Here Are the Questions to Ask About Your PFML Benefits Amid Evolving State Laws

By: Terri Rhodes | August 4, 2023

Terri L. Rhodes is CEO of the Disability Management Employer Coalition. Terri was an Absence and Disability Management Consultant for Mercer, and also served as Director of Absence and Disability for Health Net and Corporate IDM Program Manager for Abbott Laboratories.

Topics: Employee Benefits | Risk Insider

As more states pass and implement paid family and medical leave (PFML) laws, employers should consider how they design, pay for and administer their programs — and how statutory leaves affect company-sponsored leaves.

Questions about operationalizing PFML abound, from how employers determine work state to how they account for different definitions of family members, address expansions to existing laws and coordinate benefits.

With an increasing number of leave laws in the U.S. and more PFML laws expected, employers should discuss their options. A few questions to get the ball rolling:

Will the company pay all associated payroll taxes and fees or split them with employees?
If the company creates a plan, which components will it have to ensure meet or exceed the minimum requirements?
How will we adjust other benefits to avoid conflicts and ensure equity?

Answers to these questions will have far-reaching implications, especially since 47% of the employers that responded to the 2022 DMEC Absence Plan Design and Practices Benchmarking Report said they do not offer paid parental and/or paid family care leave.

The report includes data from 2021 and 2022 on how employers structure policies; whether they allow intermittent access to PFML; if policies distinguish between birth and non-birth parents; and whether employees are required to file for state-mandated PFML before they are eligible for company-sponsored benefits. The data tells an interesting story about paid and unpaid leave in the U.S., and it will be fascinating to see how practices change as more states pass and implement PFML laws.

Ready or Not

There’s no question that different versions of PFML are hard to manage, as noted during the webinar “Important Questions Employers Should Ask Before Implementing PFML,” when 30% of attendees said they were not ready to administer PFML.

They are, however, considering benefit changes as a result of the PFML wave. And that’s good news since data shows that company-sponsored benefits influence retention. In fact, employees who see value in benefits (including paid time off) are more likely to stay with employers, while those who don’t will leave even with a significant wage increase.

Generous paid leave programs are highly ranked by employees, who ask about company policies before accepting job offers and reject those that don’t meet expectations. Perhaps that is because they see a correlation between paid leave and a company’s support for work-life balance (or integration).

Customizing Policies

Recognition of (and value for) employee benefits, including paid leave, is at an all-time high. As a result, employers should assess their leave policies to ensure their plans convey a message they intend to send — or, at the very least, one with which they are comfortable.

This review could also help identify and address inherent bias. Before introducing employer-sponsored benefits or changing programs, ask employees for feedback. Questions to consider:

If we roll out this policy, what are the positive or negative aspects, and how do they affect employees?
Does this policy meet the needs of all employees or just a portion?

As you consider options, establish a goal and method for measuring program success, since some options are more costly than others.

For example, are you considering a private PFML? And if so, what are the metrics you will use for success? A quick rule of thumb is that private plans may not make sense from a cost perspective for companies with fewer than 50 employees in statutory states.

Yet there are other benefits, such as streamlining management, and they can have a positive return on investment.

Other considerations include how PFML will affect short-term disability (STD) insurance. It may be harder to get employees to pay for STD in states that mandate PFML and employees pay a portion of it. In this scenario, employers may want to consider helping employees pay for statutory PFML plans and offering an STD plan to bridge gaps.

There are also bigger-picture questions.

For example, if paid leave differentiates an employer for recruiting and retention purposes, does investing in PFML plans become more tenable for employers of all sizes? Or is now the time for employers to consider redesigning STD plans to provide different types of coverage? And is that an “and” or an “or” question?

Wise employers will conduct an analysis of all options (that includes costs and benefits), rather than choosing the one that seems easiest to implement.

A Path Forward

Once a choice is made, communicate it clearly and frequently to employees, highlight the program’s unique benefits and value, and train managers and supervisors to address questions and refer employees to appropriate resources. We frequently hear about the need for more education and training for supervisors. PFML is no exception.

Employees will compare benefits with colleagues in different states, and that will be difficult for managers, since PFML laws vary widely. Consider developing a one-page state comparison reference that highlights company policy to reduce confusion and communicate the message you want employees to hear.

In other words, manage the risk associated with varying PFML laws by managing the message.

PFML may be difficult to manage, but these laws can offer an opportunity for employers to emphasize their commitment to an employee-centered mission, their vision and their values as they pertain to employee health and wellness.⁶ It’s one thing to say employee health and wellness is integral to company success.

It’s another thing to invest in it. &

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.