Action in Congress

Feb. 1, 2006

Pleasant Surprises

Congress in late December passed the 2006 defense authorization containing a raft of personnel initiatives designed to improve recruiting and force management. Some were unexpected.

Surprises in the Fiscal 2006 bill included a provision opening Tricare Reserve Select, a watered-down version of Tricare Standard, to all drilling reservists and their families. Coverage comes with higher premiums, the steepest of which are for Reservists and Guard members who have other health insurance options. (More on this below.)

Among unexpected new authorities to reshape the force is a voluntary separation incentive that the Navy and Air Force intend to use to entice some midcareer officers in overstaffed specialties to leave active duty.

Another surprise is a provision that extends last year’s gains in death benefits to survivors of any service member who dies on active duty. This step eliminates a requirement that deaths be combat-related for a survivor to qualify for the higher amounts.

Survivors of other service members or retirees who died of service-related causes also were affected. Congress opted not to reduce a dollar-for-dollar reduction in survivor benefits when surviving spouses qualify for Dependency and Indemnity Compensation (DIC) from the Department of Veterans Affairs.

Pay and Benefits

The defense bill authorizes new spending of $441.5 billion in 2006—3.1 percent more than in 2005. Nearly $109 billion of that is for military personnel.

Most of the pay and benefit gains in the authorization bill were seen as enhancing force readiness. Proposals that would continue to raise entitlements for retirees, reservists, or survivors, most of which the Senate cleared, were tossed out or reduced in effect by House-Senate conferees.

Here are highlights of initiatives endorsed or rejected:

  • Reserve Tricare—Eligibility for the Tricare Reserve Select program will expand to all drilling reservists. Premiums will depend on personal circumstance. TRS at current premiums is open only to Reservists and National Guard members who complete post-9/11 deployments. For 2006, they will pay $81 a month for individual and $253 for family coverage, enough to cover 28 percent of TRS costs. All TRS users also pay Tricare Standard deductibles and office visit co-payments.

Two premium tiers will be open to any drilling reservist willing to pay more. The first of two higher-tiered premiums will be for reservists who lack alternative health insurance either because they are unemployed, self-employed, or work for a company that has no health insurance plan. These categories of reservists can enroll in TRS if they agree to pay 50 percent of program costs in premiums, about $145 monthly for individual coverage and $452 for family.

Another tier will apply to Reservists who do have alternative health insurance. They will be able to enroll in TRS for premiums set at 85 percent of TRS costs, roughly $245 a month for individual coverage and $768 for family.

  • Death Benefits—The bill authorizes the services to pay survivors of any service member who dies on active duty a $100,000 death gratuity versus the current gratuity for noncombat deaths of $12,400. The gratuity is retroactive for survivors of all troops that died on active duty since Oct. 7, 2001.
  • Income Replacement—The bill authorizes a limited income-loss protection plan for reservists involuntarily activated and kept on continuous active duty longer than 18 months. If such individuals show an income loss, they can receive up to $3,000 a month in replacement income, beginning in the 19th month they are mobilized. Not many reservists will qualify.
  • IU and Concurrent Receipt—The bill accepts the House plan to make modest changes in the concurrent receipt law for military retirees who are deemed “unemployable” by the Department of Veterans Affairs. These 28,000 IU retirees draw VA disability compensation at the 100 percent level. They were excluded from a provision last year that lifted the ban on concurrent receipt of VA compensation and military retirement for 100 percent disabled retirees. Conferees approved a House plan to fully restore military retired pay of IU retirees in 2009 instead of 2014.
  • Voluntary Separation Initiative— Sought by the Navy and Air Force, this authority allows the services to offer lump-sum cash incentives for officers in overpopulated job specialties to leave active duty. Eligible officers will be those with six years to 12 years of duty. The VSI amount would double the current involuntary separation incentive. Involuntary separation pay for officers is set at 10 percent of basic pay for each year of active duty served when separation occurs.
  • SBP Initiatives Sidelined—Not included in the defense bill were two Senate-approved proposals to improve the military’s Survivor Benefit Plan. One would have ended the dollar-for-dollar offset of survivor benefits that occurs when they receive VA Dependency and Indemnity Compensation. Another would have moved up by three years the 2008 effective date of the SBP premium paid-up rule for participants who paid premiums for at least 30 years and reached age 70.

Other Personnel Initiatives

The final 2006 defense bill also:

  • Raises the ceiling on hardship duty pay from $300 a month to $750.
  • Doubles the enlistment bonus ceiling to $40,000.
  • Raises the top re-enlistment bonus authority to $90,000.
  • Allows the services to pay up to $430 per month to service members during rehabilitation from combat-related wounds or illnesses
  • Authorizes 20 different types of force-shaping bonuses and special pays.
  • Increases active duty end strength for the Army by 10,000 soldiers and for the Marine Corps by 1,000 marines. (There was no change in Air Force end strength.)
  • Authorizes an interservice transfer bonus of up to $2,500 for active and reserve troops that agree to move to another service where they are needed more.
  • Authorizes a critical skills retention bonus of up to $100,000 (over a career) for qualified drilling reservists.
  • Approves payment of full Basic Allowance for Housing to reservists ordered to active duty for more than 30 days. Under current rules, reservists don’t receive full BAH pay until after 140 days of mobilization.
  • Increases Tricare benefits for the surviving children of service members who die on active duty.

    Authorizes up to 21 days of leave for military members adopting a child.

Tricare Hikes

The Joint Chiefs of Staff, led by Marine Corps Gen. Peter Pace, the Chairman, will testify if necessary to support upcoming Pentagon budget proposals to increase Tricare fees. The Tricare price hikes would affect under-65 military retirees and their families, according to a senior military officer.

The Tricare proposals are expected to be unveiled officially when the department delivers its Fiscal 2007 budget request to Congress in early February. Changes would raise enrollment fees and deductibles sharply over the next three years, for three million beneficiaries.

Draft department plans show that annual enrollment fees for Tricare Prime, the military’s managed care option, would triple by October 2008 for working-age retired officers. They would double for enlisted retirees.

Yearly deductibles for Tricare Standard, the fee-for-service health insurance option, would nearly double for officers and rise by nearly a third for enlisted. For the first time, retirees who use Tricare Standard would pay an enrollment fee in addition to their deductible.

Pharmacy co-payments also would climb for retirees and their families, regardless of age, if they use the retail drug network or the Tricare mail order program to buy brand-name drugs on the military formulary.

The intent of these initiatives is to slow a projected sharp rise in military health care costs through Fiscal 2015. The cost growth would be slowed by having working-age retirees either pay a greater share of Tricare costs or switch to employer-provided health insurance.

Defense officials have expressed alarm over an on-going migration of retirees into Tricare and away from employer-provided health insurance. William J. Winkenwerder Jr., assistant secretary of defense for health affairs, has said some civilian employers and even state governments are offering cash incentives to retired military workers in order to entice them to use Tricare rather than company- or government-provided insurance. (See “Action in Congress: Rising Health Care Costs … And Ways to Curb Them,” December 2005, p. 24.)

High Tide

A senior Capitol Hill staff member predicted that 2005 may represent the “high tide” of Congress expanding entitlements for military retirees, reservists, and survivors. Lawmakers this past year voted to phase out the reduction in SBP benefits that occurs when survivors turn 62 and become eligible for Social Security.

Congress is “improving the benefit without any change in premium, without any change in the overall contribution from the retiree,” said the staffer. Lawmakers have enhanced the benefit in ways that have enormous legacy costs over time, he said. “These are costs that have to be looked at.”