Paid Family and Medical Leave and Employer Private Plans

By Chantel Boyens, Jack Smalligan and Patricia Bailey

Note: Chantel Boyens is a principal policy associate, Jack Smalligan is a senior policy fellow, and Patricia Bailey is a visiting fellow at the Urban Institute.

With new state laws expanding paid family and medical leave (PFML) and momentum growing for a federal policy, it is more critical than ever to ensure that state and federal policymakers create equitable programs that are accessible to all workers. Currently, over 33 million workers lack access to paid leave. The small share that gain access to paid leave do so through voluntary employer-provided benefit plans or through a state-administered paid leave program, but access is spread unevenly amongst workers. 

This paper looks at the use of private plan options in the context of state-administered paid family and medical leave programs, describing how states approve and monitor private programs and how the interaction between public and private affect workers’ equitable access to benefits and employer take-up of private plan options. Specifically, our research concludes that:

1.  The short-term disability insurance industry has continued to grow, even as state paid family and medical leave programs expanded. Employers provide state benefits though private plans at modest rates.

2.  Employers who seek to self-administer public benefits are more likely to have a higher-wage workforce; workers paid lower wages may not enjoy similar benefits. The consequences of this disparity include increased state costs and uneven access to benefits.

3.  Strong regulation of employer private plans is needed and does not deter highly motivated employers from offering private plans. Employers offering plans in paid leave states have demonstrated an ability to establish plans that comply with strong state regulations aimed at protecting workers.

4.  To inform policymaking, more data transparency and research is needed on how private plans serve workers, especially those in low-wage jobs. 

The relationship between public and private coverage can inform future state and national policy efforts. Our findings suggest that public PFML programs are not likely to impede growth of the private insurance market. However, private plans may lead to inequities in benefit access and be costly for states to oversee. Policymakers should use caution in developing private plan alternatives. Where policies permit private plan alternatives, policymakers can more effectively use public resources and support equity for workers by building on examples of robust oversight and monitoring currently used in several state programs.


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