In response to the multi-year debate over paid leave in New Hampshire and Vermont, the Governors of both states together have constructed the outline of a plan they bill as an alternative to state legislation currently under review by both states.
On January 30, 2019, Governors Sununu and Scott issued a Request for Information (RFI) to gauge interest among insurance carriers and third party administrators and to collect feedback on the program parameters for the “Governor’s Twin State Voluntary Paid Leave Program (TSVPLP)”. Seven companies responded and Vermont Governor Phil Scott’s office released the responses. Governor Sununu’s office released a statement on the responses. The responses themselves can be found here and reveal a startling disconnect between what the RFI requests and what the companies are able to provide.
The underlying concept of the TSVPLP relies on the creation of privately operated and administered paid family and medical leave insurance products to be offered by insurance companies. This kind of voluntary product does not currently exist for family and medical leave insurance products in New Hampshire, Vermont or any other state.
The minimal role of the states would be to offer the 18,500 state employees of New Hampshire and Vermont a paid family and medical leave benefit of six weeks for qualifying events (birth of a child, caring for a seriously ill family member, etc) at 60% wage replacement. Conceptually, businesses and individuals would have the option of purchasing private paid leave coverage from the vendor chosen to provide the state employee benefits. However, the multi-tiered rate structure would penalize small businesses and their employees, those with the least access to an affordable benefit.
The RFI responses raise serious feasibility questions about the proposed program design, potential costs, and implementation timeline of the proposed program. There is not enough information in the RFI responses to allow for an apples-to-apples comparison to plans currently under consideration by the legislatures of New Hampshire and Vermont. Most concerning, none of the companies responding to the RFI were able to provide pricing information for employees in the private sector because of the uncertainty surrounding the composition of the insurance pool. In contrast, SB1 and HB712 create certainty and simplicity by providing coverage at one uniform rate to every employee in the state.
Based on an analysis of the responses, the Campaign for a Family Friendly Economy has the following concerns:
Cost Effectiveness and Affordability: Specifics are sparse and initial estimates exceed premiums in SB1 and HB712
None of the company submissions provide cost estimates indicating what the costs of the entire New Hampshire workforce would be. Some companies were able to estimate costs for covering state employees; none were able to provide full pricing information for all employees in the state. In all cases where specific cost estimates were included, those costs exceed the premium costs of the program proposed by New Hampshire legislators in SB1 and HB712.
- Three of the seven companies provide no cost estimates (The Standard, Reed Group, and Sun Life Financial).
- The Hartford provides a cost estimate for state employee premiums only and indicates there would be additional, unspecified administrative costs. The cost for state employees quoted is double that of the program proposed by New Hampshire legislators in SB1 and HB 712, even before those administrative costs are figured in. No cost estimate for private employee coverage is provided by The Hartford.
- Anthem provides a premium estimate for state employees in line with the total cost of the legislative proposal but would charge seven additional fees on top of that premium making it considerably more expensive than the legislative proposal for state employees and higher claim costs still for employers with less than 100% participation. Anthem’s reply also reveals as false the governors’ claims that the insurance provider would bear the risk of the program: Anthem would charge between 3% and 6% in contingency and risk margin fees to administer the funds, with the higher 6% rate passed on to the most vulnerable employees (those who are self-employed an whose employers do not offer PFMLI insurance to their employers).
- Two of the proposals (MetLife and Total Administrative Services Corporation) have cost estimates redacted so cannot be reviewed.
Voluntary Market Feasibility: cost, discrimination and administration concerns
Five of the companies cite significant concerns about a voluntary market. The other two (MetLife and Total Administrative Services Corporation) do not appear to make any assessment of the feasibility of a voluntary market but the proposals from these companies are heavily redacted.
The leading concern from companies about a voluntary market is the ability to price the insurance appropriately.
- Anthem: “We would be uncomfortable quoting for this population. Offering FMLI on an individual voluntary basis would result in a high level of anti-selection that would be difficult to price adequately for, even if a modest level of subsidization by the state plan were allowed.” Anthem also discussed at length the challenges with insuring small employers, offering that it’s current practice is only to work with employers with 250 or more employees; this would eliminate all but a small fraction of businesses in New Hampshire and Vermont.
- Sun Life Financial: “The inclusion of an employee level choice of whether or not to participate in the program could pose a challenge for insurers.” They suggest looking at successful models in which all employees are covered by FMLI programs, saying, “This is an important element of these proposals in that it creates a risk pool that can be properly priced and is more likely to avoid anti-selection.”
- Reed Group: “It is our opinion that benefits that are employer and employee selectable may be subject to anti-selection and may require additional funding to cover the anti-selection expenses.” And “This type of eligibility may lead to adverse risk selection and may significantly increase the cost of the program.”
- The Hartford: Suggests to control costs for a voluntary market, the state should consider limiting coverage for people with pre-existing medical conditions or creating “age-bands” for premium rates; this discriminatory pricing model could allow women of child bearing age or older workers to be charged higher premiums.
- The Standard: Raised another systematic concern for administration of a voluntary market, that “direct individual billing is a significant hurdle for The Standard and we believe it would be for many others.”
Implementation Timeline: Undetermined
Governors Sununu and Scott have stated that a private voluntary market could be off the ground almost immediately. However, The Standard, the only company that provided an estimated implementation timeline indicated that the Governor’s timeline was unrealistic, suggesting starting coverage instead for state employees in July of 2021 at the earliest with coverage for private employees available a year later in July of 2022.
The responses to the RFI raise significant and troubling questions about the feasibility, cost effectiveness and the timely implementation of the proposed TSVPLP. Given the reliance on private insurance carriers in the program design and the concerns raised in their RFI responses, Governors Sununu and Scott should rethink their approach. The costs cited are more expensive than those in SB1 and HB712, fewer people would have access to a quality benefit and those that need it most would likely pay higher premiums for a benefit that covers only six weeks compared to the twelve weeks available in the legislative proposals. Additionally, it would be at least two years before a paid family and medical leave benefit would be available to employees outside state government, the same start-up period as would apply to creation of a universal, affordable public plan. In short, the program proposed by Governors Sununu and Scott offers fewer benefits at more expensive, volatile rates and does not expedite the start-up process.