Privatizing paid leave: bad for everyone’s bottom line.
For the public,
by the public.
Maine law allows the state to privatize the Paid Family & Medical Leave Program. This means the state could hire a private, for-profit company to oversee the Paid Family & Medical Leave Program. That’s a bad idea - and here’s why.
Privatizing paid leave: Higher costs, lesser services.
This program should be a public insurance plan, administered by and for the public.
Of the 13 other states and Washington DC that have created and are implementing paid family and medical leave, Connecticut is the only one that has used a private third party to administer the benefits.
States’ experiences administering the programs have been very effective. The administrative costs remain low and program outcomes show that state-run programs are effective and well-implemented.
In 2021, administrative costs for California’s disability and paid family leave program were 3%. Administrative costs in the private sector run much higher. The Congressional Budget Office found that profits plus administration account for 13% to 19% of private health care plan costs. The Kaiser Family Foundation reports privately administered Medicare Advantage plans average 14% administrative costs, compared to about 2% for the public Medicare program.
For-profit businesses are organized to make profits, not to serve people equitably. Having a profit margin built into program administration will raise costs for employers and employees.
That is the experience in Connecticut. Their contractor failed to meet performance standards, had higher erroneous claim denial rates than other PFML programs, and overall the administrative cost has been nearly twice that of other states.
More than 75% of claim application denials were due to incomplete applications or not receiving required documents. Numerous reports attribute the high rate of denials for incomplete applications to the program’s confusing application process.
With robust oversight from the Paid Leave Authority to establish program rules and process for implementation, we can assess the best opportunities to contract out aspects of the program while preserving strong public infrastructure and oversight and clear metrics for success.
Want to help us fight against paid leave privatization?
Click the image on the right to download our one-pager. Share with your networks and use it to draft your comments for a Department of Labor listening session (see below).
The Department of Labor is hosting listening sessions via Zoom* for Maine’s new paid family & medical leave program. This is where we can provide comments against privatizing the program. We will provide info/registration links here as they become available.
*If you have tech difficulties, you can watch the session at the Maine Department of Labor Frances Perkins Room, 45 Commerce Drive, Augusta.