Editor’s note: This commentary is by Michael Pieciak, commissioner of the Vermont Department of Financial Regulation.
[T]here is a growing consensus that paid family medical leave is a valuable program that benefits individuals, families and businesses alike. Generally, paid family medical leave provides an individual with income replacement while away from work to bond with a new child, recover from a serious medical condition or care for a sick relative.
Research suggests children and parents experience better health outcomes if they have access to paid family medical leave. Businesses can experience a more productive workforce and higher morale with measurable improvements in retaining employees and recruiting new talent. This last point is particularly relevant when considering Vermont’s pressing need to grow the workforce.
This is why Vermont Gov. Phil Scott and New Hampshire Gov. Chris Sununu proposed the Twin State Voluntary Leave Plan earlier this year. The plan is built around two basic tenets: that employers should be given the choice to opt-into the program, acknowledging that some small businesses simply cannot afford to provide it; and that individuals should be able to opt-in if not offered through their employer, thereby creating universal access. With this plan, employers who opt-in could cover the total cost of employee premiums or could develop a cost-sharing plan.
The Twin State Plan would be administered by an established and experienced insurance company. This approach means the state is not responsible for designing and implementing a new IT system – a task that recently proved difficult and costly when building the state’s health care exchange. Importantly, it would also allow Vermonters to receive paid family leave benefits more quickly, more efficiently and at a lower cost.
Instead, if Vermont was to administer a mandatory paid family medical leave program, for example, a new payroll tax would deduct money from Vermonters’ paychecks for 15 months prior to providing any benefits in order to build up a necessary reserve, which is estimated to cost over $95 million. Additionally, the state would have to build and maintain a new IT system – at a five-year cost estimate of over $16 million – over 60 new state workers would need to be hired at a three-year cost estimate of over $24 million. Under this approach, taxpayers will also assume 100 percent of the cost-overrun risk.
In contrast, the governors’ plan uses private sector partners that already offer an paid family medical leave insurance product and maintain the required reserves to protect against insolvency, the necessary IT to administer the program and experienced staff to ensure Vermonters receive their benefits promptly.
With a voluntary approach, we’ll provide needed flexibility for Vermont small businesses – 90 percent of which employ fewer than 20 employees – to determine what they can afford to offer.
The Vermont-New Hampshire partnership is yet another benefit. Many of our residents live and work on opposite sides of the Connecticut River and many of our businesses operate in both states. Providing the same program in both states will spread out administrative costs and eliminate confusion regarding employee eligibility. Further, combining Vermont and New Hampshire’s 18,500 state employee workforce – which will be covered under the governors’ plan – together with the participating private employers in both states will expand the risk pool, resulting in lower and more stable rates.
We were recently encouraged to receive responses to our bi-state request for information from seven insurance companies interested in managing the program. On average, these companies have a combined $2.2 trillion in assets under management and have considerable experience administering paid family medical leave benefits in other states. The responses provide clear evidence that the Twin State Plan can be crafted to provide the most efficient, sustainable and lowest-cost program for Vermonters.
Gov. Phil Scott has been clear that we all want to get to the same destination: affordable paid family and medical leave for everyone who needs it. We’re confident the governors’ proposal is a more affordable and economically beneficial way to implement a program that can be scaled to include everyone.
If we keep this shared goal in mind, we can craft a program that will greatly benefit Vermont families while ensuring Vermont workers and small businesses can afford it while our state’s economy can sustain it.
