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Guest editorial: Gov. Scott's family leave plan works

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Posted on April 29, 2019 |
By Michael Pieciak



There is growing consensus that paid family and medical leave (FML) is a valuable program that benefits individuals, families, and businesses alike. Generally, paid FML 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 FML. Businesses can experience a more productive workforce with higher morale and 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 Governor Phil Scott and New Hampshire Governor Chris Sununu proposed the Twin State Voluntary Leave plan earlier this year. The plan is built around two basic tenets:

•  employers should be given the choice to opt into the program — acknowledging that some small businesses simply cannot afford to provide it; and,

• 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 on the hook for designing and implementing a new IT system — a task that recently proved difficult and costly when building the state’s healthcare exchange. Importantly, it would also allow Vermonters to receive paid family leave benefits more quickly, more efficiently and at a lower cost.

For example, if the State were to, instead, administer a mandatory paid FML program:

•  a new payroll tax would deduct money from Vermonters’ paychecks for 15 months prior to providing any benefits to build up a necessary reserve — estimated to cost over $95 million;

•  the state would have to build and maintain a new IT system — at a five-year cost estimate of over $16 million; and

•  over 60 new state workers would need to be hired — at a three-year cost estimate of over $24 million. And, under this approach, taxpayers will assume 100 percent of the cost-overrun risk.

In contrast, the Governors’ plan uses private sector partners that already offer an FML 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.

And 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 — who 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 encouraged to recently 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 FML 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.

Governor Scott has been clear 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 more 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, and our state’s economy can sustain it.  

Michael Pieciak

Commissioner of the Vermont Department of Financial Regulation

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