Eleven states and the District of Columbia have now enacted paid family leave programs. While these programs vary in their design, most of them utilize a public social insurance model. In contrast, the state of Virginia recently enacted a law that employs a different approach – one that seeks to expand access to paid family leave by establishing the benefit as a class of insurance that private insurers can offer to employers.
Throughout the country, employers commonly purchase various forms of insurance to provide non-wage benefits like disability and life insurance. Virginia is among the first states to enact a law establishing paid family leave as a form of private insurance that employers can voluntarily purchase for their employees.
Qualifying events for workers to use the benefit include time off for the birth or adoption of a child, a foster care placement, a serious personal health condition or a serious health condition of a family member, or a family member who currently is or will be on military active duty. Additionally, the policy may be included as part of a group disability insurance policy or purchased as its own group insurance policy, allowing employers more flexibility.
Two other states utilize similar private insurance models, but with more significant state involvement. In New York, employers must carry a paid family leave insurance policy from a private insurance market that the state strictly regulates. Meanwhile, New Hampshire is preparing to offer voluntary paid family leave benefits through a private insurer, with the state government selecting a single carrier and purchasing coverage for its public employees to establish a risk pool.
While Virginia’s law does not establish a state-wide paid family leave mandate or a universal social insurance program, it is expected to expand access to the benefit. In today’s tight labor market, employers are increasingly offering competitive compensation to gain an edge in hiring. With 73% of Virginians supporting paid family leave, the new law enables more employers to include paid family leave in the competitive compensation packages needed to attract and retain workers. Moreover, by giving private insurers flexibility to design their paid family leave policies, Virginia is establishing a marketplace where insurers are able to compete with one another and design different policies that address the needs of diverse businesses and employees.
While there are advantages to the voluntary nature of the law, Virginia’s policy provides no guarantee that employers will utilize the insurance to offer a paid leave benefit to their employees. Additionally, the law does not establish minimum standards for benefit size, maximum duration, or other characteristics that influence benefit quality.
Though this creative approach will help employers provide paid family leave, state lawmakers should take two key additional steps to support its success. First, to ensure utilization, the state should actively promote the law to raise awareness among business owners. Second, the state should collect the data necessary to understand the impact of the law in expanding access to paid family leave. Doing so will be critical to assess how many workers gain access to paid family leave, any remaining challenges employers face in providing the benefit, and other effects of the law on workers and businesses alike. This information will also help lawmakers assess adopting supplemental measures to expand access to paid family leave further.
Working parents, especially moms, need paid family leave now more than ever. According to a BPC-Morning Consult poll, over half of mothers in the workforce (51%) feel less financially secure today than they did before the pandemic, and they say that paid family leave would increase their financial security (53%) and help them continue to work (53%). The innovative law recently enacted in Virginia will give employers additional tools to provide this crucial benefit.
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