Proposed medical insurance leave bill won’t threaten disability plans

Legislators want a national insurance program for paid family leave, but it won’t disenfranchise current insurance options.



Two congressional legislators want to extend paid family and medical leave to all American employees. Sen. Kirsten Gillibrand, D-NY, and Rep. Rosa DeLauro, D-Conn., announced the Family and Medical Insurance Leave Act Thursday, which would create a national insurance program through the Social Security Administration to collect fees and distribute benefits.

Under the legislation, business owners and their employees would contribute 0.2% of their income to the fund in exchange for two-thirds of their monthly salary for 12 weeks. The proposal would be a dramatic change to the existing model—an assurance of 12 weeks of unpaid, job-protected leave.

Currently, just 12% of Americans have access to employer-provided, job-protected paid leave. Susan Lundy, director of Larkspur, Calif.-based Benefits by Design Insurance Services, makes her living by selling long- and short-term disability plans to cover the kind of individual and family leave not provided by the federal government.

However, she said passing a bill like the one proposed by Gillibrand and DeLauro wouldn’t decrease her business.

“Already, state of California pays 50% of your income [when you take leave], but you really want to cover three-quarters of income,” Lundy said. “I would assume that if the bill passed, all plans would be reconfigured to match ones like California’s. That’s all that would happen to my plans.”

Politicos are already labeling the legislation “doomed,” but some believe it could shift the conversation in a way that benefits producers selling short-term disability insurance, as well as their clients.

Indeed, a recent study from the Consumer Federation of America (CFA) shows that already, nine out of 10 American employees want their workplace to offer more generous coverage through disability insurance and paid leave. More than half even indicated they would pay for the entire cost of coverage themselves.

“In a nutshell, employees are telling us that they want access to disability coverage at work, they’ll pay for it and they’ll feel better about their employers as a result,” said Mary Clarke Guenther, a spokesperson for disability insurance carrier Unum. “That should be a powerful sales motivator for a broker.”

Guenther and Lundy both added that disability plans are a “very inexpensive add-on” and should continue to be an attractive product to employers, whatever the outcome of the proposed legislation.

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