate understanding of the challenges facing service-disabled 
veterans and their families during this critical time.
    To adapt from Ghandi, the greatness of a nation and its moral 
progress can be judged by the way its veterans, and those who survive 
them, are treated. Today's hearing, and the legislation proposed, make 
strides toward improving the financial security of the surviving family 
members of our warriors.
    On behalf of the families of our fallen heroes and TAPS, I 
appreciate the dedication and commitment of the distinguished Members 
of the Subcommittee to protect, defend, restore, and improve the 
services provided to those who have served our Nation in peace and war 
and their families. Thank you for the opportunity to submit testimony 
on behalf of the surviving families of TAPS.

                                 
                   Prepared Statement of John Wilson,
  Associate National Legislative Director, Disabled American Veterans

    Mr. Chairman and Members of the Subcommittee:
    I am pleased to submit the views of the Disabled American Veterans 
(DAV) on the various bills under consideration today. In accordance 
with its congressional charter, the DAV's legislative mission is 
focused on benefits and services provided to veterans because of 
service-connected disabilities. We are therefore, pleased to support 
the bills insofar as they fall within that scope.

                               H.R. 2713

    The ``Disabled Veterans Life Insurance Enhancement Act'' (H.R. 
2713) would amend title 38, United States Code, to make certain 
improvements in the service-disabled veterans' insurance program of the 
Department of Veterans Affairs. Specifically, this bill would provide 
for a 2-year period beginning on the date of its enactment during which 
a qualified veteran may submit an application for insurance, despite 
that fact that such claimant's time limit for filing an application for 
service-disabled insurance may have expired under current law.
    Further, H.R. 2713 would also increase the maximum amount of 
protection from $10,000 to $100,000, and would increase the 
supplemental insurance for totally disabled veterans from $20,000 to 
$50,000. Finally, the bill would replace the ``Commissioner's 1941 
Standard Ordinary Table of Mortality'' with an ``appropriate and 
current mortality table as selected by the Secretary.''
    The four veterans service organizations who coauthored The 
Independent Budget (IB), have consistently stood behind the need to 
lower the premium schedule for Service-Disabled Veterans' Insurance 
(SDVI), specifically advocating that the VA be authorized to charge 
lower premiums for SDVI policies based on improved life expectancy 
under current mortality tables. Because of service-connected 
disabilities, disabled veterans have difficulty getting, or are 
charged, higher premiums for life insurance on the commercial market, 
Congress created the SDVI program to furnish disabled veterans life 
insurance at standard rates. When this program began in 1951, its 
rates, based on mortality tables then in use, were competitive with 
commercial insurance. Commercial rates have since been lowered to 
reflect improved life expectancy shown by current mortality tables. 
However, the VA has continued to base its rates on mortality tables 
from 1941. Consequently, SDVI premiums are no longer competitive with 
commercial insurance and therefore, no longer provide the intended 
benefit for eligible veterans.
    The current $10,000 maximum for life insurance under SDVI does not 
adequately provide for the needs of survivors. When life insurance for 
veterans had its beginnings in the War Risk Insurance program, first 
made available to members of the armed forces in October 1917, coverage 
was limited to $10,000. At that time, the law authorized an annual 
salary of $5,000 for the director of the Bureau of War Risk Insurance. 
Obviously, the average annual wages of servicemembers in 1917 was 
considerably less than $5,000. A $10,000 life insurance policy provided 
sufficiently for the loss of income from the death of an insured in 
1917.
    Today, more than 88 years later, maximum coverage under the base 
SDVI policy is still $10,000. Given that the annual cost of living is 
many times what it was in 1917, the same maximum coverage, well more 
than three-quarters of a century later, clearly does not provide 
meaningful income replacement for the survivors of service-disabled 
veterans. A May 2001 report from an SDVI program evaluation conducted 
for VA recommended that basic SDVI coverage be increased to $50,000 
maximum. The Independent Budget veterans' service organizations 
(IBVSOs) recommended that the maximum protection available under SDVI 
be increased to at least $50,000. This bill mandates a maximum of 
$100,000 in coverage.
    The DAV has carried forward resolutions at our National conventions 
on this same subject for years. This year, the issue is addressed in 
Resolution No. 102, which seeks to increase the face value of service-
disabled veterans' insurance for eligible veterans suffering from a 
disability or disabilities for which a compensable rating would be 
payable.
    Since this legislation does not modify the waiver of premiums for 
totally disabled veterans, it is also in agreement with DAV's 
Resolution No. 103, which supports legislation to provide for waiver of 
premiums for supplemental service-disabled veterans' insurance. This 
legislation also coincides with Resolution No. 136, in that it seeks to 
reduce premiums for service-disabled veterans' insurance consistent 
with current life expectancy based on updated mortality tables.
    We would however, propose two amendments for the Subcommittees' 
consideration. First, we would suggest the legislation be modified to 
provide for open-ended period for veterans to apply for service-
disabled veterans' insurance, which is consistent with DAV's Resolution 
No. 016. Under the current program, service-connected disabled veterans 
are entitled to apply for SDVI within 2 years from the date the VA 
grants service-connection for any disability. Many eligible veterans, 
due to financial difficulties and problems associated with readjustment 
to civilian life, did not apply for this insurance within the 2-year 
eligibility period. Many of these service-connected disabled veterans 
are now prepared and can afford to purchase this insurance, but are not 
able to purchase comparable insurance coverage in the private sector. 
Precedent has been established to extend previously closed 
``eligibility periods'' for certain other VA benefits and services, 
including insurance. The DAV seeks the enactment of legislation that 
would authorize an ``open period'' for eligible service connected 
disabled veterans to apply for coverage under the Service-Disabled 
Veterans' Insurance Program.
    Second, we would suggest legislative language be restructured to 
allow veterans to choose the amounts of SDVI coverage they wish, in 
increments of $10,000 up to the $100,000 amount. This level of 
flexibility would allow them to structure the insurance coverage that 
best suits their financial and personnel needs.
    Given the aforementioned references in The IB and DAV's resolutions 
on this subject, we fully support this long overdue and beneficial 
legislation. We also extend our appreciation to Mr. Donnelly for 
constructing this important legislation that, if adopted, will ease the 
burden faced by so many that up until now, had no prospect for 
adequately providing for their families. We also applaud the efforts of 
every Member of this Subcommittee for their advocacy in this critical 
area.

                               H.R. 2379

    The ``Veterans Group Life Insurance Improvement Act of 2009'' (H.R. 
2379) would provide certain veterans an opportunity to increase the 
amount of Veterans' Group Life Insurance (VGLI). This legislation a 
VGLI recipient to request in writing, not more the once in each 5-year 
period, an increase in the amount of VGLI as long as the applicant is 
under the age of 60 and the requested increase is not more than 
$25,000. The DAV has no resolution on this issue; however, we have no 
opposition to its favorable consideration.

                               H.R. 2774

    The ``Families of Veterans Financial Security Act'' (H.R. 2774) 
would permanently extend the duration of Servicemembers' Group Life 
Insurance (SGLI) coverage for totally disabled veterans. The DAV has no 
resolution on this issue; however, we have no opposition to its 
favorable consideration.

                               H.R. 2968

    This legislation (H.R. 2968) would limit the required reduction in 
the amount of the accelerated death benefit payable to certain 
terminally ill persons insured under Servicemembers' Group Life 
Insurance or Veterans' Group Life Insurance. The DAV has no resolution 
on this issue; however, we have no opposition to its favorable 
consideration.

                               Conclusion

    We hope the Committee will review these recommendations and give 
them consideration for inclusion in The ``Disabled Veterans Life 
Insurance Enhancement Act'' (H.R. 2713). Mr. Chairman, thank you for 
inviting the DAV to testify before you today.

                                 
               Prepared Statement of Thomas M. Lastowka,
      Director, Philadelphia Regional Office and Insurance Center,
 Veterans Benefits Administration, U.S. Department of Veterans Affairs

    Mr. Chairman and Members of the Subcommittee, I am pleased to be 
here today to provide the Department of Veterans Affairs' (VA) views on 
three bills and one draft bill that would affect VA's insurance 
programs.

                               H.R. 2379

    Veterans' Group Life Insurance (VGLI), established in 1974, permits 
the conversion of Servicemembers' Group Life Insurance (SGLI) coverage 
to a lifetime renewable term policy of insurance protection after a 
servicemember separates from service. Under current law, the amount of 
VGLI coverage available is limited to the amount of SGLI coverage a 
servicemember had when the member separated from service. This means 
that veterans, many of whom are disabled, who separated from service in 
past years when the maximum SGLI coverage was considerably less than 
the $400,000 it currently is, cannot increase their VGLI coverage to 
meet their families' current needs.
    H.R. 2379, the ``Veterans' Group Life Insurance Improvement Act of 
2009,'' would permit VGLI-insured veterans, including those with 
service-connected disabilities, to increase their VGLI coverage once 
every 5 years beginning on the date of commencement of their VGLI 
coverage, in increments up to $25,000, until they reach the age of 60. 
VA would prefer that each increase be in a single increment of $25,000. 
The maximum amount of coverage available would be the current maximum 
SGLI amount, $400,000, regardless of what the maximum SGLI amount was 
when the veteran separated from service.
    VA strongly supports H.R. 2379. It would permit VGLI-insured 
veterans, including service-disabled veterans, to purchase amounts of 
life insurance adequate to protect their families. It would also help 
VGLI maintain a competitive level of coverage. Ninety-six percent of 
veterans insured under VGLI have less than $400,000 in coverage and, 
therefore, could potentially benefit from this change. VGLI 
policyholders have for several years expressed an interest through 
inquiries to VA, as well as customer surveys, in increasing their 
coverage. The bill would introduce much-needed flexibility to the 
program by enabling VGLI insureds to purchase more life insurance as 
their needs change.
    There would be no mandatory cost to the government from enactment 
of H.R. 2379. Any cost of the optional increase in coverage would be 
offset by the premiums paid by the veterans who choose to buy extra 
VGLI coverage. Hence, VA strongly supports its enactment.

                               H.R. 2713

    Service Disabled Veterans' Insurance (SDVI) is available to 
veterans with a service-connected disability that would be compensable 
if rated at 10 percent or higher who apply within 2 years from the date 
on which VA notifies them that their disability is service connected. 
SDVI provides up to $10,000 in coverage, as either a permanent or term 
insurance plan, and premiums are based the Commissioners 1941 Standard 
Ordinary Table of Mortality. SDVI insureds who are totally disabled 
before reaching age 65 may have their premium payments waived on the 
basic SDVI coverage of $10,000. Waiver of premiums permits them to 
apply for additional insurance, Supplemental SDVI, for which the 
maximum coverage amount is $20,000. However, premiums cannot be waived 
on the supplemental coverage.
    H.R. 2713, the ``Disabled Veterans Life Insurance Enhancement 
Act,'' would make several changes to the program. It would provide a 2-
year open season, beginning on the date of enactment, during which 
certain veterans who did not submit a SDVI application and pay premiums 
within the current 2-year statutory application period could obtain 
SDVI by applying for it and paying premiums. The veterans eligible for 
this open season would be veterans who are otherwise eligible for SDVI 
but failed to apply or pay premiums during the 2-year period beginning 
when VA notified them of the service connection of their disabilities.
    The bill would also require that SDVI premiums be based on ``an 
appropriate and current mortality table selected by the Secretary'' 
rather than the 1941 mortality table, increase the maximum amount of 
SDVI to $100,000, and increase the maximum amount of Supplemental SDVI 
to $50,000. These changes would apply to insurance policies issued on 
or after the date of enactment.
    Although the VA Insurance Service wishes to honor and aid all 
veterans, especially disabled veterans who have lost access to 
commercial insurance due to their service, oppose H.R. 2713 because it 
would go far beyond the appropriate and legitimate policy goals 
normally associated with VA life insurance programs. It would create a 
new and expensive program offering insurance policies far beyond what 
is normally available to average Americans. Under the bill, many 
elderly veterans who are now totally disabled would be eligible for 
free SDVI coverage, as well as $50,000 of Supplemental SDVI, even 
though they did not obtain life insurance at a younger age when they 
were insurable and when most people purchase life insurance. Because a 
disproportionate number of SDVI insureds would be veterans who are in 
poor health, the cost of the SDVI program would be greatly increased. 
Furthermore, although VA did not have sufficient time to finalize our 
cost estimates, we are confident that mandatory costs associated with 
enactment of H.R. 2713 would be in the billions of dollars. With your 
permission, Mr. Chairman, we would like to submit our finalized 
estimates in writing for the record.

                               H.R. 2774

    The SGLI program provides low-cost term insurance protection for 
active duty servicemembers and eligible reservists. Under current law, 
totally disabled servicemembers are entitled to free SGLI coverage for 
a period of 2 years after they separate from active duty or reserve 
status, provided they separate from service before October 1, 2011. For 
totally disabled servicemembers who separate after that date, coverage 
will extend for only 18 months after separation.
    H.R. 2774, the ``Families of Veterans Financial Security Act,'' 
would eliminate the sunset date for the period of extended coverage. 
Totally disabled servicemembers separating after September 30, 2011, 
would be entitled to a 2-year extension of free SGLI coverage.
    VA supports H.R. 2774. The bill would eliminate an inequity for 
totally disabled SGLI insureds discharged after September 30, 2011. It 
would also guarantee that the servicemembers who are most seriously 
disabled when separated or released would have life insurance coverage 
during a period when they are likely undergoing medical treatment and 
rehabilitation. This bill would provide financial reassurance to 
disabled servicemembers and their families.
    Any costs associated with enactment of H.R. 2774 would be absorbed 
by the SGLI fund.

  Draft Bill to Eliminate Interest Deduction from Accelerated Benefit 
                                Payment

    Under current law, an accelerated benefit is available under SGLI 
and VGLI. The one-time accelerated benefit payable to a terminally ill 
SGLI or VGLI insured is the amount requested by the insured, up to 50 
percent of his or her insurance coverage, minus an interest deduction, 
which is the amount that the Office of Servicemembers' Group Life 
Insurance actuarially determines to be the amount of interest lost due 
to early payment of the insurance proceeds. This draft bill would 
eliminate the interest deduction for accelerated benefit payments made 
after the date of enactment of the bill.
    VA supports the draft bill because it would provide additional 
financial resources to terminally ill insureds and their families at a 
critical time when they are most likely in need of financial 
assistance. Eliminating the interest deduction would also be consistent 
with the accelerated benefit offered in the commercial insurance 
industry.
    Any costs associated with enactment of the draft bill would be 
absorbed by the SGLI or VGLI fund.

                                 
                     Statement of Hon. Steve Buyer,
         a Representative in Congress from the State of Indiana

    Mr. Chairman, I appreciate the opportunity to discuss H.R. 2379 the 
Veterans Group Life Insurance Improvement Act of 2009, which would 
increase the amount of life insurance available to veterans.
    Veterans Group Life Insurance (VGLI), administered by the 
Department of Veterans Affairs (VA), provides veterans the opportunity 
to convert their active duty Servicemembers Group Life Insurance (SGLI) 
coverage to a competitive life insurance product for them and their 
family in post-military life.
    Under current law, veterans have up to 1 year to convert the amount 
of SGLI coverage they carry to VGLI, and the amount they select cannot 
be altered. Many separating servicemembers are young and don't see the 
need to carry a large amount of life insurance coverage; however, as 
they grow older and have a family, many of them require additional 
coverage.
    The Veterans' Group Life Insurance Improvement Act of 2009 allows 
veterans to purchase up to $400,000 of VGLI coverage in $25,000 
increments, every 5 years, until the age of 60. The costs of such 
increases would be offset by premiums veterans pay, so there is no 
direct cost to the government. This bill gives our veterans greater 
flexibility in their life insurance choices and I urge all members to 
cosponsor and support this legislation. I thank the chair and I yield 
back.

                                 
               Statement of Paralyzed Veterans of America

    Mr. Chairman and Members of the Subcommittee, on behalf of 
Paralyzed Veterans of America (PVA), we would like to thank you for the 
opportunity to submit a statement for the record regarding the proposed 
legislation. We appreciate the fact that you continue to address the 
broadest range of issues with the intention of improving benefits for 
veterans. We particularly support any focus placed on meeting the 
complex needs of the newest generation of veterans, even as we continue 
to improve services for those who have served in the past.

  H.R. 2713, the ``Disabled Veterans Life Insurance Enhancement Act''

    Paralyzed Veterans of America supports H.R. 2713, a bill to amend 
title 38, United States Code, to create certain improvements in the 
service-disabled veterans' insurance program under the Department of 
Veterans Affairs. This bill would provide for a 2 year period beginning 
on the date of its enactment which a qualified veteran may submit an 
application for insurance, regardless of the fact the claimant's time 
limit may have expired for filing an application for service-disabled 
insurance under current law.
    Additionally, H.R. 2713 would also increase the maximum amount of 
protection from $10,000 to $100,000, and would increase the 
supplemental insurance for totally disabled veterans from $20,000 to 
$50,000. PVA would like to recommend adding open enrollment to the 
supplemental insurance as stated in the regular insurance protection 
plan. This would create an equal opportunity for both disabled veterans 
and regular applicants.

  H.R. 2379, the ``Veterans Group Life Insurance Improvements Act of 
                                 2009''

    Paralyzed Veterans of America supports H.R. 2379, the ``Veterans 
Group Life Insurance Improvements Act of 2009.'' This legislation would 
provide certain veterans an opportunity to increase the amount of 
Veterans' Group Life Insurance (VGLI). The VGLI recipient requests an 
increase, in writing, of no more than $25,000 in the amount of VGLI, 
and as long as the applicant is under 60 years of age.

 H.R. 2774, the ``Families of Veterans Financial Security Act of 2009''

    PVA supports H.R. 2774, the ``Families of Veterans Financial 
Security Act of 2009.'' This legislation would permanently extend the 
period of Servicemembers' Group Life Insurance (SGLI) coverage for 
totally disabled veterans. PVA is an advocate of disabled veterans and 
applauds the extended period of 2 years after the date of separation 
for servicemembers on active duty or active duty for training on or 
after June 15, 2005.

                               H.R. 2968

    PVA supports H.R. 2968, to amend Title 38, United States Code, to 
eliminate the required reduction in the amount of the accelerated death 
benefit payable to certain terminally ill persons insured under 
Servicemembers' Group Life Insurance or Veterans' Group Life Insurance. 
PVA views this bill as a benefit to severely ill servicemembers by 
taking away the current method of calculation and adding a set payout 
rate.
                                 

                   MATERIAL SUBMITTED FOR THE RECORD

                                     Committee on Veterans' Affairs
         Subcommittee on Disability Assistance and Memorial Affairs
                                                    Washington, DC.
                                                      July 15, 2009

Bonnie Carroll
Chairman and Executive Director
Tragedy Assistance Program for Survivors
1777 F Street, NW, 6th Floor
Washington, DC 20006

Dear Ms. Carroll:

    Thank you for testifying at the House Committee on Veterans' 
Affairs' Subcommittee on Disability Assistance and Memorial Affairs 
legislative hearing on H.R. 2379, H.R. 2713, H.R. 2774 and H.R. 2968, 
held on June 24, 2009. I would greatly appreciate if you would provide 
answers to the enclosed follow-up hearing questions by Monday, August 
17, 2009.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for material for all Full 
Committee and subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively on letter size paper, 
single-spaced. In addition, please restate the question in its entirety 
before the answer.
    Due to the delay in receiving mail, please provide your responses 
to Ms. Megan Williams by fax at (202) 225-2034. If you have any 
questions, please call (202) 225-3608.

            Sincerely,

                                                       John J. Hall
                                                           Chairman
                               __________
                           Tragedy Assistance Program for Survivors
                                                    Washington, DC.
                                                    August 20, 2009

Hon. John J. Hall
Chairman, Subcommittee on Disability and Memorial Affairs
335 Cannon House Office Building
Washington, DC 20515

Dear Mr. Chairman,

    Thank you for the opportunity to address questions from the 
Department of Veterans Affairs following my testimony before your 
Subcommittee on June 24, 2009. The following are my responses to 
questions received on July 15, 2009.

    Question 1: How involved are spouses in selecting a VA insurance 
benefit? Is there any VA requirement to notify them about available 
benefits and inform them of their beneficiary status?

    Answer: I respectfully defer the response to those at the VA who 
set the requirements, with encouragement to fully inform both veteran 
and spouse/beneficiary of the benefits to which they are eligible.

    Question 2: The VA disagreed with the position you took regarding 
increases to premiums every 5 years and the impact this has 
particularly on older veterans. Do you have a response to VA's 
contention that their program is competitive with the private sector 
and that older veterans have more income so can better afford the 
premiums than younger veterans?

    Answer: According to the VA Web site (www.insurance.va.gov) and VA 
form SGL-75 Ed. 07/2008 106430-0508-200M, premiums for the Veterans 
Group Life Insurance increase in cost at age 30, 35, 40, 45, 50, 55, 
60, 65, 70, and 75. These appear to be 5-year increments, at which time 
premium costs rise significantly. For instance, $400K coverage costs 
$88 a month at age 45, the age at which a veteran may leave the service 
after a 20-year career. Five years later, at age 50, the veteran has a 
64-percent increase in premium to $144 a month. Another five years 
later, now at age 55, the veteran experiences an increase of 86 percent 
to $268. The total increase from what the veteran pays at age 45 and 
what the veteran would pay at age 55 is a 205-percent increase in 
premium payments.
    The following is a comparison with an insurance policy commonly 
selected by veterans, both of which go up every 5 years:

      VGLI: 45 yr old, non smoker, 5 yr renewable term is 
$88.00 per month or $1,056 per year.
      AAFMAA: 45 yr old, non smoker, 5 yr renewable term is 
$45.90 per month or $550.80 per year.
    For further comparison, the following are the monthly rates for 20 
or 30 year level term policies:
      Navy Mutual Aid: $400k, 20 year term policy rate: $52.20 
per month--Rates stay the same thru the 30 yrs
      ING: $400K, 30 YR TERM, $72 per month--Rates stay the 
same thru the 30 yrs
      Prudential: $400K, 30 YR TERM, $76, Rates stay the same 
thru the 30 yrs
      Transamerica: $400K, 30 YR TERM, $82, Rates stay the same 
thru the 30 yrs

    Regarding older veterans having more income and therefore being 
better able to afford higher premiums, I would offer that our Nation's 
veterans deserve the very best life insurance options at the most 
competitive rates possible.

            Respectfully,

                                                     Bonnie Carroll
[GRAPHIC] [TIFF OMITTED] T1870A.001

                                 

                                     Committee on Veterans' Affairs
         Subcommittee on Disability Assistance and Memorial Affairs
                                                    Washington, DC.
                                                      July 15, 2009

Thomas M. Lastowka
Director, Philadelphia Regional Office and Insurance Center
U.S. Department of Veterans Affairs
810 Vermont Ave., NW
Washington, DC 20420

Dear Mr. Lastowka:

    Thank you for testifying at the House Committee on Veterans' 
Affairs' Subcommittee on Disability Assistance and Memorial Affairs 
legislative hearing on H.R. 2379, H.R. 2713, H.R. 2774 and H.R. 2968, 
held on June 24, 2009. I would greatly appreciate if you would provide 
answers to the enclosed follow-up hearing questions by Monday, August 
17, 2009.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for material for all full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively on letter size paper, 
single-spaced. In addition, please restate the question in its entirety 
before the answer.
    Due to the delay in receiving mail, please provide your responses 
to Ms. Megan Williams by fax at (202) 225-2034. If you have any 
questions, please call (202) 225-3608.

            Sincerely,

                                                       John J. Hall
                                                           Chairman
                               __________
                        Questions for the Record
                  The Honorable John J. Hall, Chairman
       Subcommittee on Disability Assistance and Memorial Affairs
                  House Committee on Veterans' Affairs
                             June 24, 2009
 Legislative Hearing on H.R. 2379, H.R. 2713, H.R. 2774, and H.R. 2968
    Question 1: Do increments up to $25,000 give veterans enough 
flexibility, or would the ability to select smaller increments work 
better for the veteran? What challenges might this approach present for 
the VA Insurance Center?
    Response: We believe the $25,000 increment provides adequate 
flexibility for Veterans. Typically, Veterans do not purchase Veterans 
group life insurance (VGLI) in increments smaller than $25,000. The 
insurance industry generally does not offer supplemental insurance in 
smaller increments because purchasers generally opt for larger amounts. 
Implementation and administration costs would be significantly higher 
if multiple increments were available. Communicating a single amount of 
coverage and a single rate will help Veterans understand and take 
advantage of the benefit.
    Another factor is premium cost. The monthly premium for the $25,000 
increment is competitively priced and relatively low. The two most 
populated age groups in the VGLI program are the ages of 40-44 and 45-
49, which together account for nearly 50 percent of all VGLI 
participants. The monthly cost for the $25,000 increment is shown 
below:


----------------------------------------------------------------------------------------------------------------
                                                                                      Monthly Cost for a $25,000
                        Age-Group                               Rate per $1,000                Increment
----------------------------------------------------------------------------------------------------------------
40-44                                                                          $.17                       $4.25
----------------------------------------------------------------------------------------------------------------
45-49                                                                          $.22                       $5.50
----------------------------------------------------------------------------------------------------------------

    Question 2(a): If the VGLI price tag for a 75-year-old veteran is 
$20,520 per year, how could VA reduce this premium price?

    Response: The premium quoted--$20,520 per year for a 75-year-old 
Veteran--is for $400,000 of coverage, the maximum amount available 
through VGLI. The amount of VGLI may not exceed the amount of an 
insured's Servicemembers' group life insurance (SGLI) coverage at the 
time of separation from service. Congress increased the maximum amount 
of SGLI to $400,000 effective September 30, 2005. As a result, there 
are no Veterans with VGLI age 75 or older who have $400,000 of 
coverage.
    The Department of Veterans Affairs (VA) takes measures to keep 
costs as low as possible for Veterans, such as capping VGLI premiums at 
the rate charged to 75-year old Veterans. However, the VGLI program is 
self-supporting, and premiums must reflect the mortality experience of 
each age group.
    There are, however, actions that VGLI insureds can take to reduce 
life-insurance costs. As is true in the commercial insurance industry, 
term life insurance becomes quite costly at advanced ages. However, the 
need for life insurance diminishes at older ages because financial 
responsibilities are reduced; mortgages are fully paid, children are 
grown, and savings have accumulated. People often reduce their life 
insurance coverage to defray increased premium costs. For example, a 
75-year old with $100,000 of VGLI coverage may switch to $50,000 of 
coverage to lower the annual premium from $5,130 to $2,565. VGLI 
insureds who want to maintain a high amount of coverage for their 
lifetime can convert to a permanent plan at a young age. VA regularly 
informs insureds that VGLI premiums will get more expensive as Veterans 
age and advises them to consider alternatives, such as reducing their 
coverage or converting to a permanent plan.
    Question 2(b): Would VGLI be more viable and self-sustaining with 
fixed premiums, similar to some commercial insurance policies?

    Response: If VGLI offered permanent rather than term insurance, 
premiums would have to be increased more than current VGLI premiums for 
term insurance in order for the program to be self-supporting. ``Whole 
life'' polices have fixed premiums; however, the premiums are more 
expensive at older ages. For example, a typical whole life policy in 
the commercial industry with $400,000 coverage has the following 
monthly premium rates: approximately $540 at age 45, $940 at age 55 and 
$1,688 at age 65. In comparison, the monthly rates for the same 
coverage under VGLI are $88 at age 45, $268 at age 55 and $600 at age 
65. Because higher premiums would be required, we do not believe that 
VGLI would be more viable if it provided permanent rather than term 
insurance. Also, if VGLI offered permanent plans directly, the 
program's administrative costs would significantly increase.

    Question 3: VA testified that 96 percent of veterans insured under 
VGLI have less than $400,000 in coverage. Can you provide the percent 
of veterans insured under the VGLI program for every $25,000 increment 
up to the $400,000 maximum amount?

    Response: The percentage of Veterans enrolled in VGLI for every 
$25,000 increment in July 2009 is shown below:

------------------------------------------------------------------------
                                                Percentage of Veterans
               Coverage Amount                     Enrolled in VGLI
------------------------------------------------------------------------
Less than $25,000                                                     6
------------------------------------------------------------------------
$25,000-- 49,999                                                      4
------------------------------------------------------------------------
$75,000-- 99,999                                                     26
------------------------------------------------------------------------
$50,000-- 74,999                                                      1
------------------------------------------------------------------------
$100,000--124,999                                                    26
------------------------------------------------------------------------
$125,000-- 149,999                                                    0
------------------------------------------------------------------------
$150,000-- 174,999                                                    4
------------------------------------------------------------------------
$175,000-- 199,999                                                    0
------------------------------------------------------------------------
$200,000-- 224,999                                                   16
------------------------------------------------------------------------
$225,000-- 249,999                                                    0
------------------------------------------------------------------------
$250,000-- 274,999                                                   11
------------------------------------------------------------------------
$275,000-- 299,999                                                    0
------------------------------------------------------------------------
$300,000-- 324,999                                                    1
------------------------------------------------------------------------
$325,000-- 349,999                                                    0
------------------------------------------------------------------------
$350,000-- 399,999                                                    0
------------------------------------------------------------------------
$400,000                                                              5
------------------------------------------------------------------------
Total                                                               100
------------------------------------------------------------------------

    Question 4(a): VA testified that the cost of the optional increase 
in coverage would be offset by the premiums paid by the veterans who 
choose to buy extra VGLI coverage. How did VA make this calculation?

    Response: VA used an actuarial model to project future reserve 
requirements for this proposal as well as the overall financial 
feasibility of this proposal. New insurance issued under VGLI would 
require the establishment of a financial reserve worth approximately 
2.5 percent of the face value to provide for the difference between 
expected future claims and expenses and the expected future premiums.
    The participation assumptions varied by age bracket because younger 
Veterans are more inclined to purchase optional coverage. Hence, we 
applied a 30 percent participation rate for Veterans up to age 39, a 20 
percent participation rate for Veterans ages 40 to 49, and a 10 percent 
participation rate for Veterans ages 50 to 59. To minimize adverse 
selection and costs, coverage would be restricted to Veterans under age 
60 and limited to increments of $25,000.
    The increased premiums collected for higher coverage amounts would 
fund the estimated annual program cost of $10 million to establish 
initial reserves and additional coverage.
    Question 4(b): Are there any variables or hidden costs that may 
affect this conclusion?

    Response: We do not anticipate any significant variables or hidden 
costs.

    Question 5: During our discussion at the hearing, the VA witness 
noted that VA continues to use a 1941 mortality table because it would 
be cost-prohibitive to change that practice. Can VA further explain the 
reasons and bases for that position in more detail?

    Response: It is important to clarify that the VA witness did not 
state that it would be cost-prohibitive to change to the new mortality 
table, as is stated in this question. Rather, the witness stated that 
``generally it is a much higher cost to the government.''
    By law (38 U.S.C. Sec. 1922(a)), service-disabled Veterans' 
insurance (S-DVI) premiums are based on the Commissioners 1941 standard 
ordinary (CSO) table of mortality with 2.25 percent interest. In 1951 
when this program began, these premium rates were competitive with 
commercial insurance policy rates. Since life expectancy has 
significantly improved over the past 60 years, a more recent mortality 
table would reflect lower mortality and lower premium rates. The 
current S-DVI premium rates are no longer representative of 
``standard'' rates, and in fact are more than twice as high as the 
standard rates in the new mortality table at most ages.
    VA supports use of the 2001 CSO table of mortality to reduce S-DVI 
insured individuals' premiums and to align with current industry 
standards. Use of an appropriate and current mortality table would 
enable S-DVI premiums to correspond to life-insurance premiums charged 
by private companies to nondisabled Veterans, as is the original intent 
of the S-DVI program. The cost of updating premium rates to the 2001 
CSO mortality table with an interest rate of 4.5 percent (which is the 
current mortality standard in the insurance industry) would result in a 
5-year cost of $112 million and a 10-year cost of $232.6 million.
    Question 6(a): For H.R. 2713, Congress intended to have the S-DVI 
coverage closely correspond to the private sector's premiums for 
nondisabled veterans, in your opinion, does this legislation accomplish 
this goal? Would the use of up-to-date mortality tables reduce the 
premiums sufficiently for Congress to achieve this goal?

    Response: The provision in H.R. 2713 that would require VA to use 
an appropriate and current mortality table would enable S-DVI premiums 
to correspond to life-insurance premiums charged by private companies 
to nondisabled Veterans because the 2001 CSO table of mortality is used 
by private insurance companies to set premiums for policies issued 
after January 1, 2008.
    Use of an appropriate and current mortality table would 
significantly decrease premium costs for S-DVI policyholders, as noted 
in the reply to question 5 above. The average age of Veterans applying 
for S-DVI is 56. The table below compares S-DVI premium rates at ages 
40, 50, and 60 for ordinary life and term policies under the 1941 CSO 
table and the 2001 CSO table. The interest rate also changes from 2.25 
percent with the current 1941 CSO table to 4.5 percent with the 2001 
CSO table.

 Comparison of Current S-DVI Premium Rates with Updated Rates Monthly 
                   Premiums for $10,000 of Insurance

----------------------------------------------------------------------------------------------------------------
                               5 Year Term Plan                                   Ordinary Life Plan
------------------------------------------------------------------------------------------------------
                        Age                             Current       Updated     Current     Updated
------------------------------------------------------------------------------------------------------
40                                                           $5.80       $1.60      $21.60       $9.80
----------------------------------------------------------------------------------------------------------------
50                                                          $11.90       $3.70      $32.30      $16.20
----------------------------------------------------------------------------------------------------------------
60                                                          $26.00      $10.00      $51.00      $27.90
----------------------------------------------------------------------------------------------------------------

    Question 6(b): While H.R. 2713 will increase the life insurance 
maximum to $100,000, how will disabled veterans be able to satisfy the 
requirements for maximum coverage?

    Response: H.R. 2713 would simply increase the maximum coverage 
amount to $100,000 and provide for a 2-year open season only for 
otherwise eligible Veterans who did not submit an application for S-DVI 
within the 2-year timeframe required by statute. It would not mandate 
any change to the current eligibility rules for obtaining S-DVI. 
Veterans would still have to meet the current statutory requirements, 
which include good health requirements for all conditions other than 
service-connected disabilities and (except for those affected by the 
open season ``retroactive'' portion of the bill) apply within 2 years 
of notification of a VA award of service connection. Veterans already 
enrolled in the S-DVI program would therefore not be eligible for the 
increased coverage.
    Although purchasing S-DVI in excess of the current maximum amount 
of coverage would be more expensive, ``open season eligible'' Veterans 
rated totally disabled prior to age 65 would be eligible to have 
premiums waived for $100,000 of coverage. However, Veterans who already 
have $10,000 of S-DVI coverage could not increase coverage to the 
maximum allowed under the bill.
    As described above, enactment of H.R. 2713 would create inequities 
between those already insured under S-DVI and those who would be 
insured as a result of enactment of H.R. 2713.
    Question 6(c): If Congress made the rates more equitable with the 
private sector under the S-DVI program, do you think more veterans 
would be inclined to participate or does the private sector insurance 
industry just do a better job?

    Response: Significant differences in premium rates would be 
unlikely if S-DVI used a mortality table as mandated in H.R. 2713 
because the private sector uses the same mortality table for policies 
issued after January 1, 2008. However, many of the service-connected 
Veterans insured by S-DVI would either be denied insurance or charged 
higher rates in the private sector. Therefore, Veterans with service-
connected disabilities would be more likely to participate in the S-DVI 
program with premium rates based on an appropriate and current 
mortality table as mandated in H.R. 2713.
    Question 6(d): Please inform whether VA has proposed or is 
considering any of its own initiatives to improve S-DVI? Any of its 
other insurance programs?

    Response: VA has a systematic process in place to regularly review, 
identify, and assess opportunities for additional improvements and 
expansion. VA submits legislative proposals in the annual budget 
request to Congress, and VA recently testified regarding the following 
bill provisions:

      Section 101 of S. 728 would create a new life insurance 
program for Veterans who are less than 65 years old and have a service-
connected disability. The program would target the same disabled 
Veterans as S-DVI but provide $50,000 of level premium term insurance 
using the 2001 CSO mortality table. At age 70, when insurance needs 
lessen for most people, the amount of coverage would reduce to 20 
percent of the original amount, and no further premiums would be due. 
VA supports section 101, subject to appropriate funding.
      Section 102 of S. 728 would increase the maximum amount 
of supplemental S-DVI coverage to $30,000. VA supports section 102 
provided Congress identifies an offsetting source of funding.
      Section 104 of S. 728 would increase the Veterans' 
mortgage life insurance maximum coverage amount from $90,000 to 
$150,000. VA supports section 104 subject to Congress identifying 
offsets.

    Question 7: Please provide a cost estimate for H.R. 2713.

    Response: The costs associated with H.R. 2713 are broken out below. 
Scenario 1 assumes participation rates ranging from 25 to 75 percent 
depending on the service-connected rating. Scenario 2 assumes 
participation rates ranging from 10 to 50 percent.

------------------------------------------------------------------------
                                    5-Year Cost  ($    10-Year Cost  ($
    Cost Elements of Proposal          millions)           millions)
------------------------------------------------------------------------
I. New issues only (prospective)               $416              $1,500
------------------------------------------------------------------------
II. Open season for current                  $1,800              $3,600
 insureds*
------------------------------------------------------------------------
III. Open season for all service-
 connected disabled Veterans who
 were ever eligible for SDVI
 (retrospective)
Scenario 1                                   $5,100             $12,300
Scenario 2                                   $2,500              $6,100
------------------------------------------------------------------------
IV. Administrative cost
Scenario 1                                     $203                $203
Scenario 2                                     $102                $102
------------------------------------------------------------------------
V. Total cost
Scenario 1                                   $7,500             $17,600
Scenario 2                                   $4,800             $11,300
------------------------------------------------------------------------

    *Note: VA believes the legislation as currently drafted would not 
allow current S-DVI policyholders to increase their coverage, which 
could be considered inequitable. (See response to 6b. above.) However, 
the cost of including these Veterans is shown in row II above.

    Question 8: In testimony, VA contended that H.R. 2713 would go far 
beyond the appropriate legitimate policy goals normally associated with 
VA life insurance programs since there have been expansions of some of 
these programs already as well as the creation of new ones. Can you 
further explain why this is the VA's view?

    Response: H.R. 2713 would exceed the policy goals associated with 
VA life insurance programs on two bases. First, under the current 
statute, a Veteran must apply for S-DVI within 2 years from the date VA 
determines that the Veteran's disability is service connected, unless 
the Veteran is shown to be mentally incompetent. H.R. 2713 would 
provide a 2-year open season during which certain service-connected 
Veterans who did not submit a S-DVI application and pay premiums could 
obtain S-DVI. Thus, Veterans who did not comply with the statute, whose 
disabilities may have worsened, and who have aged since being notified 
that their disabilities are service-connected would be allowed to 
purchase insurance at rates that place these disabled Veterans on par 
with healthy non-Veteran populations, particularly at younger ages.
    Second, the amount of government support that would be required for 
H.R. 2713 would far exceed the amount of the current subsidy for the S-
DVI program. The current S-DVI program is not self-supporting because 
the premiums for 45 percent of the policyholders have been waived, and 
because policyholders, who are disabled, pay standard premium rates but 
have a higher rate of mortality than healthy persons. As explained in 
VA's budget submission to Congress, VA has requested $40.1 million for 
the S-DVI program for fiscal 2010.
    The proposal would increase costs because more disabled 
policyholders: (1) would enroll, (2) would be eligible for waiver of 
premiums, (3) would have a higher risk of mortality, and (4) would 
receive higher coverage amounts. We estimate that the 5-year costs for 
H.R. 2713 would range from $7.5 billion to $4.8 billion.
    The alternative proposed in S. 728 would assist veterans with 
greater life insurance needs in a more cost-effective and 
programmatically sound way.

    Question 9: What is the strategic plan for the Insurance Center to 
conduct better outreach and improve its educational services to 
veterans, their families and survivors about insurance?

    Response: The insurance program's strategic plan for outreach 
efforts beginning in fiscal 2010 focuses on three major areas:
    More Precisely Targeting Our ``Special Outreach to Disabled 
Veterans'': We individually call and follow-up with Veterans whose 
disabilities would affect their ability to purchase commercial 
insurance. We inform them of their insurance benefits and explain their 
value. We are identifying recently separated Veterans with low 
percentage service-connected ratings who would have difficulty 
purchasing commercial insurance. This group will be added to our 
special outreach.
    Expanding Customer Access: We provide Veterans with multiple 
avenues for accessing insurance benefits information and managing 
coverage for those currently insured.
    Improving Communications: We provide Veterans with enhanced 
communication materials, including forms, applications, and program 
news, which are easy to understand, provide necessary information, and 
address the needs and concerns of specific demographic groups.
    Additional Insurance outreach initiatives are described below:

      Expand training for branch of service casualty offices, 
Veterans service organizations, and other stakeholders;
      Enhance the insurance Web site to include additional 
self-service functions, Web chat, guidelines and manuals;
      E-mail information such as newsletters to Veterans and 
servicemembers;
      Use Department of Defense military news outlets (TV, 
newspapers, Web sites);
      Remind beneficiaries of the free beneficiary financial 
counseling service; and
      Provide a comprehensive package of information and 
applications and a series mailings regarding eligibility for VGLI upon 
separation.

    Question 10(a): Currently, in calculating an accelerated benefit 
payment, VA applies an interest deduction for proceeds. H.R. 2968 would 
eliminate this. What rate is used to determine the interest deduction, 
how is it calculated?

    Response: The discount rate for the accelerated benefit payment is 
updated monthly and is calculated using the 3-month Treasury bill rate 
rounded down to the nearest 0.25 percent.

    Question 10(b): What would the average increase in accelerated 
benefit payments to terminally ill insured veterans if interest 
deductions are eliminated?

    Response: Elimination of the discount increases terminally ill 
Veterans' benefit payments by varying amounts based on the discount 
rate and the benefit amount. The table below illustrates the 
discounting effect for someone who requests one-half of their $400,000 
coverage (i.e., $200,000) at various discount rates.

------------------------------------------------------------------------
                                                           Discount for
                   ABO Discount Rate                         $200,000
                                                             Benefit
------------------------------------------------------------------------
0.25%                                                              $379
------------------------------------------------------------------------
1.00%                                                            $1,513
------------------------------------------------------------------------
1.50%                                                            $2,266
------------------------------------------------------------------------
2.00%                                                            $3,018
------------------------------------------------------------------------
3.00%                                                            $4,516
------------------------------------------------------------------------


    Question 11: During the hearing, Ms. Carroll noted that survivors 
still need to go through the VBA for assistance and that the newly 
instituted Office of Survivors Assistance established under P.L. 110-
389 is only acting as a policy office. The legislation states that the 
Survivor Assistance Office shall, ``serve as a resource regarding all 
benefits and services furnished by the Department to survivors and 
dependents of deceased veterans and members of the Armed Forces.'' How 
is VA meeting this portion of the mandate?

    Response: The Office of Survivors Assistance (OSA) meets this 
portion of the mandate by referring survivors and dependants of 
deceased Veterans and members of the armed forces to the appropriate 
office within VA for action on their claims and responses to their 
inquiries. This effort is consistent with Congress' expectation, 
expressed in the Joint Explanatory Statement on amendment to Senate 
Bill, S. 3023, as amended, that OSA would ``ensure that policies and 
procedures are such that such survivors will receive appropriate 
referrals to the relevant administrations and offices of the 
Department, so that such survivors may receive all of the benefits and 
services for which they are eligible.'' Most claims/inquiries from 
survivors pertain to compensation, and therefore, OSA refers such 
inquiries to the Veterans Benefit Administration, which has the 
technical expertise to provide an accurate and full response. In 
addition, OSA refers survivors to other administrations within VA, such 
as the National Cemetery Administration and the Veterans Health 
Administration, to address issues within their expertise.

    Question 12(a): Congresswoman Halvorson correctly mentioned that 
totally disabled veterans have ``limited or no opportunity'' of 
obtaining commercial insurance and thus H.R. 2774 ``maximizes'' the 
opportunity for veterans to secure insurance. Has VA done an impact 
study on uninsured veterans?

    Response: We have not conducted a specific impact study; however, 
we believe H.R. 2774 would be beneficial to totally disabled SGLI 
insureds and add minimal cost to the SGLI program.

    Question 12(b): Does this additional 6-month stopgap measure 
address the underlying problems for disabled veterans in securing 
private insurance?

    Response: Totally disabled Veterans are either entirely unable to 
obtain life insurance or can obtain life insurance only at 
prohibitively high premium rates due to their service-connected 
disabilities. This provision would extend free coverage under SGLI for 
6 additional months and provide them automatic entry into VGLI without 
any underwriting. This extra 6-month period gives VA additional time to 
continue outreach and encourage Veterans to purchase VGLI.

    Question 12(c): Can, or should, the proposed 24-month extension be 
lengthened even further?

    Response: VA believes the 24-month extension is the appropriate 
length of time for the following reasons:

      It takes disabled Veterans 12 to 18 months following 
separation to adjust to civilian life and address medical concerns. 
Most Veterans are not ready to address other concerns such as life 
insurance until this time.
      Lengthening the SGLI disability extension would increase 
claims costs to the program and could increase SGLI premiums. The SGLI 
program is self-supporting, and members would have to cover the cost if 
death claims exceeds premium income. Commercial insurance companies 
typically provide a 31-day free conversion period for members to 
convert from a group term policy to an individual policy. The 24-month 
free conversion period for disabled SGLI insureds far exceeds the 
comparable free coverage period offered in the commercial industry.
      The 2-year period is consistent with the application time 
period for S-DVI.

    Question 13: If inquiries and surveys have shown that veterans have 
wanted to increase their amount of SGLI coverage, then why has VA not 
been proactive in asking Congress to fund this benefit? Does it intend 
to request funding to support this increase?

    Response: VA believes that this question refers to VGLI rather than 
SGLI based on the reference to Veterans in the question. In April 2005, 
VA took the initiative to explore the feasibility and advisability of 
offering VGLI policyholders an opportunity to increase their coverage. 
A survey of over 800 VGLI policyholders found that 60 percent wanted 
more coverage. We have been researching, developing, and reviewing 
effective and actuarially sound program designs and recently provided 
the Committee with technical advice regarding this concept. We believe 
H.R. 2379, the ``Veterans' Group Life Insurance Improvement Act of 
2009,'' is the best way to offer VGLI policyholders the opportunity to 
increase coverage. Premiums paid for extra VGLI coverage would offset 
any cost of the optional increase in coverage.

    Question 14: Please confirm the conversion rate/participation 
levels for the VGLI program. Please inform whether there is any 
disparity between VGLI/SGLI and whether more parity between VGLI and 
SGLI be enough to decrease the attrition rate of the SGLI/VGLI 
transfer?

    Response: The VGLI participation rate was 9.4 percent in 2008. The 
participation rate for Veterans with disabilities that might have 
trouble obtaining commercial insurance is 52 percent, and approximately 
90 percent of Veterans with a 100 percent disability rating purchase 
VGLI. Since we began our special outreach program in 2001, 9,500 
seriously disabled Veterans have purchased or been granted insurance 
coverage.
    Despite extensive outreach efforts, some Veterans do not apply and 
purchase insurance from companies with similar value and cost to VGLI. 
The reasons why Veterans may not convert from SGLI to VGLI coverage are 
listed below:

      Employers frequently insure Veterans for little or no 
cost.
      The SGLI premium is 6.5 cents per $1,000 of coverage at 
all ages. VGLI premiums, which increase with age, may deter Veterans.
      Unmarried Veterans often believe they do not need life 
insurance.
      Recently returning Veterans perceive the risk of death to 
be much lower compared to their risk while in service and may not 
purchase any life insurance.

                                 
