Virginia's 12-Week Maternity Requirement for Short-Term Disability: What does it mean for Employers?

On July 1st, Senate Bill 567 came into effect for the state of Virginia, stating individual or group sickness insurance policies providing short-term disability (“STD”) coverage for childbirth must provide a benefit of at least 12 weeks following birth. It may seem like I am late on the announcement, but because it’s suddenly become a large part of my renewal conversations with employers, I want to uncover the nuances of the new law.

A state-mandated, 12-week short-term disability benefit for giving birth seems like a big step in the direction of state-mandated paid leave, however, depending on the carrier and plan design, your policy may not be changing all that much.

Overview of the short-term disability requirements: ?

• STD policies must provide a minimum maternity benefit of at least 12 weeks duration immediately following the birth of a child.
• The elimination period cannot be used to reduce the 12-week period.
• The new requirements only apply to new policies issued after July 1st, 2021. Employers who already have a policy in place may amend their policy to follow the new requirements.

The question is—how does the new law impact employers and employees? As always, it depends.

Here are the factors which impact your disability policy:

Elimination period: Most disability policies will have an elimination (waiting) period the member must satisfy before receiving the benefit. This could be 7, 14, or even 30 days. Most commonly in Virginia, I see a 7-day waiting period. With the new law, we are seeing most carriers remove the 7 day waiting period and instead have the benefit start day one. If you are an employer with a 30-day waiting period, the new law could greatly impact your policy.

Carrier: The carrier an employer chooses for short-term disability impacts the way the benefit is paid. It's important to ask the carrier for the policy language on the new requirement. Most carriers are requiring medical documentation from a physician, stating the member is disabled and cannot go back to work for the 12 weeks. ?A couple of carriers are not requiring further documentation and instead are paying out the full 12-week benefit. You can imagine the second option is a lot more generous to employees.

Cost: With maternity being the number one claim for short-term disability, you can imagine the new requirements will have an impact on the price of the policy. We are seeing a rate load of about 5% for adding the amendment to an existing policy. Some of the carriers are allowing employers to decide whether they want to require the medical documentation for the full 12-week benefit. If an employer decides to remove the requirement for medical documentation, I am seeing a 15-20% load to the rate.

I do believe this law is a step in the direction of state-wide, paid maternity/paternity leave, however, in the way it’s written now, the requirement is likely not going to make much of a difference for employees. An employee may receive an extra week of benefit if the elimination period is removed, however, because the 12 weeks must be ‘medically necessary’, I cannot imagine many members will actually receive the full benefit. Let’s also remember that short-term disability typically only replaces 60% (up to a maximum amount) of an employee’s income (before taxes).

My conclusion is the new regulations are not a replacement for an employer’s maternity leave coverage. At the very most, it will be a slight enhancement.?

Disclaimer: The opinions expressed here belong solely to myself and do not constitute as legal or professional advice.