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The family and medical leave bill headed for another round in the 2020 session could come with a higher price tag than proponents predicted in the 2019 session.

A draft of an actuarial study, discussed Tuesday by a task force charged with looking at leave proposals, estimates the lowest cost option would be at least $200 million more, and a high-cost option would run at least $1.2 billion more than was originally estimated in 2019 legislation.

As introduced, Senate Bill 19-188 put the cost at $922.4 million in 2021-22 and $956.5 million the following year, mostly premium payments that would be stashed into a pseudo-insurance fund until the program goes live on Jan. 1, 2022. Those premiums would be paid equally by employers and employees in the bill as introduced. 

The leave program provides partial wage replacement to eligible workers who need to take time off work, and would primarily benefit low-wage workers.

The program is set up as an enterprise — a state-owned business — which would allow the state to collect revenue in 2021-22 to pay claims without pushing state revenue limits over the Taxpayer's Bill of Rights cap, which would trigger a refund to taxpayers.

The bill ran into trouble in the 2019 session and was turned into a study. Opponents pointed out that these types of programs are already offered by some employers, including local governments, and that forcing a second program into the market could mean businesses might eliminate more generous programs.

Since the session ended in May, a task force has been looking at options, including a proposal from Pinnacol Assurance. The task force also contracted with AMI Risk Consultants of Miami to conduct an actuarial study of the short-term and long-term solvency of a paid family and medical leave program.

Pinnacol’s presentation, given to the task force in October, raised a host of issues based on the experience of other states, including New York. That included slow claims processing, accuracy problems and rate increases, noting that New York’s plan saw a 70% increase in the state-run program’s first year because of higher-than-expected utilization rates and mandated automatic benefit increases.

They recommended private carriers offer the program, rather than the state, and that the program start off with minimum benefits, with the option to add more. The state’s role would be to define those minimum benefits, with employers buying coverage from private insurers or even self-insuring.

New York’s program was also among those examined by AMI in a draft actuarial study, which was submitted to the Colorado Department of Labor and Employment at the end of November.

The draft report assumes the program would go live on July 1, 2020, to be followed by an education and outreach program beginning Jan. 1, 2022. A funding stream, including premium collections, would begin Jan. 1, 2023, and benefit payments would start on Jan. 1, 2024.

The study looked at two options: a low-benefit model and high-benefit model. The low-benefit model caps contributions at $90,000; the high-benefit model halts contributions once the employee’s pay reaches $132,000 per year, which is just slightly above the maximum earnings subject to payroll taxes from Social Security.

Maximum allowed leave under the low-benefit model would be 12 weeks; it could be as much as 28 weeks under the high-benefit model, the study said. Employers with 15 or fewer employees would be exempted from paying premiums; however, their employees would be required to pay into the program, at 50% of the premiums for the low-benefit model.

AMI estimated the premium cost to employers and employees in 2024, one year after premiums start rolling in, at $1.15 billion for the low benefit model and $2.2 billion for the high cost model. Both models would double in premium costs within a decade, the draft study said.

The study said the premium rate charged for the low benefit model would start at 0.7% of payroll, and 1.1% for the high benefit model. In future years, those premium rates would bump up to 0.85% for a low-benefit plan and and 1.4% for a high-benefit plan.

As to utilization, the study estimated that for the low benefit model, 258,000 Coloradans would tap family/medical leave benefits in 2024. By 2033, that figure would grow to more than 445,000. At the high benefit level, 271,000 Coloradans would seek benefits in the plan’s first year, and increase to 468,000 within a decade.

Among the types of leave, the highest utilization estimated by the study for both the low- and high-benefit models was for family bonding after the birth or adoption of a child, with about 2 percent of the workforce enrolled in the program. The most expensive form of leave, according to the study, would be for medical leave tied to childbirth.

In addition to New York, the study also looked at state-mandated programs in New Jersey, California, Hawaii, Rhode Island, Massachusetts, Washington D.C., Washington State, Connecticut and Oregon.

The draft study did get pushback from task force members, who asked AMI's Bob Ingco to revisit some of the draft study's assumptions on several issues, such as the amount of leave time, wage replacement and the impact of wages on premiums as wages increase. For example, Terra McKinnish, a task force member and economist from the University of Colorado, said that if a job protection provision, which has been proposed in the draft study, is more extensive than what exists in other states, that would cause higher usage than what was predicted by the draft study. 

The task force is expected to provide a final recommendation on a paid family and medical leave program to the General Assembly no later than Jan. 8, the first day of the 2020 session.

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