DAR File No. 40772

Transportation, Operations, Construction

Rule R916-5

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

Notice of Proposed Rule

(Amendment)

DAR File No.: 40772
Filed: 09/14/2016 02:48:14 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Subsection 72-6-107.5(6) requires the Utah Department of Transportation to adopt administrative rules which: 1) establish the procedure a contractor must follow to demonstrate that he will maintain an offer of qualified health insurance coverage for the contractor's employees for the duration of the state contract; 2) set penalties that may be imposed if a contractor intentionally violates the section; and 3) identify the website where a benchmark for qualified health insurance coverage can be found. H.B. 282 amended Subsection 72-6-107.5(6) during the 2016 General Session of the Legislature. This amendment makes the changes required by H.B. 282.

Summary of the rule or change:

This amendment: 1) raises the application threshold from $1,500,000 to $2,000,000 for prime contractors and $750,000 to $1,000,000 for subcontractors; 2) updates citations to the Utah code needed due to renumbering by the Legislature; 3) includes text that requires prime and subcontractors to certify to the Department that they have obtained and will maintain offers of qualified health insurance coverage to employees that comply with an actuarial equivalence determination that is bench-marked by the Department of Health; and 4) makes a number of grammatical corrections.

Statutory or constitutional authorization for this rule:

• Section 72-6-107.5

Anticipated cost or savings to:

the state budget:

The Department does not anticipate that this amendment will result in direct costs or savings to the state's budget because it does not require an allocation or payment of funds from or to the state or a subdivision of the state.

local governments:

The Department does not anticipate that this amendment will result in direct costs or savings to the budgets of local governments because it does not require an allocation or payment of funds from or to local government or a subdivision of a local government.

small businesses:

This amendment may lead to savings by those small businesses that have been required to offer health care benefits to their employees due to the application thresholds included in the former rule and will no longer be required to offer health care benefits to their employees due to the higher thresholds included in this amendment.

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

The Department does not anticipate that this amendment will result in direct costs or savings to the budgets of persons other than small businesses, businesses, or local government entities because it does not require an allocation or payment of funds from or to persons other than small businesses, businesses, or local government entities.

Compliance costs for affected persons:

The Department does not anticipate this amendment will result in any additional compliance costs for affected persons because it does not require an allocation or payment of funds from or to persons other than small businesses, businesses, or local government entities.

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

This amendment may have a positive fiscal impact on business, but an exact measure of that impact is not known at this time.

Carlos Braceras, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Office 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:

• Christine Newman at the above address, by phone at 801-965-4026, by FAX at 801-965-4338, or by Internet E-mail at cwnewman@utah.gov
• James Palmer at the above address, by phone at 801-965-4000, by FAX at 801-965-4338, or by Internet E-mail at jimpalmer@utah.gov
• Michelle Jeronimo at the above address, by phone at 801-965-3883, by FAX at , or by Internet E-mail at mjeronimo@utah.gov
• Linda Hull at the above address, by phone at 801-965-4253, by FAX at , or by Internet E-mail at lhull@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:

10/31/2016

This rule may become effective on:

11/07/2016

Authorized by:

Carlos Braceras, Executive Director

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 Section 72-6-107.5 and establish the requirements and procedures a contractor, subcontractor, consultant and subconsultant must follow to demonstrate they will maintain an offer of health insurance as required by Section 72-6-107.5. This rule also establishes penalties for intentional violations 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.

 

R916-5-4. Applicability of Rule.

(1) Except as provided in Subsection (2) below, this rule applies to all contracts entered into by the Department on or after July 1, 2009, and is applicable to a prime contractor if its contract is in the amount of $[1,500,000]2,000,000.00 or greater at the original execution of the contract, and to a subcontractor if its subcontract is in the amount of $[750,000]1,000,000.00 or greater at the original execution of the contract.

(2) This rule does not apply if:

(a) the application of this rule 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 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 R916-5-4(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, and be subject to the 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, offeror, or contractor or consultant under Section 63G-[6-801]6a-1602 or any other provision in Title 63G, Chapter 6a, Part [8]16 , Legal and Contractual Remedies; and

(b) may not be used by the procurement entity or a prospective bidder, offeror, 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 upon submission of the executed contract, signed by the successful bidder, may be declared non-responsive and the Department may award the contract to the next 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.

(1) A contractor, or consultant, subcontractors or subconsultants must comply with the following requirements and procedures, and demonstrate, no later than the time of execution of the contract, compliance with Section 72-6-107.5:

(a) [b]By providing a written certification to the Executive Director that the contractor, consultants, subcontractors, and subconsultants have and will maintain for the duration of the contract an offer of qualified health insurance coverage for the employees who live and/or work within the State, along with their dependents; 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.

(c) The contractor shall: (i) Include a requirement in the applicable subcontract and certify to the Department that the subcontractor must 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

(ii) certify to the Department 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.

(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 ten (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 , which is no more than one year old, from either the Utah Insurance Department, an actuary selected by the contractor or the contractor's insurer, an actuary selected by the consultant or the consultant's insurer, or an underwriter who is responsible for developing the employer groups premium rates.

(a) For purposes of this rule, actuarial equivalency, or greater is achieved by meeting or exceeding the requirements of qualified health insurance coverage as defined in Subsection 72-6-107.5(1)(c). The commercially equivalent benchmark, provided by the Department of Health, [plan ]referred to in Subsection 72-6-107.5(1)(c), may be found at: http://dfcm.utah.gov/downloads/Health%20Insurance%20Benchmark.pdf.

(4) The health insurance must be available upon the first day of the calendar month following the initial 90 days from the date of hire.

(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) Contractor Compliance Process. Contractors who are subject to this rule must demonstrate compliance with this rule. When a contract is written, contractors will confirm the prime contractor is in compliance with this rule and their subcontractors will certify through their contractor that 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) The contractor [M]must be in [C]compliance at the [T]time the [C]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 executory contract.

(8) The contractor's compliance is subject to an audit by the Department or the Office of the Legislative Auditor General.

 

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 [R]rule R907-1 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 this rule 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;

(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;

(c) an action for debarment of the contractor, subcontractor, consultant or subconsultant in accordance with Section 63G-[6-804]6a-904 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.

 

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

Date of Enactment or Last Substantive Amendment: [October 11, 2011]2016

Notice of Continuation: September 12, 2014

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