After childbirth, postpartum recovery can take several months under the best of circumstances. When a disability arises out of childbirth, recovery can be significantly prolonged. Senate Bill 567 was signed into law on April 9, 2020, by the Governor of Virginia and requires insurers who issue group or individual illness insurance policies to also offer short-term disability (STD) coverage for employees that have gone through childbirth. The new requirement applies to those policies that were delivered or issued for delivery in the Commonwealth of Virginia on or after July 1, 2021.
Learn more about short-term disability maternity changes in Virginia and what it could mean as an employer.
What Is Virginia Senate Bill 567?
Senate Bill 567 Disability Insurance: coverage for disability arising out of childbirth (SB567) was successfully passed during the 2020 General Assembly Session. This coverage requires insurers to provide members with a benefit of at least 12 weeks after the birth. Senate Bill 567 is state-mandated and has played a key role in the push for statewide paid leave. However, some policies may not change much based on the plan design and carrier.
Several changes have been made to Virginia’s short-term disability maternity benefits, including the following:
- Short-term disability policies are required to provide a maternity benefit of at least 12 weeks in length directly following childbirth.
- These new requirements apply only to policies that were issued on or after July 1, 2021.
- The elimination period cannot be used as a way to reduce the mandatory 12-week period.
There are important items to know about the impact of Senate Bill 567 on short-term disability benefits. First, this change applies only to STD childbirth and not Paid Family Medical Leave (PFML). In addition, an employee must meet the current definition of disability outlined in the short-term disability plan.
It is important to note that some pre-existing condition limitations could apply. For example, if an employer has an STD plan with a pre-existing condition limitation and the employee is still within that pre-existing period, a claim will not be paid. Finally, the elimination period must be waived as a birthdate, meaning if the birth of the child is January 2nd, then the benefit should begin on January 2nd.
What Factors Will Impact Disability Policies?
There are multiple factors that may affect disability policies in Virginia due to these recent changes. It is important for employers to fully understand what changes could impact them and how to adjust to these new requirements.
1. Insurance Carrier
The insurance carrier that an employer selects for short-term disability will have a direct effect on the way that these benefits are paid. Request information from the carrier on potential changes in policy language for the new requirements. If the changes are unsatisfactory, consider switching to a new carrier.
The bulk of insurance carriers require qualifying employees to obtain medical documentation from a doctor that states that they are disabled and unable to return to work for up to 12 weeks. Some carriers choose to bypass the documentation requirement and simply payout the full 12-week benefit without requesting medical proof. The second option is favored as it gives employees maximum time to recover.
Changes to Virginia’s short-term disability policies are also likely to impact policy costs. Maternity is one of the top claims for short-term disability and these new requirements may cause the price to increase.
Some insurance carriers are allowing employers to make the decision about requiring employees to obtain medical documentation in order to receive the full 12-week benefit. Employers that choose not to require this documentation are likely to see a larger increase in price compared to employers that require staff to obtain medical proof.
3. Elimination Period
It is common for disability policies to have an elimination or “waiting” period. This elimination period refers to the amount of time that a member must wait until he or she can receive benefits. Elimination periods can range from carrier to carrier but are most commonly 7, 14 or 30 days. In Virginia, a 7-day waiting period is the norm.
With the rollout of Virginia’s short-term disability policy changes, many carriers are removing this 7-day waiting period and allowing members to begin coverage starting on day one. This means that employers that currently have a 14- or 30-day elimination period will be greatly impacted by these new requirements.
How Should Employers Prepare?
There are several things that employers should do to prepare for the new requirements outlined in Senate Bill 567. First, employers who have established short-term disability plans that were written in Virginia should contact their insurer to make sure that their plan, and all policy documents, are accurate and up-to-date. If changes need to be made to the policy or its terms, it is important to make these changes as soon as possible.
Next, employers should review current company leave plans in place to coordinate with the impacted insured short-term disability policy. Take the time to assess possible impacts to paid benefits, leave processes, policies and potential financial implications. Consider extending the duration of the company leave plans to meet the requirements of Virginia’s new STD law.
Consider the financial impact of an extended duration of maternity benefits, as well as extended job protection. It is uncommon for insured STD policies to offer job protection; however, FMLA and similar company leave policies may provide job protection to employees. Also, consider the impact to plan experience, or the loss ratio and future renewal rate impacts, due to the extended duration of benefits.
Contact the Experts at Business Benefits Group
The 2020 legislative session in Virginia enacted several new laws protecting employee rights with one of the most notable being Senate Bill 567. The new law is now in effect and applies to employers with five or more employees. For more information about Virginia short-term disability maternity changes, or to speak with an experienced business benefits consultant, contact the experts at the Business Benefits Group (BBG).