03/18/2010 05:12 am ET Updated May 25, 2011

Screwing Over Private Contractors

We often hear about how private military contractors are supposedly screwing the American government and taxpayers through fraud, waste or abuse. But almost nothing ever gets said or written about how those contractors are themselves often screwed by incompetent or unscrupulous employers.

Contrary to popularly-held beliefs, most private contractors are not armed, and the vast majority of them are just ordinary people trying to do the best job they can in exceptionally difficult circumstances. But you would never know that if all you read is Daily Kos or The Nation.

A rare exception is T. Christian Miller, a former reporter for the Los Angeles Times and author of the 2006 book called "Blood Money: Wasted Billions, Lost Lives and Corporate Greed in Iraq," who who now works with ProPublica. There, Miller has published has investigative series, "Disposable Army: Civilian Contractors in Iraq and Afghanistan" which is a must-read for anyone interested on the subject, on how contractors are often not given the medical care or insurance benefits which are required under U.S. law, notably the Defense Base Act.

Yesterday, Miller was on the NPR program Fresh Air speaking with host Terry Gross. The title of the program "Wounded in Wars, Civilians Face Battle Care at Home," is clear on what to expect. Here is some of what was said:

Mr. Miller: Yes, some of these contractors carry weapons. Some of them have been involved in incidents where they have killed Iraqis and Afghan civilians, but really the bulk of employees in Iraq and Afghanistan, right now, are kind of ordinary, everyday folks who are doing things like delivering mail and cleaning laundry, picking up trash and serving meals.

These are guys who are over there, they've been hired to do a job, they're supporting the soldiers. So what do we owe them? What do we owe this set of people who has been hired and outsourced by the U.S. government to support the American war effort?

And I just wanted to kind of explore that whole area of the side of the contracting and the contract workers you don't hear about. We hear a lot about the 30,000-or-so armed security contractors. You don't hear a lot about the 170,000 other people who are just doing ordinary, everyday jobs.


Gross: Well, let's start talking specifically about health insurance. The contract workers are insured by private companies. It's not government insurance, and the kind of insurance that they get is determined by a law from 1940. And you've been writing about that. I don't think hardly anybody knows about this. So would you explain the law that regulates what kind of insurance the private contractors get?

Mr. Miller: Sure. It's a law called the Defense Base Act, and it was first passed in the 1940s. And at the time - for a little bit of history on this issue of contractors and their participation on the battlefield - at the time there were about 1,000 contractors who were captured on Wake Island, while they were building up military bases in U.S. - on Wake Island in preparation for the war, World War II.
So at the time, 1,000 of these civilian contractors were captured by the Japanese and held prisoner of war, and the question was: well, what happens to these people?

And so Congress passed the Defense Base Act, and it was a very rudimentary law, which is essentially kind of a worker's compensation law. And what it does is it requires any defense contractor who's working for the U.S. government in a war zone to purchase worker's compensation for their employees.

Now, the original idea was that these people would be suffering typical workplace injuries like slipping and falling. In reality, what has occurred is the civilian contractors have been suffering horrific war zone-type injuries, such as having their legs blown off or having psychological conditions like post-traumatic stress disorder.

And so this Defense Base Act law essentially requires a defense contractor to purchase insurance for a workplace that is actually a war zone. And the problems that these civilian workers have had in having medical payments paid for a new prosthetic leg, for instance, is because that was never contemplated under the law that somebody who is working for a defense contractor would need two new prosthetic legs or would need three decades' worth of psychological counseling to overcoming a post-traumatic-stress-type injury which occurred when they were involved in a horrible roadside bombing.

And so what you've had is this Defense Base Act law was written, designed for a situation which no longer exists and has mushroomed far beyond what anybody ever thought it was designed to handle.

Gross: So why are we still using it, if it's so inappropriate to the situation our contractors are in now?

Mr. Miller: I think there's two reasons for that. The first reason is because I think it's taken a long time to build up enough - a body of injuries and a body of deaths to even raise an awareness that this law is out there and that people are using it. I just think there's been a long lag time in realizing or anybody paying attention to it.
But I also think there is something with the fact that we as a society don't really have a place, socially, for a civilian war veteran. We know how to treat veterans, and we know what their status is, and there's a Veteran Affairs Department, and it's part of the president's Cabinet, and there's a VA system to deal with them.


Mr. Miller: Right. What the law says is every defense contractor has to purchase this specialized type of workers' compensation insurance for their employees. It's up to the contract company to purchase the insurance. As it so happens, they actually don't have a lot of choices.

AIG sells almost all of the policies which comply with the Defense Base Act. They sell about 80 to 85 percent of the policies that cover worker injuries. It's a very specialized type of insurance because it's in a war zone.

So yes, the contract companies are told to go buy this insurance. In point of fact, they usually end up buying it from AIG and a handful of other companies, like CNA is another one, and Zurich is yet another one - and they buy that insurance.

Ultimately, that's paid for by us, by taxpayers, because we fund the contract, and so the contractor buys the insurance, and then we pay for the total price of that contract, which includes the insurance. So we end up funding this insurance policy.

Gross: You write in your series that early in the Iraq War, it cost taxpayers $100,000 per year to insure a civilian contractor who was paid $100,000 per year. So the insurance was the same amount as the salary.

Mr. Miller: Yeah, that's why I'm saying these prices were just astronomical. I mean, there's no workers' comp insurance anywhere that has that much of a premium. You can look at some of the most dangerous professions in the U.S., like the fishing industry or the construction industry, and those companies aren't paying anything like one dollar for insurance for every one dollar of salary, but in Iraq and Afghanistan, they could charge that because there wasn't a market.

Another very peculiar part of this particular story is that because of another law, the U.S. actually reimburses the insurance companies for any civilians who are injured in a combat situation.

So at the very end, the insurance company will ultimately submit the bill to the U.S. government, and they will get paid back for any injury involving a combat wound.

Gross: Let me ask a stupid question: What is the point of the insurance company if taxpayers are paying for the premium and then also paying for the medical bill?

Mr. Miller: I don't think that's a stupid question at all. I think that's a very relevant question. The Pentagon, just this summer, finally released a report, which addressed that, and they essentially said why don't we just self-insure, like we do in any other field that we're involved with? And the Pentagon's suggestion was that the Pentagon provided the money to pay for these injuries, since they're going to pay for it one way or the other anyway, but remove the level of the private insurance company. Nobody's actually done anything about that. No senator's office or representative's office has picked that up, but the savings were several hundred million dollars a year - could have been saved if that reform was made.

Gross: So let's compare what the situation is for a military person and for a civilian contractor who's injured in a war zone. So the military person, they have the whole military health care system behind there, and they have military planes to transport - if they've gotten their legs blown off, they have a military helicopter to transport them to a hospital and then to take them home, and they have a military hospital, hopefully with state-of-the-art equipment and prosthetics to help them.

So you're a civilian contractor. Your legs are blown off. How do you even get out of the war zone? Does the military helicopter take you out, or are you on your own?

Mr. Miller: Well, because there is no overall system in place, it very much depends upon where you are and when it happens. If you happen to be fortunate enough - I guess is not a good word - but if you happen to be with the U.S. military when your legs are blown off, you will at least be given military transport out of the country to a military hospital - if you're an American -and will be discharged eventually to an American hospital.

So if, however, you happen to be driving from Point A to Point B, and your legs are blown off, then it's up to - your contract company, hopefully, has arranged some means to evacuate you out of the country.

If you happen to be a third-country national or an Iraqi or Afghan, you may be taken to a local hospital, whose standards of care are nowhere near what are in the United States or nowhere near what the military is going to receive, and worse, since you've been clearly identified as having been working with the U.S. military, you run the risk of being targeted by insurgents and actually being killed in the hospital or as soon as you return home because the insurgents will go after you as somebody who collaborated.

So in many ways, there is no system, at all, for these people, and it depends very much on who you are and where you are and what happens if you're able to get medical care.


I know you don't have exact numbers on this, but how common do you think it is that civilian contractors are denied claims or denied coverage for things as essential as a prosthetic leg?

Mr. Miller: Well, what you'll find that we found when we analyzed information on these insurance claims that we got from the Labor Department after a Freedom of Information Act lawsuit and the Labor Department, which administers the system and keeps track of the system to a very minimal degree, showed that that data - showed that about almost one of every two claims gets some kind of a denial from the insurance industry, which is much higher than a typical insurance industry denial rate.

So one of every two claims they'll hit some hostility where they'll get some pushback from the insurance company saying we can't pay for your treatment now or we'll pay for it later or we'll never pay for it. And that's the best we could do in terms of being able to explore this world, is that we know that there's been this initial denial, at least, almost one of every two times. I think the figure was 44 percent of the time.

Now that's just for the people who file claims. A lot of contractors don't know about this insurance at all, especially those that we've hired from overseas, they don't even know to file a claim. So there's a number of individuals out there who are sick or wounded or injured, who are owed medical treatment or who are owed treatments and are not getting them at all.

Gross: Now why don't they know that they have this coverage? Do the contracting companies intentionally not tell their employees?

Mr. Miller: I don't think that's - that certainly could happen sometimes. What I think is much more common is the falling scenario: It's a little known fact that two-thirds of the civilian workforce in Iraq and Afghanistan are foreigners, people from other countries like Iraq, from Afghanistan, local laborers hired there, people who are imported from third world countries like the Philippines - and that makes up the bulk of the contracting force. They're generally working to clean clothes or serve meals. They're, nonetheless, often suffer injuries because they'll - mortars will fall into a camp or they'll be going from one place to another and they'll be attacked.

Those individuals simply don't know about the system because they've never been told about it. They never heard about it, the Labor Department's made no effort to contact them, they may be subcontractors of subcontractors of subcontractors, so they simply don't know the system exist and there's no easy way to find out about it, either. So you have an enormous number of people out there who are simple ignorant of their rights. And what's I think saddest about that is that taxpayers have actually paid the price to cover those people. We've already paid for their insurance, but they're not taking advantage of it. And so, that money that money is going to stay in the hands of companies like AIG and CNA, who don't have to pay out on those claims.

Gross: You also found instances where people were basically pressured -civilian contractors were pressured to accept a settlement instead of what they were actually insured for, which was more of a lifetime benefit.

Mr. Miller: Right. I think those are some of the - some of the saddest cases of all involve Iraqis and Afghans who went to work to translate for American troops. The U.S. troops need to be able to understand the locals and when they do their counterinsurgency work or when they're just going about a market town. So they were often hired - Defense contractors would hire locals to translate for these troops. They worked right alongside them, they drove in the same vehicles, they worked with them 24 hours a day.

When those guys got injured or were attacked, they were often with the soldiers so there was some system where they would file a claim. When then happened, is you have the insurance company come and say well, we'll give you $5,000. We'll give you $10,000 to settle off. Sign this piece of paper and we're done with you. And to an Afghan villager or to an Iraqi villager, that seemed like a lot of money. When if they had had full access to the system, had, you know, had some knowledge of what the system was, that claim would typically have been paid off for let's say $100,000, they may have taken something like $10,000 or $50,000 for it. And so they ended up receiving far less money than they were actually owed.

Gross: So you're writing about how some Iraqi and Afghani interpreters had been taken advantage of, and right now, we need a lot more interpreters in Afghanistan because we have more troops there to interpret for, the war has escalated there. So do you think things are improving for the translators?

Mr. Miller: No, not at all. I think this is a problem that's going to get a lot worse before it gets better and that's because these people literally have, although they are translators, they have no voice; there's no translators of Afghanistan and Iraq lobby in Washington. So there's nobody who's really paying any attention to their medical needs, their benefits, any of the monies they're getting - so it's a completely unregulated system, an unregulated place and they don't have any real access to the system.

And so until that changes, until somebody cares enough or pays enough attention, these Afghans and Iraqis who have worked with U.S. troops and often helped them greatly will kind of remain a disposable army. They just - we have hired them, they've been injured and then they go back to their villages where they suffer by themselves.