Article reported in the NH Business Review, 8/12/2022 "Teeing up Paid Family Leave"

‘Publicity blitz’ planned for new state plan

A “publicity blitz” about the state’s new Granite State Paid Family Medical Leave Plan, to be launched shortly, will mean that every employer in the state should receive a brochure explaining the program by Aug. 26, says Richard Lavers, deputy commissioner of NH Employment Security, one of the agencies administering the program.

“NH PFML provides employers and employees with peace of mind and strengthens a business’s bottom line,” says the brochure. “NH workplaces will have reduced turnover, improved employee retention, increased morale and productivity.”

But brochures may not be what will sell the program to employers, who can sign on starting Dec. 1, or to individual employees, who can enroll staring Jan. 1, the date the program kicks off. The selling point is the cost.

Companies should be able to provide basic coverage — which would provide 60 percent of income to employees taking leave for six weeks — for less than $5 a week per employee.

That appears to be the bottom line in a filing by MetLife Inc., the company the state has contracted with to offer the program. Rates, however, could vary considerably for employers (though they are capped by law at $5 a week for individuals who sign up for the plan on their own if their employer isn’t taking part).

“Obviously I’m pleased,” said D.J. Bettencourt, deputy commissioner of the NH Department of Insurance. “Our assumptions were that the rates would be affordable, but hopefully, once they are known, it will be attracted to businesses to create a robust and diverse risk pool.”

If that happens, it would be a major win for Gov. Chris Sununu, who pushed this experimental voluntary program as an alternative to a universal mandatory program adopted by other states, including Massachusetts, Rhode Island and New York. In 2020, Sununu vetoed a mandated program, which was financed by a payroll deduction that he called an income tax.

Even members of his own party, particularly in the House, opposed Sununu’s plan in 2021 because they were worried it was not sustainable. Republican House members only ended up voting for it because it was included in a budget compromise that cut taxes or had other provisions they agreed with. During the last session, House Republicans voted to repeal it, though that effort died in the Senate.

‘A brand new product’

The plan’s proposed rates may be too low to be sustainable.

Even though the MetLife filing estimates that the company will take in about $2.8 million in premiums more than it will pay out in claims during the first year, the rates may be too low to be sustainable. (When NH Business Review asked the Insurance Department about the company’s margin, a spokesman said that it wasn’t pure profit, since there are also administrative costs.)

To make such predictions, MetLife relied on its 60 years of experience in disability insurance. It provides group benefits for 40 million workers, with 1,795 people specifically working on disability and absence management, according to the company’s response to the state’s request for proposal.

MetLife has experience with paid family leave. It is the administrator of paid leave programs in California, Connecticut, Massachusetts and Washington, and is about to administer programs in Colorado and Oregon. Because those programs are mandatory, they don’t have the problem of adverse selection — when most of the people who sign up are more likely to use it.

“This is a brand new product — the only program kind in the country,” said Charlie Arlinghaus, commissioner of the Department of Administrative Services, who will administer the program along with Employment Security.

New Hampshire then will be a laboratory — a guinea pig, some might say — so that MetLife can gain that experience.

“They are going to learn a lot over the next five years,” said Bettencourt.

The publicly traded MetLife can afford to learn from its mistakes. The company has nearly $760 billion in assets, including $4.5 billion in cash at the end of June. Last year, it took in nearly $44 billion in revenue and posted net income of $6.3 billion.

It also won’t have to wait five years to learn from any mistakes, since the company could file new rates with the insurance department each year.

“It could go up and down,” said Bettencourt, “but we are obviously hopeful they are going to stay affordable.”

However, individual rates would be capped at $5 a week.

The Granite State Paid Family Leave Plan will piggyback on the pool of more than 10,000 state workers who will be taking part in the Paid Family and Medical Leave Plan. MetLife signed a $6.164 million five-year contract approved by the Executive Council in June to provide that plan.

That works out to 0.207 percent of payroll up to the Social Security maximum.

Although that amount is for state employees only, in its RFP the state required the winning bidder to offer both medical and family leave to employers and employees at comparable rates. Only one other company bid, and the state submitted a bid, and it was deemed unqualified.

So it was MetLife — using it’s actuarial magic — that had to translate that deal to cover both public and private employees. According to MetLife’s insurance filing for private companies and municipalities, employers would pay in a range of $16.60 to $55.33 a month per employee, with an average of $27.67 per employee. That could be paid by the employer as a benefit for all, or it could be paid by the employee or divided between the two.

But employers can deduct half of the premium from whatever their business enterprise tax bill is, meaning the actual average amount to be paid would be $13.84 a month per employee, or $3.22 a week.

But averages don’t paint a complete picture because other factors have to be taken into consideration, like the percent of workplace participation, whether you have to use a company’s existing shortterm disability benefits first or vacation pay before paid family medical leave kicks in, location and gender. Women are expected to be more likely to use the family leave portion of the benefit, which is why the highest-rated example (which translates into more than $65 a month) is for a hypothetical two-person, all-women firm with an average age of 33 (the lowest age given).

And that’s still not all. Companies, or their insurance brokers, can negotiate further. They could ditch the plan’s short-term disability coverage, if they already have it and lower the premium price, or they could add as much as six more weeks to the benefit or provide a greater percentage of income, both of which would increase the premium.

‘It’s a crapshoot’

Rep. Will Infantine, R-Manchester, who chairs the House Labor Committee, said he was skeptical of the plan when it passed. An insurance agent himself — though he does not write disability policies — he was leery of a program because he didn’t know the extent of the cost to the taxpayers.

Now that the rates are out, he said that they are “pretty standard,” and he thought they would be low enough to get many employers to sign up, particularly with the tax incentive.

Still, it’s unknown how many businesses will take advantage of that credit. “As an insurance agent, if they can take that off their taxes, of course it’s a good deal. But as a representative, I have to scratch my head and hope it is not too much money out of the budget,” said Infantine.

Ray White, owner of Cornerstone Benefits in Bedford, does sell disability insurance, and he is even more skeptical about the plan.

“It’s a crapshoot when you insure and you don’t have enough experience,” he said. His initial reaction was, “I’m always nervous quoting something when there is no base.”

So far, he said, “I haven’t heard a peep about the program, not from my clients, not from the state.”

That’s about to change, said Lavers, in response to questions about the publicity campaign originally addressed to Mason, Inc., a Connecticut-based firm awarded a $1.9 million contract to market the program over the next five years.

Marketing, apparently, doesn’t include talking to the media, but it does include coordinating a publicity campaign: the aforementioned brochure, development of a website, launch of social media, television and radio campaigns. There will also be outreach to trade organizations, and “brokers are huge,” said Lavers. In addition, there will be a series of webinars offered in September.

Mason will also try to market to individuals, but employers come first. That’s because an employee can only sign up as an individual if their employee doesn’t join the plan by Dec. 1.

On Jan. 1, individuals will get a 60-day open enrollment period, and they have a seven-month waiting period before the benefits kick in, as a way to mitigate against adverse selection.

In MetLife’s separate filing for individuals, it anticipated at least an $800,000 monthly deficit. But those costs could be partially covered by diverting 2 percent of insurance premium tax revenues from the general fund to a premium stabilization fund, if it can demonstrate that it is losing money. The Department of Employment Security would administer that fund.

Even if businesses don’t participate in the program, they are required to cooperate with claims for individuals who sign up. Larger businesses — those with 50 or more employees — would also have to administer their payroll and keep their jobs open, as required under the federal Family and Medical Leave Act.

Smaller businesses aren’t covered by FMLA. Nor do they have to be involved with payroll deductions. Indeed, they could fire an employee for using the Granite State Paid Family and Medical Leave Plan, but then that employee could collect unemployment benefits, though that unemployment check would be partially reduced because of the income from the leave plan.

But Lavers thinks that many employers will be excited by the program especially if it’s competitively priced.

“Hopefully, this will provide something of value to them, to retain their employees,” he said. Indeed, he added, they may feel like they have to.

“You always run the risk of them going elsewhere,” he said of employees. “You really need to take that into consideration in this labor market.”

WHAT THE PAID FAMILY AND MEDICAL LEAVE AMOUNTS TO

For employees to qualify to receive 60 percent of their salary for six weeks, they must be out of work for one of these reasons:

• The birth of a child of the employee, within the past 12 months
•  The placement of a child with the employee for adoption or fostering within the past 12 months
•  A serious health condition of a family member
•  To care for a spouse, child or parent who is in the military
•  The employee has a personal serious health condition that is unrelated to work
•  The employer does not offer short-term disability insurance