Federal government to pay interest on late defense-contractor insurance reimbursements
H.R. 9520 — War Hazards Compensation Reform Act · Filed by Michael Lawler (R-NY) · Introduced Jun 29, 2026 · Referred to committee
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What it does
This bill requires the federal government to pay interest on late reimbursements to insurance carriers and employers who advance compensation payments under the War Hazards Compensation Act (WHCA), a program covering workers injured in overseas defense-related activities. It also exempts insurance carriers from posting collateral (financial security) when handling WHCA claims, and mandates the Department of Labor hire at least 15 examiners to process claims faster.
Why we flagged it
The operative mechanism is a federal subsidy to private insurance carriers—interest payments on late reimbursements and collateral exemptions—framed as a worker-protection measure but functionally reducing insurer carrying costs and financial risk.
What the text implies
- The collateral exemption (Section 4) removes a financial safeguard that previously required insurers to post security for WHCA liabilities. This shifts default risk to the federal government, potentially increasing taxpayer exposure if an insurer becomes insolvent before reimbursement.
- Interest accrual at the IRS overpayment rate (currently ~8% annually) creates a new federal liability stream. If reimbursement delays persist, the government's total cost per claim rises substantially—a cost not borne by workers but by taxpayers.
The full analysis lists 4 implications of this text.
Who stands to gain
private insurance carriers underwriting WHCA claims; defense contractors and employers in overseas/defense sectors (via reduced insurance costs); government contractors relying on WHCA coverage