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[Senate Report 108-410]
[From the U.S. Government Publishing Office]

108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-410
_______________________________________________________________________

                                     

                                                       Calendar No. 801

 PROVIDING FOR CONTINUED HEALTH BENEFITS COVERAGE FOR CERTAIN FEDERAL 
                   EMPLOYEES, AND FOR OTHER PURPOSES

                               __________

                              R E P O R T

                                 of the

         COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE

                              to accompany

                                S. 2409

 PROVIDING FOR CONTINUED HEALTH BENEFITS COVERAGE FOR CERTAIN FEDERAL 
                   EMPLOYEES, AND FOR OTHER PURPOSES

               November 16, 2004.--Ordered to be printed
                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania          RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah              THOMAS R. CARPER, Delaware
PETER G. FITZGERALD, Illinois        MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire        FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama           MARK PRYOR, Arkansas

           Michael D. Bopp, Staff Director and Chief Counsel
            Jennifer A. Hemingway, Professional Staff Member
Andrew Richardson, Staff Director, Oversight of Government Management, 
        Restructuring, and the District of Columbia Subcommittee
 Theresa M. Prych, Professional Staff Member, Oversight of Government 
  Management, Restructuring, and the District of Columbia Subcommittee
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                  Lawrence B. Novey, Minority Counsel
  Marianne Clifford Upton, Minority Staff Director and Chief Counsel, 
Oversight of Government Management, Restructuring, and the District of 
                         Columbia Subcommittee
      Cathryn J. Kennedy, Legislative Assistant to Senator Durbin
                      Amy B. Newhouse, Chief Clerk

                            C O N T E N T S

                              ----------                              
                                                                   Page
  I. Purpose and Summary..............................................1
 II. Background.......................................................1
III. Legislative History..............................................2
 IV. Section-by-Section Analysis of Bill as Amended...................3
  V. Estimated Cost of Legislation....................................3
 VI. Evaluation of Regulatory Impact..................................6
VII. Changes to Existing Law..........................................6

                                                       Calendar No. 801
108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-410

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

 
 PROVIDING FOR CONTINUED HEALTH BENEFITS COVERAGE FOR CERTAIN FEDERAL 
                    EMPLOYEES AND FOR OTHER PURPOSES

                                _______
                                

               November 16, 2004.--Ordered to be printed

                                _______
                                

Ms. Collins, from the Committee on Governmental Affairs, submitted the 
                               following

                              R E P O R T

                         [To accompany S. 2409]

    The Committee on Governmental Affairs, to which was 
referred the bill (S. 2409) to provide for continued health 
benefits coverage for certain Federal employees, and for other 
purposes, having considered the same reports favorably thereon 
with an amendment and recommends that the bill do pass.

                         I. Purpose and Summary

    S. 2409 is a bill to provide continued health and life 
insurance coverage under federal employee benefit programs for 
employees who are called or ordered to active duty in the Armed 
Forces Reserves.

                             II. Background

    The Reserves of the Armed Forces, including the National 
Guard, continue to play an integral role as the United States 
continues to be engaged in the Global War on Terrorism. In 
support of its mission, the Department of Defense has required 
certain members of its reserve component to serve 24 months of 
active duty.\1\
---------------------------------------------------------------------------
    \1\ 10 U.S.C. Sec. 12302.
---------------------------------------------------------------------------
    Current law authorizes federal departments and agencies the 
option of paying for 18 months both the employee and government 
contribution for health insurance provided to civilian federal 
employees under the Federal Employee Health Benefits Program 
(FEHBP) who are called or ordered to active duty in the 
Reserves. According to the Office of Personnel Management, all 
federal departments and agencies with affected employees have 
exercised this option for their employees.\2\ However, with 
certain members of the Reserve component being called to serve 
a 24 month period, current statute leaves a six month gap in 
coverage for the affected federal employee. This gap requires 
those federal employees and their families to change their 
health insurance coverage to the Department of Defense's 
TRICARE program for the remaining six months of mobilized duty.
---------------------------------------------------------------------------
    \2\ www.opm.gov/press/rel2003/BL-Military-Attach.asp
---------------------------------------------------------------------------
    S. 2409 would amend current law to extend from 18 to 24 
months the period of time a Federal department or agency may 
pay the health insurance premium for mobilized Federal 
employees. This provision of S. 2409 is retroactive to March 1, 
2003, which coincides with the expiration of FEHBP coverage 
extended for Reservists first mobilized in response to the 
September 11, 2001, terrorist attack.
    Additionally, federal employees have the option to purchase 
life insurance through the Federal Employees' Group Life 
Insurance (FEGLI) Program. When called or ordered to active 
duty, federal employees are granted military leave.\3\ Federal 
employees in nonpay status with a federal department or agency 
are extended FEGLI coverage for up to 12 months.\4\ At the end 
of 12 months in nonpay status, the coverage terminates. 
Employees are granted a 31-day extension of coverage at no cost 
to themselves and have the right to convert to a nongroup 
policy.
---------------------------------------------------------------------------
    \3\ 5 U.S.C. 6323.
    \4\ 5 U.S.C. 8706.
---------------------------------------------------------------------------
    When federal employees who also serve in the Reserves are 
called or ordered to active duty, there is potential for a 
lapse in FEGLI coverage should active duty exceed the 12 month 
coverage period. S. 2409 would extend coverage under FEGLI from 
12 to a maximum of 24 months for federal employee reservists. 
The additional FEGLI coverage would be in addition to the 
coverage reservists are automatically eligible for under the 
Servicemembers Group Life Insurance program, which is provided 
to members of the uniformed services and all reservists when 
they are mobilized.

                        III. Legislative History

    S. 2409 was introduced by Senator Voinovich for himself and 
Senator Akaka, Senator Collins, Senator Durbin, and Senator 
Lieberman on May 11, 2004, and was referred to the Committee on 
Governmental Affairs. On May 17, 2004, the bill was referred to 
the Subcommittee on Financial Management, the Budget, and 
International Security.
    On May 27, 2004, the Subcommittee on Financial Management, 
the Budget, and International Security favorably polled out S. 
2409. The Committee considered the legislation on July, 21, 
2004. By voice vote, the Committee accepted an amendment 
offered by SenatorRichard Durbin. Specifically, whereas the 
bill as introduced extended FEHBP coverage, the amendment added a 
provision extending coverage under FEGLI as well. The Committee 
subsequently ordered S. 2409 reported favorably as amended on July 21, 
2004. Senators present: Collins, Voinovich, Specter, Fitzgerald, 
Lieberman, Akaka, Durbin, Carper, and Lautenberg.

           IV. Section-By-Section Analysis of Bill as Amended

Section 1. Payment of Federal Employee Health Benefit premiums

    Subsection (a) amends section 8905(a) of title 5, United 
States Code, to authorize for 24 months continued participation 
in the Federal Employee Health Benefits Program for federal 
employees who also serve in the Reserves and have been called 
or ordered to active duty.
    Subsection (b) amends section 8906 of title 5, United 
States Code, to extend from 18 months to 24 months the length 
of time federal departments or agencies may pay both the 
Government and employee contributions for health insurance 
premiums under the Federal Employee Health Benefits Program.
    Subsection (c) establishes an effective date of March 1, 
2003. The effective date of this section coincides with the 
expiration of FEHBP coverage for reservists mobilized 
immediately following September 11, 2001.

Section 2. Payment of Federal Employee Life Insurance premiums

    This section amends section 8706 of title 5, United States 
Code, to extend coverage of life insurance purchased under the 
Federal Employees' Group Life Insurance Program for up to 24 
months for a federal employee who also is a member of the 
Reserves and has been called or ordered to active duty.

                    V. Estimated Cost of Legislation

S. 2409--A bill to provide for continued health benefits coverage for 
        certain federal employees, and for other purposes

    Summary: S. 2409 would increase health insurance benefits 
for reservists in the Armed Forces who are also federal 
employees, when those reservists are called to active duty for 
longer than 18 months. Specifically, it would extend the time 
period when reservists on active duty can remain enrolled in 
the Federal Employees Health Benefits (FEHB) program from 18 
months to 24 months. Furthermore, it would extend for the same 
period the authority for federal agencies to pay both the 
employee's share and the agency's share of the FEHB premium for 
reservists on active duty. Finally, the bill would extend life 
insurance benefits to federal employees who are also reservists 
and are deployed for periods longer than 12 months.
    CBO estimates that enacting S. 2409 would increase direct 
spending on life insurance benefits for the deployed reservists 
by $1 million in 2005, $2 million over the 2005-2009 period, 
and $4 million over the 2005-2014 period. In addition, CBO 
estimates that implementing the bill would increase spending by 
federal agencies for the FEHB program by $4 million in 2005 and 
$17 million over the 2005-2009 period, assuming appropriation 
of the estimated amounts.
    S. 2409 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 2409 is shown in the following table. 
The costs of this legislation fall within budget functions 550 
(health) and 600 (income security).

                                      ESTIMATED BUDGETARY IMPACT OF S. 2409
----------------------------------------------------------------------------------------------------------------
                                                               By fiscal year in millions of dollars--
                                                   -------------------------------------------------------------
                                                      2004     2005      2006       2007       2008       2009
----------------------------------------------------------------------------------------------------------------
                                         CHANGES IN DIRECT SPENDING \1\

Estimated Budget Authority........................        0        1          *          *          *          *
Estimated Outlays.................................        0        1          *          *          *          *

                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level.....................        0        4          4          3          3          3
Estimated Outlays.................................        0        4          4          3          3          3
----------------------------------------------------------------------------------------------------------------
\1\ CBO estimates that enacting S. 2409 would also raise direct spending by less than $500,000 each year over
  the 2010-2014 period.

Note.*=less than $500,000.

    Basis of estimate: This estimate assumes that S. 2409 is 
enacted before the end of December 2004 and that appropriations 
are increased by the estimated amounts.

Direct Spending

    Section 2 of H.R. 2409 would extend life insurance coverage 
provided by the Federal Employees' Group Life Insurance (FEGLI) 
program for certain federal employees who are also revervists 
and are called to active duty. Current law provides up to 12 
months of FEGLI coverage for federal employees in the reserves 
who are placed on leave from their jobs because of a call to 
active duty. The bill would extend FEGLI coverage among those 
revervists who are serving in Iraq or Afghanistan for an 
additional 12 months, making them eligible for a total of 24 
months of FEGLI coverage while on active duty.
    FEGLI provides group term life insurance to approximately 4 
million federal employees and retirees. FEGLI premiums, which 
amounted to nearly $3 billion in 2003, are paid in part by the 
program's participants and partly by employing federal agencies 
(retirees pay the entire premium). Federal employees who are 
covered by FEGLI while on active duty in the reserves are not 
required to pay their share of FEGLIL premiums. Because 
premiums are not paid for those individuals, the cost of 
providing this coverage must be included in premium rates 
levied on the program's other participants.
    By extending the period of time for which reservists 
employed by the federal government are eligible to receive 
FEGLI coverage, this provision would increase the program's 
costs, as well as its premium rates. Based on information 
provided by the Department of Defense (DoD), CBO estimates that 
more than 17,000 reservists who work for the federal government 
will serve in Iraq and Afghanistan next year, and that about 20 
percent will have been on active duty longer than 12 months. We 
estimate that extending FEGLI coverage to this group would 
increase the program's costs by about $1 million in 2005. After 
2005, CBO assumes the number of reservists deployed in Iraq and 
Afghanistan will decline and premiums paid by other FEGLI 
participants would increase, resulting in an net increase in 
the program's costs of less than $500,000 annually. 
Cumulatively, CBO estimates that enacting this provision would 
increase direct spending for the FEGLI program by $2 million 
over the 2005-2009 period and $4 million over the 2005-2014 
period. Over the long term, higher premiums collected from both 
participants and federal agencies would cover these additional 
costs.

Spending Subject to Appropriation

    Under current law, reservists in the Armed Forces who are 
employed by the federal government and are involuntarily called 
to active duty for a contingency operation can continue their 
enrollment in the FEHB program for up to 18 months. 
Additionally, federal agencies may pay both the employee's 
share and the agency's share of the FEHB premium while the 
reservist is on active duty. Under S. 2409, reservists who are 
deployed for longer than 18 months would be able to continue 
their enrollment for up to 24 months and agencies would be able 
to pay the entire FEHB premium for that period. Those changes 
would affect those reservists called to active duty on or after 
March 1, 2003.
    Based on information from DoD, CBO estimates that this 
authority would affect about 750 reservists working for the 
federal government at an estimated cost of $5,200 per reservist 
in 2005. CBO assumes for this estimate that all government 
agencies would use the authority to pay the full FEHB premium 
for two years. Assuming a declining number of reservist 
mobilizations over the 2005-2009 period, CBO estimates that 
implementing this provision would cost about $4 million in 2005 
and $17 million over the 2005-2009 period. Those amounts would 
be paid from agencies' future appropriations.
    Intergovernmental and private-sector impact: S. 2409 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Previous CBO estimate: On May 17, 2004 CBO transmitted an 
estimate for H.R. 4200, the National Defense Authorization Act 
for Fiscal Year 2005, as reported by the House Committee on 
Armed Services on May 14, 2004. Section 1101 of H.R. 4200 is 
almost identical to section 1 of S. 2409. The only difference 
is the effective date of the provision--September 14, 2001, for 
H.R. 4200 as opposed to March 1, 2003, for S. 2409. According 
to DoD, reservists were not called to serve for longer than 18 
months until March 2003; thus, CBO does not estimate any 
difference in costs because of the differing effective dates. 
In addition, H.R. 4200 does not contain any provisions relating 
to the FEGLI program, while S. 2409 does.
    Estimate prepared by: Federal Costs: FEHB Program: Sam 
Papenfuss, FEGLI Program: Geoffrey Gerhardt. Impact on State, 
Local, and Tribal Governments: Melissa Merrell. Impact on the 
Private Sector: Adebayo Adedeji
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis.

                  VI. Evaluation of Regulatory Impact

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact of this bill. CBO states that 
there are no intergovernmental or private-sector mandates as 
defined in the Unfunded Mandates Reform Act and no costs on 
state, local, or tribal governments. The legislation contains 
no other regulatory impact.

   VII. Changes in Existing Law Made by the Bill, as Ordered Reported

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic and existing law, in which no 
change is proposed, is shown in roman):

TITLE 5, UNITED STATES CODE

           *       *       *       *       *       *       *

Subpart G--Insurance and Annuities

           *       *       *       *       *       *       *

CHAPTER 87--LIFE INSURANCE

           *       *       *       *       *       *       *

Sec. 8706. Termination of insurance; assignment of ownership

    (a) [A] Except as provided in subsection (h), a policy 
purchased under this chapter shall contain a provision, 
approved by the Office of Personnel Management, to the effect 
that insurance of an employee stops on his separation from the 
service or 12 months after discontinuance of his pay, whichever 
is earlier, subject to a provision for temporary extension of 
life insurance coverage and for conversion to an individual 
policy of life insurance under conditions approved by the 
Office. Justices and judges of the United States described in 
section 8701(a)(5)(ii) and (iii) of this chapter are deemed to 
continue in active employment for purposes of this chapter.
    (h)(1) The provisions of subsection (a) shall apply to an 
employee described under paragraph (2), except that the Office 
of Personnel Management shall apply a 24-month period instead 
of a 12-month period.
    (2) An employee referred to under paragraph (1) is an 
employee who is--
          (A) covered by an insurance policy under this 
        chapter;
          (B) a member of a Reserve component of the armed 
        forces;
          (C) mobilized to active duty in accordance with 
        section 101(a)(13)(B) of title 10;
          (D) placed on leave without pay or separated from 
        service to perform active duty; and
          (E) serves on active duty for a period of more than 
        30 consecutive days.

           *       *       *       *       *       *       *

CHAPTER 89--HEALTH INSURANCE

           *       *       *       *       *       *       *

Sec. 8905a. Continued coverage

    (a) Any individual described in [paragraph (1) or (2) of] 
subsection (b) may elect to continue coverage under this 
chapter in accordance with the provisions of this section.
    (b) This section applies with respect to--
          (1) any employee who--
                  (A) is separated from service, whether 
                voluntarily or involuntarily, except that is 
                the separation is voluntary, this section shall 
                not apply if the separation is for gross 
                misconduct (as defined under regulations which 
                the Office of Personnel Management shall 
                prescribe); and
                  (B) would not otherwise be eligible for any 
                benefits under this chapter (determined without 
                regard to any temporary extension of coverage 
                and without regard to any benefits available 
                under a nongroup contract); [and]
          (2) any individual who--
                  (A) ceases to meet the requirements for being 
                considered an unmarried dependent child under 
                this chapter;
                  (B) on the day before so ceasing to meet the 
                requirements referred to in subparagraph (A), 
                was covered under a health benefits plan under 
                this chapter as a member of the family of an 
                employee or annuitant; and
                  (C) would not otherwise be eligible for any 
                benefits under this chapter (determined without 
                regard to any benefits available under a 
                nongroup contract)[.]; and
          (3) any employee who--
                  (A) is enrolled in a health benefits plan 
                under this chapter;
                  (B) is a member of a Reserve component of the 
                armed forces;
                  (C) is called or ordered to active duty in 
                support of a contingency operation (as defined 
                in section 101(a)(13) of title 10);
                  (D) is placed on leave without pay or 
                separated from service to perform active duty; 
                and
                  (E) serves on active duty for a period of 
                more than 30 consecutive days.
    (e)(1) Continued coverage under this section may not extend 
beyond--
          (A) in the case of an individual whose continued 
        coverage is based on separation from service, the date 
        which is 18 months after the effective date of the 
        separation; [or]
          (B) in the case of an individual whose continued 
        coverage is based on ceasing to meet the requirements 
        for being considered an unmarried dependent child, the 
        date which is 36 months after the date on which the 
        individual first ceases to meet those requirements, 
        subject to paragraph (2)[.]; or
          (C) in the case of an employee described in 
        subsection (b)(3), the date which is 24 months after 
        the employee is placed on leave without pay or 
        separated from service to perform active duty.

Sec. 8906. Contributions

    (e)(3)(C) Notwithstanding the one-year limitation on 
coverage described in paragraph (1)(A), payment may be made 
under this paragraph for a period not to exceed [18 months] 24 
months.

           *       *       *       *       *       *       *

                                  
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