GO-HHS Item 1
March 19,2015
Worksession
MEMORANDUM
March 17,2015
TO:
FROM:
SUBJECT:
Government Operations and Fiscal
POliCYlHealth;.~an
Services Committee
Robert H. Drummer, Senior Legislative
AttomeYI!~
j
Worksession: BillS-IS, Contracts and Procurement Health Insurance Preference
Expected attendees:
DGS Director David Dise
Pam Jones, DGS
Grace Denno, DGS
Bill 5-15, Contracts and Procurement - Health Insurance Preference, sponsored by
Council member Navarro, was introduced on February 3, 2015. A public hearing was held on
March 3.
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 5­
15 would encourage a County bidder to provide affordable health insurance for its employees by
giving these bidders a preference in the competitive process.
Council member 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 the Council staff
and members of the Executive Branch, the GO Committee amended Bill 14-14 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 5-15 would
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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.
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 (LiONA)
supported the Bill as an effort to increase the availability of employer-sponsored health insurance.
(©IO)
Issues
1.
What is the fiscal and economic impact of the Bill?
We have not received the fiscal and economic impact statement yet. We will put it in an
addendum if we receive it before the worksession.
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% of salary.
An
employee who
does not have health insurance after declining employer-sponsored health insurance is subject to a
fine under the ACA.
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
2
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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.
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 would add 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,
requested by the Executive, would 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 $14.15 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 would
eventually create a burden on a small business competing with a large employer for a County
service contract.
A costlbenefit 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?
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."
3
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These agreements are not subject to the Wage Requirements Law or this Bill. Therefore, line 46
should be amended as follows:
using department [[and each cooperative purchasing agreement]] to
This packet contains:
Bill 5-15
Legislative Request Report
Navarro Memorandum
Testimony
David Dise
Victoria Leonard
F:\LAw\BILLS\lSOS Contracts - Health Insurance Preference\GO-HHS Memo.Docx
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Bill No.
5-15
Conceming: Contracts and Procurement
- Health Insurance Preference
Revised: December 29, 2014 Draft No.
1..
Introduced:
February 3,2015
Expires:
August 3, 2016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
-!..!.No.:::.:n.!.:!!e,--~:--
_ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmember Navarro
AN
ACT
to:
(1)
(2)
J
(2)
create a preference in the procurement of services by the County for a business that
provides health insurance for its employees;
require the County Executive to adopt a regulation implementing the preference for
a business that provides health insurance for its employees; and
generally amend the law governing the County's procurement of services,
By adding
Montgomery County Code
Chapter 11 B, Contracts and Procurement
Article XVII
Section 11 B-77
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface bracketsD
* * *
Heading or defined 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
Article XVII is added to Chapter llB as follows:
Article XVII. Preference for Business With Health Insurance.
llB-77. Preference for Business With Health Insurance.
(a)
Definitions.
In this Article the following terms have the following
2
3
4
5
meanmgs:
Business With Health Insurance
means
§:
6
7
business that provides health
insurance for each employee who provides services to the County under
~
8
9
10
11
contract.
Certified Business With Health Insurance
means
§:
business certified
J1y
the Director as meeting the standards established
Qy
regulation for
Business With Health Insurance.
~
12
Contract
means
~
contract for procurement services subject to the Wage
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 employer
17
18
19
benefit package that
~
for medical expenses incurred
Qy
an employee
and an employee's family either
J1y
reimbursing the employee or
J1y
paying the care provider directly and provides the minimum essential
health benefits required under the Patient Protection and Affordable
Care Act, 26 U.S.C. §5000A. as amended.
Health insurance evaluation factor
means an evaluation factor in
~
20
21
22
23
24
request for proposals that gives an offeror credit for being
Business With Health Insurance.
~
certified
25
26
27
Percentage price preterence
means the percent
J1y
which
£!
responsive
bid from
~
responsible bidder who is
~
certified Business With Health
~
Insurance may exceed the lowest responsive bid submitted
J1y
o
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BILL
No. 5-15
28
29
30
responsible bidder who
Insurance.
IS
not
~
certified Business With Health
~
{hl
Regulation.
The County Executive must adopt
regulation under
31
32
33
Method
~
that includes:
ill
ill
ill
ill
(£}
an application process for
~
business to be certified as
With Health Insurance;
~
Business
34
35
36
37
38
39
40
standards for
~
business to meet to be certified as
~
Business With
Health Insurance;
~
percentage price preference for
~
Business With Health
Insurance under
~
solicitation for competitive sealed bidding; and
~
Business With Health Insurance evaluation factor for use in
~
request for proposals.
Certification.
The Director must certify
~
~
business that meets the
Business With Health
41
42
standards established
Qy
regulation as
Insurance.
43
44
45
46
@
Role
Q[
Office
Q[
Procurement and Department
Q[
Health and Human
Services.
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
~
47
48
49
percentage price preference or an evaluation factor, and
consistency among using departments procuring similar services.
50
51
ill
The Department of Health and Human Services must operate the
certification process and maintain
~
list of businesses that have
52
53
54
been certified as
~
Business With Health Insurance.
ill
Denial or Revocation
Q[
certification.
The Director may refuse to
~
certify
~
business under this Section, and may suspend or revoke
(j)
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BILL
No. 5-15
55
56
57
58
59
certification issued under this Section, after
~
hearing for which
reasonable notice has been given, if the business or applicant does not
meet the standards for certification as
Insurance. '
~
Business With Health
ill
Notice and opportunityfOr hearing.
60
61
62
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
63
in person or
Qy
regular mail, postage prepaid, addressed to the
person's last known address as maintained in the Director's file.
Service on that person
Qy
mail is effective
J
days after mailing.
The written notice must, at
~
minimum:
CA)
state that the Director has found that the business or
applicant may be subject to denial, suspension, or
revocation ofthe certification;
64
65
66
67
68
69
70
all
identify the specific grounds for the Director's fmdings;
and
71
72
©
ill
set
~
date for
~
hearing on denial of the application or
73
suspension or revocation ofthe certification.
Hearing.
The Director or
~
designee may conduct the hearing. At
74
75
76
77
78
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 are part of the hearing
record.
The person conducting the hearing must render
!!
79
80
81
decision in writing, giving the reasons for the decision. That
o
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1505
contracts - health insurance preference\biIl1.doc
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BILL
No.
5-15
82
83
decision is [mal, subject to judicial review under the Maryland
Rules for review of administrative decisions in the Circuit Court
and the Court of Special Appeals.
84
85
86
87
88
89
90
91
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 aggrieved
Qy
the denial, suspension, or revocation
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.
92
93
94
(h)
Report
ill!.
Office
gf
Procurement.
The Director of the Office of
95
Procurement, after consulting with the Director of Health and Human
Services, must submit
~
96
97
report to the County Council and County
Executive
Qy
September 30 each year after implementation of this
Section for the prior fiscal year. The report should include:
98
99
100
ill
ill
ill
the dollar value of services purchased from
With Health Insurance;
~
certified Business
101
102
103
the dollar value of services purchased from !! business that is not
~
certified Business With Health Insurance;
to the extent ascertainable, the additional cost of any contracts
awarded to'!! certified Business With Health Insurance under !!
percentage price preference;
104
105
106
107
108
ill
!! summary of applications for certification as
~
Business With
Health Insurance made during the year, including the results of
each application;
(!)
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BILL
No.
5-15
109
110
111
112
Approved:
ill
®
ill
~
list of certified Businesses With Health Insurance;
suggested legislative or administrative changes; and
any other relevant information.
113
George Leventhal, President, County Council
Date
114
Approved:
115
Isiah Leggett, County Executive
Date
116
This is a correct copy ofCouncil action.
117
Linda M. Lauer, Clerk of the Council
Date
@)
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LEGISLATIVE REQUEST REPORT
Bill 5-15
Contracts and Procurement
-
Health Insurance Preference
DESCRIPTION:
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 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:\Iaw\bills\1505 contracts - health insurance preference\legislative request report.docx
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MONTGOMERY COUNTY COUNCIL
ROCKVILLE, MARYLAND
NANCY NAVARRO
COUNClLMEMBER, DISTRICT
4
MEMORANDUM
January 15,2015
TO:
FROM:
SUBJECT:
Councilmembers
Nancy Navarro, Councilmember
ft'!
v/
_.~
./1
1d/t
i/!-,,/
f
i
;
f
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 22nd, 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 (DOS) 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 believe 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 •
TrY
(240) 777-7914
COUNCILMEMBER.NAVARRO@MONTGOMERYCOUNTYMD.GOV • WWW.CoUNCILMEMBERNAVARRO.COM
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'21
Testimony on behalf of County Executive Isiah Leggett
Bill 5-15, 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 Bill 5-15, 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 ofBill5-15, the Executive notes that as currently drafted the
poses potential consequences for your consideration:
I) 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 fmalize details on how this may be effectively implemented. Thank you for
the opportunity to testify.
(j)
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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 BillS-iS 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 Bill 5-15. And thank you Council member
Navarro for introdUCing this bilt and for your unwaivering support of the County's
contract workers.
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GO-HHS Item 1
March 19,2015
Worksession
MEMORANDUM
March 17,2015
TO:
FROM:
SUBJECT:
Government Operations and Fiscal
POliCYlHealth;.~an
Services Committee
Robert H. Drummer, Senior Legislative
AttomeYI!~
j
Worksession: BillS-IS, Contracts and Procurement Health Insurance Preference
Expected attendees:
DGS Director David Dise
Pam Jones, DGS
Grace Denno, DGS
Bill 5-15, Contracts and Procurement - Health Insurance Preference, sponsored by
Council member Navarro, was introduced on February 3, 2015. A public hearing was held on
March 3.
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 5­
15 would encourage a County bidder to provide affordable health insurance for its employees by
giving these bidders a preference in the competitive process.
Council member 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 the Council staff
and members of the Executive Branch, the GO Committee amended Bill 14-14 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 5-15 would
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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.
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 (LiONA)
supported the Bill as an effort to increase the availability of employer-sponsored health insurance.
(©IO)
Issues
1.
What is the fiscal and economic impact of the Bill?
We have not received the fiscal and economic impact statement yet. We will put it in an
addendum if we receive it before the worksession.
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% of salary.
An
employee who
does not have health insurance after declining employer-sponsored health insurance is subject to a
fine under the ACA.
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
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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.
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 would add 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,
requested by the Executive, would 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 $14.15 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 would
eventually create a burden on a small business competing with a large employer for a County
service contract.
A costlbenefit 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?
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."
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These agreements are not subject to the Wage Requirements Law or this Bill. Therefore, line 46
should be amended as follows:
using department [[and each cooperative purchasing agreement]] to
This packet contains:
Bill 5-15
Legislative Request Report
Navarro Memorandum
Testimony
David Dise
Victoria Leonard
F:\LAw\BILLS\lSOS Contracts - Health Insurance Preference\GO-HHS Memo.Docx
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Bill No.
5-15
Conceming: Contracts and Procurement
- Health Insurance Preference
Revised: December 29, 2014 Draft No.
1..
Introduced:
February 3,2015
Expires:
August 3, 2016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
-!..!.No.:::.:n.!.:!!e,--~:--
_ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmember Navarro
AN
ACT
to:
(1)
(2)
J
(2)
create a preference in the procurement of services by the County for a business that
provides health insurance for its employees;
require the County Executive to adopt a regulation implementing the preference for
a business that provides health insurance for its employees; and
generally amend the law governing the County's procurement of services,
By adding
Montgomery County Code
Chapter 11 B, Contracts and Procurement
Article XVII
Section 11 B-77
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface bracketsD
* * *
Heading or defined 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
Article XVII is added to Chapter llB as follows:
Article XVII. Preference for Business With Health Insurance.
llB-77. Preference for Business With Health Insurance.
(a)
Definitions.
In this Article the following terms have the following
2
3
4
5
meanmgs:
Business With Health Insurance
means
§:
6
7
business that provides health
insurance for each employee who provides services to the County under
~
8
9
10
11
contract.
Certified Business With Health Insurance
means
§:
business certified
J1y
the Director as meeting the standards established
Qy
regulation for
Business With Health Insurance.
~
12
Contract
means
~
contract for procurement services subject to the Wage
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 employer
17
18
19
benefit package that
~
for medical expenses incurred
Qy
an employee
and an employee's family either
J1y
reimbursing the employee or
J1y
paying the care provider directly and provides the minimum essential
health benefits required under the Patient Protection and Affordable
Care Act, 26 U.S.C. §5000A. as amended.
Health insurance evaluation factor
means an evaluation factor in
~
20
21
22
23
24
request for proposals that gives an offeror credit for being
Business With Health Insurance.
~
certified
25
26
27
Percentage price preterence
means the percent
J1y
which
£!
responsive
bid from
~
responsible bidder who is
~
certified Business With Health
~
Insurance may exceed the lowest responsive bid submitted
J1y
o
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BILL
No. 5-15
28
29
30
responsible bidder who
Insurance.
IS
not
~
certified Business With Health
~
{hl
Regulation.
The County Executive must adopt
regulation under
31
32
33
Method
~
that includes:
ill
ill
ill
ill
(£}
an application process for
~
business to be certified as
With Health Insurance;
~
Business
34
35
36
37
38
39
40
standards for
~
business to meet to be certified as
~
Business With
Health Insurance;
~
percentage price preference for
~
Business With Health
Insurance under
~
solicitation for competitive sealed bidding; and
~
Business With Health Insurance evaluation factor for use in
~
request for proposals.
Certification.
The Director must certify
~
~
business that meets the
Business With Health
41
42
standards established
Qy
regulation as
Insurance.
43
44
45
46
@
Role
Q[
Office
Q[
Procurement and Department
Q[
Health and Human
Services.
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
~
47
48
49
percentage price preference or an evaluation factor, and
consistency among using departments procuring similar services.
50
51
ill
The Department of Health and Human Services must operate the
certification process and maintain
~
list of businesses that have
52
53
54
been certified as
~
Business With Health Insurance.
ill
Denial or Revocation
Q[
certification.
The Director may refuse to
~
certify
~
business under this Section, and may suspend or revoke
(j)
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BILL
No. 5-15
55
56
57
58
59
certification issued under this Section, after
~
hearing for which
reasonable notice has been given, if the business or applicant does not
meet the standards for certification as
Insurance. '
~
Business With Health
ill
Notice and opportunityfOr hearing.
60
61
62
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
63
in person or
Qy
regular mail, postage prepaid, addressed to the
person's last known address as maintained in the Director's file.
Service on that person
Qy
mail is effective
J
days after mailing.
The written notice must, at
~
minimum:
CA)
state that the Director has found that the business or
applicant may be subject to denial, suspension, or
revocation ofthe certification;
64
65
66
67
68
69
70
all
identify the specific grounds for the Director's fmdings;
and
71
72
©
ill
set
~
date for
~
hearing on denial of the application or
73
suspension or revocation ofthe certification.
Hearing.
The Director or
~
designee may conduct the hearing. At
74
75
76
77
78
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 are part of the hearing
record.
The person conducting the hearing must render
!!
79
80
81
decision in writing, giving the reasons for the decision. That
o
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1505
contracts - health insurance preference\biIl1.doc
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BILL
No.
5-15
82
83
decision is [mal, subject to judicial review under the Maryland
Rules for review of administrative decisions in the Circuit Court
and the Court of Special Appeals.
84
85
86
87
88
89
90
91
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 aggrieved
Qy
the denial, suspension, or revocation
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.
92
93
94
(h)
Report
ill!.
Office
gf
Procurement.
The Director of the Office of
95
Procurement, after consulting with the Director of Health and Human
Services, must submit
~
96
97
report to the County Council and County
Executive
Qy
September 30 each year after implementation of this
Section for the prior fiscal year. The report should include:
98
99
100
ill
ill
ill
the dollar value of services purchased from
With Health Insurance;
~
certified Business
101
102
103
the dollar value of services purchased from !! business that is not
~
certified Business With Health Insurance;
to the extent ascertainable, the additional cost of any contracts
awarded to'!! certified Business With Health Insurance under !!
percentage price preference;
104
105
106
107
108
ill
!! summary of applications for certification as
~
Business With
Health Insurance made during the year, including the results of
each application;
(!)
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BILL
No.
5-15
109
110
111
112
Approved:
ill
®
ill
~
list of certified Businesses With Health Insurance;
suggested legislative or administrative changes; and
any other relevant information.
113
George Leventhal, President, County Council
Date
114
Approved:
115
Isiah Leggett, County Executive
Date
116
This is a correct copy ofCouncil action.
117
Linda M. Lauer, Clerk of the Council
Date
@)
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LEGISLATIVE REQUEST REPORT
Bill 5-15
Contracts and Procurement
-
Health Insurance Preference
DESCRIPTION:
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 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:\Iaw\bills\1505 contracts - health insurance preference\legislative request report.docx
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MONTGOMERY COUNTY COUNCIL
ROCKVILLE, MARYLAND
NANCY NAVARRO
COUNClLMEMBER, DISTRICT
4
MEMORANDUM
January 15,2015
TO:
FROM:
SUBJECT:
Councilmembers
Nancy Navarro, Councilmember
ft'!
v/
_.~
./1
1d/t
i/!-,,/
f
i
;
f
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 22nd, 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 (DOS) 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 believe 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 •
TrY
(240) 777-7914
COUNCILMEMBER.NAVARRO@MONTGOMERYCOUNTYMD.GOV • WWW.CoUNCILMEMBERNAVARRO.COM
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'21
Testimony on behalf of County Executive Isiah Leggett
Bill 5-15, 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 Bill 5-15, 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 ofBill5-15, the Executive notes that as currently drafted the
poses potential consequences for your consideration:
I) 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 fmalize details on how this may be effectively implemented. Thank you for
the opportunity to testify.
(j)
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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 BillS-iS 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 Bill 5-15. And thank you Council member
Navarro for introdUCing this bilt and for your unwaivering support of the County's
contract workers.