PRINTER'S NO. 4321
No. 2817 Session of 2006
INTRODUCED BY GODSHALL, ADOLPH, BASTIAN, BOYD, CLYMER, CRAHALLA,
CREIGHTON, FAIRCHILD, FICHTER, GEIST, GOODMAN, KILLION,
SCAVELLO, SHANER, TANGRETTI, E. Z. TAYLOR AND WRIGHT,
JUNE 21, 2006
REFERRED TO COMMITTEE ON INSURANCE, JUNE 21, 2006
AN ACT
1 Amending the act of May 17, 1921 (P.L.789, No.285), entitled, as
2 amended, "An act relating to insurance; establishing an
3 insurance department; and amending, revising, and
4 consolidating the law relating to the licensing,
5 qualification, regulation, examination, suspension, and
6 dissolution of insurance companies, Lloyds associations,
7 reciprocal and inter-insurance exchanges, and certain
8 societies and orders, the examination and regulation of fire
9 insurance rating bureaus, and the licensing and regulation of
10 insurance agents and brokers; the service of legal process
11 upon foreign insurance companies, associations or exchanges;
12 providing penalties, and repealing existing laws," further
13 providing for powers and duties of the Insurance Fraud
14 Prevention Authority and for the Insurance Fraud Prevention
15 Trust Fund.
16 The General Assembly of the Commonwealth of Pennsylvania
17 hereby enacts as follows:
18 Section 1. Sections 1122 and 1123 of the act of May 17, 1921
19 (P.L.789, No.285), known as The Insurance Department Act of
20 1921, added December 6, 2002 (P.L.1183, No.147), are amended to
21 read:
22 Section 1122. Powers and duties.
23 The authority shall have the powers necessary and convenient
1 to carry out and effectuate the purposes and provisions of this
2 article and the purposes of the authority and the powers
3 delegated by other laws, including, but not limited to:
4 (1) Employ administrative, professional, clerical and
5 other personnel as may be required and organize the staff as
6 may be appropriate to effectuate the purposes of this
7 article.
8 (2) Have a seal and alter the same at pleasure, have
9 perpetual succession, make, execute and deliver contracts,
10 conveyances and other instruments necessary or convenient to
11 the exercise of its powers and make and amend bylaws.
12 (3) Procure insurance against any loss in connection
13 with its property, assets or activities.
14 (4) Apply for, solicit, receive, establish priorities
15 for, allocate, disburse, contract for, administer and spend
16 funds in the fund and other funds that are made available to
17 the authority from any source consistent with the purposes of
18 this article.
19 (5) Make grants to and provide financial support for the
20 Section of Insurance Fraud, the unit of insurance fraud in
21 the Philadelphia District Attorney's Office, other county
22 district attorneys' offices, other government agencies,
23 community, consumer and business organizations consistent
24 with the purposes of this article and considering the extent
25 of the insurance fraud problem in each county of this
26 Commonwealth.
27 (6) Advise the State Treasurer in relation to the
28 investment of any money held in the fund and any funds held
29 in reserve or sinking funds and any money not required for
30 immediate use or disbursement and to advise the State
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1 Treasurer in relation to the use of depositories for moneys
2 of the fund.
3 (7) Assess the scope of the problem of insurance fraud,
4 including areas of this Commonwealth where the problem is
5 greatest, and review State and local criminal justice
6 policies, programs and plans dealing with insurance fraud.
7 (8) Develop and sponsor the implementation of Statewide
8 plans, programs and strategies to combat insurance fraud,
9 improve the administration of the insurance fraud laws and
10 provide a forum for identification of critical problems for
11 those persons dealing with insurance fraud. In conjunction
12 with this power, the authority shall require health care
13 facilities to place posters in each facility announcing that
14 a $25,000 reward will be paid to persons reporting insurance
15 fraud when the report leads to an arrest and conviction.
16 Rewards pursuant to this provision shall be paid from the
17 Insurance Fraud Prevention Trust Fund.
18 (9) Coordinate the development, adoption and
19 implementation of plans, programs and strategies relating to
20 interagency and intergovernmental cooperation with respect to
21 insurance fraud law enforcement.
22 (10) Promulgate rules or regulations related to the
23 expenditure of moneys held in the fund in order to assist and
24 support those agencies, units of government, county district
25 attorneys' offices and other organizations charged with the
26 responsibility of reducing insurance fraud or interested and
27 involved in achieving this goal.
28 (11) Audit at its discretion the plans and programs that
29 it has funded in whole or in part in order to evaluate the
30 effectiveness of the plans and programs and withdraw funding
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1 should the authority determine that a plan or program is
2 ineffective or is no longer in need of further financial
3 support from the fund.
4 (12) Report annually on or before the first day of April
5 to the Governor and the General Assembly on the authority's
6 activities in the preceding period of operation.
7 (13) Meet with the Section of Insurance Fraud on at
8 least a quarterly basis in order to advise and assist it in
9 implementing its statutory mandate.
10 (14) Advise the General Assembly on matters relating to
11 insurance fraud and recommend to the General Assembly on an
12 annual basis any changes to the operation of the Section of
13 Insurance Fraud. The report shall be available for public
14 inspection.
15 (15) Establish either alone or in cooperation with
16 authorized insurance companies and licensed agents and
17 producers a fund to reward persons not connected with the
18 insurance industry who provide information or furnish
19 evidence leading to the arrest and conviction of persons
20 responsible for insurance fraud.
21 (16) Require as a condition of every application and
22 request for financial support, including every application
23 for ongoing renewal of a multiyear grant under section
24 1123(f), that the applicant describe both the nature of and
25 the amount of funding for the activities, if any, devoted to
26 the investigation and prosecution of insurance fraud at the
27 time of the application or request.
28 (17) Require as a condition of every application and
29 request for financial support that every recipient of funding
30 report annually within four months of the close of each
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1 funding cycle to the authority on the use of the funds
2 obtained from the authority during the previous year,
3 including a description of programs implemented and results
4 obtained. The authority will include this information on the
5 use of funds by grantees in its annual report under paragraph
6 (12) and send a copy specifically to the chairman and the
7 minority chairman of the standing committees of the Senate
8 and the chairman and the minority chairman of the standing
9 committees of the House of Representatives with jurisdiction
10 over insurance matters.
11 Section 1123. Insurance Fraud Prevention Trust Fund.
12 (a) Establishment.--There is hereby established a separate
13 account in the State Treasury to be known as the Insurance Fraud
14 Prevention Trust Fund. This fund shall be administered by the
15 State Treasurer with the advice of the authority. All interest
16 earned from the investment or deposit of moneys accumulated in
17 the fund shall be deposited in the fund for the same use.
18 (b) Funds.--All moneys deposited into the fund shall be held
19 in trust and shall not be considered general revenue of the
20 Commonwealth but shall be used only to effectuate the purposes
21 of this article as determined by the authority and shall be
22 subject to audit by the Auditor General.
23 (c) Assessment.--
24 (1) Annually on or before the first day of April, each
25 insurer engaged in the writing of the insurance coverages
26 listed below, as a condition of its authorization to transact
27 business in this Commonwealth, shall pay into the fund in
28 trust an amount equal to the product obtained by multiplying
29 $8,000,000 by a fraction, the numerator of which is the
30 direct premium collected for those coverages listed below by
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1 that insurer in this Commonwealth during the preceding
2 calendar year and the denominator of which is the direct
3 premium written on such coverages in this Commonwealth by all
4 insurers in the same period.
5 (2) The following coverages, as listed in the Annual
6 Statistical Report of the Insurance Department, shall be
7 considered in determining assessments: all fire and casualty
8 direct business written and accident and health and credit
9 accident and health written under life/annuity/accident and
10 health direct business written. Assessments made under this
11 section shall not be considered burdens and prohibitions
12 under section 212.
13 (3) Assessments for health plan corporations and
14 professional health services plan corporations when added
15 together shall not be more than 10% of the total assessment
16 authorized by this subsection. If the total assessment for
17 these organizations is more than 10%, such organizations will
18 share the assessment up to the 10% limit among themselves in
19 the same proportion as they would otherwise have shared their
20 calculated assessment absent this limit. Any deficiency in
21 the total assessment caused by the application of this limit
22 will be shared by all other entities being assessed in the
23 same proportions as they are sharing the rest of the
24 assessment.
25 (d) Base amount.--In succeeding years the authority may vary
26 the base amount of $8,000,000, provided, however, that any
27 increase which on an annual basis exceeds the increase in the
28 Consumer Price Index for this Commonwealth must be approved by
29 three of the four insurance representatives on the board.
30 (d.1) Forfeiture proceedings.--In addition to other sources
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1 of moneys set forth in this section, the fund shall receive the
2 proceeds derived from forfeiture proceedings relating to
3 insurance fraud.
4 (e) Expenditures.--Moneys in the fund may be expended by the
5 authority for the following purposes:
6 (1) Effectuate the powers, duties and responsibilities
7 of the authority as set forth in this article.
8 (2) Pay the costs of administration and operation of the
9 Section of Insurance Fraud and the unit for insurance fraud
10 in the Philadelphia District Attorney's Office.
11 (3) Provide financial support to law enforcement,
12 correctional agencies and county district attorneys' offices
13 for programs designed to reduce insurance fraud and to
14 improve the administration of insurance fraud laws.
15 (4) Provide financial support for other governmental
16 agencies, community, consumer and business organizations for
17 programs designed to reduce insurance fraud and to improve
18 the administration of insurance fraud laws.
19 (5) Provide financial support to programs designed to
20 inform insurance consumers about the costs of insurance fraud
21 to individuals and to society and to suggest methods for
22 preventing insurance fraud.
23 (6) Provide financial support for reward programs
24 leading to the arrest and conviction of persons and
25 organizations engaged in insurance fraud.
26 (7) Provide financial support for other plans, programs
27 and strategies consistent with the purposes of this article.
28 (f) Multiyear grants.--In funding the Section of Insurance
29 Fraud, the Unit for Insurance Fraud in the Philadelphia District
30 Attorney's Office and in funding grant requests, the authority
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1 may consider and approve requests for multiyear grants of not
2 more than four years in length, although extensions of such
3 multiyear commitments may be renewed from year to year. No
4 funding reduction under subsection (d) can be imposed by the
5 authority in any given year which would operate to reduce
6 funding for any multiyear approved program for which persons
7 have been hired for full-time positions to a funding level where
8 such positions must be terminated unless the organization
9 employing such persons certifies either that other equivalent
10 positions are available or that such positions with the
11 antifraud program can be funded from other sources.
12 (g) Dissolution.--In the event that the trust fund is
13 discontinued or the authority is dissolved by operation of law,
14 any balance remaining in the fund, after deducting
15 administrative costs for liquidation, shall be returned to
16 insurers in proportion to their financial contributions to the
17 fund in the preceding calendar year.
18 Section 2. This act shall take effect in 60 days.
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