NH House panel looks at financing of a family and medical leave program

Benefits may have to be reduced and premiums higher, says Employment Security official

If a proposed paid family and medical leave program is going to work in New Hampshire, premiums would have to be higher and benefits would have to be lower than originally envisioned, Richard Lavers, deputy commissioner of the NH Employment Security told lawmakers Tuesday.

But while Lavers criticisms echoed those of some of the bill’s opponents, who also testified before the House Commerce Committee, he emphasized that he really wants the program to work.

“Look, we are the agency that would run this program, and we want something that is long term and going to be successful,” he said. “We are putting a lot of resources into it and want to do something that is going to be around for a long time.”

The House already passed House Bill 628 earlier this month, but that was on policy, so it was sent to the Commerce Committee to weigh its financially viability as an insurance product.

Opt-out provision

In a sense, the bill has come full circle, pointed out its sponsor, Rep. Mary Stuart Giles, D-Concord, because the committee had sent it to study at the start of this decade. But it took years to find the funding to do an actuarial study.

By that time, enough states had passed similar programs to provide enough data to assess that it would take a 0.5 percent premium (about $5 a week) to create a program that would provide a maximum of 12 weeks leave, at 60 percent of a worker’s salary (with some maximums and minimums) to care for a new child, a sick or elderly relative, or one’s own physical or mental disability.

Employers would not have to pay into the plan unless they wanted to as a benefit or provided their own benefit.

The states that have such programs, however, like California and New Jersey, mandate that all workers participate, and the study assumed the same for New Hampshire.

But as Sen. Martha Fuller Clark, D-Portsmouth, pointed out: “New Hampshire doesn’t like to mandate things.”

So in an effort to get business organizations and some Republicans on board, backers agreed to make it voluntary, sort of.

Employees would automatically be enrolled in the program, unless they opt out (and forgo any benefits). They could opt in after a waiting period, but they couldn’t opt out again unless they switch jobs.

“That’s not a true opt-out, if you can’t leave unless you quit or are fired, even if they raise the fee on you,” said Rep. Jess Edwards, R-Auburn. “If it was done by a private company, the Federal Trade Commission would call it a deceptive practice.”

But supporters argued that making it too easy to come and go would enable workers to game the system and lower participation, which is needed to make the program viable.

Other changes

The opt-out provision wasn’t the only change made by proponents to win support from employers.

Sen. Dan Feltes, D-Concord, the bill’s chief Senate sponsor, pointed to the other adjustments, which include tying it in as much as possible to the unemployment insurance program to make it easier to administer and not extending federal unpaid family leave policies to companies with fewer than 50 employees.

And a number of businesses have expressed support, particularly smaller businesses that say they couldn’t afford to offer benefits that some larger companies give.

But the opt-out provision would put New Hampshire into uncharted territory. Even with 100 percent participation, the program would just barely run in the black with a 0.5 premium.

There would be a $6 million a year surplus in a $150 million program, Lavers said. “At 90 percent (participation), it is no longer solvent,” he added.

Lavers ran scenarios ranging from 50 to 100 percent participation. He picked 70 percent as the most likely participation rate, reflecting a survey of how many employees said they would sign up at $5 a week. But at that participation rate, the premium would have to increase to 0.67 percent (or slightly less than $7 a week) and even then “it is very tight,” Lavers said, especially at an average benefit level of eight weeks (the average projected amount people would use with a 12 week maximum.)

“If the average is one week too high, the whole thing blows up,” he said.

But if the average benefit is reduced to six weeks, it would give enough “wiggle room” to make the program more viable, he said.

And to be conservative, Lavers suggested a six-week maximum for a couple of years, until the state had more data under its belt.

That way, he said, the state could collect some data to suggest some legislative parameters, similar to the rules governing the unemployment insurance trust fund, with premiums going up or down slightly when the fund reaches a certain level.

Feltes said that perhaps the department was being too conservative. He said that its revenue estimates on how much it would take to run the program was “a bit high,” since the cost to adjudicate an adversarial unemployment compensation case would cost more then a family leave case. After all, he said, if an employee has a child, “it is pretty hard to dispute that.”

Rep. Laurie Sanborn, R-Bedford said that there might be some dispute when it comes to a disability, however. But Lavers said the department under the law would defer to the treating physician. He also said the department had already assumed much lower adjudication cost.

Before Lavers was through, Committee Chair Rep. John Hunt, R-Rindge, asked him to look into making the program entirely voluntarily for employers, who would sign up all their employees, and then let employees from other companies join if they wish, letting Employment Security determine the level of premiums

Lavers said he would look into it, but such a program would be harder to predict.

Lavers’ testimony was welcomed by supporters of the bill, even it meant that the program might provider fewer benefits.

“We’d rather have 12 weeks, but six weeks is better than nothing,” said Amanda Sears, director of the Campaign for a Family Friendly Economy, one of the main organizations backing the bill. “It is better that we start this now for two years, than give it to some commission for two years and not do anything until then. We are open to changing the bill to make sure it is as sustainable program that helps working people and businesses.”