Bill Text: NJ S2999 | 2010-2011 | Regular Session | Introduced
Bill Title: Provides for competitive contracting for health benefits plans by certain local units of government and boards of education.
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2011-07-07 - Introduced in the Senate, Referred to Senate Commerce Committee [S2999 Detail]
Download: New_Jersey-2010-S2999-Introduced.html
Sponsored by:
Senator THOMAS H. KEAN, JR.
District 21 (Essex, Morris, Somerset and Union)
Senator JOSEPH F. VITALE
District 19 (Middlesex)
SYNOPSIS
Provides for competitive contracting for health benefits plans by certain local units of government and boards of education.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning the solicitation and purchase of health benefits plans by certain local units and boards of education and supplementing Title 17B of the New Jersey Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. The Legislature finds and declares that:
a. Every local unit of government, including boards of education, is authorized to provide health benefits for its employees and their dependents; the "Local Public Contracts Law," P.L.1971, c.198 (C.40A:11-1 et seq.), and the "Public School Contracts Law," N.J.S. 18A:18A-1 et seq. provide that the purchase of health benefits plans and acquisition of related consulting services may be awarded without public advertising for bids and bidding therefor; and
b. Providing health benefits to employees is one of the major expenses of local units, and local units should be encouraged to explore all of the opportunities available to them to procure health benefits plans that provide optimum cost effectiveness; this can best be done through competition, among insurers and providers of alternative health benefits plans, insurance producers, and other consultants who advise local units with respect to procuring health benefits plans; and
c. Free and open competition for contracts to provide health benefits plans and related consulting services, including the payment by the local units directly for consultants' services, will ensure that local units obtain health benefits at the lowest possible cost; and
d. Consultants and producers who assist a local unit in procuring a health benefits plan owe a duty of loyalty to the local unit with whom they contract, and not to the provider of health benefits plans, and therefore local units responsible for the acquisition of health benefits plans and ancillary services provided in connection with those plans should contract for acquisition and consulting services directly with producers or consultants providing those services, paying on a flat fee or hourly rate basis. No producer or consultant should be permitted to receive any commission, fee, incentive payment, or bonus, either directly or indirectly from any insurer or other provider of health benefits plans, to ensure that they and any other provider of services in connection with a plan do not have conflicting loyalties between the provider of the health benefits plans and the local unit; now therefore
e. The Legislature hereby determines that the purchase of health benefits plans and related consulting services should no longer be exempt from the laws requiring public advertising for bids and bidding, and should instead be subject to regular and open competition to achieve maximum savings, and that local units of government should use the competitive contracting process to acquire these goods and services, and negotiate the fees paid to insurance producers and consultants involved in the health benefits procurement process.
2. For the purposes of this act:
"Alternative health benefits plans" means health benefits plans provided to a local unit on a self-insured basis and administered by a third party administrator, the State Health Benefits Program, the School Employees' Health Benefits Program, an insurance fund as provided for in Article 3 of chapter 10 of Title 40A of the New Jersey Statutes, a joint insurance fund created pursuant to P.L.1983, c.372 (C.40A:10-36 et seq.), a pharmacy benefits manager, and a self-funded or partially self-funded multiple employer welfare arrangement provided for in the "Self-Funded Multiple Employer Welfare Arrangement Regulation Act," P.L.2001, c.352 (C.17B:27C-1 et. seq.)
"Bona fide employee" means a person solely and exclusively employed by an organization or business.
"Consulting services" and "consultant" means services provided to a local unit in connection with the benefit design, evaluation and administration of a health benefits plan, which may include, but not be limited to, the preparation of a proposal to be submitted to a provider of health benefits plans, risk management services, and claims administration services, and may include the services of producers, but shall not include any provider of ancillary services such as case management, behavioral health services, or similar ancillary services contracted for by an insurer or third party administrator.
"Health benefits plan" means a plan providing one or more of the following:
(1) medical-surgical and ancillary medical benefits,
(2) dental benefits,
(3) pharmaceutical benefits, durable medical goods, or both; provided, however, that any arrangement entered into for the provision of pharmacy benefits shall include a provision that the insurer, pharmacy benefits manager or administrator of the benefits shall share with the local unit any discount or rebate given to the insurer, manager or administrator by a manufacturer or distributor of pharmaceuticals, durable medical goods, or any other benefit provided in connection with the pharmacy benefits or other plan, under terms and conditions established in the contract;
(4) ancillary services, if required, from specialized vendors, including case management organizations, behavioral health organizations, utilization review organizations, or similar services.
"Insurer" means an insurer authorized to issue insured health benefits plans in this State pursuant to the provisions of Title 17 of the Revised Statutes, Title 17B of the New Jersey Statutes, or a health maintenance organization issuing health benefits plans pursuant to P.L.1973, c.337 (C.26:2J-1 et seq.).
"Local unit" means a municipality or county, and any agency or instrumentality thereof providing health benefits to employees, and a board of education.
"Producer" means an insurance producer licensed pursuant to the "New Jersey Insurance Producer Licensing Act of 2001," P.L.2001, c.210 (C.17:22A-26 et seq.), that is authorized to procure health benefits plans from an insurer.
"Third party administrator" means an administrator of self-insured health benefits plans licensed by the Department of Banking and Insurance pursuant to the provisions of P.L.2001, c.267 (C.17B:27B-1 et seq.).
3. Notwithstanding the provisions of paragraph (m) of subsection (1) of section 5 of P.L.1971, c.198 (C.40A:11-5) and paragraph (10) of subsection a. of N.J.S. 18A:18A-5, every local unit seeking to enter into a contract or contracts for the purchase of health benefits plans and for the purchase of related consulting services shall be subject to the competitive contracting process set forth in sections 3, 4, and 5 of P.L.1999, c.440 (C.40A:11-4.3, 40A:11-4.4, and 40A:11-4.5) or sections 47, 48, and 49 of P.L.1999, c.440 (C.18A:18A-4.3, 4.4, and 4.5), as appropriate. The local unit shall advertise in a newspaper or newspapers of general circulation in the State and on the Internet, stating the type of health benefits plan or plans or the type of related consulting services to be provided, and that a specific request for proposals is available at the offices of the local unit.
4. The finance officer, purchasing agent, administrator, or other official of a local unit may prepare the request for proposals or the local unit may, in its discretion, conduct a competitive contracting process for the services of a consultant to assist in preparing the request for proposals and assist the local unit in evaluating the responses. Any consultant appointed pursuant to this section shall be paid a flat fee or hourly rate by the local unit, and shall not be deemed to be a broker of record for the purposes of the acquisition of a health benefits plan.
5. a. A request for proposals to provide a health benefits plan shall include a copy of the health benefits plan currently in effect in the local unit, including the benefits in the plan, the level of deductibles or coinsurance, the loss experience of the plan, the annual total cost of the plan to the local unit, including the commissions or fees paid to an insurer, administrator, or a provider of any ancillary services.
b. In addition to publishing a request for proposals, the finance officer, purchasing agent, administrator, other official of a local unit, or a consultant shall remit a request for proposal to an insurer, health maintenance organization, multiple employer welfare arrangement, joint insurance fund, the State Health Benefits Program and the School Employees' Health Benefits Program directly.
6. a. Consultants or producers, as the case may be, shall receive all compensation for the acquisition of a health benefits plan, or for other services to be performed in connection with the provision of the health benefits plan, directly and solely from the local unit, and no provider of health benefits plans shall pay a consultant or producer any commission or other form of compensation, including incentive payments, bonuses, rebates, or any other thing of value. This provision shall apply to any policy of reinsurance issued in connection with a health benefits plan if the reinsurance is purchased for and covers only the health benefits plan of a single local unit. A third party administrator shall also be compensated directly and solely by the local unit.
b. It shall be a violation of this act for any consultant or producer under contract with a local unit to pay any third party intermediary all or any portion of a fee paid by the local unit for services which under the contract are to be rendered directly by the consultant or producer, including, but not limited to, the procurement of a policy of insurance or reinsurance, or the procurement of any alternative benefit plan or ancillary benefit in conjunction with a health benefits plan.
c. Nothing in this act shall prohibit any provider of health benefits plans from compensating third parties with whom the provider contracts to perform the provider's contractual responsibilities to a local unit or from compensating its own bona fide employees on the basis of commissions or other forms of compensation as it provides in its normal course of business.
d. Any consultant contracting with a local unit pursuant to this act or any producer procuring a policy of insurance shall certify to the governing body at least annually that no further fee, commission, bonus, or any other thing of value has been paid by a provider of health benefits plans to the consultant or producer with respect to health benefits contracted for by the local unit.
e. Every provider of health benefits plans shall certify to a local unit annually that no compensation has been paid by the provider of health benefits plans in violation of subsection a. of this section.
f. At the inception of any request for proposals process for health benefits plans, and at the time an award recommendation is made to the local unit, any consultant assisting the local unit with respect to procuring health benefits plans and any producer procuring a policy of insurance shall submit to the local unit a statement of the aggregate amount of commissions, fees, bonuses, or any other thing of value it has received from each health benefits provider that submits a proposal during each of the preceding three years.
7. At no time during the proposal solicitation process shall the finance officer, purchasing agent, administrator, other official of the local unit, or a consultant, if one is under contract, convey any information to any other responder to the request for proposals, including the projected cost of a health benefits plan submitted by any other responder to the request for proposals or disclose any fees proposed to be charged to the local unit by another provider, a consultant or producer that could convey an unfair advantage over any other provider, consultant or producer. The local unit may, however, conduct discussions with those submitting proposals for the purpose of clarifying any information as may be necessary and appropriate, may request and receive best and final offers from all or fewer than all or the proposers and may, if necessary, issue a revision or addendum to the original request for proposals, which shall be remitted to all proposers in writing in order that no proposers have an advantage over others.
8. a. The finance officer, purchasing agent, administrator, or consultant, if one is used by a local unit, shall:
(1) evaluate responses to the request for proposals for a health benefits plan, in terms of cost to the local unit, efficiency of operation, and the quality of services for beneficiaries of the plan, and evaluate the benefits of fully insured plans and potential alternative health benefits plans, including a fully self-insured plan administered by a third party administrator, which may be an insurer acting as a third party administrator, a partially self-insured plan, with or without a stop-loss or reinsurance component, varying deductibles and copayments; and
(2) through examination of the local unit's past loss experience, identify any modifications of components of the local unit's existing plan that may lend themselves to the overutilization of benefits, and modify the existing benefits design to add or eliminate benefits to make the plan more cost effective and economically efficient. The evaluation shall also consider whether the proposed plans meet adequate industry standard levels of service, including timeliness of payment and whether it is compliant with State and federal laws and regulations.
b. Following an analysis of the responses to the request for proposals pursuant to subsection a. of this section, the finance officer, purchasing agent, administrator, or consultant, as the case may be, shall submit a written report to the governing body of the local unit, which shall contain an account of the responders to the proposal, their respective proposals, a discussion of the alternative benefit plans reviewed, and a recommendation for a final award that is in the best interest of the local unit, cost and other factors considered, along with a comprehensive explanation of the basis for the recommendation.
9. Following the submission of a report to the governing body of the local unit as provided in section 8 of this act, the governing body shall pass a resolution selecting the health benefits plan and provider whose proposal it deems to be in the best interest of the local unit, cost, and other factors considered, stating the reasons for the selection in the resolution.
10. Any violation of this act by a consultant, producer, or any other person to whom the local unit pays a fee or other thing of value for services in procuring a health benefits plan, or by any provider of health benefits plans, may result in a breach of contract and the local unit may recover damages in a civil proceeding in a court of competent jurisdiction.
11. Nothing in this act shall be deemed to preclude any negotiation between an employer and its employees or an employee representative with respect to the formulation or procurement of a health benefits plan.
12. This act shall take effect on the 120th day next following enactment and shall apply to every contract for a health benefits plan entered into by a local unit on or after that date.
STATEMENT
This bill requires certain local units of government, including boards of education, to use the established competitive contracting process when purchasing health benefits plans for their employees.
Currently, the "Local Public Contracts Law" and the "Public School Contracts Law" each provide an exception from the requirement of publicly bidding and advertising for bids for contracts for insurance and consultant services. This bill provides that, with respect to units of local government, including municipalities, counties, and agencies and instrumentalities thereof, and boards of education, the competitive contracting process already permitted under the law with respect to certain goods and services shall be used by the local units when purchasing health benefits plans for their employees, and for the purchase of related consulting services, while leaving the current general exception to the public contracts laws for the purchase of insurance coverage and consultant services in place. The bill carves out this new requirement for competitive contracting from that exception only in the case of health benefits plans and related consulting services.
Specifically, the bill requires that every local unit seeking to enter into a contract or contracts for the purchase of health benefits plans and for the purchase of related consulting services shall be subject to the competitive contracting process set forth in sections 3, 4, and 5 of P.L.1999, c.440 (C.40A:11-4.3, 40A:11-4.4, and 40A:11-4.5) or sections 47, 48, and 49 of P.L.1999, c.440 (C.18A:18A-4.3, 4.4, and 4.5), as appropriate.
The bill's provisions supplement the details of this process as it applies to health benefits plans as follows:
A request for proposals to provide a health benefits plan shall include a copy of the health benefits plan currently in effect in the local unit, including the benefits in the plan, the level of deductibles or coinsurance, the loss experience of the plan, the annual total cost of the plan to the local unit, including the commissions or fees paid to an insurer, administrator, or a provider of any ancillary services. The finance officer, purchasing agent, administrator, or consultant, if one is used by a local unit, shall review and evaluate responses to the request for proposals for a health benefits plan. The individual reviewing the responses shall evaluate them in terms of cost to the local unit, efficiency of operation, and the quality of services for beneficiaries of the plan, and evaluate the benefits of fully insured plans and potential alternative health benefits plans, including a fully self-insured plan administered by a third party administrator, which may be an insurer acting as a third party administrator, a partially self-insured plan, with or without a stop-loss or reinsurance component, varying deductibles and copayments. Through examination of the local unit's past loss experience, the person reviewing the plan shall also identify any modifications of components of the local unit's existing plan that may lend themselves to the overutilization of benefits, and modify the existing benefits design to add or eliminate benefits to make the plan more cost effective and economically efficient. The evaluation shall also consider whether the proposed plans meet adequate industry standard levels of service, including timeliness of payment and whether it is compliant with State and federal laws and regulations.
Following an analysis of the responses to the request for proposals, the finance officer, purchasing agent, administrator, or consultant, as the case may be, shall submit a written report to the governing body of the local unit, which shall contain an account of the responders to the proposal, their respective proposals, a discussion of the alternative benefit plans reviewed, and a recommendation for a final award that is in the best interest of the local unit, cost and other factors considered, along with a comprehensive explanation of the basis for the recommendation.
The governing body shall pass a resolution selecting the health benefits plan and provider whose proposal it deems to be in the best interest of the local unit, cost, and other factors considered, stating the reasons for the selection in the resolution.
The bill provides that consultants or producers, as the case may be, shall receive all compensation for the acquisition of a health benefits plan, or for other services to be performed in connection with the provision of the health benefits plan, directly and solely from the local unit, and no provider of health benefits plans shall pay a consultant or producer any commission or other form of compensation, including incentive payments, bonuses, rebates, or any other thing of value.
Any violation of the bill by a consultant, producer, or any other person to whom the local unit pays a fee or other thing of value for services in procuring a health benefits plan, or by any provider of health benefits plans, may result in a breach of the contract.
