No. 32771: R23-23. Health Reform -- Health Insurance Coverage in State Contracts -- Implementation

DAR File No.: 32771
Filed: 06/30/2009, 02:54
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 63A-5-205. 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 63A-5-205. 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 employees' dependents that live and/or work in the State of Utah. (DAR NOTE: A corresponding proposed new rule is under DAR No. 32772 in this issue, July 15, 2009, of the Bulletin.)

State statutory or constitutional authorization for this rule:

Section 63A-5-205

Anticipated cost or savings to:

the state budget:

Enactment of this rule may indirectly increase the cost of state construction projects depending on 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. Kimberly K. Hood, 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 is the bill requires the rule to be in 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 bill, 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:

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:

La Priel Dye, Alan Bachman, or Priscilla Anderson at the above address, by phone at 801-538-3240, 801-538-3105, or 801-538-9595, by FAX at 801-538-3313, 801-538-3313, or 801-538-3378, or by Internet E-mail at [e-mail], [e-mail], or [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:

D. Gregg Buxton, 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)" is as defined in 63A-5-205(1)(c) 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 the use of the term employee for purposes of State of Utah Workers' Compensation laws along with their dependents.

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

 

R23-23-4. Applicability of Rule.

(1) Except as provided in Rule R23-23-4(2) below, this Rule R23-23 applies to all contracts entered into by the Division or the Board on or after July 1, 2009, if:

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

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

(i) a subcontract, at any tier, is in the amount of $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,

(c) the contract is an emergency procurement.

(3) This Rule R23-23 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 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. Contractor to Comply with Section 63A-5-205.

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.

 

R23-23-6. Not Basis for Protest or Suspend, Disrupt, or Terminate Design or Construction.

(1) The failure to comply with 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-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, 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. 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 of execution of the contract:

(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

(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 Subsections 63A-5-205(1)(e)(i) and (iii) is met by the contractor if the contractor provides the 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.

For purposes of this Rule R23-23-7(3), actuarially equivalency is achieved by meeting any of the following:

(a) 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

(b) provides coverage that is actuarially equivalent to 75 percent of the benefit plan determined under Rule R23-23-7(3)(a) above and employer's premium contribution as required by statute.

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

(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.

(7) Notwithstanding any prequalification process, any 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.

(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 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-6-804 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) In addition to the penalties imposed above, a contractor, consultant, subcontractor or subconsultant who violates the provisions of this Rule shall be liable to the employee for health care costs not covered by insurance.

 

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.

 

R23-23-9. Effective Date of this Rule.

The Rule shall be effective on July 1, 2009.

 

KEY: health insurance, contractors, contracts

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

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