2020 Pinnacol Proposal: Paid Family and Medical Leave

Ever since the state legislative session kicked off on January 8, much of the buzz has centered on Colorado’s years-long debate over paid family and medical leave (PFML).

A growing number of states require businesses to provide paid leave through state-run plans that are funded by payroll contributions. But there has been little consensus in our state about who should provide PFML benefits, and what should be included, since the first PFML bill was introduced in Colorado in 2014.

Over the years, some have suggested Pinnacol Assurance as a possible administrator for a state-run PFML plan. While we are honored by their confidence in our ability, we do not believe that taking on this role would be in the best interests of Pinnacol or our policyholders — in part because we don’t believe that a state-run PFML plan makes sense for Colorado. Like many other businesses, we already offer a generous PFML benefit to our own employees. And we agree with business leaders that a market-based solution is a better fit for Colorado.

Because of our insurance expertise and unique Colorado perspective, some in the business community suggested last year that Pinnacol could help shape such a market-based solution. Accordingly, we hired national insurance consultant Aon Inpoint to help us explore the feasibility of a commercial PFML market and product.

The resulting proposal draws from both workers’ comp and short-term disability models:

• Employers are required to provide the benefit (exceptions could be made for very small businesses and those with seasonal workforces).
  o Employers can choose whether to cover the benefit through existing disability and paid-time-off programs, purchase a newly created insurance product from carriers, or self-insure.
  o Employers that already offer PFML can fulfill the requirement by demonstrating that their existing coverage is at least as good as the state-required core benefit.
  o Requiring the benefit ensures that most workers are covered regardless of their job.
• Core benefit parameters will be outlined in statute; all employers’ plans must conform.
  o Both employers and employees may purchase additional coverages, subject to certain restrictions. This approach is similar to that used in the short-term disability market.
  o Benefits (leave duration, definitions of a family member, etc.) are a policy decision to be determined by stakeholders and legislators, not insurers. Accordingly, we are not recommending specific benefits. However, we urge policymakers to avoid vague definitions (e.g., who qualifies as family) that would make claims determinations difficult.
• Pricing would reflect age and demographic factors (just as in short-term disability), based on 13 broad industry sectors. Insurers must understand the risk profile of those using the benefit in order to know how to insure it.
• Competitive market, with Pinnacol acting as the carrier of last resort in addition to participating in that competitive market.

In order for us to participate in this newly created PFML market, Pinnacol’s statute would have to be changed. If granted statutory authority, we envision establishing a sister company to provide and administer the benefit.

As of this writing, legislators and stakeholders are continuing to debate the relative merits of a state-run PFML plan versus a market-based approach. And a new element was added on Jan. 22, when PFML advocates filed PFML ballot initiatives. Their stated plan is to use these initiatives as insurance if the legislature fails to pass PFML legislation. While neither initiative has yet been approved to begin gathering signatures, both establish a state-run PFML plan.

We will let you know if Pinnacol’s proposal moves forward in the remaining months of the legislative session.