Agenda Item SA
September 15,2015
Action
MEMORANDUM
September 11, 2015
TO:
FROM:
SUBJECT:
County Council
Robert H. Dnmuner, Senior Legislative Attorney
Action: BillS-IS, Contracts and Procurement
~
Health Insurance Preference
Government Operations and Fiscal PolicylHealth and Human Services Committee
recommendation (5-1, Leventhal opposed): approve the Bill
with
amendments.
Bill 5-15, Contracts and Procurement - Health Insurance Preference, sponsored by
Councilmember Navarro, was introduced on February 3, 2015. A public hearing was held on
March 3 and joint Government Operations and Fiscal PolicylHealth and Human Services
Committee worksessions were held on March 19 and July 16.
Background
Bill 5-15 would create a preference in the competitive procurement of services by the
County for a business that provides health insurance for its employees. The Bill would also require
the County Executive to adopt a regulation implementing this preference. The public health and
welfare is better served if each County resident has access to affordable health care.
Congress recognized the benefits of universal health insurance when enacting the Patient
Protection and Affordable Care Act. Although the Federal mandate for employers with more than
100 employees to provide its employees with affordable health insurance began this year and the
mandate for employers with 50 - 99 employees is scheduled to begin in 2016, there are still many
smaller employers in the County who do not provide health insurance for their employees. Bill
15 would encourage a County bidder to provide affordable health insurance for its employees by
giving these bidders a preference in the competitive process.
Councilmember Navarro outlined her reasons for introducing this legislation in a
memorandum attached at ©8. Bill 14-14, Contracts and Procurement - Wage Requirements
Health Insurance - Amendments, as introduced on February 4, 2014, would require a contractor
awarded a County service contract to provide health insurance for each employee who provides
services to the County under the contract. After a series of meetings between Council staff and
members of the Executive Branch, the Council enacted Bill 14-14 on April 14 with amendments
to require HHS to assist these contractor employees to apply for health insurance on the Maryland
Health Benefit Exchange instead of requiring their employers to provide health insurance. Bill S­
IS would encourage bidders on a County service contract to provide employer-sponsored health
insurance by giving those bidders who do provide health insurance a preference in the award of
the contract.
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Public Hearing
DGS Director David Dise, representing the Executive, supported the intent of the Bill, but
pointed out some problems. (©9)
Mr.
Dise pointed out that this Bill could result in an increase in
bid prices for service contracts and might provide an advantage for large businesses.
Mr.
Dise
also testified that HHS may find the certification of businesses with health insurance cumbersome
and difficult. Victoria Leonard, representing the Laborer's International Union (LiUNA)
supported the Bill as an effort to increase the availability of employer-sponsored health insurance.
(©10)
March 19 GO-HHS
Worksession
The joint Committee discussed the Bill with Council staff and representatives of the
Executive Staff. Bonnie Kirkland, Assistant CAD, Uma Ahluwalia, HHS Director, David Dise,
DGS Director, and Grace Denno, DGS, represented the Executive Branch. The Committee
requested Council staff to work with DGS to draft amendments to:
1.
2.
3.
4.
limit the preference to a small business that provides health insurance and has less
than 50 employees;
allow a small business with employees who have health insurance from sources
other than the employer to receive the preference;
pennit pre-certification by HHS of a business with health insurance; and
clarify that the amount ofthe preference to be determined by regulation.
The Committee recommended (5-0) approval ofthe technical amendment on line 46 ofthe
Bill explained in the packet. The Committee requested a revised fiscal impact statement from
DMB based upon changes discussed at the worksession and a recommendation from the
Procurement Task Force.
July 16 GO-HHS
Worksession
The Joint Committee discussed the Bill with Council staff and representatives of the
Executive Staff. Stuart Venzke, HHS, Cherri Branson, Procurement Director, Pam Jones,
Procurement, and Grace Denno, Procurement, represented the Executive Branch. The Committee
adopted amendments to:
1.
limit the preference to a small business that provides health insurance and has less
than 50 employees;
2.
allow a small business with employees who have health insurance from sources
other than the employer to receive the preference;
3.
pennit pre-certification by HHS of a business with health insurance;
4.
clarify that the amount of the preference to be determined by regulation; and
5.
make a false statement on an application for certification a Class A Violation.
The Committee recommended (5-1, Leventhal opposed) approval of the Bill as amended.
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Issues
1. What is the fiscal and economic impact of the Bill?
OMB estimated that the Office of Procurement would need to add the equivalent of 2 half­
time Grade 23 employees to review bids for compliance with the Procurement Regulations adopted
to implement the Bill at an annual recurring cost of $85,946. OMB estimated that HHS staff
needed time to develop criteria to determine if a bidder provides employer-sponsored health
insurance that complies with the law could be absorbed by existing resources in HHS. Finally,
OMB stated that bid prices are likely to be increased due to the Bill, but could not estimate this
increased cost to the County. See ©11-13.
Finance included an interesting discussion of the possible effects of the Bill on County
workers, but was unable to estimate the economic impact of the Bill. Finance cited statistics from
the Bureau of Labor Statistics showing that employer-sponsored health insurance was available to
86% of private industry workers in the United States as of March 2014. However, only 57% of
employers with less than 100 employees provide employer-sponsored health insurance. Finance
also pointed out that the imbalance between large and small businesses with regard to employer­
sponsored health insurance would have a negative impact on small County businesses unless they
were able to pass the cost of health care on to the County. According to a Kaiser survey cited by
Finance, an employer's annual cost for single coverage was $4944 per employee and $12,011 per
employee for family coverage.
2. How would this Bill coordinate with the Patient Protection and Affordable Care Act?
The Federal Patient Protection and Affordable Care Act (ACA) was enacted by Congress
and signed into law by President Obama in 2010. The ACA took effect on January 1,2014, but
some relevant provisions have been delayed. Under the ACA, employers with more
than
50 full­
time employees (defined as working 30 or more hours per week) must offer health insurance to
their employees. Although this provision was to take effect on January 1,2014, the President has
delayed its effect until January 1,2016 for employers with more than 50 full-time employees but
less than 100 full-time employees. The Federal business mandate for employers with more than
100 employees began on January 1, 2015. The ACA requires an employer with more than 50
employees to pay a penalty for each employee if they fail to comply with the employer-sponsored
health insurance mandate. Once this Federal business mandate takes full effect, the Bill would
primarily affect small businesses with 50 or less full-time employees with a County service
contract and larger companies who choose to pay a penalty instead of complying.
Under the ACA, employees who are not offered health insurance through their employer
may obtain health insurance directly from the Maryland Health Benefit Exchange, which is a
public corporation and independent unit of Maryland State government established in Title 31 of
the Maryland Insurance Code. Low income workers who purchase insurance directly from the
Exchange may be eligible for substantial Federal tax subsidies to reduce their cost. The ACA also
requires each health insurance policy to provide a list of minimum essential benefits. Employer
provided health insurance must cost the employee no more than 9.5% ofsalary.
An
employee who
does not have health insurance after declining employer-sponsored health insurance
is
subject to a
fine under the ACA.
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The Bill would not require any contractor to provide employer-sponsored health insurance.
The employer mandate in the ACA would work well with Bill 5-15 because an employer with 50
or more employees would face penalties under the ACA for failing to provide employer-sponsored
health insurance. If all bidders provide employer-sponsored health insurance, there will be no
preference. However, since the ACA employer mandate does not apply to an employer with less
than 50 employees, the preference in Bill 5-15 may work in favor of larger employers who are
already subject to the ACA employer mandate. The joint Committee approved an amendment
limiting the applicability of the preference to an employer with less than 50 employees. This
amendment would make the Bill more compatible with the ACA since only those employers who
are not required to provide health insurance by the ACA would be eligible for a preference.
3. What are the policy considerations for the Council?
County procurement often struggles with competing purposes. First, the County has an
obligation to County residents to obtain the best goods and services from contractors for the best
possible price. This is normally served by using an open competitive process for the award of a
County contract. The County sometimes attempts to use its contracting dollars to serve a different
public purpose.
For example, the County has a Local Small Business Reserve Program that reserves certain
contracts for local small businesses. Bill 61-14, requested by the Executive, would create a new
local business subcontracting program for high dollar value contracts. The County Procurement
Law also has a Minority Owned Business Program. Bill 48-14 added a new requirement for
contracts awarded by a request for proposals. The County has a Prevailing Wage Law that requires
a County construction contractor to pay at least the prevailing wage set by the State. Bill 29-14
will require County service contractors to provide additional reports on wages paid to their
employees. The County Wage Requirements Law already requires most service contractors to pay
all employees working on a County service contract at least a living wage, currently set at $14.35
per hour. This Bill would add a new preference for a bidder on a service contract who provides
employer-sponsored health insurance.
Each of these procurement laws supports a strong public policy, but also runs counter to
the County's overall obligation to obtain the best goods and services for the best price. The
resulting procurement system is complicated and sometimes slow.
It
can be difficult to navigate.
However, each new procurement requirement adds an incremental layer of complexity. Due to
the employer mandate under the ACA for an employer with 50 or more employees, the Bill could
eventually create a burden on a small business competing with a large employer for a County
service contract.
A costibenefit analysis of Bill 5-15 raises some interesting issues. If the winning bidder
on a County service contract is successful due to the preference in this Bill, the County's cost for
the service will be greater. Reducing the number of uninsured residents is a worthy goal. The
question is how much will this Bill help and how much will it cost to get there?
The Bill's interaction with the ACA also creates a disincentive for a small business who
does not provide employer-sponsored health insurance who bids on a County service contract. Is
this result in conflict with the County's policy of promoting contract awards to small businesses
under the Local Small Business Reserve Program?
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4. Technical Amendment.
The Bill would apply to the same County service contracts that are subject to the Wage
Requirements Law. The Office of Procurement pointed out that line 46 of the Bill requires the
Office of Procurement to review specifications for "each cooperative purchasing agreement."
These agreements are not subject to the Wage Requirements Law or this Bill. Therefore, line
54
should be amended as follows:
using department [[and each cooperative purchasing agreement]] to
Committee recommendation (5-0):
approve the technical amendment on line
55
at
©4.
5. Executive Branch Comments.
(a)
There are internal conflicts between the definition of health insurance and a small
business with health insurance. Council staff agrees with this comment and the
Committee amended the Bill in lines 9, 11, 16-17, and 32 at ©2, 3.
The Executive Branch asked for an amendment to add a penalty for a false
statement on an application for certification as a small business with health
insurance. They pointed out that neither the Office of Procurement nor the
Department ofHealth and Human Services have sufficient resources to enforce this
law. They anticipate permitting self-certification. The request is reasonable, but
the plan to permit self-certification may encourage bid protests when an award goes
to a business that receives a preference by self-certification. Also, a potential $500
fine may not be sufficient to discourage false statements.
(b)
Committee recommendation:
add a penalty for a false statement on lines 50-51 of the
Bill at ©3.
(c)
The Executive Branch commented that the Bill does not require periodic prooffrom
, a certified vendor that they still provide health insurance.
It
was also noted that this
could be handled by regulation. Council staff agrees that this is best handled by
regulation.
Committee recommendation:
leave this for regulation.
(d)
The Executive Branch commented that a vendor who loses a bid because of failure
to receive a point preference for health insurance could challenge the award by
claiming that the preference does not comply with ACA. Although the preference
may generate bid protests from a losing bidder, the Executive Branch failed to
explain how this preference would violate the ACA. Although the ACA does not
require an employer with less than 50 employees to provide health insurance for its
employees, it is a long stretch to conclude that this preference conflicts with the
ACA. The purpose of the ACA is to increase the number ofemployers who provide
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health insurance - not protect the right ofan employer with less than 50 employees
to refuse to provide health insurance.
Committee recommendation: no change.
6.
Comments from the Procurement Policies and Regulations
Task
Force.
The joint Committee requested comments on the Bill from the Procurement Policies and
Regulations Task Force. Although the Task Force did not present a single position on the Bill, we
did receive comments from 5 of the 7 individual members. See the Summary of the Task Force
Comments at ©17-1S. Generally, the members did not support the Bill because they felt that it
would increase the complexity of the County procurement system and discourage bids from very
small businesses who cannot afford to provide its employees with health insurance.
7. Effective date.
The Bill would take effect 90 days after it becomes law. The Office of Procurement
requested that the effective date be extended to July
1,
2016. The Executive would need time to
adopt regulations implementing the law, the Department of Health and Human Services would
have to set up a certification process, and the Office of Procurement would have to establish
preference methods and procedures. The request from Grace Denno, Chief of the Division of
Business Relations and Compliance, is at © 19.
A
later effective date could be accomplished by
adding the following after line 122 of the Bill:
Sec. 2. Effective Date.
This Act takes effect on July
1.
2016 and applies to any solicitation issued on
or after July
1.
2016.
This packet contains:
Bill 5-15
Legislative Request Report
Navarro Memorandum
Testimony
David Dise
Victoria Leonard
Fiscal and Economic Impact Statement
Summary of Task Force Comments
Grace Denno Email 9-11-15
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Bill No.
5-15
Concerning: Contracts and Procurement
- Health Insurance Preference
Revised: July 16, 2015 Draft No. . .:.4_ _
Introduced:
February 3,2015
Expires:
August 3, 2016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ _ __
Effective: _ _,--_ _ _ _ _ __
Sunset Date: --'-lLNo=n:'-':e'-:----::--_ _ __
Ch. _ _, Laws of Mont. Co.. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: COWlcilmember Navarro
AN
ACT to:
(1)
(2)
(2)
create a preference in the procurement of services by the COWlty for a small business
that provides health insurance for its employees;
require the COWlty Executive to adopt a regulation implementing the preference for
a small business that provides health insurance for its employees; and
generally amend the law governing the COWlty'S procurement of services,
By adding
Montgomery COWlty Code
Chapter
11
B, Contracts and Procurement
Article XVII
Section
11
B-77
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defmed term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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BILL No. 5-15
1
2
3
4
5
6
7
Article
xvn
is added to Chapter llB as follows:
Article XVII. Preference for
l
Small Business With Health Insurance.
llB-77. Preference for a Small Business With Health Insurance.
(a)
Definitions.
In this Article the following tenns have the following
mearungs:
[[Business With Health Insurance
means
~
business that provides health
insurance for each employee who provides services to the County under
~
8
9
contract.]]
~
Certified Small Business With Health Insurance
means
business
10
certified
Qy
the Director as meeting the standards established
Qy
regulation for
~
Small Business With Health Insurance.
Contract
means
~
contract for procurement services subject to the Wage
11
12
13
14
Requirements Law in Section IlB-33A.
Director
means the Director of the Department of Health and Human
15
16
Services or the Director's designee.
Health insurance
means insurance coverage [[that is part of an
17
18
employer benefit package]] that
~
for medical expenses incurred
Qy
an employee and an employee's family either
Qy
reimbursing the
employee or
Qy
paying the care provider directly and provides the
minimum essential health benefits required under the Patient Protection
and Mfordable Care Act, 26 U.S.C. §5000A, as amended.
Health insurance evaluation ,{actor
means an evaluation factor in
~
19
20
21
22
23
request for proposals that gives an offeror credit for being
Business With Health Insurance.
Percentage price preference
means the percent
Qy
which
~
~
certified
24
25
26
responsive
bid from
~
responsible bidder who is
~
certified Business With Health
~
27
Insurance may exceed the lowest responsive bid submitted
Qy
@-f:\Jaw\bills\1505
contracts -
health
insurance preference\bill
4.docx
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BILL
No. 5-15
28
29
responsible bidder who
Insurance.
IS
not a certified Business With Health
30
31
Small Business With Health Insurance
means a business that:
(1)
(2)
has 50 or fewer full-time equivalent employees; and
provides an employer benefit package that includes health
insurance for each employee who provides services to the County
ugder a contract: or
32
33
34
35
36
(3)
demonstrates that each employee who provides services to the
County has health insurance from another source.
37
38
39
(hl
Regulation.
The County Executive must adopt
~
regulation under
Method
~
that [[includes]] establishes:
ill
ill
ill
an application process for
~
business to be certified as
f!
Small
40
41
42
43
44
45
Business With Health Insurance;
standards for
~
business to meet to be certified as
~
Small
Business With Health Insurance;
the amount of
~
percentage price preference for
~
Small Business
With Health Insurance under
~
solicitation for competitive sealed
bidding; and
46
ill
(£)
~
Small Business With Health Insurance evaluation factor for use
47
48
49
50
51
52
53
in
~
request for proposals.
Certification.
The Director must certify
~
~
business that meets the
standards established
.!2y
regulation as
Small Business With Health
Insurance. A false statement on an application for certification is a
Class A violation.
@
Role
gf
Office
gf
Procurement and Department
gf
Health and Human
Services.
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BILL
No. 5-15
54
55
56
57
ill
The Office of Procurement must review all specifications of each
using department
[[and
each cooperative purchasing agreement]]
to assure compliance with this Section, appropriate use of
~
percentage price preference or an evaluation factor, and
consistency among using departments procuring similar services.
58
59
ill
The Department ofHealth and Human Services
~
(Al
operate the certification process;
permit pre-certification as a Small Business With Health
Insurance: and
maintain
~
60
61
£ID
62
63
list of businesses that have been certified as
~
64
65
Small Business With Health Insurance.
W
Denial or revocation
Q[certification.
The Director may refuse to certify
~
66
business under this Section, and may suspend or revoke
~
certification
~
67
issued under this Section, after
hearing for which reasonable notice
68
69
70
71
72
73
has been given, if the business or applicant does not meet the standards
for certification as
~
Small Business With Health Insurance.
ill
Notice and opportunity/Or hearing.
ill
Notice.
After finding that one or more grounds for denial,
suspension, or revocation of
Director may serve
~
~
certification could exist, the
written notice on the business or applicant
74
75
in person or
by
regular mail, postage prepaid, addressed to the
person's last known address as maintained in the Director's file.
Service on that person
by
mail is effective
The written notice must, at
~
minimum:
76
77
J
days
after mailing.
78
79
80
(A)
state that the Director has found that the business or
applicant may be subject to denial, suspension, or
revocation ofthe certification;
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contracts -
health
insurance preference\biIl4.docx
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BILL
No.
5-15
81
82
.em
(C)
identify the specific grounds for the Director's fmdings;
and
set
~
83
84
85
86
87
date for
~
hearing on denial of the application or
suspension or revocation ofthe certification.
ill
Hearing.
The Director or
~
designee may conduct the hearing. At
the hearing, the business or applicant may present evidence and
witnesses to refute the grounds cited
Qy
the Director for denying
the application or suspending or revoking the certification, and
the County and any other person may submit relevant evidence.
The relevant records of the [[Department]] Office are part of the
hearing record. The person conducting the hearing must render
~
decision in
writing,
giving the reasons for the decision. That
decision is final, subject to judicial review under the Maryland
Rules for review of administrative decisions
in
the Circuit Court
and the Court of Special Appeals.
88
89
90
91
92
93
94
95
96
97
ill
Failure to appear.
A business or applicant who after notice does
not appear at
~
hearing waives the right to
~
hearing and consents
to the action that the Director proposed in the notice. The
Director may deny the application or suspend or revoke the
certification as proposed in the notice.
(g)
Appeals.
Any person
~grieved
Qy
the denial, suspension, or revocation
98
99
100
101
102
103
104
105
106
107
of any certification under this Section may seek judicial review under
the Maryland Rules for review of administrative decisions in the Circuit
Court and the Court of Special Appeals.
®
Report
lD!.
Office
Q[
Procurement.
The Director of the Office of
Procurement, after consulting with the Director of Health and Human
Services, must submit
~
report to the County Council and County
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BILL No. 5-15
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
Approved:
Executive
.hy
September 30 each year after implementation of this
Section for the prior fiscal year. The report should include:
ill
ill
ill
the dollar value of services purchased from
Business With Health Insurance;
the dollar value of services purchased from
~
~
certified Small
~
business that is not
certified Small Business With Health Insurance;
to the extent ascertainable, the additional cost of any contracts
awarded to
~
certified Small Business With Health Insurance
under
~
percentage price preference;
ill
~
summary of applications for certification as
~
Small Business
With Health Insurance made during the year, including the results
of each application;
ill
®
ill
~
list of certified Small Businesses With Health Insurance;
suggested legislative or administrative changes; and
any other relevant information.
George Leventhal, President, County Council
Date
125
Approved:
126
Isiah Leggett, County Executive
Date
127
This is a correct copy o/Council action.
128
Linda M. Lauer, Clerk ofthe Council
Date
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LEGISLATIVE REQUEST REPORT
BillS-IS
Contracts and Procurement
-
Health Insurance Preference
DESCRIPTION:
BillS-I5 would create a preference in the competitive procurement of
services by the County for a business that provides health insurance
for its employees and require the County Executive to adopt a
regulation implementing this preference.
County residents without access to affordable health insurance create
a drain on public resources and adversely affects the public health and
welfare.
To encourage bidders for County service contractors to provide
employer sponsored health insurance for their employees.
Department of General Services, County Attorney
To be requested.
To be requested.
To be requested.
To be researched.
Robert H. Drummer, Senior Legislative Attorney
Not applicable.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
None.
f:\law\bills\1505 contracts - health insurance preference\legislative request report.docx
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MONTGOMERY COUNTY COUNCIL
ROCKVILLE, MARYLAND
NANCY NAVARRO
COUNCILMEMBER, DISTRICT 4
MEMORANDUM
January 15,2015
TO:
FROM:
SUBJECT:
Councilmembers
Nancy Navarro, Councilmember
f /
~~-
/'/
A/ld
'/"
,
I
f/
I
1-"
I
Health Insurance Procurement Preference
On October 30, 2013, I sent you a memo about my intent to introduce legislation
that would help provide low-wage employees of County contractors with access to
affordable health insurance. On February 4, 2014, I introduced Bill 14-14, Contracts and
Procurement - Wage Requirements - Health Insurance Amendments. Over the course of
nearly a year, I have worked closely with the Executive Branch and the Laborer's
International Union of North America (LiUNA) to maintain the goal of providing more
workers with health insurance while at the same time ensuring that any approach we take
is fiscally sustainable. On January 22
nd ,
the Health and Human Services Committee
(HHS) and Government Operations and Fiscal Policy Committee (GO) is set to hold its
final worksession and vote on Bill 14-14.
Bill 14-14's focus, as amended, requires the Department of Health and Human
Services (DHHS) to help employees of County contractors sign up for health insurance
through the Maryland Health Exchange and receive the maximum subsidy allowed by the
Affordable Care Act. The bill also strengthens the County's Living Wage Law by
requiring employers to report to the Department of General Services (DGS) on the
number of employees with health insurance and requires DGS to retain contractors'
quarterly payroll records, which it does not currently do.
In my October 30, 2013 memo, I said I was "exploring legislation that would
grant a preference to a bidder on a County contract who provides affordable benefits for
their employees." The attached legislation does just that. I beJieve that as a County we
should reward contractors who treat their employees fairly. Including this preference in
the procurement process demonstrates this value.
Thank you in advance for your support and please contact my office if you would
like to cosponsor the attached legislation.
STELLA
B.
WERNER COUNCIL OFFICE BUILDING' ROCKVILLE, MARYLAND 20850
(240) 777·7968'
TTY
(240) 777·7914
COUNCILMEMBER.NAVARRO@MONTGOMERYCOUNTYMD.GOV • WWW.CoUNCILMEMBERNAVARRO.COM
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Testimony on behalf of County Executive Isiah Leggett
BillS-1S, Contracts and Procurement - Health Insurance Preference
March 3,2014
Good afternoon Council President Leventhal and Councilmembers. I am David Dise,
Director of Montgomery County's Department of General Services and I am here to
testify on behalf of County Executive Isiah Leggett regarding BillS-IS, Contracts and
Procurement - Health Insurance Preference.
The intention of this Bill is to encourage companies performing services to the County
government to provide health insurance to their employees. To accomplish this, the Bill
creates a preference in competitive procurements for businesses that provide employee
health insurance.
The County Executive supports efforts to increase health insurance coverage to uninsured
and underinsured individuals. As the Affordable Care Act provides a combination of
mandates and incentives for companies employing 50 or more employees, this bill would
primarily affect those businesses with fewer than 50 employees.
While supporting the intent of Bill 5-15, the Executive notes that as currently drafted the
poses potential consequences for your consideration:
1) Increased costs to the employer for health insurance may be passed onto the
County in the form of higher contract pricing;
2) This Bill may give unintentional advantage to larger businesses that already
provide health insurance. The additional requirements under this preference may
negatively impact already overburdened small businesses. This unintended
negative impact may put small businesses at a disadvantage in the competitive
procurement process.
3) The bill rightly assigns certifying responsibility to HHS. However, this may prove
cumbersome as the Department does not typically perform this duty. Delays
occurring in the certification process may impact the procurement process.
These concerns notwithstanding, County Executive Leggett supports the intent of this bill
and believes that the public health and welfare is better served if County residents have
access to affordable health care. He commits Executive Branch staff to work with the
Council to finalize details on how this may be effectively implemented. Thank you for
the opportunity to testify.
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TESTIMONY OF VICTORIA LEONARD
Before the Public Hearing on
B5-15:
Contracts
and
Procurement -Health Insurance Preference
March
3,
2015
Thank you Council President Leventhal for holding this public hearing on Bill 5-15. I am
testifying today in support of this bilL
My name is Victoria Leonard. I am employed by the Mid-Atlantic region of the Laborers'
International Union of North America, or LiUNA for short LiUNA represents more than
500,000 construction and public service workers across the United States and Canada. We
have three locals that serve the Washington, DC area. Our membership base proudly
includes the sanitation workers employed by Potomac Disposal and Unity Disposal,
companies with contracts to collect residential trash in Montgomery County.
When the workers at Potomac Disposal and Unity Disposal decided they needed to form a
union to negotiate better working conditions, pay, and benefits, they chose to affiliate with
LiUNA And since then, we have sought to provide these workers with access to affordable,
employer-sponsored health insurance for themselves and their family members.
LiUNA believes that Bill 5-15 will help achieve this goaL The bill creates a preference in
the competitive procurement of County services for businesses that provide employee
health insurance. Having a preference system in place will incentivize companies to do the
right thing and eliminate skimping on worker benefits as a way to reduce costs and win
contracts. Bill 5-15 will help raise the bar among County contractors in positive way-­
using the carrot approach, rather than the stick
The County Council has recognized the need to overhaul its regulations of the taxicab
system and emphasize improving driver welfare.
It
is my hope that as the County Council
seeks to update the procurement system, the welfare of contract workers will be
incorporated into these efforts, as well.
Thank you for the opportunity to comment on BillS-iS. And thank you Councilmember
Navarro for introducing this bill, and for your unwaivering support of the County's
contract workers.
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Fiscallmpad Statement
Council Bill 5·15
&
Contracts
and Procurement,
Health Insurance Preference
1.
Legislative Summary.
The proposed legislation creates a preference in the procurement of services by the
County for a business that provides health insur.mce for its employees; requires the
County Executive to adopt a regulation implementing the preference for a business that
provides health insurance for
its
employees; and generally amends the law governing the
County's procurement of services.
2. An estimate of changes in County revenues and expenditures regardless of whether the
revenues or expenditures are a...;;sumed in the reconuD.ended or approved budget. IncJudes
source of information, assumptions, and methodologies used.
The proposed legislation does not affect revenues. The proposed legislation would not
impact expenditures for the Department of Health and Human Services.
The proposed legislation would impact the Office of Procurement. Based on FY14
procurements, the Office of Business Relations and Compliance (OBRC) and the
.Procurement Division processed 145 bidderslofferors that responded to solicitations
subject
to
the Living Wage. The Office of Procurement estimates
that
it will continue to
process 145 bidders/offeror responses each year, requiring an additional 7.5 hours to
review each response for compliance with the OBRC program, and 7 hours to review
each response for compliance
with
the Procurement program; see below for a summary.
Assuming a grade 23 Program Manager I or Procurement Specialist II, this workload
equates to an estimated cost of $85,946 annually.
I
--I
OBRe
i
i
i
0.5
~o~~::r
Bidder
Respons,,-_
$42,97_3-1-_.
7.S
Number of
Bidder
I~otal-]
~~~==--J
23J
-Dei
i
~~
-
Respo~s
23 ,
14.:
l~-~:
1--
_~:j
Number of
SIa_1f
Hours
145 ,
1088
i
I
j
I
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
Over six years) the workload equates to an estimated cost of $515,676.
4. An actuarial analysis through the entire amortization period for each bill that would affect
retiree pension or group insurance costs.
The proposed legislation does not affect retiree pension or group insurance costs.
II
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5.
An
estimate of expenditures related to County's information technology (IT) systems,
including Enterprise Resource Planning
(ERP)
systems.
Not applicable.
6.
Later actions that may affect future revenue and expenditures if the bill authorizes future
spending.
Ibe proposed legislation does not affect future spending.
7.
An
estimate of the staff time needed to implement the bill.
To implement the bill, HHS staff will need to develop a set ofcriteria based on the
proposed regulations to evaluate and certify whether the health
insurance
provided by a
contractor meet.:;
the
requirements oflaw. The staff time dedicated to the development of
the criteria and review process will be absorbed within existing resources.
Please
see
#2
for
the
proposed legislation's impact on the Office of Procurement.
8.
An explanation ofhow the addition of new staff responsibilities would affect
other
duties.
Please see
#2
for
the
proposed legislation's impact on
the Office
of Procurement. Other
duties would
be
impacted
by this
additional workload.
9.
An estimate of costs when an additional appropriation is needed.
The bill does not require an. appropriation, but if the workload cannot be absorbed within
existing staff, an additional $85,946 and the equivalent of one FTE would be needed.
10. A
description ofany variable that could affect revenue and cost estimates.
Not
applicable.
11.
Ranges of revenue or expenditures that are uncertain or difficult to project.
Not applicable.
12. If
a bill is likely
to
have no fiscal impact, why that is the case.
Not
applicable.
13. Other
fi
seal impacts or comments.
There could be an increased cost that is passed through
to
the County in the form of
higher labor rates and administrative costs offered by a
finn
offering health insurance
compared to those finns that do not.
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There could be an increased cost
that
is passed through to the County in the fonn of
higher labor rates and administrative costs offered
by
a firm offering health insurance
compared
to those fums
that do
not.
14. The following contributed to and concurred with this analysis:
Bery1Feinberg, Department of General Services
Grace Denno, Business Relations and Compliance, Office ofProcurement
Pam Jones, Office ofProcurement
Erika Lopez-Finn, Office of Management and Budget
Pofen Salem, Office of Management and Budget
Tamen Morris, Department of Health and Human Services
Jenni er .
Director
Office of Management and Budget
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Economic Impact Statement
Council BillS-IS, Contracts
and
Procurement­
Health
Insurance Preference
Background:
This proposed legislation would create a preference
in
the competitive proc1.H'ement of
services by the County for a business that provides health insurance f:or
its
employees and
requires
the
County Executive to adopt a regulation implementing this preference.
Bil1
IS would encourage a County bidder to provide affordable health insurance for
its
employees by giving these bidders a preference in the competitive process. Bill 5-15
adds Article XVII, Section IIB-77 to Chapter 11B ofthe County Code
and
defines the
preference in two parts:
• Health insurance evaluation factor:
A
health insurance evaluation factor is
defined
as
"an evaluation factor in
a
request for proposal that gives
an
offeror
credit for
being
a certified Business With Health Insurance", and
• Percentage price preference: The percentage price preference
is
defmed
as
"the
percent by which a responsive bid from a responsible bidder who
is a
certified
Business With Health
Insurance
may exceed the lowest responsive
bid
submitted
by a responsible bidder who
is
not a certified Business With Health Insurance".
The proposed legislation enables the Director ofthe Department ofHealth and
Human Services to certify a business that meets the standards established by
regulation
as
a Business With Health Insurance.
1.
The sources ofinformation, assumptions,
and
methodologies
used.
Department of General Services, Office ofProcurement
Department of Eco1}omic Development
Bureau ofLabor Statistics (BLS),
U.S.
Department of Labor
Kaiser
Family Foundation -
Employer Health Benefits 2014
Annual
Survey
According to research and data provided by the sources listed above; the following
facts are provided in the preparation of the economic impact statement:
• According to a ne'\i\l'S release from BLS dated July 25, 20
14~
employer­
provided medical insurance was available to 86 percent offull-time private
industry workers
in
the United States as of March 2014. Access to medical
insurance varied by size of the establishment: 57 percent for workers in small
establishments (fimls with .less tJlan
100
employees) compared to
84
percent
for workers
in
medium and large establishments (firms with
100
or more
employees).
• According to a Kaiser Family Foundation (Kaiser) survey dated September
10, 2014, 54 percent ofsmall firms surveyed, those employing between 3 and
199 employees, offered health insurance benefits to their employees. The
10f3
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percent varied by size and industry sector. For example, ofthe smallest firms
that
were surveyed, those with between 3 and 9 workers, only 44 percent
offered health insurance benefits. I'or specific industry sectors surveyed: 37
percent ofretail establishments offered health insurance benefits, 52 percent
of wholesale establishments, 48 percent
in
agriculture/mining/construction, 57
percent in the service sector,
and
59 percent health care establishments.
• According to the Kaiser survey the average annual fitm and worker
contributions for single and family coverage for all types ofplans was $1,081
for single coverage for the employee and $4,944 for the employer for a total
annual
cost of$6,025 per employee. For
a
family, the cost
was
$4~823
for the
employee and $12,011 for the employer for a total cost of$16,834
per
employee.
• Data provided by
the
Department of Economic Development noted that
30,011 employees work in fimls that employ between I and 199 employees.
As
such, applying the
54
percent rate of coverage for small
firm
from
the
Kaiser survey that offer health insunmce benefits, 16,206 employees in
Montgomery County may not have employer sponsored health insurance.
• According to
BLS'
s
2013
Quarterly Census of Employment and Wages
tor
Montgomery County, the latest date for which data
are
available, the average
weekly wage rates for those industry sectors identified in the Kaiser survey
are:
o Retail:
$620
o
\Vholesale trade: $2,113
o
Agriculture/forestry/fishinglhunting: $495
o
Mining:
$1,736
o
Construction: $1,161
o Professional and technical services: $1,835
o Health care and social assistance: $985
2. A description of
any
variable that could affect the economic impad estimates
The variables that
could
affect the economic impact estimate are the number of
employees \\1thout health insurance benefits and the average anIluallabor costs for
the employee and employer of pro'viding health benefits.
3. The .Bill's positive or negative effect, if any on employment, spending, saving,
investment, incomes, and property values in the County.
According to the Office of Procurement, there
is
an increased labor cost that is passed
onto
the
County in the fonn of higher labor costs/rates by a fiml offering health
insurance compared to those fmns that do not. Second, Bill 5-15 may provide an
advantage to larger finns that currently provide health insurance.
Therefore, BillS-IS could.have either a positive or negative impact on small
businesses because the additional cost to provide health insurance coverage would be
additional labor costs and operating expenses. If those firms can pass those additional
20f3
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costs onto the County. Bill 5 15 would have an economic benefit of providing health
insurance coverage
to
their employees. However, that benefit could be offset ""ith
lower \'..'age rates in order to maintain the competitive advantage
with
the benefit of
the higher price performance.
Ba~d
on the average annual c.()st ofproviding health
. insurance coverage for both single and family programs, the total annual cost could
range from $97.6 million to $136.4 million. That range assumes that all estimated
employees who do not currently receive health insurance coverage would receive
health insurance coverage. Whether
Bill5-IS
has a positive economic impact would
depend on the ability of
fimlS
to pass those additional costs on to the County.
A
Therefore, there
is a
tradeoff bet\veen the demand by potential employees to work tbr
a
finn
that provides health insurance coverage as required under
Bill5-IS
in the terms
of its effect on the differential in the wage mtes between
fimls
that provide health
care coverage and firms
that
do not
and
the value to employers who would receive a
preference in the competitive process. Ibe value ofthat preference would depend on
difference between the value of the contract and the labor costs of providing health
insurance coverage.
4.
If
a Bill is likely to have no economic impact,
why
is that the case?
It is ullcertain whether
Bill
5-15 would have
a
positive economic benefit based on the
tradeoff between the demand by employees
and
the difference between the value of
the competitive preference
and
additional expenditures by employers
to
provide
health insurance coverage.
5. The following contributed to
and concurred
with this analysis:
David Platt,
Mary
Casciotti,
and
Rob Hagedoom; Finance; Grace Denno. Department of General
Services.
ch, Director
Department of Finance
30f3
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MONTGOMERY COUNTY COUNCIL
ROCKVILLE, MARYLAND
MEMORANDUM
July 13, 2015
TO:
FROM:
Governm~perations
and
Fiscal Policy
&
Health and Human Services Committee
Linda Price, Legislative Analyst
SUBJECT: Task Force Comments on Bill 5-15, Contracts and Procurement - Health Insurance
Preference
As
requested~
the Montgomery County Council appointed Procurement Policies and Regulations
Task Force reviewed Bill 5-15, Contracts and Procurement - Health Insurance Preference.
Council staff received comments on Bill 5-15 from five out of the seven Task Force members.
These general comments are being submitted on behalf of the Task Force. However, the Task
Force did not take a formal position on Bill 5-15.
Three members oppose this legislation, one member was neutral. One member supported Bill 5­
15, but also commented that the entire procurement system appears to suffer from a piecemeal
approach of one incremental addition after another. This member also noted that the County is
approaching the point where the system may not function as intended. He added that there are
dueling sets ofpreferences without a meaningful set of priorities and decision tradeoff's, as well
as no cap on preference premiums. He also stated that, "the social programs - though serving
meaningful objectives of importance to taxpayers and voters when polled on a vacuum - run the
risk of overcoming the basic acquisition strategies the County employs". Finally, he mentioned
the recent Task Force survey that generated over 200 responses. The survey reported that the
length of time the process takes and the challenges in getting qualified and understanding the
process are the primary concerns.
In
his view, each additional complexity adds sentences to
answer the offeror's question on how their bid will be evaluated. Simplifying the answer to this
question should be a goal to attract additional qualified suppliers and drive down costs.
Many Task Force members expressed concern about the fiscal impact and increased cost to the
County and taxpayers. Additional concerns expressed about the legislation include:
• Would the financial costs of offering health insurance make small businesses less
competitive with large businesses as well as other small businesses as it relates to wages
and attracting the best employees?
• It
was suggested that the County not accept being slower
than
other jurisdictions because
users characterize the process as slow and cumbersome.
STELLA B. WERNER COUNCIL OFFICE BUILDING·
240/777-7900
• TTY
100 MARYLAND AVENUE· ROCKVILLE, MARYLAND 20850
2401777-7914
FAX
2401777-7989
WWW.MONTGOMERYCOUNTYMD.GOV
e
PRINTED ON RECYCLED PAPER
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• To the extent the Council is focused on fiscal impact and vendor loss to other local
jurisdictions, the Council would be well served to consider tabling any new preference
legislation until a study ofthe system can be completed.
Other comments focused on the impact this legislation will have on small businesses and their
willingness to bid on County contracts. Comments include:
• Many small business simply cannot afford to offer health insurance plans.
• Small businesses have the perception that doing business with the County is cumbersome
and costly. This legislation may fuel that perception.
• It
places an unreasonable burden on very small businesses and that can have the effect of
inhibiting small business growth. There is a reason that very small business are typically
not subject to various labor requirements, which can have the effect of stifling growth.
• It
disproportionately rewards the larger small business just for being large.
It
will
help keep the smaller businesses small, even when they could give taxpayers service at
lower price points or higher value points. This will ultimately lower small
business competition for County contracts. The smaller small businesses will not
proactively bear the costs to insure their employees on the hope
th~t
they will be better
positioned
to
win a County contract
• It
is in the CoUnty's best interest
if
the highest value creating small business win County
contracts and grow into large value creating businesses thatemploy and insure lots of
people. This legislation is well intended but punishes the smaller small business for
being small. More legislation is needed that rewards small business for innovating
and creating high value for the County.
• Once awarded County contracts,
it
is appropriate
to
expect small businesses to carry
insurance for their employees. They can fund the insurance requirement at that point
Comments received related to amending or adding to the Bill include the following:
• How will subcontractors be affected by this legislations?
• Establish an insurance help desk for small businesses and employees of small businesses.
• Engage the insurance industry and other stakeholders to educate small businesses on the
. available options for health providing insurance.
• Support development of a risk pool of insurances to provide
insuranc~
for small
businesses.
• Remove the certification process and have the self-certification take place at the time of
the bid, much like pricing certification.
2
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Drummer. Bob
From:
Sent:
To:
Subject:
Denno, Grace
Friday, September
11,
20151:36
PM
Drummer, Bob
justifications to extend the effective date on Bill 5-15
Bob,
Bill S-1S is going to be voted by the full council next Tuesday. If the Bill is passed, the 90 days implementation time
would not be enough for both departments to organize resources:
1. HHS needs to figure out their certification process;
2. Procurement needs to put together the preference methods and procedures.
We would like to ask for an extension on the effective date to be July 1
st,
2016. By then, we should also have
2
quarterly
reports to analyze after implementing Bill 14-14. It would give us a better understanding on how to implement BiIIS-1S.
Thank you very much!
Best Regards,
Grace Denno
I
Division of Business Relations and Compliance
Office of Procurement
I
Montgomery County MD
255 Rockville Pike, Ste. 180
I
Rockville, MD 20850
P 240-777-9959
I
F 240-777-9952
Chief
Grace.Denno@montgomerycountymd.gov
www.montgomervcountymd.gov/OBRC
1