No. 40440 (Emergency Rule): Rule R23-23. Health Reform -- Health Insurance Coverage in State Contracts -- Implementation

DAR File No.: 40440
Filed: 05/23/2016 12:24:57 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this rule is to comply with the provisions of Section 63A-5-205. H.B. 282 from the 2016 General Session updated Section 63A-5-205, and the changes in this rule are to comply with H.B. 282.

Summary of the rule or change:

The changes in this rule outline the requirements of contractors and subcontractors, that do work for the State of Utah to carry health insurance for their employees. (Editor's Note: A corresponding proposed amendment to Rule R23-23 is under Filing No. 40441 in this issue, June 15, 2016, of the Bulletin.)

Emergency rule reason and justification:

Regular rulemaking procedures would place the agency in violation of federal or state law.

Justification: H.B. 282 (2016) is currently in effect, and this rule is out of compliance.

State statutory or constitutional authorization for this rule:

• Section 63A-5-205
• Subsection 63A-5-103(1)(e)

Anticipated cost or savings to:

the state budget:

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

local governments:

There are no anticipated costs or savings to local government budget. The changes to the rule do not affect local government.

small businesses:

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

Compliance costs for affected persons:

There are no anticipated compliance costs that are expected as a result of this rule. The changes to this rule only incorporate the changes in statute. The statute directly determines costs for affected persons 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 changes to this rule only incorporate the changes in statute. The statute directly determines the potential fiscal impact and not this rule.

Kimberly Hood, Executive Director

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

Administrative Services
Facilities Construction and Management
Room 4110 STATE OFFICE BLDG
450 N STATE ST
SALT LAKE CITY, UT 84114-1201

Direct questions regarding this rule to:

• Alan Bachman at the above address, by phone at 801-538-3105, by FAX at 801-538-3313, or by Internet E-mail at [e-mail]
• Nicole Alder at the above address, by phone at 801-538-3240, by FAX at , or by Internet E-mail at [e-mail]

This rule is effective on:

05/23/2016

Authorized by:

Eric Tholen, Director

RULE TEXT

R23. Administrative Services, Facilities Construction and Management.

R23-23. Health Reform -- Health Insurance Coverage in State Contracts -- Implementation.

R23-23-1. Purpose.

The purpose of this rule is to comply with the provisions of Section 63A-5-205.

 

R23-23-2. Authority.

This rule is authorized under Subsection 63A-5-103(1)(e), which directs the Utah State Building Board to make rules necessary for the discharge of the duties of the Division of Facilities Construction and Management as well as Section 63A-5-205 which requires this rule related to health insurance provisions in certain design and/or construction contracts.

 

R23-23-3. Definitions.

(1) Except as otherwise stated in this rule, terms used in this rule are defined in Section 63A-5-205.

(2) In addition:

(a) "Board" means the State Building Board established pursuant to Section 63A-5-101.

(b) "Director" means the Director of the Division, including, unless otherwise stated, the Director's duly authorized designee.

(c) "Division" means the Division of Facilities Construction and Management established pursuant to Section 63A-5-201.

(d) "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.

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

 

R23-23-4. Applicability of Rule.

(1) Except as provided in Subsection s R23-23-4(2) or R23-23-4(3) below, this Rule R23-23 applies to all design or construction contracts entered into by the Division or the Board[ on or after July 1, 2009], 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[$1,500,000 or greater]; 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.[$750,000 or greater.]

(2) This Rule R23-23 does not apply if:

(a) the application of this Rule R23-23 jeopardizes the receipt of federal funds;

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

(c) the contract is an emergency procurement.

(3) This Rule R23-23 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 R23-23-4(1).

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

 

R23-23-5. Contractors and Subcontractors to Comply with Section 63A-5-205.

(1) All contractors and subcontractors that are subject to the requirements of Section 63A-5-205 shall comply with all the requirements, penalties and liabilities of Section 63A-5-205.

(2) If a subcontractor of the contractor is subject to Section 63A-5-205(3) or Section R23-23-4, 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.

 

R23-23-6. 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 this rule or Section 63A-5-205:

(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.

 

R23-23-7. 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 63A-5-205.

(1) Demonstrating Compliance with Health Insurance Requirements. A Contractor (including Design Professional) shall demonstrate compliance with Subsection 63A-5-205(6)(a) or (b) at the time of execution of each initial contract described in Subsection 63A-5-205(3).

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

(b) A Contractor (including Design Professional) subject to Subsection 63A-5-205(3) shall demonstrate to the 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 Division.[The following requirements must be met by a contractor (including consultants, designers and others under contract with the Division) that is subject to the requirements of this Rule no later than the time the contract is entered into or renewed:] The form shall also require compliance with Subsection R23-23-5(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 Division 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.

[(a) demonstrate compliance by a written certification to the Director that the contractor has and will maintain for the duration of the contract an offer of qualified health insurance coverage for the contractor's employees and the employee's dependents; and

(b) The contractor shall also provide such written certification prior to the execution of the contract, in regard to all subcontractors (including subconsultants) at any tier that is subject to the requirements of this Rule.

(2) Recertification. The Director shall have the right to request a recertification by the contractor by submitting a written request to the contractor, and the contractor shall so comply with the written request within ten (10) working days of receipt of the written request; however, in no case may the contractor be required to demonstrate such compliance more than twice in any 12-month period.

(3) Demonstrating Compliance with Actuarially Equivalent Determination. The actuarially equivalent determination required by Subsection 63A-5-205(1)(e) and defined in Section 26-40-115 is met by the contractor if the contractor provides the Director with a written statement of actuarial equivalency from either the Utah Insurance Department; 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.] (2) For purposes of this Rule R23-23-7[(3)], actuarially equivalency is achieved by meeting or exceeding the commercially equivalent benchmark for the qualified health insurance coverage identified in Subsection 63A-5-205(1)(e) that is provided by the Department of Health, in accordance with Subsection 26-40-115(2).[requirements of Section 26-40-115 which are also delineated on the DFCM website at http://dfcm.utah.gov/downloads/1const/Health_Insurance_Benchmark.pdf.]

( 3[4]) The health insurance must be available upon the first day of the calendar month following sixty (60) days from the date of hire.

[(5) Architect and Engineer Compliance Process. Architects and engineers that are subject to this Rule must demonstrate compliance with this Rule in any annual submittal under Section 63G-6-702. During the procurement process and no later than the execution of the contract with the architect or engineer, the architect or engineer shall confirm that their applicable subcontractors or subconsultants meet the requirements of this Rule.

(6) General (Prime) Contractors Compliance Process. Contractors that are subject to this Rule must demonstrate compliance with this Rule for their own firm and any applicable subcontractors, in any pre-qualification process that may be used for the procurement. At the time of execution of the contract, the contractor shall confirm that their applicable subcontractors or subconsultants meet the requirements of this Rule.]

( 4[7]) [Notwithstanding any prequalification process, ]A[a]ny contract subject to this Rule shall contain a provision requiring compliance with this Rule from the time of execution and throughout the duration of the contract.

( 5[8]) Hearing and Penalties.

(a) Hearing. Any hearing for any penalty under this Rule conducted by the Board or the Division shall be conducted in the same manner as any hearing required for a suspension or debarment.

(b) Penalties that may be imposed by Board or Division. The penalties that may be imposed by the Board or the Division if a contractor, consultant, subcontractor or subconsultant, at any tier, intentionally violates the provisions of Subsections (3) through (10) of 63A-5-205[this Rule R23-23, may] 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 63A-5-205[this rule] 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 R23-23-7( 5[8])(c)(i) as provided in Subsection 63A-5-205 (8)(b)[(3)(g)(ii)]. An employee has a private right of action only against the employee's employer to enforce the provision of Subsection 63A-5-205(8).

 

R23-23-8. Not Create any Contractual Relationship with any Subcontractor or Subconsultant.

Nothing in this Rule shall be construed as to create any contractual relationship whatsoever between the State of Utah, the Board, or the Division with any subcontractor or subconsultant at any tier.

 

KEY: health insurance, contractors, contracts, contract requirements

Date of Enactment or Last Substantive Amendment: May 23, 2016

Notice of Continuation: June 10, 2014

Authorizing, and Implemented or Interpreted Law: 63A-5-103(1)(e); 63A-5-205

 

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