House approves bill to register employee-leasing companies, bar new self‑funded health plans

Representative David S. Osler introduced substitute House Bill 426, telling the House the bill would require employee‑leasing companies to register with the state, provide detailed application materials, and meet insurance and employment tax obligations before operating in Utah. "A registered employee leasing company is considered the employer of its leased employees for purposes of sponsoring and maintaining any benefit plans," the sponsor said in explaining key provisions.

The bill responds to reports that some undercapitalized leasing firms have failed, leaving employees unpaid and without promised coverage. Representative Moody warned of the scope of the problem: "It's estimated now that as many as 8 to 10,000 people in the state of Utah fall under these provisions," and said one company’s failure left healthcare providers with unpaid claims and employees facing bankruptcy. Representative Franson raised a constitutional concern, saying, "My understanding... may make this bill... unconstitutional" if federal law preempts the state; he recommended adding a saving clause to preserve other parts of the bill if one provision were struck.

Sponsors and supporters said the bill limits but does not ban self‑funding: companies that commence operations after July 1, 1991, may not offer self‑funded insurance, while existing firms are grandfathered but must obtain private‑carrier coverage by March 1, 1993. Representative Osler said, "From a technical standpoint, we don't really forbid self funding of medical insurance. We just don't allow them to be licensed if they do." The bill also requires proof of workers' compensation coverage, compliance with the Employment Security Act, and specified application information (names, addresses, notarized oaths) to improve oversight and civil remedies for noncompliance.

During floor debate, members pressed sponsors on prelicensure review, application disclosures, and criminal penalties for operating without registration; supporters framed the measure as consumer protection for employees and a way to prevent repeat failures that shift costs to hospitals and individuals. After a motion to call the previous question, the House voted on the substitute bill and recorded 72 affirmative votes and 0 negatives; the bill was forwarded to the Senate.

The next step is Senate consideration. The measure includes deadlines and reporting requirements; sponsors said they expect administrative rules and registration procedures to be developed by the insurance or labor divisions referenced in the bill.