I met with Richard Lavers (Department of Employment Security) briefly on Wednesday of this week to discuss the spreadsheets he handed out at the Commerce Committee hearing on January 16th (I am currently awaiting further updates). My questions were focused on the assumptions/estimates he utilized in creating the spreadsheets. As you will recall from Lavers’ testimony, my testimony, and multiple statements contained in the two handouts by the Carsey Institute’s Smith, and Institute for Women’s Policy Research Jeffery Hayes, there exists ZERO data regarding “opt-out, opt-in” FMLI programs since no State has ever attempted them.
My questions for Mr. Lavers:
1) What is the assumed take-up rate (percentage of those who opt-in to the program that will utilize the benefits annually)?
He utilized an assumed 6% rate which was the figure used in the assessments of Smith and Hayes.
Understand, and this cannot be repeated enough, that all assessments on the sustainability of an FMLI for NH require/mandated 100% participation of every employee in the state (rather than opt-out, opt-in).
2) As you reduce the percentage participation rate, did you increase the take-up rate of 6%?
He stated that he maintained the 6% rate throughout all his charts. I explained that as the employee participation numbers decline, one MUST anticipate that the utilization rates would increase (at what rate is unknown due to lack of actual availability of data). Mr. Lavers absolutely agreed but again stated there is no data.
It is a human tendency (and financially smart) to only sign-up and pay for (and utilize) that which is needed. Therefore, the charts provided showing reductions in participation percent must have the take-up rates adjusted increasingly higher for each reduction in participation level (again, however, no models or data exist so any guesses would be just that, guesses).
As you do that, either the cost to the employee must increase, or the program becomes unsustainable at higher participation rates.
Then as costs increase, there will be an even more significant loss of participation as employees weigh the overall cost vs. benefit. And as costs increase and plan participation decreases, the utilization (take-up) rates must be assumed to increase dramatically as only those anticipating the need for paid leave would opt-in.
It’s a downward spiral that ends inevitably with unsustainability and why in my assessment, no other state in our country has attempted an optional scheme.
Recall that for Temporary Disability Insurance (TDI) plans with fewer benefits (types of events covered), costs can start in the $30 per week range and go to $60 per week. This is in stark contrast to the $5-$6 per week numbers being promulgated.
Editors Note: It is important to understand that the methodology for funding this entitlement is grossly flawed. Costs and benefits rely entirely on participation which is not required nor predictable. You can opt-in anytime and collect a benefit without ever having previously paid a dime*. This sketchy funding scheme was not unlike ObamaCare funding; issues ignored in the rush to pass something so we could then see what was in it.
*Update: “there is a minimum time you have to be in the program…..the numbers show… paying in around $300 and being able to take out over $5000.”
Also, the Floor Vote is scheduled for this Wednesday, Feb 7th. Please contact your NH House Reps to express your opposition to this legislation and the tax on income it creates. For additional details/articles posted about this bill please look here.