SENATE AMENDED
PRIOR PRINTER'S NOS. 134, 413, 1354 PRINTER'S NO. 1471
No. 112 Session of 2007
INTRODUCED BY EACHUS, MUNDY AND CALTAGIRONE, JANUARY 30, 2007
SENATOR D. WHITE, BANKING AND INSURANCE, IN SENATE, AS AMENDED,
MAY 2, 2007
AN ACT
1 Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An
2 act relating to insurance; amending, revising, and
3 consolidating the law providing for the incorporation of
4 insurance companies, and the regulation, supervision, and
5 protection of home and foreign insurance companies, Lloyds
6 associations, reciprocal and inter-insurance exchanges, and
7 fire insurance rating bureaus, and the regulation and
8 supervision of insurance carried by such companies,
9 associations, and exchanges, including insurance carried by
10 the State Workmen's Insurance Fund; providing penalties; and
11 repealing existing laws," further providing for effect of act
12 on existing laws and, in insurance holding companies, for
13 definitions; providing for the Insurance Restructuring <--
14 Executive Board and for Insurance Restructuring Executive
15 Board approval; further providing, for acquisition of control <--
16 of or merger with domestic insurer and for acquisitions
17 involving insurers not otherwise covered; ESTABLISHING THE <--
18 INSURANCE RESTRUCTURING BOARD; PROVIDING FOR ITS POWERS AND
19 DUTIES; and making an inconsistent repeal.
20 The General Assembly of the Commonwealth of Pennsylvania
21 hereby enacts as follows:
22 Section 1. Section 108 of the act of May 17, 1921 (P.L.682,
23 No.284), known as The Insurance Company Law of 1921, is amended
24 to read:
25 Section 108. Effect of Act on Existing Laws.--The provisions
1 of this act, so far as they are the same as those of existing
2 laws, shall be construed as a continuation of such laws and not
3 as new enactments. The repeal by this act of any provision of
4 law shall not revive any law heretofore repealed or superseded,
5 nor shall such repeal affect any act done, liability incurred,
6 or any right accrued or vested, or any suit or prosecution
7 pending or to be instituted to enforce any right or penalty or
8 punish any offense under the authority of the repealed laws. The
9 provisions of this act shall not limit the jurisdiction and
10 authority of the Office of Attorney General, including, but not
11 limited to, the jurisdiction and authority granted pursuant to
12 the act of October 15, 1980 (P.L.950, No.164), known as the
13 "Commonwealth Attorneys Act."
14 Section 2. The definitions of "insurer" and "person" in
15 section 1401 of the act, amended December 20, 2000 (P.L.967,
16 No.132), are amended and the section is amended by adding a
17 definition to read:
18 Section 1401. Definitions.--As used in this article, and for
19 the purposes of this article only, the following words and
20 phrases shall have the meanings given to them in this section:
21 * * *
22 "Insurer." Any health maintenance organization, preferred
23 provider organization, company, association [or], exchange,
24 hospital plan corporation subject to 40 Pa.C.S. Ch. 61 (relating
25 to hospital plan corporations) or professional health services
26 plan corporation subject to 40 Pa.C.S. Ch. 63 (relating to
27 professional health services plan corporations), authorized by
28 the Insurance Commissioner to transact the business of insurance
29 in this Commonwealth except that the term shall not include:
30 (1) the Commonwealth or any agency or instrumentality
20070H0112B1471 - 2 -
1 thereof;
2 (2) agencies, authorities or instrumentalities of the United
3 States, its possessions and territories, the Commonwealth of
4 Puerto Rico, the District of Columbia or a state or political
5 subdivision; or
6 (3) fraternal benefit societies[; or
7 (4) nonprofit medical and hospital service associations].
8 * * *
9 "Person." An individual, an insurer, a corporation, a
10 partnership, a limited liability company, an association, a
11 joint stock company, a trust, an unincorporated organization,
12 any similar entity or any combination of the foregoing acting in
13 concert. The term shall not include any joint venture
14 partnership exclusively engaged in owning, managing, leasing or
15 developing real or tangible personal property.
16 * * *
17 "Shareholder." A record holder or record owner of shares of
18 an insurer.
19 (1) The term shall include all of the following:
20 (i) A member of an insurer that is a domestic
21 nonstock corporation under 15 Pa.C.S. Ch. 21 (relating to
22 nonstock corporations) or a prior statute.
23 (ii) A member, as defined in 15 Pa.C.S. § 5103
24 (relating to definitions), of an insurer that is a
25 domestic nonprofit corporation under 15 Pa.C.S. Ch. 51
26 (relating to general provisions) or a prior statute.
27 (iii) A subscriber of an insurer that is a domestic
28 reciprocal exchange under Article X or a prior statute.
29 (2) The term shall not include any subscriber, insured
30 or customer of:
20070H0112B1471 - 3 -
1 (i) a hospital plan corporation subject to 40
2 Pa.C.S. Ch. 61 (relating to hospital plan corporations);
3 or
4 (ii) a professional health service plan corporation
5 subject to 40 Pa.C.S. Ch. 63 (relating to professional
6 health services plan corporations).
7 * * *
8 Section 3. Section 1402 of the act, amended or added
9 December 18, 1992 (P.L.1519, No.178) and December 21, 1998
10 (P.L.1108, No.150), is amended to read:
11 Section 1402. Acquisition of Control of or Merger or
12 Consolidation with Domestic Insurer.--(a) (1) No person other
13 than the issuer shall make a tender offer for or a request or
14 invitation for tenders of, or enter into any agreement to
15 exchange securities or seek to acquire or acquire in the open
16 market or otherwise, any voting security of a domestic insurer
17 if, after the consummation thereof, such person would directly
18 or indirectly or by conversion or by exercise of any right to
19 acquire, be in control of such insurer, and no person shall
20 enter into an agreement to merge or consolidate with or
21 otherwise to acquire control of a domestic insurer or any person
22 controlling a domestic insurer unless, at the time any such
23 offer, request or invitation is made or any such agreement is
24 entered into or prior to the acquisition of such securities if
25 no offer or agreement is involved, such person has filed with
26 the department and has sent to such insurer a statement
27 containing the information required by this section and such
28 offer, request, invitation, agreement or acquisition has been
29 approved by the department in the manner hereinafter prescribed.
30 (2) For purposes of this section, a "domestic insurer" shall
20070H0112B1471 - 4 -
1 include any person controlling a domestic insurer unless such
2 person as determined by the department is either directly or
3 through its affiliates primarily engaged in business other than
4 the business of insurance. Such person shall, however, file a
5 preacquisition notification with the department containing the
6 information set forth in section 1403(c)(2) thirty (30) days
7 prior to the proposed effective date of the acquisition. Failure
8 to file is subject to section 1403(e)(3). For purposes of this
9 section, "person" shall not include any securities broker
10 holding, in the usual and customary manner, less than twenty per
11 centum (20%) of the voting securities of an insurance company or
12 of any person which controls an insurance company.
13 (b) The statement to be filed with the department under this
14 section shall be made under oath or affirmation and shall
15 contain the following information:
16 (1) The name and address of each person by whom or on whose
17 behalf the merger, consolidation or other acquisition of control
18 referred to in subsection (a) is to be effected, hereinafter
19 called "acquiring party," and
20 (i) if such person is an individual, his principal
21 occupation and all offices and positions held during the past
22 five (5) years, and any conviction of crimes other than minor
23 traffic violations during the past ten (10) years; or
24 (ii) if such person is not an individual, a report of the
25 nature of its business operations during the past five (5) years
26 or for such lesser period as the person and any predecessors
27 thereof shall have been in existence; an informative description
28 of the business intended to be done by the person and the
29 person's subsidiaries; and a list of all individuals who are or
30 who have been selected to become directors or executive officers
20070H0112B1471 - 5 -
1 of the person, or who perform or will perform functions
2 appropriate to those positions. This list shall include for each
3 individual the information required by subparagraph (i).
4 (2) The source, nature and amount of the consideration used
5 or to be used in effecting the merger, consolidation or other
6 acquisition of control, a description of any transaction wherein
7 funds were or are to be obtained for any such purpose, including
8 any pledge of the insurer's stock or the stock of any of its
9 subsidiaries or controlling affiliates, and the identity of
10 persons furnishing such consideration, provided, however, that
11 where a source of such consideration is a loan made in the
12 lender's ordinary course of business, the identity of the lender
13 shall remain confidential if the person filing such statement so
14 requests.
15 (3) Fully audited financial information as to the earnings
16 and financial condition of each acquiring party for the
17 preceding five (5) fiscal years of each such acquiring party, or
18 for such lesser period as such acquiring party and any
19 predecessors thereof shall have been in existence, and similar
20 unaudited information as of a date not earlier than ninety (90)
21 days prior to the filing of the statement.
22 (4) Any plans or proposals which each acquiring party may
23 have to liquidate such insurer, to sell its assets or merge or
24 consolidate it with any person or to make any other material
25 change in its business or corporate structure or management.
26 (5) The number of shares of any security referred to in
27 subsection (a) which each acquiring party proposes to acquire,
28 and the terms of the offer, request, invitation, agreement or
29 acquisition referred to in subsection (a), and a statement as to
30 the method by which the fairness of the proposal was arrived.
20070H0112B1471 - 6 -
1 (6) The amount of each class of any security referred to in
2 subsection (a) which is beneficially owned or concerning which
3 there is a right to acquire beneficial ownership by each
4 acquiring party.
5 (7) A full description of any contracts, arrangements or
6 understandings with respect to any security referred to in
7 subsection (a) in which any acquiring party is involved,
8 including, but not limited to, transfer of any of the
9 securities, joint ventures, loan or option arrangements, puts or
10 calls, guarantees of loans, guarantees against loss or
11 guarantees of profits, division of losses or profits, or the
12 giving or withholding of proxies. Such description shall
13 identify the persons with whom such contracts, arrangements or
14 understandings have been entered into.
15 (8) A description of the purchase of any security referred
16 to in subsection (a) during the twelve calendar months preceding
17 the filing of the statement, by any acquiring party, including
18 the dates of purchase, names of the purchasers and consideration
19 paid or agreed to be paid therefor.
20 (9) A description of any recommendations to purchase any
21 security referred to in subsection (a) made during the twelve
22 calendar months preceding the filing of the statement, by any
23 acquiring party, or by anyone based upon interviews or at the
24 suggestion of such acquiring party.
25 (10) Copies of all tender offers for, requests or
26 invitations for tenders of, exchange offers for and agreements
27 to acquire or exchange any securities referred to in subsection
28 (a) and, if distributed, of additional soliciting material
29 relating thereto.
30 (11) The term of any agreement, contract or understanding
20070H0112B1471 - 7 -
1 made with or proposed to be made with any broker-dealer as to
2 solicitation of securities referred to in subsection (a) for
3 tender and the amount of any fees, commissions or other
4 compensation to be paid to broker-dealers with regard thereto.
5 (12) Such additional information as the department may by
6 rule or regulation prescribe as necessary or appropriate for the
7 protection of policyholders of the insurer or in the public
8 interest.
9 (c) If the person required to file the statement referred to
10 in subsection (a) is a partnership, limited partnership,
11 syndicate or other group, the department may require that the
12 information called for by subsection (b)(1) through (12) shall
13 be given with respect to each partner of such partnership or
14 limited partnership, each member of such syndicate or group and
15 each person who controls such partner or member. If any such
16 partner, member or person is a corporation or the person
17 required to file the statement referred to in subsection (a) is
18 a corporation, the department may require that the information
19 called for by subsection (b)(1) through (12) shall be given with
20 respect to such corporation, each officer and director of such
21 corporation and each person who is directly or indirectly the
22 beneficial owner of more than ten per centum (10%) of the
23 outstanding voting securities of such corporation.
24 (d) If any material change occurs in the facts set forth in
25 the statement filed with the department and sent to such insurer
26 pursuant to this section, an amendment setting forth such
27 change, together with copies of all documents and other material
28 relevant to such change, shall be filed with the department and
29 sent to such insurer within two (2) business days after the
30 person learns of such change.
20070H0112B1471 - 8 -
1 (e) If any offer, request, invitation, agreement or
2 acquisition referred to in subsection (a) is proposed to be made
3 by means of a registration statement under the Securities Act of
4 1933 (48 Stat. 74, 15 U.S.C. § 77a et seq.), or in circumstances
5 requiring the disclosure of similar information under the
6 Securities Exchange Act of 1934 (48 Stat. 881, 15 U.S.C. § 78a
7 et seq.), or under a State law requiring similar registration or
8 disclosure, the person required to file the statement referred
9 to in subsection (a) may utilize such documents in furnishing
10 the information called for by that statement.
11 (f) (1) The department shall approve any merger,
12 consolidation or other acquisition of control referred to in
13 subsection (a) unless it finds any of the following:
14 (i) After the change of control, the domestic insurer
15 referred to in subsection (a) would not be able to satisfy the
16 requirements for the issuance of a license to write the line or
17 lines of insurance for which it is presently licensed.
18 (ii) The effect of the merger, consolidation or other
19 acquisition of control would be to substantially lessen
20 competition in insurance in this Commonwealth or tend to create
21 a monopoly therein. In applying the competitive standard in this
22 subparagraph:
23 (A) the informational requirements of section 1403(c)(2) and
24 the standards of section 1403(d)(2) shall apply;
25 (B) the merger, consolidation or other acquisition shall not
26 be disapproved if the department finds that any of the
27 situations meeting the criteria provided by section 1403(d)(3)
28 exist; and
29 (C) the department may condition the approval of the merger,
30 consolidation or other acquisition on the removal of the basis
20070H0112B1471 - 9 -
1 of disapproval within a specified period of time.
2 (iii) The financial condition of any acquiring party is such
3 as might jeopardize the financial stability of the insurer or
4 prejudice the interest of its policyholders.
5 (iv) The plans or proposals which the acquiring party has to
6 liquidate the insurer, sell its assets or consolidate or merge
7 it with any person, or to make any other material change in its
8 business or corporate structure or management, are unfair and
9 unreasonable to policyholders of the insurer and not in the
10 public interest.
11 (v) The competence, experience and integrity of those
12 persons who would control the operation of the insurer are such
13 that it would not be in the interest of policyholders of the
14 insurer and of the public to permit the merger, consolidation or
15 other acquisition of control.
16 (vi) The acquisition is likely to be hazardous or
17 prejudicial to the insurance buying public.
18 (vii) The merger, consolidation or other acquisition of
19 control is not in compliance with the laws of this Commonwealth,
20 including Article VIII-A.
21 (2) If the merger, consolidation or other acquisition of
22 control is approved, the department shall so notify the person
23 filing the statement and the insurer [whose stock] that is
24 proposed to be acquired, and such a determination is hereafter
25 referred to as an approving determination. Notice shall also be
26 given by the department of any determination which is not an
27 approving determination. If an approving determination is made
28 by the department and not otherwise, the proposed offer and
29 acquisition may thereafter be made and consummated on the terms
30 and conditions and in the manner described in the statement and
20070H0112B1471 - 10 -
1 subject to such conditions as may be prescribed by the
2 department as hereinafter provided. An approving determination
3 by the department shall be deemed to extend to offers or
4 acquisitions made pursuant thereto within one year following the
5 date of determination. The department may, as a condition of its
6 approving determination, require the inclusion in any offer of
7 provisions requiring the offer to remain open a specified
8 minimum length of time, permitting withdrawal of shares
9 deposited prior to the time the offeror becomes bound to
10 consummate the acquisition and requiring pro rata acceptance of
11 any shares deposited pursuant to the offer. The department shall
12 hold a hearing before making the determination required by this
13 subsection if, within ten (10) days following the filing with
14 the department of the statement, written request for the holding
15 of such hearing is made either by the person proposing to make
16 the acquisition, by the insurer [whose stock] that is proposed
17 to be acquired or, if [such] the issuer of stock proposed to be
18 acquired is not an insurer, by the [insurance company] insurer
19 controlled by such issuer. Otherwise, the department shall
20 determine in its discretion whether such a hearing shall be
21 held. Thirty (30) days' notice of any such hearing shall be
22 given to the person proposing to make the acquisition, to the
23 issuer whose stock is proposed to be acquired and, if such
24 issuer is not an insurer, to the insurance company controlled by
25 such issuer. Notice of any such hearing shall also be given to
26 such other persons, if any, as the department may determine.
27 (3) The department may retain at the acquiring person's
28 expense any attorneys, actuaries, accountants and other experts
29 not otherwise a part of the department's staff as may be
30 reasonably necessary to assist the department in reviewing the
20070H0112B1471 - 11 -
1 proposed acquisition of control.
2 (g) The provisions of this section shall not apply to any
3 offer, request, invitation, agreement or acquisition which the
4 department by order shall exempt therefrom as:
5 (1) not having been made or entered into for the purpose and
6 not having the effect of changing or influencing the control of
7 a domestic insurer; or
8 (2) as otherwise not comprehended within the purposes of
9 this section.
10 (h) The following shall constitute a violation of this
11 section:
12 (1) the failure to file any statement, amendment or other
13 material required to be filed pursuant to subsection (a) or (b);
14 (2) the effectuation or any attempt to effectuate an
15 acquisition of control of or merger or consolidation with a
16 domestic insurer unless the department has given its approval
17 thereto; or
18 (3) a violation of section 819-A.
19 (i) The department shall, within seventy-two hours of
20 receiving a statement filed under this section, provide
21 notification to the Office of Attorney General that the filing
22 was received.
23 Section 4. The act is amended by adding sections to read: <--
24 Section 1402.1. Insurance Restructuring Executive Board.--
25 (a) The Insurance Restructuring Executive Board is established
26 and shall be composed of the following members:
27 (1) The Attorney General or a designee.
28 (2) The Governor or a designee.
29 (3) The Secretary of Health or a designee.
30 (4) The Secretary of Public Welfare or a designee.
20070H0112B1471 - 12 -
1 (5) The Majority Leader of the Senate or a designee.
2 (6) The Minority Leader of the Senate or a designee.
3 (7) The Majority Leader of the House of Representatives or a
4 designee.
5 (8) The Minority Leader of the House of Representatives or a
6 designee.
7 (b) The members shall select from among themselves a
8 chairperson and such officers as they shall determine.
9 (c) The board shall meet at the call of the chairperson.
10 (d) Three quarters of the members of the board shall
11 constitute a quorum. All business of the board shall be
12 conducted by a quorum of the board, except as provided under
13 subsection (g)(2).
14 (e) The members of the board shall be entitled to no
15 compensation for their services as members of the board but
16 shall be entitled to reimbursement for all necessary and
17 reasonable expenses incurred in connection with the performance
18 of their duties as members of the board.
19 (f) The members of the board shall stand in a fiduciary
20 relationship with the Commonwealth.
21 (g) The board shall have the following powers and duties:
22 (1) To hold at least one public hearing on the merger,
23 consolidation or other acquisition of control of a hospital plan
24 corporation or professional health services plan corporation at
25 which the commissioner shall present the commissioner's findings
26 concerning the merger, consolidation or other acquisition of
27 control to the executive board.
28 (2) To make written recommendations to the commissioner.
29 Recommendations under this paragraph shall be approved by at
30 least six members of the board.
20070H0112B1471 - 13 -
1 Section 1402.2. Insurance Restructuring Executive Board
2 Approval.--(a) On or after the effective date of this section,
3 the commissioner shall, prior to approving the merger,
4 consolidation or other acquisition of control of a hospital plan
5 corporation or professional health services plan corporation,
6 present findings and recommendations on the merger,
7 consolidation or other acquisition of control to the Insurance
8 Restructuring Executive Board.
9 (b) The commissioner shall not approve the merger,
10 consolidation or other acquisition of control of a hospital plan
11 corporation or professional health services plan corporation
12 without a prior written recommendation of the board authorizing
13 approval by the commissioner.
14 Section 5 4. Section 1403(a), (b) and (d), added December <--
15 18, 1992 (P.L.1519, No.178), are amended to read:
16 Section 1403. Acquisitions Involving Insurers not Otherwise
17 Covered.--(a) As used in this section the following words and
18 phrases shall have the meanings given to them in this
19 subsection:
20 "Acquisition." Any agreement, arrangement or activity the
21 consummation of which results in a person acquiring, directly or
22 indirectly, the control of another person and includes, but is
23 not limited to, the acquisition of voting securities, the
24 acquisition of assets, bulk reinsurance [and], mergers and
25 consolidations.
26 "Involved insurer." Includes an insurer which either
27 acquires or is acquired, is affiliated with an acquirer or
28 acquired or is the result of a merger or consolidation.
29 (b) (1) Except as exempted in paragraph (2), this section
30 applies to any acquisition in which there is a change in control
20070H0112B1471 - 14 -
1 of an insurer authorized to do business in this Commonwealth.
2 (2) This section shall not apply to any of the following:
3 (i) An acquisition subject to approval or disapproval by the
4 department pursuant to section 1402.
5 (ii) A purchase of securities solely for investment purposes
6 so long as such securities are not used by voting or otherwise
7 to cause or attempt to cause the substantial lessening of
8 competition in any insurance market in this Commonwealth. If a
9 purchase of securities results in a presumption of control as
10 described in the definition of "control" in section [1301] 1401,
11 it is not solely for investment purposes unless the insurance
12 department of the insurer's state of domicile accepts a
13 disclaimer of control or affirmatively finds that control does
14 not exist and such disclaimer action or affirmative finding is
15 communicated by the domiciliary insurance department to the
16 Insurance Department of the Commonwealth.
17 (iii) The acquisition of a person by another person when
18 both persons are neither directly nor through affiliates
19 primarily engaged in the business of insurance, if
20 preacquisition notification is filed with the department in
21 accordance with subsection (c)(2) thirty (30) days prior to the
22 proposed effective date of the acquisition. However, such
23 preacquisition notification is not required for exclusion from
24 this section if the acquisition would otherwise be excluded from
25 this section by this paragraph.
26 (iv) The acquisition of already affiliated persons.
27 (v) An acquisition if, as an immediate result of the
28 acquisition:
29 (A) in no market would the combined market share of the
30 involved insurers exceed five per centum (5%) of the total
20070H0112B1471 - 15 -
1 market;
2 (B) there would be no increase in any market share; or
3 (C) in no market would:
4 (I) the combined market share of the involved insurers
5 exceeds twelve per centum (12%) of the total market; and
6 (II) the market share increases by more than two per centum
7 (2%) of the total market.
8 For the purpose of this subparagraph, a market means direct
9 written insurance premium in this Commonwealth for a line of
10 business as contained in the annual statement required to be
11 filed by insurers licensed to do business in this Commonwealth.
12 (vi) An acquisition for which a preacquisition notification
13 would be required pursuant to this section due solely to the
14 resulting effect on the ocean marine insurance line of business.
15 (vii) An acquisition of an insurer whose domiciliary
16 insurance department affirmatively finds that such insurer is in
17 failing condition; there is a lack of feasible alternative to
18 improving such condition; the public benefits of improving such
19 insurer's condition through the acquisition exceed the public
20 benefits that would arise from not lessening competition; and
21 such findings are communicated by the domiciliary insurance
22 department to the Insurance Department of the Commonwealth.
23 (3) Sections 1409(b) and (c) and 1411 shall not apply to
24 acquisitions provided for in this subsection.
25 * * *
26 (d) (1) The department may enter an order under subsection
27 (e)(1) with respect to an acquisition if there is substantial
28 evidence that the effect of the acquisition may be substantially
29 to lessen competition in any line of insurance in this
30 Commonwealth or tend to create a monopoly therein or if the
20070H0112B1471 - 16 -
1 insurer fails to file adequate information in compliance with
2 subsection (c).
3 (2) In determining whether a proposed acquisition would
4 violate the competitive standard of paragraph (1), the
5 department shall consider the following:
6 (i) Any acquisition covered under subsection (b) involving
7 two or more insurers competing in the same market is prima facie
8 evidence of violation of the competitive standards as follows:
9 (A) if the market is highly concentrated and the involved
10 insurers possess the following shares of the market:
11 Insurer A Insurer B
12 4% 4% or more
13 10% 2% or more
14 15% 1% or more; or
15 (B) if the market is not highly concentrated and the
16 involved insurers possess the following shares of the market:
17 Insurer A Insurer B
18 5% 5% or more
19 10% 4% or more
20 15% 3% or more
21 19% 1% or more.
22 A highly concentrated market is one in which the share of the
23 four largest insurers is seventy-five per centum (75%) or more
24 of the market. Percentages not shown in the tables are
25 interpolated proportionately to the percentages that are shown.
26 If more than two insurers are involved, exceeding the total of
27 the two columns in the table is prima facie evidence of
28 violation of the competitive standard in paragraph (1). For the
29 purpose of this subparagraph, the insurer with the largest share
30 of the market shall be deemed to be insurer A.
20070H0112B1471 - 17 -
1 (ii) There is a significant trend toward increased
2 concentration when the aggregate market share of any grouping of
3 the largest insurers in the market, from the two largest to the
4 eight largest, has increased by seven per centum (7%) or more of
5 the market over a period of time extending from any base year
6 five (5) to ten (10) years prior to the acquisition up to the
7 time of the acquisition. Any acquisition [or merger], merger or
8 consolidation covered under subsection (b) involving two or more
9 insurers competing in the same market is prima facie evidence of
10 violation of the competitive standard in paragraph (1) if:
11 (A) there is a significant trend toward increased
12 concentration in the market;
13 (B) one of the insurers involved is one of the insurers in a
14 grouping of such large insurers showing the requisite increase
15 in the market share; and
16 (C) another involved insurer's market is two per centum (2%)
17 or more.
18 (iii) For the purposes of this paragraph:
19 (A) The term "insurer" includes any company or group of
20 companies under common management, ownership or control.
21 (B) The term "market" means the relevant product and
22 geographical markets. In determining the relevant product and
23 geographical markets, the department shall give due
24 consideration to, among other things, the definitions or
25 guidelines, if any, promulgated by the NAIC and to information,
26 if any, submitted by parties to the acquisition. In the absence
27 of sufficient information to the contrary, the relevant product
28 market is assumed to be the direct written insurance premium for
29 a line of business, such line being that used in the annual
30 statement required to be filed by insurers doing business in
20070H0112B1471 - 18 -
1 this Commonwealth and the relevant geographical market is
2 assumed to be this Commonwealth.
3 (C) The burden of showing prima facie evidence of violation
4 of the competitive standard rests upon the commissioner.
5 (iv) Even though an acquisition is not prima facie violative
6 of the competitive standard under subparagraphs (i) and (ii),
7 the department may establish the requisite anticompetitive
8 effect based upon other substantial evidence. Even though an
9 acquisition is prima facie violative of the competitive standard
10 under subparagraphs (i) and (ii), a party may establish the
11 absence of the requisite anticompetitive effect based upon other
12 substantial evidence. Relevant factors in making a determination
13 under this paragraph include, but are not limited to, the
14 following: market shares, volatility of ranking of market
15 leaders, number of competitors, concentration, trend of
16 concentration in the industry and ease of entry and exit into
17 the market.
18 (3) [An] EXCEPT FOR A MERGER, CONSOLIDATION OR ACQUISITION <--
19 OF CONTROL INVOLVING A HOSPITAL PLAN CORPORATION OR PROFESSIONAL
20 HEALTH SERVICES PLAN CORPORATION, AN order may not be entered
21 under subsection (e)(1) if:
22 (i) the acquisition will yield substantial economies of
23 scale or economies in resource utilization that cannot be
24 feasibly achieved in any other way, and the public benefits
25 which would arise from such economies exceed the public benefits
26 which would arise from not lessening competition; or
27 (ii) the acquisition will substantially increase the
28 availability of insurance, and the public benefits of such
29 increase exceed the public benefits which would arise from not
30 lessening competition.
20070H0112B1471 - 19 -
1 * * *
2 SECTION 5. THE ACT IS AMENDED BY ADDING A SECTION TO READ: <--
3 SECTION 1404.1. INSURANCE RESTRUCTURING BOARD.--(A) THE
4 INSURANCE RESTRUCTURING BOARD IS ESTABLISHED TO REVIEW THE
5 MERGER, CONSOLIDATION OR OTHER ACQUISITION OF CONTROL OF A
6 HOSPITAL PLAN CORPORATION OR PROFESSIONAL HEALTH SERVICES PLAN
7 CORPORATION.
8 (B) THE BOARD SHALL CONSIST OF THE FOLLOWING MEMBERS:
9 (1) THE ATTORNEY GENERAL OR A DESIGNEE.
10 (2) THE AUDITOR GENERAL OR A DESIGNEE.
11 (3) THE SECRETARY OF PUBLIC WELFARE OR A DESIGNEE.
12 (4) THE SECRETARY OF HEALTH OR A DESIGNEE.
13 (5) THE MAJORITY LEADER OF THE SENATE OR A DESIGNEE.
14 (6) THE MINORITY LEADER OF THE SENATE OR A DESIGNEE.
15 (7) THE MAJORITY LEADER OF THE HOUSE OF REPRESENTATIVES OR A
16 DESIGNEE.
17 (8) THE MINORITY LEADER OF THE HOUSE OF REPRESENTATIVES OR A
18 DESIGNEE.
19 (9) A MEMBER OF THE GENERAL PUBLIC WHO IS A POLICY HOLDER OF
20 A HOSPITAL PLAN CORPORATION OR PROFESSIONAL HEALTH SERVICES PLAN
21 CORPORATION APPOINTED BY THE GOVERNOR.
22 (C) A MAJORITY OF THE MEMBERS OF THE BOARD SHALL SELECT A
23 CHAIRPERSON AND OTHER OFFICERS AS THEY SHALL DETERMINE.
24 (D) THE BOARD SHALL MEET AT LEAST FOUR TIMES ANNUALLY.
25 ADDITIONAL MEETINGS SHALL BE HELD AT THE CALL OF THE CHAIRPERSON
26 OR ON THE SUBMISSION OF A REQUEST SIGNED BY A MAJORITY OF THE
27 MEMBERS OF THE BOARD.
28 (E) A MAJORITY OF THE MEMBERS OF THE BOARD SHALL CONSTITUTE
29 A QUORUM. EXCEPT AS PROVIDED IN SUBSECTION (G) OR (H), ALL
30 BUSINESS OF THE BOARD SHALL BE CONDUCTED BY A QUORUM.
20070H0112B1471 - 20 -
1 (F) NO MEMBER OF THE BOARD SHALL BE ENTITLED TO COMPENSATION
2 FOR SERVICES PERFORMED AS A MEMBER OF THE BOARD, BUT SHALL BE
3 ENTITLED TO REIMBURSEMENT FOR ALL NECESSARY AND REASONABLE
4 EXPENSES INCURRED IN CONNECTION WITH THE PERFORMANCE OF THE
5 DUTIES AS A MEMBER OF THE BOARD.
6 (G) THE BOARD SHALL HAVE THE FOLLOWING POWERS AND DUTIES:
7 (1) TO RECEIVE AND REVIEW ALL FILINGS SUBMITTED TO THE
8 DEPARTMENT RELATING TO THE MERGER, CONSOLIDATION OR OTHER
9 ACQUISITION OF CONTROL OF A HOSPITAL PLAN CORPORATION OR
10 PROFESSIONAL HEALTH SERVICES PLAN CORPORATION AND ALL
11 ACCOMPANYING DATA OR OTHER INFORMATION.
12 (2) TO HOLD AT LEAST ONE PUBLIC HEARING ON A MERGER,
13 CONSOLIDATION OR OTHER ACQUISITION OF CONTROL OF A HOSPITAL PLAN
14 CORPORATION OR PROFESSIONAL HEALTH SERVICES PLAN CORPORATION AT
15 WHICH THE DEPARTMENT SHALL PRESENT FINDINGS RELATING TO THE
16 MERGER, CONSOLIDATION OR OTHER ACQUISITION OF CONTROL.
17 (3) TO MAKE WRITTEN RECOMMENDATIONS TO THE DEPARTMENT.
18 RECOMMENDATIONS UNDER THIS PARAGRAPH MUST BE APPROVED BY AT
19 LEAST SEVEN MEMBERS OF THE BOARD.
20 (4) TO APPROVE A FINDING OF THE DEPARTMENT UNDER SUBSECTION
21 (I).
22 (H) THE DEPARTMENT SHALL PRESENT THE FOLLOWING TO THE BOARD:
23 (1) FINDINGS AND RECOMMENDATIONS ON THE MERGER,
24 CONSOLIDATION OR OTHER ACQUISITION OF CONTROL TO THE INSURANCE
25 RESTRUCTURING BOARD, INCLUDING AN ANALYSIS OF WHETHER THE
26 HOSPITAL PLAN CORPORATION OR PROFESSIONAL HEALTH SERVICES PLAN
27 CORPORATION HAS MET ALL THE REQUIREMENTS OF SECTIONS 1402 AND
28 1403.
29 (2) A WRITTEN DETERMINATION THAT THE MERGER, CONSOLIDATION
30 OR OTHER ACQUISITION OF CONTROL IS CONSISTENT WITH THE PUBLIC
20070H0112B1471 - 21 -
1 INTEREST.
2 (I) THE DEPARTMENT SHALL NOT APPROVE THE MERGER,
3 CONSOLIDATION OR OTHER ACQUISITION OF CONTROL OF A HOSPITAL PLAN
4 CORPORATION OR PROFESSIONAL HEALTH SERVICES PLAN CORPORATION
5 UNLESS THE BOARD HAS APPROVED THE WRITTEN DETERMINATION OF THE
6 DEPARTMENT UNDER SUBSECTION (H)(2). THE WRITTEN DETERMINATION
7 MUST BE APPROVED BY AT LEAST SEVEN MEMBERS OF THE BOARD.
8 Section 6. The act of December 19, 1990 (P.L.834, No.198),
9 known as the GAA Amendments Act of 1990, is repealed insofar as
10 it is inconsistent with this act.
11 Section 7. This act shall not apply to any merger,
12 consolidation or other acquisition of control made COMPLETED or <--
13 consummated prior to the effective date of this section and, if
14 required, following the issuance of an approving determination.
15 SECTION 8. THIS ACT SHALL APPLY TO ANY APPLICATION, <--
16 STATEMENT OR OTHER PLAN OR PROPOSAL RELATING TO A MERGER,
17 CONSOLIDATION OR OTHER ACQUISITION OF CONTROL FILED WITH THE
18 INSURANCE DEPARTMENT ON OR AFTER JANUARY 1, 2007.
19 Section 8 9. This act shall take effect immediately. <--
A18L40MSP/20070H0112B1471 - 22 -