A cautionary tale from Connecticut as Maine lawmakers weigh privatizing paid leave
As lawmakers consider a proposal to establish a paid family and medical leave policy, advocates in Maine — and another New England state — are warning about the potential pitfalls of creating a privatized program, in which benefit claims are administered by an outside company rather than the state.
Maine lawmakers introduced a paid leave measure last week amid wide support. The bill, the product of years of intensive work, is being sponsored by Assistant Senate Majority Leader Mattie Daughtry (D-Cumberland) and Assistant House Majority Leader Kristen Cloutier (D-Lewiston) and has 100 co-sponsors.
The legislative paid leave bill, LD 1964, would set up a program in which most Maine workers could take up to 12 weeks of paid leave and 12 weeks medical leave in the aggregate annually. Leave could be taken to welcome a new child, in response to health issues or to care for a loved one, among other events. Having a paid leave policy would help people avoid choosing between their health and their economic livelihood, advocates argue.
The legislation, however, leaves open the possibility of a private company administering benefit claims under the program. While the bill stipulates that the Maine Department of Labor (DOL) would oversee the program, it also says that the department could — if it chooses — conduct a competitive bidding process to allow a “3rd party to conduct claims administration” for the system.
That bidding process would be subject to a number of requirements, including that the department consider factors such as cost, transparency and accountability in relation to a vendor’s application. The measure also requires that any third party company have a meaningful presence in Maine, among other stipulations.
The provision that allows for privatization is supported by Gov. Janet Mills, whose administration — along with advocating for the paid leave policy to be narrowed in scope — is throwing cold water on the idea of the DOL administering the program and instead pushing for the state to “contract with a third party to run the program.”
But proponents of paid leave are warning that privatization could lead to a number of issues, pointing to problems another New England state has faced when contracting out the claims process in its policy.
Trouble in Connecticut
Connecticut, which passed paid leave in 2019, has a system similar to how Maine’s would be set up if a private company ultimately becomes involved here. The Connecticut Paid Leave Authority, a body with board members appointed by public officials, officially oversees the program. However, the authority has contracted with the insurance company Aflac to administer and handle the initial adjudication of claims filed by benefit-seekers, signing a $72 million agreement with the company in 2021.
The program has been beset with issues in its early years, with far fewer workers than expected able to take advantage of the critical benefits offered under the policy. In fact, about one-third of all paid leave claims made by Connecticut workers were denied during the first year of the initiative.
In response to Aflac failing to meet multiple performance benchmarks, the Connecticut Paid Leave Authority earlier this year penalized the company by recouping $375,000 from the insurance giant.
Alfac did not respond to a request for comment from Beacon.
Lindsay Farrell, senior political strategist for the national Working Families Party and the director of the Connecticut Working Families Party during the paid leave campaign, said advocates fought back hard against having a private company administering claims. However, given that Hartford, Connecticut, is a center of the for-profit insurance industry, she said that turned out to be an uphill battle.
Despite the aspect of privatization in the system, Farrell said the program in Connecticut is still a success — helping tens of thousands of people take leave when they need to — and that she expects more people to be able to take advantage of the policy as issues get ironed out. But she argued that the state’s experience with a private claims processor does puncture a central talking point of those who argue for third-party involvement in paid leave policies.
“That the private industry is going to always do things more efficiently and cost effectively and rigorously is just a total myth,” Farrell said.
As Maine considers how to set up its policy, Farrell argued that state lawmakers should resist attempts to involve a corporate entity in the program or — if that becomes impossible — ensure at the very least that there is significant public oversight of such a company.
“This is a public program that is there to deliver for the financial security of the people who pay into it,” she said of paid leave. “And we know that the for-profit insurance industry has a bad record of denying claims and creating hoops for people to jump through.”
More profit, less accountability
James Myall, an analyst with the Maine Center for Economic Policy, also cautioned against having a private administrator of a state paid leave program, pointing to the issues seen in Connecticut. Myall said while the sponsors of LD 1964 have created safeguards designed to stop some of the worst aspects of privatization from occurring, there is still the potential for problems under such a set-up.
“The thing about having any third-party administrator insurance company is that it reduces the accountability that ultimately voters and taxpayers have over the program because they’re one step removed,” Myall said.
Another potential problem Myall sees with privatizing the claims process is that while doing so might save the state some money at the beginning of program implementation, having corporate involvement will likely be more expensive in the long-run. That’s because a private company will have a profit margin built into any agreement with the state, he said.
Finally, Myall pushed back against a primary argument in favor of privatizing the claims process — namely, that the state lacks the capacity to administer the program entirely by itself. He said that claim relies on flawed logic.
“If we don’t invest in these systems and staffing at the state level, then we don’t develop the capacity to do some of these things and then we get stuck in this cycle of relying on third party programs that are often overpriced or unaccountable,” he said … “There’s some circular reasoning built in.”
Ultimately, Myall said he worries that fewer workers would be able to use a paid leave program in Maine if it’s privately administered. In contrast, he said having public control would give lawmakers greater accountability over the program and the flexibility to make necessary changes.
The next step in the journey of Maine’s paid leave bill will take place today, when the Legislature’s Labor and Housing Committee will hold a work session on the measure and decide whether to recommend its passage.
Looming in the background of lawmakers’ consideration of the bill is a referendum that advocates (including Maine People’s Alliance, of which Beacon is a project) could put on the ballot in 2024 to create a paid leave program if the legislature fails to act.