DoD Reserve Chief Recommends Suspending Mobilization Insurance

Deborah Lee, assistant secretary of defense for reserve affairs, said the department would honor its commitment to pay those now deployed to Operation Joint Endeavor and Joint Guard. However, poor program marketing, low participation and a $72 million deficit is forcing DoD to rethink its Ready Reserve Mobilization Income Insurance Program.

Speaking before the military personnel subcommittee of the House National Security Committee here May 8, Lee told panel members both DoD and Congress recognized the insurance program was unique. "We realized that there were risks associated with the judgments we made about certain aspects of the program," said Lee, "but felt that the risks were acceptable and the judgments the best we could make."

In February 1996, Congress enacted the optional insurance program as part of the fiscal 1996 Defense Authorization Act. Under the program, reserve component members contribute to insure against loss of their regular income if they are involuntarily called to active duty.

However, only 24,600 of the 900,000-member Selected Reserve currently participate in the insurance program -- far below the 40 percent figure defense officials anticipated would apply.

To complicate matters, just as the new law took effect, DoD announced more deployments to support Joint Endeavor. In most cases, reservists called up for Bosnia duty enrolled for the maximum amount -- $5,000 a month.

Lee said the program suffered what commercial insurers call "adverse selection" -- too many people who knew they were getting called up bought the insurance. Reserve component service members not set for call-up virtually ignored the program. The net result, she said, was the fund immediately lost an estimated $72 million.

To offset the expense, the House and Senate appropriations committees recently recommended inclusion of a $72 million request in the fiscal 1997 emergency supplemental appropriation bill.

If Congress suspends the program, benefit payments would continue for the 3,000 service members currently enrolled and deployed. However, reservists in the program who aren't deployed would halt premiums. Both DoD and Congress would look into ways to either credit or reimburse service members for their income insurance investment.

Lee said a number of factors contribute to the low program enrollment. She said the initial program enrollment period, combined with new reserve activations for Bosnia-Herzegovina, led many to believe the program was solely for Joint Endeavor participants.

Another factor was a marketing problem. "Marketing materials were not available until the last minute because the premium rate was not approved until the middle of August 1996," said Robert J. Lieberman, DoD's assistant inspector general for auditing. Still, he said, DoD had no comprehensive marketing plan to inform reserve troops of the plan.

Lieberman said each reserve component handled its own marketing, with different degrees of aggressiveness and efficiencies. "Four provided toll-free telephone numbers; three of those also furnished information on the Internet," he said. "Three of the reserve components offered neither. Only the Marine Corps and Coast Guard mailed a package to every reservist."

Those inconsistencies also appear in a recent survey conducted for the General Accounting Office. The study said 27 percent of reservists contacted never heard of the insurance program. Another 16 percent said they knew about the program, but did not have detailed information or enough time to make an informed decision. "With better marketing, more of these reservists might have enrolled in the program," said Mark E. Gebicke, GAO's director of military operations and capabilities issues.

Lee said a third concern was the time reservists had to enroll in the insurance program. Those in Ready Reserve prior to Oct. 1 had until Dec. 30, 1996, to select their insurance option. DoD considered those failing to act on their options as declining coverage.

DoD enrolled reservists and Guard members who entered the military on or after Oct. 1 automatically at the $1,000 basic level. They have 60 days from entry to exercise one of four options: enrolling at the basic level of $12.20 per month for $1,000 of monthly coverage; increasing coverage in $500 increments up to $5,000 per month ($61 premium); decreasing coverage to $500 per month ($6.10); or declining coverage.

Finally, Lee said, many reserve component members weren't interested, possibly because they believe their activation is highly unlikely.

Despite the request to suspend the program, both Lee and subcommittee members still promote the need to protect civilian income for those called. Lee said should Congress approve the proposed legislation, DoD would conduct a study to answer the questions of income protection. Lee said she feels these questions could play in DoD efforts to enhance reserve component recruiting, retention and quality of life.

Lee said four pivotal questions will anchor the study:

• Do reservists want and need a mobilization income insurance program?
• Are the military departments willing to require reservists' participation in such a program if it is determined that only a mandatory program would be viable?
• Is it feasible to outsource a mobilization income insurance program to the private sector?
• Are there better means of addressing reserve component concerns about recruiting, retention, and quality of life issues than a mobilization income insurance program?

Defense officials said the insurance program is not a dollar-for-dollar replacement of lost civilian income. Rather, they designed the program to help close the gap between civilian and military pay. Benefit payments for insured members in covered service could last for up to one year, or a maximum of 12 months of any 18-month period.

However, to collect benefits, deployment orders must specify that the member's duty is in support of war, national emergency, or to augment active forces for a contingency operation.

Lee said extensive use of reserve component forces during the Persian Gulf War prompted Pentagon officials to establish some kind of insurance program. A survey of reserve component members revealed about two-thirds of the nearly 268,000 service members activated during the war suffered economic loss.

Service members said they suffered losses because their military pay is less than their civilian income and because deployment increased family expenses. Self-employed reserve component members suffered the most losses -- caused by the adverse effect on their client base during deployment.

Officials said reservists' losses were widespread across all pay grades and military occupations. About two-thirds of the enlisted members and more than half of the officers surveyed indicated interest in buying income insurance.