The Impact of Proposed Legislation to Restrict Access to the SSA DMF; Making “The Perfect” the Enemy of “The Good”?

There is an old story about large numbers of government benefit checks piling up at Post Offices.  Postal carriers, leery of mail theft in marginal neighborhoods, would hold checks rather than placing them in mail boxes.  While this kept the checks out of the hands of would be thieves, it also kept benefits out of the hands of needy recipients.  Are the government’s actions about to keep people from receiving money that they are entitled to?

There are currently a number of proposals in congress seeking to limit access to the Social Security Administration’s Death Master File (SSA DMF).  The common theme underlying each is a desire to combat fraud by reducing or eliminating access to the Personally Identifiable Information (PII) that is currently available on the DMF.  As many in the insurance industry may know, the last major change to the DMF occurred in November 2011 when 4.2 million state protected records were removed, in addition to the elimination of several pieces of PII across the entire SSA DMF including the decedent’s State and Zip Code.  Since 2011, other proposals to further limit access have come and gone but there seems to be a greater sense of urgency this cycle, perhaps due to an increasing number of data breaches combined with heightened privacy concerns following the NSA scandal and associated fallout.

The current bills include:

• H.R. 2720:  “Alexis Agin Identity Theft Protection Act of 2013”
• H.R. 295: “Protect and Save Act of 2013”
• H.R. 531: “Tax Crimes and Identity Theft Prevention Act”
• H.R. 466: “Social Security Death Master File Privacy Act of 2013”
• S. 676: “Identity Theft and Tax Fraud Prevention Act of 2013”

The goals of these bills range from implementing a ‘certification’ process that controls access to the SSA DMF, to adding delays in the release of information or in the case of Sam Johnson’s (R-TX) HR 2720, the inclusion of a sunset provision eliminating ALL access in 2019 regardless of certification.  The Executive Branch has also helped set the tone with its Department of the Treasury’s 2014 budget proposal which included restricting immediate access to the DMF to users with a legitimate need for fraud prevention purposes and a request for delayed release of the DMF for three years to all others.

What does the legislation before us mean today?   While the “asymmetrical use” of the DMF caused trouble for some insurers (in utilizing death matching to suspend annuity payments while not leveraging the same data source on the life side of the company), the DMF has become a powerful force in not only identifying deceased insureds and getting policy proceeds into the hands of beneficiaries, but also in preventing life insurers from issuing annuity payments that, due to the annuitant’s death, are not actually owing.  Access to a complete DMF is good for beneficiaries and life insurers alike.

To date, one dozen States have proposed or passed legislation based on NCOIL’s Unclaimed Life Insurance Benefits Act, which was modeled assuming that the insurance industry would have reasonable access to the SSA DMF.  Some of those States specifically define the SSA DMF as the required source while others use language similar to the following: “Death Master File means the U.S. Social Security Administration’s Death Master File or any other database or service that is at least as comprehensive as the Death Master File for determining that a person has reportedly died.”  In the case of the former, what would an insurer do in the absence of access?  Even with a more ‘flexible’ definition such as the one above, the reality is that in the absence of access to the DMF, there is no other source that would continue to be available that is ‘at least as comprehensive’.

In contemplating these new restrictions, we must also ask how this will impact the auditors that are conducting the reviews of insurer books and records on behalf of the States.  Seemingly, the auditors themselves will also lose access and if they do not, then one could clearly argue that it is not reasonable for the states to conduct audits using data sources that are not commercially available to the insurers’ themselves.

There must be a better way.  It is inevitable that the proposed restrictions would result in rightful owners not receiving the substantial benefits to which they are entitled.  Accordingly, perhaps more focus should be placed on adding stricter requirements mandating that lending institutions perform a match against the SSA DMF before issuing credit in the first place (this is in fact one of the best arguments for an open, public DMF; unfortunately, fraudsters apparently make more consistent use of the death index than do issuers of credit).  This would seem to be a much more appropriate method of reducing the potential negative impact of the nefarious use of SSA DMF’s PII for fraudulent purposes.  After all, if companies check the SSA DMF before issuing credit then how could a thief successfully be issued credit using the PII of those very same decedents?

For more information on Cross Country Computer’s APEARS® death matching capabilities and to stay informed about other relevant insurance legislation, please contact Thomas Berger at (631) 220-6947 or via email to TBerger@crosscountrycomputer.com.