No. 32768: R916-5. Health Reform -- Health Insurance Coverage in State Contracts -- Implementation

DAR File No.: 32768
Filed: 06/29/2009, 06:26
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of the rule is to comply with H.B. 331 of the 2009 Utah Legislative Session which created Section 72-6-107.5. Said statute requires that contracts entered into on or after 07/01/2009, have provisions requiring health insurance as specified in this statute. The statute also requires administrative rules that define the process and enforcement. In order to facilitate the contract requirements required as of 07/01/2009, it is necessary to have the administrative rules in place at the same time. (DAR NOTE: H.B. 331 (2009) is found at Chapter 13, Laws of Utah 2009, and was effective 05/12/2009.)

Summary of the rule or change:

This is a new rule and required in said H.B. 331. The rule introduces the procedure and requirements for implementation of the Health Reform -- Health Insurance Coverage in State Contracts as required by the Utah Legislature in H.B. 331 codified in Section 72-6-107.5. H.B. 331, 2009 General Session, Health Reform -- Health Insurance Coverage in State Contracts, requires all contractors, subcontractors, and subconsultants at any tier, entering into any state contract, to have and maintain for the duration of the contract an offer of qualified health insurance coverage for their employees and their employee's dependents that live and/or work in the State of Utah.

State statutory or constitutional authorization for this rule:

Subsection 72-6-107.5(6)

Anticipated cost or savings to:

the state budget:

Enactment of this rule may indirectly increase the cost of state construction projects depending upon the contractor. The extent of such increases is currently unknown.

local governments:

No cost or savings are anticipated for local governments with this new rule. No new requirements were created with this new rule that impact local governments. (Note: while not affected by this rule, H.B. 331 does affect public transit districts.)

small businesses and persons other than businesses:

Enactment of this rule may result in certain cost increases to private contractors, but may benefit individuals working for such contractors. Enactment of this rule likely will not result in direct, measurable costs and/or benefits for local governments.

Compliance costs for affected persons:

To the extent there are cost increases to contractors (including designers), it is highly likely that such cost increases will be passed on as part of the costs of the contract that the State pays. The statute already provides the requirements that may cause cost increases. The rule does not add to these cost increases.

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

As stated, the statute itself created the fiscal impacts. The rule does not add additional burdens than already provided by the statute. The rule will not impact the costs. The statute will increase the cost of the contracts as the price of the insurance passed along in the bids and subsequent contracts. John R. Njord, Executive Director

Emergency rule reason and justification:

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

The specific reason an emergency rule process is needed: H.B. 331 codified as Section 72-6-107.5 requires contractors, subcontractors, and subconsultants at any tier, entering into any state contract, to have and maintain for the duration of the contract an offer of qualified health insurance coverage for their employees and their employees dependents that live and/or work in the State of Utah, and will go into effect on 07/01/2009. The regular rulemaking process would not allow for the rule to be in effect before the required date. In order to comply with the statute, an emergency rulemaking process is required.

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

Transportation
Operations, Construction
CALVIN L RAMPTON COMPLEX
4501 S 2700 W
SALT LAKE CITY UT 84119-5998

Direct questions regarding this rule to:

Maureen Short at the above address, by phone at 801-965-4026, by FAX at 801-965-4338, 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:

This rule is effective on:

07/01/2009

Authorized by:

John R. Njord, Executive Director

RULE TEXT

R916. Transportation, Operations, Construction.

R916-5. Health Reform -- Health Insurance Coverage in State Contracts -- Implementation.

R916-5-1. Purpose.

The purpose of this Rule is to comply with Utah Code Annotated Section 72-6-107.5 and establish the requirements and procedures a contractor, subcontractor, consultant and sub-consultant must follow to demonstrate they will maintain an offer of health insurance as required by Section 72-6-107.5 The Rule also establishes penalties for anyone covered by this Rule if they intentionally violate the provisions of Section 72-6-107.5

 

R916-5-2. Authority.

This Rule is authorized under Section 72-6-107.5 which requires the Utah Department of Transportation to make rules related to health insurance in certain design and construction contracts.

 

R916-5-3. Definitions.

(1) Except as otherwise stated in this rule, terms used in this rule are defined in Section 72-6-107.5.

(2) In addition:

(a) "Executive Director" means the Executive Director of the Department of Transportation, including, unless otherwise stated, the Executive Director's duly authorized designee.

(b) "Department" means the Department of Transportation established pursuant to Section 72-1-201.

(c) "Employee(s)" is as defined in 72-6-107.5 and includes only those employees that live and/or work in the State of Utah along with their dependents. "Employee" for purposes of this rule, shall not be construed as to be broader than that the use of the term employee for purposes of State of Utah Workers' Compensation laws.

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

(3) The definitions found in Section 72-6-107.5 shall apply to Rule R916-5.

 

R916-5-4. Applicability of Rule.

(1) Except as provided in Rule R916-5-4(2) below, this Rule R916-5 applies to all contracts entered into by the Department on or after July1, 2009, if:

(a) the contract is for design and/or construction; and

(b)(i) the prime contract is in the amount of $1,500,000 or greater; or

(ii) a subcontract, at any tier, is in the amount of $750,000 or greater.

(2) This Rule R916-5 does not apply if:

(a) the application of this Rule 916-5 jeopardizes the receipt of federal funds;

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

(c) the contract is an emergency procurement; or

(d) the Rule is in conflict with federal law.

(3) This Rule R 916-5 does not apply to a change order as defined in Section 63G-6-102, or a modification to a contract, when the contract does not meet the initial threshold required by Rule R 916-5-4(1)

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

 

R916-5-5. Contractors or Consultants to Comply with Section 72-6-107.5.

All contractors, subcontractors, consultants or subconsultants that are subject to the requirements of Section 72-6-107.5 shall comply with all the requirements, penalties and liabilities of Section 72-6-107.5.

 

R916-5-6. Not Basis for Protest, Suspension, Disruption, or Termination Design or Construction.

(1) the failure of contractors, subcontractors, consultants, or subconsultants to comply with Section 72-6-107.5:

(a) may not be the basis for a protest or other action from a prospective bidder, offer, or contractor or consultant under Section 63G-6-801 or any other provision in Title 63G, Chapter 6, Part 8, Legal and Contractual Remedies; and

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

(2) A contractor who is unable to demonstrate compliance within 14 calendar days of bid opening or when proposals are due may be declared non-responsive and the Department may award the contract to the lowest responsive bidder.

(3) A consultant who is unable to demonstrate compliance within 14 calendar days of being ranked first during the consultant selection process, may be declared non-responsive and the Department may enter negotiations with the new first-ranked responsive consultant.

 

R916-5-7. Requirements and Procedures a Contractor or Consultant Must Follow.

A contractor, or consultant, subcontractors or subconsultants must comply with the following requirements and procedures in order to demonstrate compliance with Section 72-6-107.5.

(1) Demonstrating Compliance with Health Insurance Requirements.

The following requirements must be met by a contractor, consultants, subcontractors, and subconsultantsthat are subject to the requirements of this Rule no later than the time of execution of the contract:

(a) demonstrate compliance by a written certification to the Executive Director that the contractor, consultants, subcontractors, and subconsultants has and will maintain for the duration of the contract an offer of qualified health insurance coverage for the employees, as such employees are defined in Section 34A-2-104 for employees' who live and/or work within the State, along with their dependents. Employee, for purposes of this Rule, shall be no broader than the use of the term employee for purposes of the State's Workers' Compensation requirements; and

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

(2) Recertification. The Executive Director shall have the right to request a recertification by the contractor or consultant by submitting a written request to the contractor or consultant, and the contractor or consultant shall so comply with the written request within (10) working days of receipt of the written request; however, in no case may the contractor or consultant 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 (1) of 72-6-107.5 is met by the contractor or consultant if the contractor or consultant provides the Executive Director with a written statement of actuarial equivalency from either the Utah Insurance Department or an actuary selected by the contractor or the contractor's insurer or an actuary selected by the consultant or the consultant's insurer

(a) For purposes of Rule R916-5, actuary equivalency is achieved by meeting any of the following:

(i) In accordance with Section 26-40-106(2)(a), the largest insured commercial enrollment offered by a health maintenance organization in the State, which the Children's Health Insurance Program has determined is the SelectHealth plan currently offered by SelectHealth, 4646 West Lake Park Blvd, Salt Lake City, Utah 84130. The reference to SelectHealth herein is to provide an example of a qualifying plan and is not intended to endorse or indicate a preference for the use of SelectHealth as the insurance provider in any way; or

(ii) provides coverage that is actuarially equivalent to 75% of the benefit plan determined under Rule R916-5-7(3)(a)(i) above and employer premium contributions as required by statute.

(4) Time Frame Availability for Health Insurance.

The health insurance must be available upon the first of the month following the initial ninety (90) days from the beginning of employment.

(5) Consultant Compliance Process.

Consultants who are subject to this Rule must demonstrate compliance with this Rule in their initial Financial Screening Application. The consultant's will then be required to demonstrate the offer of health insurance that meets the requirements outlined in Section 72-6-107.5. During the procurement process and no later than the execution of the contract with the consultant, the consultant will confirm the prime is still in compliance with this Rule and the subconsultants of the consultant will certify through their prime consultant they meet the requirements of this Rule. The written contract will contain a provision where the consultant confirms compliance with this Rule by both the consultant and applicable subconsultants.

(6) Contractors Compliance Process.

Contractors who are subject to this Rule must demonstrate compliance with this Rule. The contractor will indicate in the Pre-qualification Application that the contractor will offer health insurance which meets the requirements outlines in Section 72-6-107.5. When a contract is written, contractors may confirm the prime contractor is still in compliance with this Rule and their subcontractors will certify through their contractor they meet the requirements of this Rule. The written contract shall contain a provision where the contractor confirms compliance with this Rule by both the contractor and applicable subcontractors.

(7) Must be in Compliance at the Time the Contract is Executed.

Notwithstanding any prequalification of a contractor, subcontractor, consultant or subconsultant that is subject to this Rule, the contractor subcontractor, consultant or subconsultant must agree to the language in the executed contract that requires the contractor to be in compliance with this Rule at the time of the execution of the contract and throughout the duration of the contract.

 

R916-5-8. Department Hearing and Penalties.

(1) Hearing. Any hearing regarding the failure to comply with this Rule shall be held in accordance with the Utah Administrative Procedures Act and Rule 907-1 unless specifically stated otherwise in a governing statute.

(2) Penalties. The penalties that may be imposed if a contractor, consultant, subcontractor or subconsultant, at any tier intentionally violates the provisions of this Rule may include:

(a) 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;

(b) a six-month suspension of the contractor, subcontractor, consultant or subconsultant 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;

(c) an action for debarment of the contractor, subcontractor , consultant or subconsultant in accordance with Section 63G-6-804 upon the third or subsequent violation; and

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

(e) A prime contractor or consultant will not be subject to penalties for the failure of a subcontractor or subconsultant to meet the requirement of maintaining their offer of qualified health care coverage.

 

R916-5 -9. Does 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 Department or the State with any subcontractor or subconsultant at any tier.

 

R916-5-10. Effective Date of this Rule.

The Rule shall be effective on July 1, 2009.

 

KEY: contracts, health insurance, health insurance in state contracts, health reform

Date of Enactment or Last Substantive amendment: July 1, 2009

Authorizing, and Implemented or Interpreted Law: 72-6-107.5