No. 40839 (New Rule): Rule R634-2. Health Reform -- Health Insurance Coverage in State Contracts -- Implementation

(New Rule)

DAR File No.: 40839
Filed: 09/28/2016 01:23:23 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose is to establish a rule within the Department of Natural Resources (DNR) in accordance with Section 79-2-204, which requires an offer of qualified health insurance coverage to employees of contractors for certain construction or design contracts.

Summary of the rule or change:

This rule for DNR is in accordance with Section 79-2-204, which requires an offer of qualified health insurance coverage by contractors to employees for certain construction or design contracts. Such contracts must be in the amount of $2,000,000 or more at the original execution of the contract or a subcontract in the amount of $1,000,000 or more at the original execution of the contract. Compliance is subject to an audit by DNR or the Legislative Auditor.

Statutory or constitutional authorization for this rule:

• Section 79-2-404

Anticipated cost or savings to:

the state budget:

There are no anticipated costs or savings that are expected to the state budget as a result of this rule. The statute directly determines the affects upon the budget and not this rule.

local governments:

There are no anticipated costs or savings that are expected to the local government budget. This rule does not affect local government.

small businesses:

There are no anticipated costs or savings that are expected to small businesses as a result of this rule. The statute directly determines the affects upon the budget and not this rule.

persons other than small businesses, businesses, or local governmental entities:

There are no anticipated costs or savings that are expected as a result of this rule. The statute directly determines the affects upon the budget and not this rule.

Compliance costs for affected persons:

There are no anticipated costs or savings that are expected for affected persons as a result of this rule. The statute directly determines the affects upon the budget and not this rule.

Comments by the department head on the fiscal impact the rule may have on businesses:

There are no anticipated fiscal impacts that are expected as a result of this rule. The statute directly determines the fiscal impact upon the budget and not this rule.

Michael Styler, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Natural Resources
AdministrationRoom 3710
1594 W NORTH TEMPLE
SALT LAKE CITY, UT 84116-3154

Direct questions regarding this rule to:

• Kaelyn Anfinsen at the above address, by phone at 801-538-7201, by FAX at 801-538-7315, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

11/14/2016

This rule may become effective on:

11/21/2016

Authorized by:

Michael Styler, Executive Director

RULE TEXT

R634. Natural Resources, Administration.

R634-2. Health Reform -- Health Insurance Coverage in State Contracts -- Implementation.

R634-2-1. Purpose.

The purpose of this rule is to comply with the provisions of Section 79-2-404.

 

R634-2-2. Authority.

This rule is authorized under Subsection 79-2-404(6), which directs the Department of Natural Resources to make rules related to health insurance provisions in certain design and/or construction contracts.

 

R634-2-3. Definitions.

(1) Except as otherwise stated in this rule, terms used in this rule are defined in Section 79-2-404.

(2) In addition:

(a) "Department" means the Department of Natural Resources created in Section 79-2-201.

(b) "Employee(s)" means an "employee", "worker," or "operative" as defined in Section 34A-2-104 who:

(i) works at least 30 hours per calendar week; and

(ii) meets employer eligibility waiting requirements for health care insurance which may not exceed the first day of the calendar month following 60 days from the date of hire.

(c) "Executive Director" means the executive director of the department who is appointed under Section 79-2-202, including, unless otherwise stated, the Director's duly authorized designee.

(d) "State" means the State of Utah.

 

R634-2-4. Applicability of Rule.

(1) Except as provided in Subsections R634-2-4(2) or R634-2-4(3) below, Rule R634-2 applies to all design or construction contracts entered into by the Department, and

(a) applies to a prime contractor if the prime contract is in the amount of $2,000,000 or greater at the original execution of the contract; and

(b) applies to a subcontractor if the subcontract is in the amount of $1,000,000 or greater at the original execution of the contract.

(2) Rule R634-2 does not apply if:

(a) the application of Rule R634-2 jeopardizes the receipt of federal funds;

(b) the contract is a sole source contract; or

(c) the contract is an emergency procurement.

(3) Rule R634-2 does not apply to a change order as defined in Section 63G-6a-103, or a modification to a contract, when the contract does not meet the initial threshold required by Subsection R634-2-4(1).

(4) A person who intentionally uses change orders or contract modifications to circumvent the requirements of Subsection R634-2-4(1) is guilty of an infraction.

 

R634-2-5. Contractors and Subcontractors to Comply with Section 79-2-404.

(1) All contractors and subcontractors that are subject to the requirement of Section 79-2-404 shall comply with all the requirements, penalties and liabilities of Section 79-2-404.

(2) If a subcontractor of the contractor is subject to Section 79-2-404(2) or Section R634-2-4, the contractor shall:

(a) place a requirement in the subcontract that the subcontractor shall obtain and maintain an offer of qualified health insurance coverage for the subcontractor's employees and the employees' dependents during the duration of the subcontract; and

(b) certify to the director that the subcontractor has and will maintain an offer of qualified health insurance coverage for the subcontractor's employees and the employees' dependents during the duration of the prime contract.

 

R634-2-6. Not Basis for Protest or Suspend, Disrupt, or Terminate Design or Construction.

(1) The failure of a contractor or subcontractor to provide qualified health insurance coverage as required by Rule R634-2 or Section 79-2-404:

(a) may not be the basis for a protest or other action from a prospective bidder, offeror, or contractor under Section 63G-6a-1603 or any other provision in Title 63G, Chapter 6a, Utah Procurement Code; and

(b) may not be used by the procurement entity or a prospective bidder, offeror, or contractor as a basis for any action or suit that would suspend, disrupt or terminate the design or construction.

 

R634-2-7. Requirements and Procedures a Contractor Must Follow.

A contractor (including consultants and designers) must comply with the following requirements and procedures in order to demonstrate compliance with Section 79-2-404.

(1) Demonstrating Compliance with Health Insurance Requirements. A contractor (including design professional) shall demonstrate compliance with Subsection 79-2-404(5)(a) or (b) at the time of execution of each initial contract described in Subsection 79-2-404(2).

(a) The compliance is subject to an audit by the Department or the Office of Legislative Auditor General.

(b) A contractor (including design professional) subject to Subsection 79-2-404(2) shall demonstrate to the executive director that the contractor has and will maintain an offer of qualified health insurance coverage for the contractor's employees and employees' dependents.

(c) Such demonstration shall be a certification on the form provided by the Department. The form shall also require compliance with Section R634-2-5(2) regarding subcontractors.

(d) The actuarially equivalent determination required for the qualified health insurance coverage is met by the contractor if the contractor provides the Department with a written statement of actuarial equivalency attached to the certification, which is not more than one year old, regarding the contractor's offer of qualified health coverage from an actuary selected by the contractor or the contractor's insurer, or an underwriter who is responsible for developing the employer group's premium rates. The Contractor is responsible for collecting the statements as required by law from any of the subcontractors at any tier that must do so.

(2) For purposes of Rule R634-2-7, actuarially equivalency is achieved by meeting or exceeding the commercially equivalent benchmark for the qualified health insurance coverage identified in Subsection 79-2-404(1)(c) that is provided by the Department of Health, in accordance with Section 26-40-115(2).

(3) The health insurance must be available upon the first day of the calendar month following sixty (60) days from the date of hire.

(4) Any contract subject to R634-2 shall contain a provision requiring compliance with Rule R634-2 from the time of execution and throughout the duration of the contract.

(5) Hearing and Penalties.

(a) Hearing. Any hearing for any penalty under Rule R634-2 conducted by the Department shall be conducted in the same manner as any hearing required for a suspension or debarment.

(b) Penalties that may be imposed by Department. The penalties that may be imposed by the Department if a contractor, consultant, subcontractor or subconsultant, at any tier, intentionally violates the provisions of Section 79-2-404 or Rule R634-2 include:

(i) a three-month suspension of the contractor or subcontractor from entering into future contracts with the State upon the first violation, regardless of which tier the contractor or subcontractor is involved with the future design and/or construction contract;

(ii) a six-month suspension of the contractor or subcontractor from entering into future contracts with the State upon the second violation, regardless of which tier the contractor or subcontractor is involved with the future design and/or construction contract;

(iii) an action for debarment of the contractor or subcontractor in accordance with Section 63G-6a-904 upon the third or subsequent violation; and

(iv) monetary penalties which may not exceed 50 percent of the amount necessary to purchase qualified health insurance coverage for an employee and the dependents of an employee of the contractor or subcontractor who was not offered qualified health insurance coverage during the duration of the contract.

(c)(i) In addition to the penalties imposed above, a contractor, consultant, subcontractor or subconsultant who intentionally violates the provisions of Section 79-2-404 shall be liable to the employee for health care costs that would have been covered by qualified health insurance coverage.

(ii) An employer has an affirmative defense to a cause of action under Subsection R634-2-7(5)(c)(i) as provided in Subsection 79-2-404(7)(a). An employee has a private right of action only against the employee's employer to enforce the provision of Subsection 79-2-404(7).

 

R634-2-8. Not Create any Contractual Relationship with any Subcontractor or Subconsultant.

Nothing in Rule R634-2 shall be construed as to create any contractual relationship whatsoever between the State or the Department with any subcontractor or subconsultant at any tier.

 

KEY: health insurance, contractors, contracts, contract requirements

Date of Enactment or Last substantive Amendment: 2016

Authorizing, and Implemented or Interpreted Law: 79-2-404

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