12-702-1 Me. Code R. § XIII

Current through 2024-51, December 18, 2024

Section 702-1-XIII - [Effective 1/1/2025] Substitution of Private Plans

A. Employer Substitution

1. An employer may request to substitute a substantially equivalent private plan pursuant to 26 M.R.S. § 850-H. The employer must identify when the proposed substitute plan is a) a fully-insured private plan, approved pursuant to section B, below, or b) a self-insured plan, approved pursuant to section C, below.

2. Applications for substitution may be made after April 1, 2025. Applications for substitution must be submitted online on a form provided by the Department. Substitutions are made in accordance with the employer's Federal Employer Identification Number (FEIN) and must provide coverage for all employees within that employer's FEIN. Applications for substitution may be accepted on a rolling basis. An application fee set by the Department must be included with the submission of the application. Beginning April 1, 2025, the application fee is $250 for review of the application, and an additional $250 administrative reimbursement fee if the application is approved for the substitution. The application fees may be increased by the Department on January 1, 2026 or thereafter, based upon inflation or based upon a redetermination by the Department that the current application fees do not cover the actual cost for administering private plans. Any such increase in the application fees shall be posted on the Department's website.

3. An approved substitution is valid for a period of three years.

4. The exemption from the obligation of premiums begins on the first day of the quarter in which the substitution is approved, except if the application for substitution is submitted less than 30 days prior to the end of a quarter, in which case the exemption is effective on the first day of quarter following when the application for substitution was submitted, assuming it is an approval.

a. If employee withholdings were made prior to the substitution being approved, the employer must refund the withholdings to the effective date of the exemption within 30 days from the approval of the substitution and failure to do so may result in a revocation of substitution.

b. The employer is responsible for premiums provided under the Act and this rule until the effective date of exemption and premiums owed prior to the effective date of exemption must be remitted and are non-refundable.

c. While an employer must have entered a contractual obligation with a certified fully-insured plan or have submitted a bond if a self-insured plan to submit a substitution, the employer may choose to start benefit coverage by May 1, 2026 at the latest.

d. If an employer is found to have not commenced benefit coverage after May 1, 2026 for a substitution approved prior to that date, they will be responsible for paying retroactive premiums from the date of the start of the exemption to May 1, 2026 and cannot deduct the employee's share of the premium for these retroactive premiums.

e. For substitutions approved after May 1, 2026, benefit coverage must commence on the first day of the first month following the approval of a substitution.

5. Employers approved for a substitution may not request cancellation of their substitution prior to the substitution expiration date except by a demonstration to the Department of significant direct negative business impact. Significant direct negative business impact includes, but is not limited to, evidence of an unanticipated and unreasonable premium increase. If the Department approves the employer's request for cancellation, the employer may not re-apply for another substitution for three years from the date of cancellation.

6. During the duration of an employer's substitution, if an employer seeks to make any material change to the approved plan, the employer must notify the Department at least 60 days in advance of the effective date of any proposed change and must receive written approval from the Department. A material change is any change which affects the rights, benefits or protections afforded to employees under the Act.

7. Following approval for substitution, the Department may conduct audits and/or investigate employee complaints to determine whether, in operation, the substituted plan provides the rights, benefits, and protections that are substantially equivalent to those provided in the Act. Failure to demonstrate adequacy of performance may lead to revocation of a private plan substitution in this rule.

8. If the employer's approved plan is canceled due to nonpayment of premium, the employer's approved substitution will be revoked. If an employer's substitution is revoked for any reason, the employer will be responsible for premiums, beginning with the first quarter following revocation. The employer is prohibited from seeking another substitution for a period of three years from the date of the revocation unless the Department allows a lesser period of time.

9. The Department shall notify employers in writing of the end date of their approved substitution sixty (60) days prior to the end date. Employers must submit an application for renewal thirty (30) days prior to the end date of their approved substitution. If the employer fails to apply to renew or if the renewal is denied, the employer must remit both the employer and employee contributions to the Fund calculated from the date of the prior exemption expiration, and the employer may not deduct the employees' portion from payroll.

10. An employer with an approved substitution must collect and submit all data required under 26 M.R.S. §850-E (6) to the Department. The employer must submit this data no later than July 31 each year. Data reports prepared for fully insured private plans by insurance companies offering such plans to several employers may meet the requirement of this paragraph. Failure to submit data reports may result in revocation of the substitution.

11. An employer with an approved substitution must submit to the Department contribution reports for each employee on a quarterly basis online, pursuant to section X of this rule of this rule. Failure to file contribution reports may result in revocation of the substitution.

12. An employer with an approved substitution must provide appropriate tax forms for benefits to employees taking leave based on guidance from the Internal Revenue Service and Maine Revenue Services around the taxability of such benefits.

13. An employer may appeal a denial of substitution, a denial of cancellation, a revocation, or the issuance of any penalty for violation pursuant to section XV of this rule within 15 business days from the date the decision of denial or revocation is issued.

B. Fully-Insured Private Plans

1. An insurer licensed in accordance with Title 24-A may offer fully-insured insurance plans that are substantially equivalent to the requirements of 26 M.R.S.850-H and this Rule. The fully-insured plan must comply with all requirements of the Maine Insurance Code. An issuer shall not deliver or issue for delivery a policy or certificate to a resident of this State unless the policy form or certificate form has been filed with and approved by the Superintendent of Insurance in accordance with filing requirements and procedures prescribed by the Maine Insurance Code and applicable rules.

2. Policy cancellation and nonrenewal is subject to the requirements of the Maine Insurance Code and applicable rules. The employer shall notify the Department of the cancellation or nonrenewal at least 10 days before the termination takes effect.

3. An insurer may cease offering a fully-insured plan if:

a. Notice of the decision to cease offering such plans is filed with the Bureau of Insurance at least three (3) months prior to the cessation unless a shorter notice period is approved by the Superintendent of Insurance; and

b. If existing contracts are nonrenewed, notice must be provided to the policyholder six (6) months prior to nonrenewal.

4. An insurer that discontinues the availability of a policy form or certificate form issued pursuant to this rule shall not file for approval of a policy form or certificate form for a fully-insured plan for a period of five (5) years after the insurer provides notice to the Superintendent of Insurance of the discontinuance. The period of discontinuance may be reduced if the Superintendent of Insurance determines that a shorter period is appropriate.

5. An insurer may request certification of a proposed plan as substantially equivalent pursuant to 26 M.R.S. §850-H by providing a copy of the proposed plan documents to the Department along with an application form and fee as determined by the Department. The Department may delegate to the Maine Bureau of Insurance (BOI) authority to review and approve plan applications for compliance with the Maine Insurance Code and for compliance with a Paid Family Medical Leave eligibility checklist jointly developed by the Department and the BOI. If after BOI review, the Department determines the insurer's proposed plan is substantially equivalent, the Department shall issue a certificate of eligibility.

C. Self-Insured Private Plans

1. An employer may request certification of a self-insured, employer provided plan as substantially equivalent pursuant to 26 M.R.S. §850-H by providing a copy of the proposed plan documents to the Department along with an application form and fee as determined by the Department. The Department may use the checklist jointly developed with the assistance of the BOI to determine eligibility. If the Department deems that the self-insured plan is substantially equivalent the Department shall issue a certificate of eligibility.

2. An employer proposing to substitute a self-insured plan may apply for both certification and substitution simultaneously.

3. The employer must also furnish to the Department a bond, in an amount determined by the Department, with a surety company authorized to transact business in Maine. The employer must submit a certification form to the Department in the amount required at the time the application is submitted.

D. Determination of Substantial Equivalence

1. The Department, in consultation with the BOI as necessary, shall determine whether a proposed plan is substantially equivalent and therefore eligible for substitution. To meet the requirement that a private plan confer rights protections and benefits substantially equivalent to those provided to employees under the Paid Family Medical Leave Act, a private plan need not be identical to the provisions set forth in the Act.

2. The following minimum requirements must be met in order to be determined substantially equivalent:

a. The plan must provide for family leave and medical leave to be taken for: the covered individual's own serious health condition; safe leave; a qualifying exigency; bonding leave; to care for a family member who is a covered service member; to care for a family member with a serious health condition; and for any other reason set forth in 26 M.R.S. §843(4);

b. The plan must provide leave to care for a family member and must account for all definitions of family listed in §850-A(19);

c. The plan must allow for at least 10 weeks of aggregate leave per benefit year;

d. The plan must allow a covered individual to take intermittent or reduced schedule leave, except that the requirements of section III(B) of this Rule need not be met;

e. The cost to employees of the plan may not be greater than the cost charged to employees under § 850-F of the Act; and

f. The plan must provide an internal reconsideration process for denial of family leave benefits or medical leave benefits.

3. Any plan which does not meet the minimum criteria in paragraph 2 may not be determined as substantially equivalent and shall not be eligible for substitution. If all of the above criteria are met, the Department shall determine whether the plan provides the same or greater aggregate monetary benefit to employees. This shall be determined by comparing the plan's wage replacement amount multiplied by the maximum number of weeks to the maximum Weekly Benefit Amount under the Act multiplied by 12 weeks. If the former is equal to or greater, the plan may be determined to be substantially equivalent and therefore eligible for substitution.

4. Examples of a plan that is substantially equivalent but not identical include, but are not limited to, the following:

a. A plan that provides the amount of leave set forth in 850-B (4) during a 12-month period shall be found to be substantially equivalent even if that 12-month period is not calculated in a manner identical to a "benefit year" as defined in 26 M.R.S. § 850-A(5);

b. A plan that provides for intermittent or reduced schedule leave but requires that such leave may only be taken in minimum increments of four (4) hours may be found to be substantially equivalent;

c. A plan that calculates an employee's benefit using a different lookback period or based upon the employee's actual wages at the time that leave begins may be found to be substantially equivalent if the requirements of paragraph 3, above, are met.

5. Notwithstanding the above provisions, the following may not be determined as substantially equivalent and therefore shall not be eligible for substitution:

a. A plan which provides benefits only for the covered individual's own serious health condition, such as a short term or long term disability plan; and

b. A plan which consists of leave benefits provided pursuant to employer policy and which are subject to change at the employer's discretion; and

c. A plan that consists of leave benefits that need to be accrued (such as sick, vacation, or paid time off) that does not provide full coverage of benefits regardless of time with the employer or availability of accrued time.

6. The Department shall evaluate any appeal pursuant to § 850-H (5) in terms of whether it constitutes grounds for withdrawal of approval of substitution.

12-702 C.M.R. ch. 1, § XIII