Administrative Services, Facilities Construction and Management

Rule R23-23

Health Reform -- Health Insurance Coverage in State Contracts -- Implementation

Notice of Proposed Rule

(Amendment)

DAR File No.: 33634
Filed: 05/11/2010 08:48:45 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This rule is being amended to comply with H.B. 20 of the 2010 Utah Legislative Session which clarified and amended Section 63A-5-205. H.B. 20 amends provisions related to the requirement that contractors with certain state entities must provide qualified health insurance to their employees and the dependents of the employees who work or reside in the state. H.B. 20 clarified the waiting period; clarified that health insurance coverage must be offered to employees and dependents who work or reside in the state; clarified that the coverage that must be offered is a minimum standard and an employer may offer greater coverage; amended the definition of qualified health insurance coverage to clarify the standards; amended the enforcement provisions to provide protections for good faith compliance and clarified how an employer offering a defined contribution arrangement may comply with state contract requirements. Therefore, this rule change is being done to be consistent with state statute. (DAR NOTE: H.B. 20 (2010) is found at Chapter 229, Laws of Utah 2010, and was effective 05/11/2010.)

Summary of the rule or change:

These rule changes implement the following changes to comply with H.B. 20 of the 2010 Utah Legislative Session: clarify and amend provisions related to the requirement that contractors with certain state entities must provide qualified health insurance to their employees and the dependents of the employees who work or reside in the state. The changes also clarify the waiting period; clarify that health insurance coverage must be offered to employees and dependents who work or reside in the state; clarify that the coverage that must be offered is a minimum standard and an employer may offer greater coverage; amend the definition of qualified health insurance coverage to clarify the standards. The rule change also amends the enforcement provisions to provide protections for good faith compliance and clarifies how an employer offering a defined contribution arrangement may comply with state contract requirements. Therefore, this rule change is being done to be consistent with state statute.

State statutory or constitutional authorization for this rule:

• Section 63A-5-205

Anticipated cost or savings to:

the state budget:

The statute itself created the fiscal impacts. This rule does not add additional burdens than already provided by the statute. The rule will not impact the costs.

local governments:

No costs or savings are anticipated for local governments with this new rule. No new requirements were created with this new rule that impact local governments.

small businesses:

No costs or savings are anticipated for small businesses with this new rule. No new requirements were created with this new rule that impact small businesses.

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

These changes may benefit individuals working for contractors that contract with the State as they and their dependents who live and/or work in the State of Utah will be offered health insurance coverage.

Compliance costs for affected persons:

Any cost increases to contractors will likely 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. This rule itself merely complies with the statute.

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

Any fiscal impacts on businesses would have been incurred when Section 63A-5-205 and Rule R23-23 were enacted in 2009. This rule change is being done to be consistent with state statutes. This rule only amends provisions related to the requirement that contractors with certain state entities must provide qualified health insurance to their employees and the dependents of the employees who work or reside in the state. These amendments also clarify the waiting period; clarify that the coverage that must be offered is a minimum standard and an employer may offer greater coverage; amend the definition of qualified health insurance coverage to clarify the standards; amend the enforcement provisions to provide protections for good faith compliance and clarify how an employer offering a defined contribution arrangement may comply with state contract requirements.

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
450 N STATE ST
SALT LAKE CITY, UT 84114-1201

Direct questions regarding this rule to:

• Priscilla Anderson at the above address, by phone at 801-538-9595, by FAX at 801-538-3378, or by Internet E-mail at phanderson@utah.gov
• Alan Bachman at the above address, by phone at 801-538-3105, by FAX at 801-538-3313, or by Internet E-mail at abachman@utah.gov
• La Priel Dye at the above address, by phone at 801-538-3240, by FAX at 801-538-3313, or by Internet E-mail at ldye@utah.gov

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:

07/01/2010

This rule may become effective on:

07/08/2010

Authorized by:

D. Gregg Buxton, Director

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 Subsection 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]Subsection R23-23-4(2) 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, [if:]and

[(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.](a) applies to a prime contractor if the prime contract is in the amount of $1,500,000 or greater; and

(b) applies to a subcontractor if the subcontract 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-6-103, or a modification to a contract, when the contract does not meet the initial threshold required by [Rule]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. 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 of a contractor or subcontractor to provide qualified health insurance coverage as required by this [to comply with this R]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]the contract is entered into or renewed:

(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 ; or an underwriter who is responsible for developing the employer group's premium rates.

For purposes of this [Rule]Subsection R23-23-7(3), actuarially equivalency is achieved by meeting or exceeding 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 details of the plan are provided on the website of the Division at http://dfcm.utah.gov/downloads/Health%20Insurance%20Benchmark.pdf; 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.](a) As delineated on the DFCM website at http://dfcm.utah.gov/downloads/Health%20Insurance%20Benchmark.pdf, a health benefit plan and employer contribution level with a combined actuarial value at least actuarially equivalent to the combined actuarial value of the benchmark plan determined by the Children's Health Insurance Program under Subsection 26-40-106(2)(a), and a contribution level of 50% of the premium for the employee and the dependents of the employee who reside or work in the State, in which:

(i) The employer pays at least 50% of the premium for the employee and the dependents of the employee who reside or work in the State; and

(ii) for purposes of calculating actuarial equivalency under this Subsection R23-23-7(3)(a):

(A) rather than the benchmark plan's deductible, and the benchmark plan's out-of-pocket maximum based on income levels, the deductible is $750 per individual and $2,250 per family; and the out-of-pocket maximum is $3,000 per individual and $9,000 per family;

(B) dental coverage is not required; and

(C) other than Subsection 26-40-106(2)(a), the provisions of Section 26-40-106 do not apply; or

(b)(i) is a federally qualified high deductible health plan that, at a minimum, has a deductible that is either;

(A) the lowest deductible permitted for a federally qualified high deductible health plan; or

(B) a deductible that is higher than the lowest deductible permitted for a federally qualified high deductible health plan, but includes an employer contribution to a health savings account in a dollar amount at least equal to the dollar amount difference between the lowest deductible permitted for a federally qualified high deductible plan and the deductible for the employer offered federally qualified high deductible plan;

(ii) an out-of pocket maximum that does not exceed three times the amount of the annual deductible; and

(iii) under which the employer pays 75% of the premium for the employee and the dependents of the employee who work or reside in the State.

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

(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) (i) In addition to the penalties imposed above, a contractor, consultant, subcontractor or subconsultant who intentionally violates the provisions of this [R]rule shall be liable to the employee for health care costs [not covered by insurance]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(8)(c)(i) as provided in Subsection 63A-5-205(3)(g)(ii).

 

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: contractors, contracts, health insurance, contract requirements

Date of Enactment or Last Substantive Amendment: [October 8, 2009 ]2010

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