PRINTER'S NO. 245
No. 219 Session of 2005
INTRODUCED BY REED, ARGALL, ARMSTRONG, BOYD, CALTAGIRONE,
CAPPELLI, CAWLEY, CLYMER, DALEY, DALLY, ELLIS, FAIRCHILD,
GABIG, GEIST, GINGRICH, GOODMAN, HENNESSEY, HERSHEY,
HUTCHINSON, JAMES, MARKOSEK, McGILL, McILHATTAN, S. MILLER,
MUSTIO, O'NEILL, PETRARCA, REICHLEY, SCAVELLO, SCHRODER,
SEMMEL, STAIRS, STERN, R. STEVENSON, E. Z. TAYLOR, THOMAS,
TIGUE, WALKO, WANSACZ, WILT, YOUNGBLOOD AND YUDICHAK,
FEBRUARY 8, 2005
REFERRED TO COMMITTEE ON INSURANCE, FEBRUARY 8, 2005
AN ACT
1 Amending Titles 40 (Insurance) and 62 (Procurement) of the
2 Pennsylvania Consolidated Statutes, establishing the Small
3 Business Employee Health Insurance Protection Fund and a
4 program to provide financial assistance to certain small
5 employers that maintain employee health insurance coverage;
6 providing for consolidated contracts; and further authorizing
7 cooperative purchasing by public procurement units.
8 The General Assembly of the Commonwealth of Pennsylvania
9 hereby enacts as follows:
10 Section 1. Title 40 of the Pennsylvania Consolidated
11 Statutes is amended by adding a part to read:
12 PART IV
13 MISCELLANEOUS PROVISIONS
14 ARTICLE A
15 INSURANCE PROGRAMS
16 CHAPTER 81
17 EMPLOYEE HEALTH INSURANCE ASSISTANCE PROGRAM
1 Sec.
2 8101. Short title of chapter.
3 8102. Legislative findings and intent.
4 8103. Definitions.
5 8104. Employee Health Insurance Protection Fund.
6 8105. Employee Health Insurance Protection Program.
7 8106. Application process.
8 8107. Outreach plan.
9 8108. Penalties.
10 8109. Limitation on expenditure of funds.
11 § 8101. Short title of chapter.
12 This chapter shall be known and may be cited as the Small
13 Business Employee Health Insurance Protection Act.
14 § 8102. Legislative findings and intent.
15 The General Assembly finds and declares as follows:
16 (1) All citizens of this Commonwealth should have access
17 to health care.
18 (2) The uninsured health care population of this
19 Commonwealth is estimated to be over 1,390,000 persons, an
20 increase of more than 485,000 persons since 2000. Many
21 thousands more lack adequate insurance coverage.
22 (3) The Commonwealth's rate of uninsured has recently
23 grown by an alarming 50%. The rate was 7.6% in 2000, about
24 half the rate of the nation, and is now estimated to be
25 11.4%. In this key index of economic well-being, the
26 Commonwealth is losing an advantage and starting to catch up
27 to the nation.
28 (4) The uninsured lack access to timely and appropriate
29 primary and preventive care. As a result, health care is
30 often delayed or forgone, resulting in increased risk of
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1 developing more severe conditions that in turn are more
2 expensive to treat. The tendency to delay accessing
3 appropriate care and instead seek health care in a hospital-
4 based setting causes inefficiencies in our health care
5 system.
6 (5) Our health care market has been distorted through
7 cost shifts for the uncompensated health care costs of our
8 uninsured citizens, causing a decrease in competition among
9 health care providers who serve the poor, ultimately
10 increasing the costs to other health care purchasers.
11 (6) It is estimated that approximately two-thirds of the
12 uninsured are employed or dependents of employed persons, and
13 the percentage of people without employment-based health
14 insurance is climbing.
15 (7) Small employers are much less likely to provide
16 health insurance coverage for employees and their dependents
17 than are larger employers.
18 (8) Larger employers are able to self-insure their group
19 health plans and are subject to the provisions of the
20 Employee Retirement Income Security Act of 1974 (Public Law
21 93-406, 88 Stat. 829) that exempts them from State-imposed
22 health insurance mandates, benefits required to be covered
23 under an individual or group health insurance policy. Smaller
24 employers cannot cost-effectively self-insure and must
25 instead purchase coverage that includes a series of State-
26 imposed health insurance mandates that increases the cost of
27 coverage.
28 (9) Changes in the way health insurers develop health
29 insurance rates for the small group market have greatly
30 increased the cost of coverage for many small employers,
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1 particularly those who employ women of childbearing years and
2 older individuals who statistically use health care services
3 more often. Such changes allow health insurers to consider
4 such factors when developing rates and enables insurers to
5 pass those costs along to the small employer without the
6 small employer receiving the benefit of true group-related
7 insurance which spreads the risk across a broader scale,
8 thereby offsetting huge spikes in costs.
9 (10) Employees of small businesses and their dependents
10 should have access to comprehensive primary health coverage
11 in this Commonwealth.
12 (11) Small businesses should be given every incentive to
13 provide or continue to provide comprehensive health care
14 coverage for employees and their dependents.
15 (12) Equity should be assured for employees of small
16 businesses and their dependents by providing a public
17 incentive for those small employers that provide
18 comprehensive health insurance coverage in the face of the
19 rapidly escalating cost of coverage.
20 § 8103. Definitions.
21 The following words and phrases when used in this chapter
22 shall have the meanings given to them in this section unless the
23 context clearly indicates otherwise:
24 "Department." The Insurance Department of the Commonwealth.
25 "Eligible employer." A for-profit corporation, limited
26 liability company, partnership or proprietorship that meets all
27 of the following:
28 (1) Maintains a place of business in this Commonwealth.
29 (2) Purchases a health insurance plan from an insurer
30 covering one or more Commonwealth-based employees.
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1 (3) Agrees to substantially maintain operations in this
2 Commonwealth throughout the year in which the application for
3 financial assistance is filed.
4 "Fraternal benefit society." An entity organized and
5 operating under Article XXIV of the act of May 17, 1921
6 (P.L.682, No.284), known as The Insurance Company Law of 1921.
7 "Fund." The Small Business Employee Health Insurance
8 Protection Fund established under section 8104(a) (relating to
9 Employee Health Insurance Protection Fund).
10 "Health insurance plan." An individual accident and health
11 insurance policy or a small group plan issued by an insurer to
12 provide comprehensive health insurance coverage for employees of
13 an eligible employer, whether issued directly to the employer or
14 made available to the employer through membership in a multiple
15 employer trust or an association. The term does not include any
16 of the following types of insurance or any combination thereof:
17 (1) hospital indemnity;
18 (2) accident;
19 (3) specified disease;
20 (4) disability income;
21 (5) dental;
22 (6) vision;
23 (7) long-term care;
24 (8) workers' compensation; or
25 (9) any other limited benefit plans.
26 "Health service corporation." A professional health service
27 corporation as defined in section 6302 (relating to
28 definitions).
29 "Hospital plan corporation." A hospital plan corporation as
30 defined in section 6101 (relating to definitions).
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1 "Insurer." An insurance company, association, exchange or
2 preferred provider organization that offers health care benefits
3 and is subject to regulation under the act of May 17, 1921
4 (P.L.682, No.284), known as The Insurance Company Law of 1921, a
5 fraternal benefit society, a nonprofit hospital plan
6 corporation, a nonprofit professional health service plan or a
7 managed care organization.
8 "Managed care organization." A health maintenance
9 organization organized and regulated under the act of December
10 29, 1972 (P.L.1701, No.364), known as the Health Maintenance
11 Organization Act, or a risk-assuming preferred provider
12 organization or exclusive provider organization, organized and
13 regulated under this chapter.
14 "Small group plan." A group accident and health insurance
15 plan purchased by an employer for a group of two to fifty
16 eligible persons.
17 § 8104. Employee Health Insurance Protection Fund.
18 (a) Establishment.--There is hereby established a special
19 fund in the State Treasury to be known as the Small Business
20 Employee Health Insurance Protection Fund.
21 (b) Sources.--Money produced by any savings from
22 consolidated contracting as provided for under 62 Pa.C.S. §
23 703(a) (relating to certification and audit of savings) and
24 interest earned by the fund shall be deposited in and credited
25 to the fund.
26 (c) Appropriation.--The money in the fund is hereby
27 appropriated, upon approval of the Governor, to the department
28 for the purpose of implementing the provisions of this chapter.
29 (d) Legislative oversight.--
30 (1) An annual financial and expenditure plan for the
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1 fund shall be submitted by the Governor to the General
2 Assembly as part of the Governor's annual budget submission.
3 (2) The Secretary of the Budget shall provide a
4 quarterly summary of savings to the Commonwealth achieved
5 through consolidated contracting, as certified to the State
6 Treasurer pursuant to 62 Pa.C.S. § 703(a), and financial
7 statements showing the status of the fund to the chairman and
8 minority chairman of the Appropriations Committee of the
9 Senate and the chairman and minority chairman of the
10 Appropriations Committee of the House of Representatives. The
11 statement shall be provided within 30 days of the close of
12 each quarter of the fiscal year and shall commence with the
13 quarter ending December 31, 2004.
14 § 8105. Employee Health Insurance Protection Program.
15 (a) Establishment.--The department shall utilize money it
16 receives from the fund to provide financial assistance in the
17 form of grants to eligible employers to be used toward the
18 purchase of a health insurance plan covering employees. The
19 department shall apply the criteria established under subsection
20 (b) to determine eligibility for grants under this section.
21 Financial assistance shall be granted to all eligible applicants
22 on a proportional basis reflecting the number of covered
23 employees in each health insurance plan.
24 (b) Eligibility criteria.--
25 (1) The department shall establish a minimum threshold
26 to determine if an employer is eligible for a grant. The
27 threshold shall reflect a comparatively high cost of health
28 insurance coverage for the employer and shall be based on the
29 per-employee cost of an applicant's health insurance plan
30 relative to the total payroll of the employer, in addition to
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1 any other factors the department may determine appropriate.
2 (2) After the first year of operation and periodically
3 thereafter, the department shall review the program and the
4 availability of funds.
5 (3) The department shall, if necessary, adjust the
6 minimum threshold for eligibility so that applicants receive
7 a meaningful level of financial assistance. The minimum
8 threshold when proposed or adjusted shall be submitted to the
9 Banking and Insurance Committee of the Senate and the
10 Insurance Committee of the House of Representatives for
11 review and comment. The committees shall have 60 days to
12 submit comments to the department.
13 (c) Administrative expense limitation.--The department may
14 not expend more than 2% of the fund moneys on administrative
15 expenses relating to the purposes set forth in this section.
16 (d) Regulations.--The department shall promulgate
17 regulations necessary to carry out the purposes of this chapter.
18 § 8106. Application process.
19 (a) Application.--An employer must complete and submit to
20 the department an application for employee health insurance
21 assistance in order to be eligible for financial assistance
22 under this chapter.
23 (b) Program year.--Application and eligibility shall be
24 based on the cost of health insurance coverage, the number of
25 employees covered by the health insurance plan, the total
26 payroll cost for all employees and any other information
27 required by the department from the applicant for the period of
28 the immediate preceding calendar year.
29 (c) Maintenance of insurance.--To be eligible for financial
30 assistance, an applicant must agree to continue to provide a
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1 substantially equivalent level of health insurance coverage for
2 employees in the year during which the application is filed with
3 the department.
4 § 8107. Outreach plan.
5 In consultation with appropriate Commonwealth agencies, the
6 department shall develop an outreach plan to inform potential
7 applicants regarding eligibility and available financial
8 assistance. The plan shall include provisions for:
9 (1) Reaching different geographic areas, including rural
10 and inner-city areas.
11 (2) Enlisting the assistance of organizations
12 representing small employers.
13 (3) Assuring that special efforts are coordinated with
14 insurers to reach those small employers most likely to
15 benefit from financial assistance.
16 § 8108. Penalties.
17 (a) Failure to maintain operations.--An employer that
18 receives financial assistance and fails to substantially
19 maintain operations in this Commonwealth throughout the year in
20 which the employer receives the financial assistance shall
21 refund to the Commonwealth the total amount of the financial
22 assistance.
23 (b) Failure to continue coverage.--An employer that receives
24 financial assistance and fails to maintain the required health
25 insurance coverage for employees throughout the year in which
26 the employer receives the financial assistance shall refund to
27 the Commonwealth the total amount of the financial assistance.
28 (c) Waiver.--The department may waive the provisions in
29 subsections (a) and (b) if it determines that an employer's
30 operations were not maintained and health insurance coverage was
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1 canceled or diminished because of circumstances beyond the
2 employer's control, including, but not limited to, natural
3 disasters or the sudden and unforeseen loss of a major supplier
4 or market.
5 § 8109. Limitation on expenditure of funds.
6 In no case shall the total amount of annual grants awarded by
7 the department under this chapter exceed the amount of receipts
8 annually deposited into the fund pursuant to 62 Pa.C.S. § 703(a)
9 (relating to certification and audit of savings) and any other
10 Federal or State funds received through the fund. The grants
11 awarded by the department shall in no way constitute an
12 entitlement derived from the Commonwealth or a claim on any
13 other funds of the Commonwealth.
14 Section 2. Section 103 of Title 62 is amended by adding a
15 definition to read:
16 § 103. Definitions.
17 Subject to additional definitions contained in subsequent
18 provisions of this part which are applicable to specific
19 provisions of this part, the following words and phrases when
20 used in this part shall have the meanings given to them in this
21 section unless the context clearly indicates otherwise:
22 * * *
23 "Consolidated contract." A contract for supplies or
24 services:
25 (1) in which the number of contractors has been reduced,
26 in comparison to the number of contractors under a previously
27 existing contract for the same supply or service by 50% of
28 the number of contractors under a previous contract as of
29 September 30, 2003; or
30 (2) that combines discrete procurement requirements from
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1 not less than two existing contracts.
2 * * *
3 Section 3. Chapter 7 heading of Title 62 is amended and the
4 chapter is amended by adding sections to read:
5 CHAPTER 7
6 [(Reserved)]
7 CONSOLIDATED CONTRACTS
8 § 701. Consolidated contracts authorized.
9 The department and other Commonwealth agencies may enter into
10 consolidated contracts for the purpose of procuring supplies and
11 services.
12 § 702. Acceptance of bids or proposals.
13 If the department or any other Commonwealth agency issues an
14 invitation for bids or a request for proposals for the purpose
15 of awarding and entering into a consolidated contract, the
16 department or agency shall establish a time and date for receipt
17 of bids or proposals that is not less than 60 days after the
18 issuance of the invitation for bids or the request for
19 proposals.
20 § 703. Certification and audit of savings.
21 (a) Certification.--No later than January 31, 2005, in the
22 first year, and September 30 of each year thereafter, the
23 Secretary of the Budget shall calculate and certify to the State
24 Treasurer the savings produced by each consolidated contract in
25 effect during the immediately preceding fiscal year and publish
26 the methodology by which the savings are calculated, the
27 individual contract savings and the total amount of the savings
28 in the Pennsylvania Bulletin. The State Treasurer shall transfer
29 an amount equal to the total savings from the General Fund to
30 the Small Business Employee Health Insurance Protection Fund
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1 established in 40 Pa.C.S. § 8104 (relating to Employee Health
2 Insurance Protection Fund).
3 (b) Duration.--
4 (1) The Secretary of the Budget shall continue to
5 calculate and certify any savings produced by a consolidated
6 contract over the duration of each contract, including any
7 contract renewals and extensions.
8 (2) Whenever an existing consolidated contract expires
9 and a new contract is awarded, the savings attributable to
10 the contract shall be recalculated by the Secretary of the
11 Budget, in accordance with subsection (a), to reflect any
12 changes in the terms and conditions of the contract and any
13 business or industry trends that could affect the level of
14 savings.
15 (c) Audit.--The Auditor General shall conduct an annual
16 audit of the administration of consolidated contracts under this
17 chapter.
18 (d) Application to executive agencies.--The Secretary of the
19 Budget shall calculate contract savings under subsection (a) for
20 all executive agencies. Any savings that accrue to an
21 independent agency, a State-affiliated entity or a local public
22 procurement unit shall not be included.
23 Section 4. Section 1902 of Title 62 is amended to read:
24 § 1902. Cooperative purchasing authorized.
25 A public procurement unit may either participate in, sponsor,
26 conduct or administer a cooperative purchasing agreement for the
27 procurement of any supplies, services or construction with one
28 or more public procurement units or external procurement
29 activities in accordance with an agreement entered into between
30 the participants. The Department of General Services is
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1 authorized to enter into cooperative purchasing contracts solely
2 for the use of local public procurement units or State-
3 affiliated entities. [The] When the department enters into a
4 consolidated contract, the department shall enter into
5 cooperative purchasing contracts for the same supply or service
6 for the use of local public procurement units or State-
7 affiliated entities [if the number of contractors under a
8 previously existing contract for the same supply or service is
9 reduced to a single contractor or reduced by more than 50% of
10 the number existing on September 30, 2003,] and shall award such
11 contracts pursuant to section 517 (relating to multiple awards)
12 using an invitation for bids. Nothing in this section shall
13 prohibit a local public procurement unit or State-affiliated
14 entity from participating in or procuring from other cooperative
15 purchasing agreements awarded by the department. Cooperative
16 purchasing may include, but is not limited to, joint or
17 multiparty contracts between public procurement units and open-
18 ended purchasing agency contracts which are made available to
19 local public procurement units.
20 Section 5. The provisions of 62 Pa.C.S. § 703 shall not
21 apply to any contract the Commonwealth has entered into prior to
22 September 30, 2003, unless the contract expires and a new
23 contract is awarded in which the terms and conditions are so
24 modified as to qualify as a consolidated contract.
25 Section 6. This act shall take effect immediately.
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