Paid Family and Medical Leave continues to be a confusing point for employers, compounded by new legislation being proposed at a seemingly constant pace. As leaders in the disability and absence management space, we are dedicated to staying on top of updates around PFML, among other areas.  After a busy year in that regard, with another on the horizon, we wanted to share this brief overview.

In 2022, there was more movement towards state PFML laws being passed after decreased activity in previous years, largely due to the COVID-19 pandemic. For example:

• Delaware and Maryland both passed laws establishing PFML programs
• Virginia established insurance rules, allowing carriers in the state to provide insured PFML plans to clients
• Colorado and Oregon began collecting contributions on 1/1 and have been working to ensure they are prepared to do so, while establishing other rules for the effective administration of PFML
• New Hampshire worked to develop their voluntary PFML program selecting MetLife as its insurance partner and began coverage on 1/1/2023
• Vermont selected The Hartford as its insurance partner for its voluntary PFML program
• Maine made strides in developing the structure of their state mandated PFML program

In 2023, we expect continued activity. Pennsylvania and Michigan have outstanding proposals for PFML, which will likely be decided upon in 2023, one way or another. Additional states may also put forward proposals in upcoming legislative sessions.  

In addition, and as seen in the updates below, states with existing legislation continue to make adjustments to their PFML programs. Adjustments to contributions and benefits are typically expected, most commonly, but not always, at the end of the calendar year.

The map below shows a summary of states with existing PFML legislation and programs in place, those who have proposed legislation without it being passed, and those that have not had any activity related to PFML in recent years.

Massachusetts

In 2023, Massachusetts will be updating maximum benefit amounts and reducing total contributions.

The maximum weekly benefit is increasing to $1,129.82, effective 1/1/2023. This is an increase of about $45 from the 2022 weekly maximum. For any employees who may have leave that runs from 2022 into 2023, the weekly benefit that was determined when leave was approved will continue. The new maximum will not be applied until there is a new MA PFML leave application.

Contributions, however, will be reduced in 2023. The total contribution is decreasing from 0.68% to 0.63%, for employers with 25 or more covered individuals. The medical leave contribution will be 0.52%, with employers funding 0.312% and employees responsible for up to 0.208%. The family leave contribution will be 0.11%, with employers able to collect the total contribution from employees. Employers with less than 25 employees are not required to submit the employer portion of premium.

Other State Updates

Other states have made updates to their programs effective January 1, 2023, unless otherwise noted below. Some states may make changes off calendar year (e.g., District of Columbia, Rhode Island), which are not included if they have not yet been released.

Recommended Approach

Employers should review their PFML plans, policies, and processes to confirm they are in line with any legislative changes. To do so, the following checklist can be followed:

– Update employee notices and benefit documentation, as appropriate
While formal notices may not always be required, especially if contributions are decreasing, communicating updates to employees is recommended, especially if the change will impact their pay. Most states provide sample notices that can be customized to fit an employer’s needs. Keep in mind that there may be timing requirements in place (e.g., 30 days in advance).

– Confirm employee count to determine if any changes to contributions are required
Some states require contributions from both employers and employees however do not require employer contributions from “small” employers. This definition of small varies by state (e.g., less than 25, less than 50 employees). Confirming the total number of employees will verify the contributions being remitted to the state are accurate.

– Review private plan strategies based on previous year experience and changes to contributions
Whether or not a private plan is an ideal method for an employer to provide PFML to employees may vary from year to year. This can largely be based on the cost of a private plan versus going with the state plan, but the employee experience also plays a major role. From a cost perspective, a private plan, in most states, will be based on that employer’s leave experience. If an employer has high PFML incidence rates, insurance carriers or TPAs may charge more than is required to be paid under the state plan. From an employee experience perspective, having to file PFML claims to the state and what are often concurrent disability, FMLA or other leave claims to the employer or its vendor partner, can be confusing and require more effort for both employees and employers.  While the driving factors will vary by employer, both cost and employee experience should be considered.

– Renew private plans as appropriate
When a private plan is in operation, states may require these be renewed at certain intervals. Massachusetts, for instance, requires this annually, while Connecticut only requires it every three years, unless a material change to the plan is made. Employers should review the timing of their private plan approval and guarantee it is up to date.

If you need assistance ensuring PFML compliance or assessing the optimal plan set up for your organization, Spring’s consultants are happy to help.

After a two-year hiatus, it was great being able to attend The Cayman Captive Forum in person this year. As the Cayman Islands is the second largest captive domicile, and the first for healthcare captives¹; it is the perfect location to share leading trends in the captive world, and the warm temperatures and tropical views made it all the more enjoyable. If you weren’t able to attend or could use a refresher after returning to the “real world,” this quick recap might be of interest. Below are some of the buzziest topics at this year’s conference.

1) Tax Updates

On large attraction to captive insurance (and certain domiciles) relates to tax advantages. It’s complicated, though. Some of the tax-focused sessions presented at the conference were:

– Mike Domanski, a lawyer from Honigman LLP, discussed offshore federal tax considerations and U.S. tax reporting requirements in his session titled “Captive Insurance: Basic Tax Fundamentals.”

– In a session titled “The State of Tax: What You Need to Know,” experts discussed U.S. federal tax updates and how taxes will be affected by the Inflation Reduction Act and updates to Section 831(b).

– The penultimate presentation titled, “U.S. Tax Update” tackled IRS and compliance updates in the U.S. on both the federal and state levels.

2) Cyber Risks

Since the start of the pandemic, employers had to adjust to remote and hybrid workplace policies. This transition forced employers and employees to rely more on digital tools to conduct day-to-day operations and made organizations more susceptible to breaches. This is not the first year that cyber took the spotlight, but there were some great discussions around risk in this area, including:

– A session titled “Placing Cyber Liability in Your Captive” reviewed current trends in cyber treats and how insuring cyber in a captive can prevent devastating losses.

– Risk and Cybersecurity experts from the Cleveland Clinic explained why the healthcare industry commonly falls victim to cyber attacks and outlined steps to take to protect patient and caregiver privacy in their session, “Current & Future Cyber Risks In Healthcare: ‘Will you still love me, tomorrow?’”

3) Healthcare-Specific Coverages

In recent years, we have been seeing an increasing number of healthcare organizations leverage their captive to bring new and industry-specific lines. At this year’s Cayman Captive Forum we learned about how captives can be used for the following emerging and alternative risks:

a) Medical Malpractice/Medical Errors

As the Cayman Islands is the most popular captive domicile amongst healthcare organizations, there was a large focus on healthcare-specific risks. There was a particular emphasis on how healthcare employers can reduce and prepare for potential medical malpractice/errors as noted in the following sessions:

– Presenters from the “Criminalizing the Clinical Defendant: Straight from the Headlines” session facilitated a mock deposition to address common medical malpractice trends and how they should be addressed.

– A session titled “Can your Captive Eradicate the Impact of Covid on its Medical Malpractice Program? Will It Ever End?” reviewed how medical malpractice can impact claims and legal outcomes.

– Dr. Dan Shapiro Ph.D., explained his experiences with burnout in the healthcare industry and steps employers can take to support healthcare workers in his presentation “Labor Shortages, Employee Burnout & Medical Errors: Working Together to Improve Results.”

b) Workplace Safety & Patient Care

Workplace safety is another non-traditional captive line (outside of employee benefits and Property and Casualty [P&C]) gaining traction. Healthcare organizations and, more specifically, healthcare workers and patients are prone to violence and discrimination more so than staff in other industries.

– In the session “Workplace Violence in Healthcare,” Trinity Health’s Diane Moritz explained initiatives their captive board are taking to prevent workplace violence injuries and support victims of patient violence.

– Children’s National Hospital’s Chief Diversity Officer, Denice Cora-Bramble discussed biases in data reporting for diverse patients, and experiences minority patients face when seeking health services in the session, “DEI Impact on Quality and Safety of Care.”

– I was joined by lawyer, Michael Domanski in a pre-recorded session titled “Using a Captive to Fund Long-Term Care,” during which we reviewed the current LTC market and different captive models (both taxable and tax-exempt) that can cover long-term care policies.

As we transition into a new era of captive insurance, this year’s Cayman Captive Forum acted as a perfect vehicle for addressing current and future themes in the industry. It was a strong end (almost) to an exciting year and we look forward to next year’s conference to continue these and other important discussions. Our team was fortunate to be part of the action in the Cayman Islands this year and is here to answer any questions you may have related to an existing or new captive program. Check out our captive expertise here and let’s chat!

¹ https://caymanintinsurance.ky/about/

As the Cayman Captive Forum starts just this week. We are proud to announce Spring and our consultants have been recognized for multiple awards from Captive International’s Cayman Awards 2022. We look forward to continuing to do excellent captive work in all domiciles, including but not limited to the Cayman Islands.

Spring has been awarded for:

Background

On election day, Massachusetts voters were asked to approve or reject four ballot questions when casting their votes for Governor and Attorney General. The 2^nd ballot question focused on regulating Dental Insurance, which if passed would “require that a dental insurance carrier meet an annual aggregate medical loss ratio for its covered dental benefit plans of 83 percent¹” In layman’s terms, this means dental insurers will have to spend at least 83% of premiums on patient care instead of administrative costs, salaries, profits, overhead, etc. The legislation mandates that if an insurance carrier does not meet that 83% minimum requirement, they will have to issue rebates to their customers. It further allows state regulators to veto unprecedented hikes in premiums and requires that carriers are more transparent with their spending allocation.

Prior to election day, Massachusetts did not have a fixed ratio when it came to dental insurance and will soon be the first state in the nation to have a fixed dental insurance ratio. Although MA requires reporting from dental plans, there were no regulations on premiums. The proposed law sets up a protocol similar to what the Affordable Care Act (ACA) requires of health insurers, where in Massachusetts health insurance carriers must spend at least 85%-88% of premiums on care.

Over 70% of voters voted in favor of regulating dental insurance, the most one-sided response of all four ballot questions. Although at face value regulating dental insurance may seem beneficial for patients, the impacts are not cut-and-dry, and the legislation may affect multiple parties, from consumers to carriers and dentists and practice owners.

Leading up to election day, general reactions about the legislation from dental insurance carriers were negative, while it was supported by most dental practitioners. In fact, the ballot initiative was brought to fruition, in large part, due to an Orthodontist in Somerville. As we can see from the polling results, the general population, or consumers/patients, were also in favor of question #2 passing.

Potential Impacts

For patients: On the intangible side for patients/consumers, the law would provide some peace of mind that the money they pay for their dental insurance was going, in large part, to their care. There is also an indirect advantage to increased transparency, mitigating the typical confusion that surrounds insurance plans and payments. More tangibly, the change could mean that insurers are willing to cover more procedures as a means to hit their minimum requirement (good), however that could result in dental practitioners charging more (not so good).

For employers: We anticipate that the new law will give employers who sponsor a dental insurance benefit plan more control over pricing and protection against unreasonable rate increases. Since many businesses do not offer a dental plan, or offer it on a voluntary basis, the effects should be relatively small. On the other hand, if the law were to create a change in the number of carriers in the marketplace, this could have an impact on plan and network options and negotiating power.

For dental practitioners: With the change, one perspective is that dental practitioners will be able to better focus on the best care for each patient. They may also see an increase in business and revenue if insurers are allocating more dollars towards care and procedures.

For dental insurance carriers: Dental insurers largely opposed question #2 for obvious reasons, such as restrictions on how much they can charge and additional requirements they need to adhere to, but also for less obvious reasons. For example, some carriers argue that the law will require them to make up for profit loss by raising premiums, warning that they could increase by as much as 38% in the state². They have reason to believe this law will lead to less competition in the dental insurer marketplace, which typically does not benefit the consumer.

Conclusion

Having worked with Massachusetts employers of all sizes on their benefits, including but not limited to dental insurance, as well as interfacing with insurance carriers, being the broker representative for a large percentage of dental offices in the state and working with MDS, we are looking at this update from all angles. Our expertise and decades of experience in this industry enables us to make the following conjectures about passing of ballot question #2:

1. Dental insurance premiums may rise, but at a minimal rate
2. We ultimately believe this is a step in the right direction as an advocate both for our employer clients and their employees, and that transparency is a positive attribute largely missing from the healthcare experience today
3. Immediate impacts will also be minimal, but we may see some of the other factors mentioned above play out over the next few years

If you have specific questions about how the new law might impact your dental plan(s) or practices, please get in touch. In the meantime, you might be interested in watching our recent webinar, “Why Long COVID Needs Short-Term Attention” as you develop your 2023 benefits strategies.

¹https://www.sec.state.ma.us/ele/ele22/information-for-voters-22/quest_2.htm
²https://www.wbur.org/news/2022/10/18/massachusetts-ballot-question-2-explainer

It is estimated that ~44 million Americans are experiencing long COVID symptoms. During a recent Spring webinar, our SVP, Teri Weber was joined by a pulmonologist and a representative from Goodpath to review common long COVID symptoms and how it is impacting productivity and claims. You can access the webinar here.

Our Actuarial Team teamed up with Alera Group experts on this COVID-19 and Mental Health Trends whitepaper which looks at the post-pandemic mental health landscape, including impacts on employees, children, plan costs, care gaps, and substance abuse.

In collaboration with Alera Group, our Actuarial Team helped create a whitepaper which provides guidance around eligibility, procedures, and plan costs for coverage of over-the counter COVID-19 tests within health plans, as mandated by President Biden. You can find the full whitepaper here.

Spring has been selected to help the Maryland Department of Labor (MDL) more effectively implement and administer the Family and Medical Leave Insurance (FAMLI) Program. Check out the press release here.

At the VCIA 2022 Annual Conference, our Managing Partner participated in a panel that highlighted the scary long-term care landscape, but that ended on a high note in exploring the possibility of captives as a next generation solution for long-term care insurance.

With innovation embedded in the DNA of both Spring and captive insurance, we are interested in helping reshaping the long-term care market of the future. Check out the other discussions our team members had on VCIA session panels, or get in touch to talk in more detail about long-term care captive strategies.