[L]egislators in the House are expected to advance a proposal this week that would establish a statewide paid family leave program.
As it stands, the plan backed by Democratic lawmakers would require all workers and employers to pay into a state-run program funded by a split payroll tax, making all employees eligible for 12 weeks of paid leave.
Gov. Phil Scott has pitched his own voluntary paid leave proposal with New Hampshire Gov. Chris Sununu.
The governor’s plan would leverage the pool of both states’ roughly 20,000 state employees to bring down the cost for other employers to offer the benefit on their own accord, but wouldn’t mandate them to do so.
While it’s unlikely Democrats will pass a paid leave program that is voluntary in nature, like the governor’s, they are considering one aspect of Scott’s plan: hiring a third party to administer the benefit.
Under the Scott administration’s plan the state would hire a private insurance carrier or administrator to run the program.
Administration officials argue that hiring a private carrier to dole out the insurance would save money over time, and spare the state multi-million-dollar investments in IT technology and staff.
It would also put the risk of the program’s insolvency on the insurer, opposed to the state, according to Michael Piecak, the commissioner of the Department of Financial Regulation.
Last week, Scott announced that six insurers and one administrator had expressed interest in offering his bi-state paid family leave insurance.
“I think both in the short and long term it’s more cost efficient to consider the use of the third party carrier,” he said.
The current version of the Democrats’ paid family leave plan would cost roughly $100 million to operate annually, according to the Joint Fiscal Office.
The state would need to collect the tax on employers and employees for months to build a reserve fund before it could start dispersing benefits.
Rep. Janet Ancel, D-Calais, chair of the House Ways and Means Committee, said Monday that her committee is considering changing the plan, and using a private carrier to administer the benefit.
“You don’t have to create from whole cloth a whole program that the state hasn’t done before and you also don’t have to build the reserves,” she said, listing the benefits of a third party administrator.
Some Democrats oppose using an independent carrier to administer the paid leave benefit and argue that private companies would be incentivized to deny claims.
Other states with paid leave policies use independent carriers. New York, which has a mandatory paid leave policy, has a market of more than 25 carriers who administer the benefit.
In California and New Jersey, employers can opt to offer paid leave insurance through private carriers, if they don’t go through the state’s program.
House legislators may decide to modify the paid leave proposal to include a private administrator, but it’s unlikely they will make the program voluntary.
Democrats argue that a paid family leave program should be offered to all workers, and that making all employees and employers pay into the insurance pool makes it more financially viable.
“The way you can keep the cost down and have some better predictability in the program is to have a larger pool of people who participate,” Ancel said.
“We’re trying to create a benefit that will be good for individuals good for families and it makes sense to make it available for everybody,” she said.
The governor has suggested he won’t support a mandatory program, and last year vetoed the paid family leave legislation passed by the Legislature because, like this year’s proposal, it was funded by a payroll tax.
“I think the governor’s made clear that the mandatory vs. voluntary is his main concern,” Piecak said. “The administration is a second tier concern.”
