NCCI SSJF Part I and Part II B-41723.pdf

Sole Source Justification Form

Version 7.01 Page 1 of 6

Bulletin Reference Number B-41723

Requesting Agency/University The Department of Insurance

Sole Source Justification Form - Part I Section I - General Information

Department/Bureau/Section: Insurance/Procurement

Need Identified Date: Nov 16, 2023 Supply/Service Need By Date: June 1, 2024

Project Title: Plan Administrator of Assigned Risk Worker's Compensation Insurance Plan

Vendor: National Council of Compensation Insurance ("NCCI")

Provide a description of the supplies or services required:

The Department of Insurance is procuring a administer for the Workers Compensation Assigned Risk Plan. The Administrator provides the following services:

• Creates and publishes a uniform classification system

• Calculates rates or loss costs, and makes filings to the state regulator

• Creates and publishes an experience rating plan

• Creates an experience rating worksheet for individual employers

• Assists the employer and/or its representative in the completion and submission of assigned risk application(s) in order to obtain coverage under the Workers Compensation Insurance Plan ( WCIP)

• Assists assigned carriers with information regarding their duties and responsibilities under the WCIP

• Needs to be a licensed rating organization according to the statute.

Value: Estimated Value of Initial Term, this Change Order or Amendment: 6,000,000

Will this Sole Source amend a Professional or Artistic Services contract? Yes No

*Sole Source may not be used for amendments for Professional or Artistic Services if the amendment would increase the value by more than 5% of the initial award or extend the term by more than 60 days.

Type: New Sole Economically Feasible Source

Section II - Proposed Term

One-Time Purchase Term Contract

Estimated Contract Begin Date: June 2, 2024

Estimated Contract End Date: June 1, 2027

Number of Potential Renewals: 0

Length of Each Renewal in Months: 0

Total Value of All Renewals: 0

If a Term Contract, does the term, including renewals, exceed 12 months? Yes No

If yes, provide a detailed justification including any economic benefit received for agreeing to a multi-year term:

Carriers selected through the NCCI Residual Market Servicing Carrier Selection Process are contracted to 3-year terms. Allowing our term to coincide with that timeline provides a safeguard from a midterm lapse.

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Bulletin Reference Number B-41723

Requesting Agency/University The Department of Insurance

Section III - Funding Source Select the type of funding to be used (Check all that apply): State Appropriate Funds Federal Funds Other (Explain):

There is no cost to the State for these services. NCCI is a non-profit vendor.

Section IV - Sole Source Justification

This purchase is economically only available from a single source primarily because it is: (If "Other" explain in one sentence)

Other: Illinois Statute and Administrative Code Requires Contract with Vendor

Are there secondary justification(s) for this sole source? Yes No

Section V - Purchase History

Has the Agency or University Purchased these supplies or services in the past? Yes No

Term Term From Term To Value Description Contract Number Type

1 May 31, 2018 May 31, 2021 0 Plan Administrator for Assigned Risk Worker's Compensation Insurance Plan DOI180146 Sole Source

2 June 1, 2021 June 1, 2024 0 Plan Administrator for Assigned Risk Worker's Compensation Insurance Plan P-27170 Sole Source

If more than 10, or if other comments, explain:

Section VI - Business Rationale

1. Provide a detailed explanation of the need for the supplies or services:

Pursuant to 820 ILCS 305/1 of the Illinois Workers Compensation Act, Illinois employers must maintain workers compensation insurance. Most Illinois employers can purchase worker’s compensation insurance coverage from any one of the 395 insurance companies that are providing workers’ compensation insurance to Illinois employers. However, some employers are unable to obtain standard market coverage due to their industry type or insurance history. These employers can purchase coverage through the residual market, also known as the “Assigned Risk Plan”.

The National Council of Compensation Insurance (“NCCI”) offers highly specialized services to Illinois consumers that the Illinois Department of Insurance does not have the staff, skills or the licenses to support; and ensures a vehicle by which all Illinois employers have a means to comply with the statutory requirements to maintain workers compensation insurance.

To provide these services, the Department of Insurance seeks the assistance of a “Plan Administrator” to facilitate the Assigned Risk Plan as allowed for in the 50 Illinois Adm. Code §2904.50.

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Bulletin Reference Number B-41723

Requesting Agency/University The Department of Insurance

2. Provide a list and describe in detail the specifications required to satisfy the need:

We have been working with NCCI for 3 years. There has not been any new required specification. The specification required are still the same.

The Administrator provides the following services:

• Creates and publishes a uniform classification system

• Calculates rates or loss costs, and makes filings to the state regulator

• Creates and publishes an experience rating plan

• Creates an experience rating worksheet for individual employers

• Assists the employer and/or its representative in the completion and submission of assigned risk application(s) in order to obtain coverage under the Workers Compensation Insurance Plan ( WCIP)

• Assists assigned carriers with information regarding their duties and responsibilities under the WCIP.

• Needs to be a licensed rating organization according to the statute.

3. Provide detail explaining the justification selected in Section IV to explain why the requested supplies or services are the only ones available that can satisfy the agency or university requirements?

Research was conducted by Neha Shrestha, which consisted of an intensive internet search. According to this research, NCCI provides services to various states and they are the only vendor for multiple states. Illinois is an NCCI state like most other states. This means that NCCI oversees employers' experience modifiers and collects all data for the state including claims, class codes, premiums, and payroll.

Currently, there are 35 states and the District of Columbia who use the services of NCCI for their workers' compensation system. Based on this research, NCCI is the only workers’ compensation rating organization available in Illinois that meets the qualification of a licensed rating organization. NCCI is national organization and is the sole provider to many states countrywide.

4. What are the unique features of the supplies or services that are not available in any other product or by any other vendor? Provide specific quantifiable factors/qualifications:

Pursuant to 50 Ill. Adm. Code § 2904.50 “Designee for the purpose in the assignment of an employee to a carrier, the Administrator is appointed the designee of the Department of Insurance pursuant of Sections 401 and 468 of the Illinois Insurance Code”. An Administrator is defined as a qualified entity who administers the managing of the Illinois Workers' Compensation Assigned Risk Plan.

A "Qualified Entity" is described as A qualified entity holds a valid Illinois license that enables it to develop and file its Plan and associated rates, rating plans, rules, forms and manuals. The NCCI is the only entity that meets this qualification as defined as a Licensed Rating Organization. No other entity meets the administrative rule requirements to supply this service.

5. Has the Agency or University considered alternative supplies or services to satisfy their need? Yes No

5a. If no, why weren't alternatives evaluated?

No other entity meets the Illinois statute (215 ILCS 5/459) and administrative rule (50 Ill. Adm. Code § 2904.40) requirements to supply this service.

6. Are there resellers or distributors?

Yes No N/A

7. What efforts were made to get the best possible price (i.e. did the agency/university negotiate) and how did you determine the price for this purchase is considered fair and reasonable?

NCCI does not charge the Department of Insurance for its services as plan administrator.

8. Will this purchase obligate the State to this vendor for future purchases such as maintenance, licensing or continuing need?

Yes No

9. What will be the financial or other impact to the State if this sole source is not approved and a competitive bid is required?

The State would need to establish a Unit to administer the Workers Compensation Assigned Risk Plan and perform the functions listed in (2) at a cost of at least $2,000,000 per year in salary, benefits, and overhead. Not having these services, the agency will not be able to meet its statutory requirements. It would cause every Illinois employer who was unable to obtain traditional workers compensation insurance to be in violation of State law. If the procurement is not approved, the Department will be in violation of state law. This will likely result in audit findings for the agency, negative press coverage, and would damage the credibility of the Department.

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Bulletin Reference Number B-41723

Requesting Agency/University The Department of Insurance

10. Is there any additional information you would like to add to justify this sole source?

The NCCI is the only Workers Compensation rating bureau in the U.S. and is a registered in Illinois as a not-for-profit corporation, owned by its member insurers. All insurance carriers have the opportunity to bid every three years to be one of the carriers who will write the residual market business. To defined residual market simply, it is a place for employers to get the statutorily required work comp coverage who were unable to obtain coverage in the voluntary market. NCCI administers the bid process and services employer placement during the 3 year term. If the term were any shorter than the 3 years, it could cause employers to not be placed with a carrier and cause non-compliance with statute. The mechanism does not exist in Illinois unless we allow it through this procurement. Without this procurement, a multitude of businesses would lose their insurance. NCCI is the national association of approximately 30 states that set the actuarial WC assigned risk rates which a at risk businesses must pay for their WC insurance coverage. Those policies are sold by licensed agents representing insurance agencies, the fees are collected by the agent/agencies; not NCCI.

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Bulletin Reference Number B-41723

Requesting Agency/University The Department of Insurance

Section VII

Requesting Department Representative

Requesting Department Signature Required

I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed.

Date Mar 8, 2024

Printed Name Neha Shrestha E-mail Address neha.shrestha2@illinois.gov

Phone Number 217-720-1513

State Agency Bureau/Division Head or University Purchasing Director Approval and Signature Required

I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed. (All prior form fields will lock once this e-signature is completed)

E-mail Address dana.severinghaus@illinois.gov

Phone Number Date Mar 11, 2024

Printed Name Dana Popish-Severinghaus

Agency Bureau/Division Head or University Purchasing Director and Not a Designee

SPO Approval and Signature Required

I have reviewed and understand the contents of this Sole Source Justification and agree with the State Agency or University determination.

I have reviewed and understand the contents of this Sole Source Justification and do not agree with the State Agency or University determination. As a result, the State Agency or University must explore other sourcing methods to satisfy their need.

State Purchasing Officer Signature Phone Number Date Mar 11, 2024

Printed Name Dereck Reeves E-mail Address dereck.reeves@illinois.gov

Version 7.01 Page 6 of 6

Bulletin Reference Number B-41723

Requesting Agency/University The Department of Insurance

Sole Source Justification Form - Part II Section I - General Information

Project Title Plan Administrator for Assigned Risk Worker's Compensation Insurance Plan

Vendor National Council of Compensation Insurance (“NCCI”)

Initial Date of Procurement Bulletin Posting Mar 12, 2024

Was a Sole Source hearing held per 30 ILCS 500/20-25?

Yes - Complete Section II and III below (Section II will only be visible when this option is selected)

No - Section II not required, go to Section III below Section III - CPO Approval and Signature Required

Based on my review, I authorize the Agency/University to proceed in accordance with the published Notice referenced above.

Based upon my review, I authorize the Agency/University to proceed with the following Changes.

Based on my review, the Agency/University is not authorized to proceed with this sole source as presented and my recommendation is that it be cancelled.

Other

CPO Signature CPO Phone 217-558-2231

Printed Name Ellen H. Daley Date

CPO E-mail ellen.h.daley

Version 7.01 Page of Sole Source Justification Form - Part I Section I - General Information Will this Sole Source amend a Professional or Artistic Services contract?

If yes, what was the original contract value?

*Sole Source may not be used for amendments for Professional or Artistic Services if the amendment would increase the value by more than 5% of the initial award or extend the term by more than 60 days.

Section II - Proposed Term If a Term Contract, does the term, including renewals, exceed 12 months?

If yes, provide a detailed justification including any economic benefit received for agreeing to a multi-year term:

Section III - Funding Source Select the type of funding to be used (Check all that apply):

Section IV - Sole Source Justification Are there secondary justification(s) for this sole source?

Section V - Purchase History Has the Agency or University Purchased these supplies or services in the past?

Term Term From Term To Value Description Contract Number Type Section VI - Business Rationale

1. Provide a detailed explanation of the need for the supplies or services:

2. Provide a list and describe in detail the specifications required to satisfy the need:

3. Provide detail explaining the justification selected in Section IV to explain why the requested supplies or services are the only ones available that can satisfy the agency or university requirements?

4. What are the unique features of the supplies or services that are not available in any other product or by any other vendor? Provide specific quantifiable factors/qualifications:

5. Has the Agency or University considered alternative supplies or services to satisfy their need?

5a. If yes, name the alternative vendors whose supplies or services were evaluated:

5b. If yes, what were the alternatives for each vendor and why were they unacceptable? Be specific with regard to features, characteristics, requirements, capabilities and compatibility:

5c. Explain how the market evaluation was conducted?

*This evaluation is to determine available options within a market. If the evaluation is to determine quality or best suited option, this is not the appropriate source selection. Under no circumstances shall the evaluation consist of testing alternative options. These activities must be conducted in a competitive transparent environment (i.e. IFB or RFP).

5a. If no, why weren't alternatives evaluated?

6. Are there resellers or distributors?

7. What efforts were made to get the best possible price (i.e. did the agency/university negotiate) and how did you determine the price for this purchase is considered fair and reasonable?

8. Will this purchase obligate the State to this vendor for future purchases such as maintenance, licensing or continuing need?

8a. If yes, please provide details regarding future obligations and/or needs:

9. What will be the financial or other impact to the State if this sole source is not approved and a competitive bid is required?

10. Is there any additional information you would like to add to justify this sole source?

Section VII Requesting Department Signature Required I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed.

State Agency Bureau/Division Head or University Purchasing Director Approval and Signature Required I know and understand the contents of this Sole Source Justification and attest that all statements are true and correct and the fairness and reasonableness of the price was adequately confirmed. (All prior form fields will lock once this e-signature is completed) SPO Approval and Signature Required Sole Source Justification Form - Part II Section I - General Information Was a Sole Source hearing held per 30 ILCS 500/20-25?

Section II - Sole Source Hearing Details The State posted to the Illinois Procurement Bulletin a description of the State's need, the justification for the sole source decision, and information regarding the opportunity to submit comments and testify at a public hearing. Notice of the hearing was also posted outside of the hearing room 48 hours prior to the hearing.

The public hearing was conducted for the purpose of receiving testimony regarding the sole source determination. The Hearing Officer recommends the following:

The following relevant documents are attached:

Section III - CPO Approval and Signature Required 9.0.0.2.20101008.1.734229 ellen.h.daley

• Creates and publishes a uniform classification system

• Calculates rates or loss costs, and makes filings to the state regulator

• Creates and publishes an experience rating plan

• Creates an experience rating worksheet for individual employers

• Assists the employer and/or its representative in the completion and submission of assigned risk application(s) in order to obtain coverage under the Workers Compensation Insurance Plan ( WCIP)

• Assists assigned carriers with information regarding their duties and responsibilities under the WCIP

• Needs to be a licensed rating organization according to the statute.

The National Council of Compensation Insurance (“NCCI”) offers highly specialized services to Illinois consumers that the Illinois Department of Insurance does not have the staff, skills or the licenses to support; and ensures a vehicle by which all Illinois employers have a means to comply with the statutory requirements to maintain workers compensation insurance.

To provide these services, the Department of Insurance seeks the assistance of a “Plan Administrator” to facilitate the Assigned Risk Plan as allowed for in the 50 Illinois Adm. Code §2904.50.

Q2Answer: We have been working with NCCI for 3 years. There has not been any new required specification. The specification required are still the same.

The Administrator provides the following services:

• Creates and publishes a uniform classification system

• Calculates rates or loss costs, and makes filings to the state regulator

• Creates and publishes an experience rating plan

• Creates an experience rating worksheet for individual employers

• Assists the employer and/or its representative in the completion and submission of assigned risk application(s) in order to obtain coverage under the Workers Compensation Insurance Plan ( WCIP)

• Assists assigned carriers with information regarding their duties and responsibilities under the WCIP.

• Needs to be a licensed rating organization according to the statute.