Report Title:

Purchases of Health and Human Services; Request for Proposals

Description:

Specifies that proposals for purchases of health and human services must be submitted by duly licensed providers, unless statutes do not require the business to be licensed to provide the service being bid on.  Requires the proposal to be an amount not exceeding the contract amount to be expended by the State.  Effective 7/1/2050.  (SD2)

HOUSE OF REPRESENTATIVES	H.B. NO.	1642
TWENTY-FIFTH LEGISLATURE, 2009		H.D. 1
STATE OF HAWAII		S.D. 2

A BILL FOR AN ACT

RELATING TO THE PURCHASES OF HEALTH AND HUMAN SERVICES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that procurement laws regarding request for proposal procedures for the purchase of health and human services need to be clarified.  Currently, the request for proposal procedure allows for-profit organizations intending to bid for health and human services contracts to submit a "pre-tax" bid.  The ability to submit a "pre-tax bid" does not apply to not-for-profit companies because not-for-profits are not subject to the insurance premium tax which is mandated by Hawaii law.

     In 2008, two for-profit companies bid for the QUEST Expanded Access Program contracts and were awarded the contracts.  In addition, the administration and the department of human services agreed to rebate the amount of the insurance premium tax of 4.265 per cent to these companies, resulting in a higher award amount than the companies had bid.  It appears that the state administration, during these difficult financial times, will be "rebating" these companies approximately $25,000,000 and then the companies will pay their taxes with these funds.  Concerned groups have argued that this is not proper, if not illegal, because the legislature is the only branch of government with the power to impose, waive, or rebate a tax by exempting certain types of organizations.

     On December 18, 2008, in Hawaii Insurers Council vs. Lingle, 120 Hawaii 51, 201 P.3d 564 (2008), the Hawaii supreme court held that only the legislature has the power to tax persons or entities.  The court further held that "[t]he executive branch is left only with the power to administer and enforce the state's tax laws, not to levy new taxes."

     The purpose of this Act is to clarify that any organization that is awarded a contract through state procurement laws and the request for proposal process shall not be entitled to receive more money, in any form, than the amount of the bid.  It further requires bidders to be properly licensed in the State to conduct the business being sought by the request for proposals, unless the business being sought is not required by the State to be licensed.

     SECTION 2.  Chapter 103F, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§103F-   Proposals. Proposals subject to this chapter shall be:

(1) Submitted by an applicant duly licensed in the state to conduct the business being sought by the request for proposals; provided that the applicant is required by statute to be licensed to conduct the business being sought by the request for proposals; and

(2) For an amount not to exceed the contract amount to be expended by the State, regardless of the tax status of the applicant."

     SECTION 3.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

     SECTION 4.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on July 1, 2050.