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.: 34803
Filed: 05/10/2011 06:15:59 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this rule is to comply with the new provisions of Section 63A-5-205 enacted by H.B. 128 of the 2011 General Session and state statutes. (DAR NOTE: H.B. 128 (2011) was effective 05/10/2011.)

Summary of the rule or change:

H.B. 128 of the 2011 General Session amended the benchmark requirements for health insurance coverage in state contracts. Other changes to the rule are to comply with state statutes. (DAR NOTE: A corresponding 120-day (emergency) rule is under DAR No. 34801 and was effective 05/10/2011.)

State statutory or constitutional authorization for this rule:

• Section 63A-5-205

Anticipated cost or savings to:

the state budget:

Enactment of this amendment 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 amendment to the rule. No new requirements were created with this amendment that impact local governments.

small businesses:

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

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

No cost or savings are anticipated for persons other than small businesses, businesses, or local government entities with this amendment to the rule. No new requirements were created with this amendment to the rule that impact local governments.

Compliance costs for affected persons:

To the extent there may be cost increases to contractors, 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 amendment to 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 any fiscal impacts. The amendment to this rule does not add additional burdens than already provided by the statute. This rule by itself will not have a fiscal impact on businesses because it merely reiterates the statutory requirements.

Kimberly K. 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
• Cecilia Niederhauser at the above address, by phone at 801-538-3261, by FAX at 801-538-9694, or by Internet E-mail at cniederhauser@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:

07/01/2011

This rule may become effective on:

07/08/2011

Authorized by:

D. Gregg Buxton, Director

R23. Administrative Services, Facilities Construction and Management.

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

R23-23-3. 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.]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 90 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 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, and

(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[,]; 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-6-103, 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.

 

R23-23-7. 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 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 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[s] 63A-5-205(1)(e)[(i) and (iii)] 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.

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

(a) As] the requirements of Section 26-40-115 which are also 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 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 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(8)(c)(i) as provided in Subsection 63A-5-205(3)(g)(ii).

 

KEY: health insurance, contractors, contracts, contract requirements

Date of Enactment or Last Substantive Amendment: [July 8, 2010]2011

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