Required contents of solicited bids and contracts

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30:4D-9. Required contents of solicited bids and contracts

Any bid solicited and any contract awarded by the commissioner in accordance with 8a, above shall contain:

(1) The method of payment subject to an audit of cash needs as determined by the underwriter with approval of the Director of Budget and Accounting and the State Treasurer and by such means as shall be directed by the Director of Budget and Accounting;

(2) That the initial contract term shall be for a period of 2 years commencing January 1, 1970, renewable for a period of 3 years and thereafter renewable for subsequent contract terms of 1 year each at the option of the parties, provided, however, at intervals of 6 months during any contract term, under conditions specified in subparagraph (4) and (5) below, the amount of the premium rate shall be subject to adjustment for the next 6 month interval of the then current contract term or the ensuing contract term, whichever is applicable;

(3) That provision shall be made for the establishment and maintenance, in the custody of the underwriter on behalf of the State, of a rate stabilization reserve to which the State, on the effective date of the contract, shall make an initial contribution of $2,000,000.00. Thereafter, it shall be the intent, from premium contributions and interest earnings, to increase said reserve to an amount equal to approximately 2 months' average premium payments and, to the extent feasible, to maintain it at that figure; and, to assure compliance with such intent, all premium rates for said contract shall include a factor which is projected to accumulate to and maintain said reserve at the level herein specified. Funds in said reserve shall be available for use by the underwriter to cover liabilities under the contract during any contract term in which the incurred liabilities of the underwriter for claims payments and operating expenses exceed premiums paid;

(4) That for any rating period should the incurred premiums payable exceed the sum of (a) liabilities for paid and incurred claims, and (b) liabilities for paid and incurred operating expenses of the underwriter, such excess and any interest thereon shall accrue to the benefit of the State and shall be credited to the rate stabilization reserve. Any such funds held on behalf of the State shall be invested by the Director of the Division of Investments in the Department of the Treasury or invested in a manner prescribed by such director. If at the end of any rating period, the amount in said reserve exceeds the level specified in subparagraph (3) above, this fact, along with the relevant factors specified in subparagraph (6) below, shall be taken into consideration in determining whether or not an adjustment in premium rate will be required for the ensuing rating period;

(5) That should premiums paid, for a 6 month rating period in any contract term, be insufficient to cover liabilities for paid and incurred claims and operating expenses of the underwriter and to maintain the rate stabilization reserve at the level specified in section 9(3), there shall be an adjustment in the premium rate for the ensuing rating period. The new premium shall provide for the recoupment of such insufficiency;

(6) That all premium rates for the contract shall be calculated giving due consideration to all relevant factors including the experience derived during the current and prior rating periods, future cost trends, and maintenance of the rate stabilization reserve. The amount of the premium rate for each 6 months' rating period shall be subject to approval of the Commissioner of Banking and Insurance. Should such approval be given after the beginning of the rating period to which the new premium rate is applicable, the new rate, nevertheless, shall be effective as of the beginning of said rating period and an appropriate retroactive adjustment in premium payments shall be made;

(7) That either party may cancel such contract upon reasonable notice to the other, but not less than 6 months notice, subject to full final accounting and settlement of liabilities;

(8) That the State shall have the right to audit the financial records of the carrier and shall have the right to conduct a performance review of the carrier, continuously or in such manner as it may deem fit, and shall have the right to audit the financial records of providers, insofar as those records deal with patients who have been treated under the provisions of this act;

(9) That the underwriter and fiscal agent shall quarterly and at such other times as the State Treasurer may require and in such form as he prescribes, render an account of the expenditures of money advanced pursuant to this act.

L.1968, c. 413, s. 9.


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