Recently, Maine became the 13th state, plus the District of Columbia, to adopt legislation guaranteeing paid family and medical leave for residents. And with a wave of interest in supporting workers’ rights, it won’t be the last state or territory to adopt universal paid leave legislation. However, like the states that have preceded it, Maine’s Department of Labor, which will take the lead in implementation and administration of the program, will need to identify the path forward that will ensure program success and positive outcomes for Mainers.
As with any new digital government program, states have options for how they can build the foundation, and these choices will impact program outcomes for the state and its constituents. When building a successful PFML program, states must consider both the technological requirements for the program, as well as the unique requirements of their state and legislation. However, the myriad considerations that need to be accounted for can make the decision seem far more complex than it ought to be.
Three Options for Delivering a PFML Program
While PFML program adoption is still in its infancy, the 12 states and District of Columbia that have already started to administer programs have taken different pathways to success. Looking over the ways in which those states and the District of Columbia have rolled out their programs, Admira Makas, Paid Family and Medical Leave Subject Matter Expert at Tata Consultancy Services, has identified three variations.
“By far the most common choice for agencies administering a PFML program is for states to directly administer their own programs internally using state staff,” Makas explained. “This means that the designated state agency, in Maine’s case the Department of Labor, would collect the taxes to fund the program, take the applications for worker claims, issue the decisions regarding benefit eligibility, then administer appeals, and audit employers for compliance with the program.”
The second option is for states to partner with a third-party organization to help administer the benefits side of the house. In this model, the partner would take in claim applications from workers and issue decisions on whether benefits should be paid. “With this option states retain control over all aspects of the PFML program except claims management,” Makas added. “The state still collects the taxes to fund the program, they administer the appeals process, and they track employer compliance with the program requirements.” Thus far, states that outsource to a third party have done so only for claims administration, but it is possible they will consider outsourcing additional components, such as tax collection, in the future.
The third possibility is for states to fully privatize their PFML programs to a third party for administration. “In this scenario the state would outsource to approved insurance providers to deliver the program,” said Makas. “So far, New York State is the only state to adopt this approach that mandates all employers to purchase PFML insurance from approved insurance providers.”
Different Administrative Models Result in Challenges and Opportunities for States
With PFML programs still in their infancy, it can be difficult for a state like Maine, that has recently passed legislation, to identify the best administrative model for their unique circumstances. Regardless of the administrative model chosen, Makas emphasized that choosing the right technology platform to underpin the program is one of the most crucial factors in delivering a successful program.
Take, for example, option two, where states elect to partner with a third party to administer the benefits. Top-of-mind for Makas is the fact that the claims management software that insurance companies use is not fit-for-purpose. “With this model, states use their vendor’s existing software, typically software that has been designed for other programs and not specifically for the administration of PFML,” she explained. “This may not seem important at the outset, but as states begin to accept claims, maladapted technology results in incorrect claim outcomes, causing backlogs in claims, frustration for employers and employees, and the potential for inadequate outcomes.”
Moreover, while state administrators might think the solution to having challenges with one vendor can be resolved by switching to another, Makas advises caution. “Vendor lock-in is a very real obstacle for states that choose to fully or partially privatize, and it’s a choice that an agency might have a difficult time overcoming if they determine it is necessary to change vendors,” she said. “The invested costs of a program are going to be significant for an agency even after just a short time, but the availability and accessibility of data and system compatibility across different vendors is actually the more serious issue.” Data migration becomes a much more difficult task because the insurance company is running the program on their proprietary software. Incompatibility between vendor systems reduces the likelihood of smooth transfer of data between systems, and there is the near inevitability that data will get lost, resulting in potential program continuity issues.
So far, most states that have rolled out PFML programs have opted to work with an experienced partner to design and implement PFML software and back-end systems. “A trusted partner with deep understanding of the field gained through multiple experiences can help identify program needs and provide the technology solution to be able to administer the PFML program successfully over a long period of time,” shared Makas.
Makas’s advice for states looking to roll-out PFML programs is that experience in building software and back-end systems for human services lends itself to focusing on human-centered design to deliver seamless customer experiences in PFML. “States want to ensure that the user experience for both employees and employers is optimized so that data can be entered quickly and correctly the first time, every time,” she explained. “To administer a PFML program successfully, that avoids backlogs and results in correct decisions on claims, the software has to be purpose-built for PFML and tailored to each state’s unique requirements.”
Perhaps the biggest opportunity to drive PFML program success with a purpose-built solution is the opportunity to leverage AI and automation to break down silos between the new PFML program and other state-administered human services such as Unemployment Insurance (UI). “Automating data integration into forms on the front-end improves customer experience by reducing frustration and the risk of errors that would delay claims processing,” Makas explained. “On the back-end it also improves employee experience and reduces the need to hire and train new staff. AI-powered tools can take a user’s data and flow it through decision-making trees. Simple issues, such as missing or incorrect data, can be handled by the tools, leaving only complex issues for staff to resolve, significantly reducing their workload, while delivering an exceptional program for all.”
Looking Forward to 2025
Although tax collection for Maine’s PFML program will not begin until 2025 and benefits for Mainers will begin in 2026, now that the bill and a funding package have been passed into law, the Department of Labor faces some vital decisions. Whether officials decide to administer a PFML program directly or outsource administration to a third-party vendor, the long-term success of a program would indicate that investing in a state-managed relationship with a skilled and dedicated partner that provides purpose-built technology will deliver a strong return-on-investment, and perhaps even mitigate concerns in the business community about the costs of such a program.
