Veterans' Group Life Insurance Increased Coverage, 18491-18494 [2018-08855]

Agencies

• DEPARTMENT OF VETERANS AFFAIRS

[Federal Register Volume 83, Number 82 (Friday, April 27, 2018)]
[Proposed Rules]
[Pages 18491-18494]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08855]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 9

RIN 2900-AQ12


Veterans' Group Life Insurance Increased Coverage

AGENCY: Department of Veterans Affairs.

[[Page 18492]]


ACTION: Proposed rule.

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SUMMARY: Current statutory provisions provide Veterans' Group Life 
Insurance (VGLI) insureds under the age of 60 with the opportunity to 
increase their VGLI coverage by $25,000 not more than once in each 5-
year period beginning on the 1-year anniversary of the date a person 
becomes insured under VGLI. The Department of Veterans Affairs (VA) 
proposes to amend its VGLI regulations to establish a permanent 
regulatory framework for such elections of increased coverage. The 
proposed rule would also clarify that coverage increases in an amount 
less than $25,000 are available only when existing VGLI coverage is 
within $25,000 of the Servicemembers' Group Life Insurance current 
maximum of $400,000, and any increases of less than $25,000 must be 
only in an amount that would bring the insurance coverage up to the 
statutory maximum.

DATES: Comment Date: Comments must be received by VA on or before June 
26, 2018.

ADDRESSES: Written comments may be submitted through https://www.Regulations.gov; by mail or hand-delivery to the Director, 
Regulation Policy and Management (00REG), Department of Veterans 
Affairs, 810 Vermont Ave. NW, Room 1063B, Washington, DC 20420; or by 
fax to (202) 273-9026. Comments should indicate that they are submitted 
in response to ``RIN 2900-AQ12 Veterans' Group Life Insurance Increased 
Coverage.'' Copies of comments received will be available for public 
inspection in the Office of Regulation Policy and Management, Room 
1063B, between the hours of 8:00 a.m. and 4:30 p.m., Monday through 
Friday (except holidays). Please call (202) 461-4902 for an 
appointment. (This is not a toll free number.) In addition, during the 
comment period, comments are available online through the Federal 
Docket Management System (FDMS) at https://www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Karen Naccarelli, Department of 
Veterans Affairs Insurance Center (310/290B), P.O. Box 13399, 
Philadelphia, PA 19101, (215) 381-3029. (This is not a toll free 
number.)

SUPPLEMENTARY INFORMATION: Before the passage of the Veterans' Benefits 
Act of 2010, Public Law 111-275, 404, 124 Stat. 2864, 2879-2880 (2010), 
the maximum amount of VGLI coverage available to a former member (also 
referred to as ``the insured'' hereafter) was limited to the amount of 
Servicemembers' Group Life Insurance (SGLI) coverage in force at the 
time of separation from service. See 38 U.S.C. 1977(a)(1). Section 404 
of the Veterans' Benefits Act of 2010 amended the governing statute, 38 
U.S.C. 1977, to authorize insureds who are under 60 years of age and 
who have less than the statutory maximum of SGLI coverage to elect in 
writing to increase coverage by $25,000 not more than once in each 5-
year period beginning on their 1-year VGLI coverage anniversary date. 
Section 404 enables former members to keep pace with changing economic 
conditions by purchasing adequate amounts of life insurance to protect 
their families. Section 404 added to 38 U.S.C. 1977(a) a new paragraph 
(3), which took effect April 11, 2011. To promptly implement this 
statutory change, VA adopted interim procedures for increasing VGLI 
coverage. See ``Servicemembers' and Veterans' Group Life Insurance 
Handbook,'' ch. 12, para. 12.01, on the VA Insurance website at https://www.benefits.va.gov/INSURANCE/resources_handbook_ins_chapter12.asp 
(outlining the interim process). Since the 2011 change in law, 70,569 
VGLI insureds have participated in VGLI increased coverage 
opportunities as of the end of calendar year 2016, electing additional 
coverage in the amount of $1,764,710,000. The proposed regulation is 
intended to establish a permanent regulatory framework for affording 
additional VGLI coverage under section 404.
    VA proposes to exercise the Secretary's authority under 38 U.S.C. 
501 and amend its regulations to establish a permanent regulatory 
framework for affording VGLI insureds the opportunity to purchase 
increased coverage pursuant to 38 U.S.C. 1977(a)(3). Under 38 U.S.C. 
1977(b)(2), VGLI is only renewable on a ``five-year term basis,'' while 
subsection (a)(3) provides for elections of increased coverage of 
$25,000 not more than once in each 5-year period beginning on the 1-
year anniversary of the date a person becomes insured under VGLI. See 
38 U.S.C. 1977. Because the statutory language does not specify the 
invitation period(s) for VGLI insureds to elect increased coverage, VA 
proposes to amend 38 CFR 9.2 to address the gap. Proposed Sec.  
9.2(b)(5) would provide that the VGLI insured's first opportunity to 
increase coverage would be on the one-year VGLI coverage anniversary 
date, the earliest date permissible under the authorizing statute. The 
insured could subsequently elect to increase coverage on the 5-year 
anniversary date from the first VGLI coverage increase election 
opportunity and on each 5-year anniversary from the date of the last 
VGLI coverage increase opportunity thereafter.
    The proposed amendment of Sec.  9.2 is consistent with 38 U.S.C. 
1977(a)(3), which states that the insured has the opportunity to 
increase coverage ``[n]ot more than once in each five-year period 
beginning on the 1-year anniversary of the date a person becomes 
insured under Veterans' Group Life Insurance.'' As stated, the 
authorizing statute is silent about if and when an insured will be 
notified about the opportunity to increase coverage. Accordingly, VA's 
proposed regulation is intended, in part, to address this gap in the 
statutory language. Specifically, the proposed regulation would provide 
that after VGLI enrollment, the insurer will invite insureds to 
increase coverage not less than 120 days prior to the 1-year 
anniversary from initial VGLI coverage and not less than 120 days prior 
to each 5-year anniversary date from the date of the last VGLI coverage 
increase election opportunity, until the former member has elected the 
SGLI statutory maximum (currently $400,000) or has attained the age of 
60 years, whichever occurs first.
    In addition, VA seeks to make clear in this proposed rule that 
insureds must elect increased coverage within 120 days prior to their 
VGLI one-year anniversary date and/or within 120 days prior to each 
subsequent 5-year anniversary date from the last VGLI coverage increase 
election opportunity. VA has determined that the 120-day period is a 
reasonable period of time for insureds to review their financial needs 
and make informed decisions regarding whether to request additional 
coverage. As such, the proposed regulation would allow VGLI insureds to 
elect increased coverage within 120 days prior to the 1-year 
anniversary date and within 120 days prior to each 5-year anniversary 
date from the date of the last VGLI increase opportunity as long as the 
insured remains eligible to do so, i.e., is under the statutory 
coverage limit and under 60 years of age.
    For example, if a former member purchased $300,000 in VGLI coverage 
effective April 11, 2017, the former member would be eligible to 
request an additional $25,000 of VGLI coverage beginning 120 days prior 
to April 11, 2018. The increased coverage would be effective April 11, 
2018. The next opportunity to increase coverage would be April 11, 
2023, the first 5-year anniversary date from the last VGLI coverage 
increase election opportunity. Subsequently, the former member would 
have the opportunity to buy an additional $25,000 in VGLI coverage once 
every five years for as long as the

[[Page 18493]]

former member was under 60 years of age and held $400,000 or less in 
VGLI coverage. See 38 U.S.C. 1977(a)(3).
    The proposed regulation would afford the insured the earliest 
opportunity to increase coverage permitted under the statute, namely on 
the one-year anniversary after coverage begins and on each subsequent 
5-year anniversary date from the last VGLI increase election 
opportunity. See 38 U.S.C. 1977(b)(2). Moreover, the proposed amendment 
would ensure that such increases in coverage would occur during 
predictable periods. This would allow both the insured and the insurer 
to plan for any potential changes in the in-force coverage amount and 
the corresponding premiums. This aspect of predictability about the 
timing of coverage elections would support the goal of managing the 
VGLI program based on sound actuarial principles, while also affording 
insureds ample opportunities to elect increased coverage if they choose 
to do so. Under the proposed regulatory amendment, insureds could make 
assessments about future financial plans and the insurer could apply 
the increased coverage amount(s) at predictable intervals, namely at 
the time of the first year anniversary date after coverage began or at 
the time of each subsequent 5-year anniversary date(s) of the last VGLI 
coverage increase election opportunity. The insurer would apply any 
increased coverage from the date of the 1-year anniversary and/or from 
any 5-year anniversary date from the most recent VGLI coverage increase 
election opportunity.
    By limiting opportunities to increase VGLI coverage to the initial, 
1-year coverage anniversary date and every 5-year anniversary date of 
the last VGLI coverage increase election opportunity thereafter, VA 
would provide insureds the opportunity to meet their financial needs 
while mitigating the potentially negative impact of adverse selection 
in the VGLI program. Adverse selection occurs when individuals use 
their superior knowledge of their insurability to minimize the period 
of time over which they are likely to pay premiums for coverage. Such a 
practice unfairly shifts the premium paying burden to other individuals 
paying premiums for coverage over a longer period of time and 
potentially undermines the financial health of the program to the 
detriment of all insureds. Insurance programs rely on a pooling of 
risks, and premium rates are set according to the expected mortality of 
the insurance pool. If a disproportionate number of insureds in 
substandard health enter the program or carry higher coverage amounts 
than healthier individuals in the program, the increased mortality 
experience will exceed that upon which the premium rates are based and 
could impact the program negatively by driving up the cost of premiums 
for all program participants. Consistent with industry practices 
designed to keep premium rates affordable, insurance providers 
typically limit changes in policies to certain defined periods of time, 
such as open seasons or during renewal periods. By limiting VGLI 
coverage changes only at established intervals, such as the initial, 1-
year anniversary from the coverage date and each 5-year anniversary 
date from the last VGLI coverage increase election opportunity 
thereafter, VA would ensure that VGLI insureds have ample opportunity 
to increase coverage in a manner that is both consistent with industry 
practice and beneficial to insureds.
    As it relates to the amount of increased coverage elected at one 
time, the statutory language of 38 U.S.C. 1977(a)(3) provides that an 
increase in coverage is generally allowable in intervals of $25,000; 
however, the statute is silent as to the options available to VGLI 
insureds who have coverage of more than $375,000, i.e., within less 
than $25,000 of the current statutory maximum. To address this gap in 
the statutory language, VA's proposed rule would also clarify that 
increases of less than $25,000 shall be permitted only when VGLI 
coverage in force is within less than $25,000 of the statutory maximum. 
In such circumstances, coverage increases in an amount less than 
$25,000 would only be allowed in the amount required to increase 
coverage up to the current statutory maximum of $400,000. For example, 
if an insured has coverage of $380,000, the proposed rule would permit 
an increase of $20,000 in order to bring the insured's coverage up to 
the current SGLI maximum of $400,000. If not for this exception, those 
within less than $25,000 of the statutory maximum coverage amount would 
be forever barred from increasing their coverage because doing so would 
result in coverage in excess of the SGLI maximum of $400,000, which is 
not permitted by law. VA's proposed rule would seek to avoid this harsh 
result and make permanent the current, interim policy that allows 
insureds with more than $375,000 coverage the opportunity to elect 
additional coverage up to the statutory maximum. There is flexibility 
in this area because 38 U.S.C. 1977(b)(5) authorizes the Secretary to 
set terms and conditions for VGLI that he determines to be reasonable 
and practicable. The exception outlined above is both permissible 
within the scope of the statute and furthers its intent to allow up to 
$400,000 in VGLI coverage.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in the expenditure by 
state, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year. This proposed rule would have no such 
effect on state, local, and tribal governments or the private sector.

Paperwork Reduction Act

    This proposed rule contains no provisions constituting a collection 
of information under the Paperwork Reduction Act (44 U.S.C 3501-3521).

Executive Orders 12866, 13563, and 13771

    Executive Orders 12866 and 13563 direct agencies to assess the 
costs and benefits of available regulatory alternatives and, when 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, and other advantages; distributive impacts; 
and equity). Executive Order 13563 (Improving Regulation and Regulatory 
Review) emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
Executive Order 12866 (Regulatory Planning and Review) defines a 
``significant regulatory action'' requiring review by the Office of 
Management and Budget (OMB), unless OMB waives such review, as ``any 
regulatory action that is likely to result in a rule that may: (1) Have 
an annual effect on the economy of $100 million or more or adversely 
affect in a material way the economy, a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local, or tribal governments or communities; (2) 
Create a serious inconsistency or otherwise interfere with an action 
taken or planned by another agency; (3) Materially alter the budgetary 
impact of entitlements, grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) Raise novel legal 
or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in this Executive Order.''

[[Page 18494]]

    The economic, interagency, budgetary, legal, and policy 
implications of this regulatory action have been examined, and it has 
been determined not to be a significant regulatory action under 
Executive Order 12866. VA's impact analysis can be found as a 
supporting document at https://www.regulations.gov, usually within 48 
hours after the rulemaking document is published. Additionally, a copy 
of the rulemaking and its impact analysis are available on VA's website 
at https://www.va.gov/orpm/, by following the link for ``VA Regulations 
Published From FY 2004 Through Fiscal Year to Date.'' This proposed 
rule is not expected to be an E.O. 13771 regulatory action because this 
proposed rule is not significant under E.O. 12866.

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed rule would not 
have a significant economic impact on a substantial number of small 
entities as they are defined in the Regulatory Flexibility Act (5 
U.S.C. 601-612). This proposed rule would directly affect only 
individuals and would not directly affect small entities. Therefore, 
pursuant to 5 U.S.C. 605(b), this rulemaking is exempt from the initial 
and final regulatory flexibility analysis requirements of sections 603 
and 604.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number and title for the 
programs affected by this document is 64.103, Life Insurance for 
Veterans.

List of Subjects in 38 CFR Part 9

    Life insurance; Military personnel; Veterans.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of the Department of Veterans Affairs. Jacquelyn 
Hayes-Byrd, Deputy Chief of Staff, Department of Veterans Affairs, 
approved this document on February 23, 2018, for publication.

    Dated: April 23, 2018.
Jeffrey M. Martin,
Impact Analyst, Office of Regulation Policy & Management, Office of the 
Secretary, Department of Veterans Affairs.

    For the reasons stated in the preamble, the Department of Veterans 
Affairs proposes to amend 38 CFR part 9 as follows:

PART 9--SERVICEMEMBERS' GROUP LIFE INSURANCE AND VETERANS' GROUP 
LIFE INSURANCE

0
1. The authority citation for part 9 continues to read as follows:

    Authority:  38 U.S.C. 501, 1965-1980A, unless otherwise noted.

0
2. In Sec.  9.2, add new paragraph (b)(5) to read as follows:


Sec.  9.2  Effective date; applications.

* * * * *
    (b) * * *
    (5) Pursuant to 38 U.S.C. 1977(a)(3), former members under the age 
of 60 can elect to increase their Veterans' Group Life Insurance 
coverage by $25,000, up to the existing Servicemembers' Group Life 
Insurance maximum. The insured's first opportunity to elect to increase 
coverage is on the one-year Veterans' Group Life Insurance coverage 
anniversary date. Thereafter, the insured could elect to increase 
coverage on the five-year anniversary date of the first VGLI coverage 
increase election opportunity and subsequently every five years from 
the anniversary date of the insured's last VGLI coverage increase 
election opportunity. Increases of less than $25,000 are only available 
when existing Veterans' Group Life Insurance coverage is within less 
than $25,000 of the Servicemembers' Group Life Insurance maximum and 
any increases of less than $25,000 must be only in the amount needed to 
bring the insurance coverage up to the statutory maximum allowable 
amount of Servicemembers' Group Life Insurance. The eligible former 
members must apply for the increased coverage through the 
administrative office, within 120 days of invitation prior to the 
initial one-year anniversary date or within 120 days prior to each 
subsequent five-year coverage anniversary date from the first VGLI 
coverage increase election opportunity. The increased coverage will be 
effective from the anniversary date immediately following the election.
* * * * *
[FR Doc. 2018-08855 Filed 4-26-18; 8:45 am]
 BILLING CODE 8320-01-P