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 20060H2817B4321 - 2 -
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 20060H2817B4321 - 3 -
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 20060H2817B4321 - 4 -
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 20060H2817B4321 - 5 -
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
20060H2817B4321 - 6 -
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 20060H2817B4321 - 7 -
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. E1L40RLE/20060H2817B4321 - 8 -