PRINTER'S NO. 1503
No. 1368 Session of 1993
INTRODUCED BY PERZEL, BARLEY, HALUSKA AND CESSAR, APRIL 21, 1993
REFERRED TO COMMITTEE ON INSURANCE, APRIL 21, 1993
AN ACT
1 Providing for a comprehensive automobile insurance reform
2 program to be developed and administered by the Insurance
3 Department.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Short title.
7 This act shall be known and may be cited as the Automobile
8 Insurance Reform Act.
9 Section 2. Definitions.
10 The following words and phrases when used in this act shall
11 have the meanings given to them in this section unless the
12 context clearly indicates otherwise:
13 "Commissioner." The Insurance Commissioner of the
14 Commonwealth.
15 "Department." The Insurance Department of the Commonwealth.
16 "Insurer" or "insurance company." An insurer authorized to
17 write automobile insurance within this Commonwealth.
18 "Peer review organizations" or "PRO." Professional groups
1 organized to self-regulate members of their own professions.
2 "Program." The comprehensive automobile insurance reform
3 program promulgated under this act.
4 "Special investigative unit" or "SIU." A special
5 investigative unit organized and operated by an insurer to
6 detect insurance fraud.
7 Section 3. Insurance reform program.
8 The department shall, within six months of the effective date
9 of this act, develop and promulgate, by regulation, a
10 comprehensive automobile insurance reform program. This program
11 shall conform to the provisions of this act.
12 Section 4. Automobile insurance cost reduction.
13 (a) Limits on health care costs.--
14 (1) The program shall contain a fee schedule specifying
15 maximum fees which physicians shall be permitted to charge
16 for virtually every medical procedure which may be required
17 for treatment. This fee schedule shall be based on the
18 revised Medicare Schedule for the preceding year. The
19 approved fee for each procedure shall be no greater than 110%
20 of the Medicare fee for each procedure.
21 (2) As an alternative to the schedule described in
22 paragraph (1), the department may adopt a fee schedule
23 developed by a private actuarial group.
24 (3) The appropriate fee schedule will be chosen by the
25 department upon the advice of a committee of industry,
26 consumer and government experts, to be appointed by the
27 commissioner.
28 (4) The program shall provide that health care providers
29 may charge the scheduled fee or their customary fee,
30 whichever is lower. Health care providers must bill insurers
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1 directly and may not bill patients for any unpaid difference
2 or any disputed amount.
3 (5) An insurer may refuse to pay for medical services
4 deemed unnecessary, duplicative or otherwise improper. Any
5 dispute relating to billing shall be referred to the
6 department which shall appoint a hearing officer to decide
7 the matter. Hearings on these matters, and appeals from
8 decisions of hearing officers, shall be as provided in 2
9 Pa.C.S. (relating to administrative law and procedure).
10 (b) Prevention of health care abuse and fraud.--
11 (1) The program shall allow insurance companies to
12 establish peer review organizations (PRO's), with the
13 approval of the department, to monitor the practices of
14 health care providers to determine if procedures or
15 treatments are unnecessary, duplicative or overcharged.
16 Companies may undertake this individually or collectively.
17 They may also contract with existing PRO's.
18 (2) The program shall require that insurance companies
19 establish special investigative units to investigate possible
20 cases of fraud committed by health care providers. Special
21 investigative units shall work with PRO's to root out,
22 identify and evaluate incidences of fraud. Insurance
23 companies may undertake this individually or collectively.
24 They may also contract with existing investigative
25 organizations.
26 (c) Rates.--
27 (1) The program shall restrain rate increases by
28 curtailing excess profits. Profits shall be limited to a fair
29 and reasonable return. The commissioner shall establish
30 guidelines for the determination of what is fair and
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1 reasonable. In the event that a company is found to have made
2 excess profits from auto insurance policies, policyholders
3 shall be guaranteed a return of such excess profits within a
4 period of six months after such a determination is made.
5 (2) The program shall require that rate increase
6 requests submitted to the department be based on all types of
7 insurance sold by that company.
8 (3) The program shall:
9 (i) Prohibit premium rate increases for a period of
10 three years following the previous increase.
11 (ii) Prohibit rate increases or surcharges resulting
12 from claims made involving damages valued at less than
13 $500 plus the value of the policy deductible.
14 (iii) Prohibit rate increases for policyholders who
15 make claims related to accidents where they are not at
16 fault.
17 (iv) Mandate rate reductions for drivers who have
18 made no at-fault accident claims or who have committed no
19 moving violations for a three-year period.
20 Section 5. Options to reduce insurance costs.
21 (a) Methods of savings.--The program shall provide
22 substantial savings on property damage coverage by the following
23 methods:
24 (1) Allowing policyholders options with regard to
25 deductibles. Insurance companies shall be required to offer a
26 $500 deductible. In addition, banks and finance companies
27 shall be prohibited from requiring deductibles of less than
28 $500 when financing the purchase of a motor vehicle.
29 (2) Requiring premium discounts for policyholders who
30 purchase antitheft devices, passive restraints or antilock
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1 braking systems.
2 (b) Less-essential coverage.--
3 (1) The program shall reduce or eliminate requirements
4 to purchase certain less-essential coverages and shall make
5 underinsured motorist coverage optional.
6 (2) The required medical benefit amount of $10,000
7 provided for under 75 Pa.C.S. § 1711 (relating to required
8 benefits) shall be reduced to $5,000 if the insured can
9 demonstrate another source of medical coverage.
10 (c) Income loss benefits.--The program shall make income
11 loss benefits optional. This option shall be available to those
12 who would not suffer a loss of income and to those who have
13 another source for this protection. The decision to purchase
14 such benefits shall be left solely to the discretion of each
15 policyholder.
16 (d) Funeral benefits.--The program shall make funeral
17 benefits optional.
18 Section 6. Improved assigned risk plan.
19 The program shall provide for appropriate financial
20 incentives for insurance companies to voluntarily sell insurance
21 in all areas of this Commonwealth.
22 Section 7. Prevention of abuse.
23 (a) Civil Penalty.--
24 (1) The program shall provide for the assessment of a
25 civil penalty, not to exceed $5,000, upon any insurer deemed
26 to have acted in bad faith toward any of its policyholders.
27 The program shall provide for the investigation and control
28 of such abuses.
29 (2) For the purposes of this section, delays in the
30 payment of benefits arising out of a reasonable need to
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1 investigate possibilities of fraud shall not constitute bad
2 faith. The program shall contain guidelines under which
3 claims can be delayed due to suspicion of fraud.
4 (b) Certain procedures prohibited.--The use of
5 subrogation/consent procedures which deny prompt payment to
6 insured parties shall be prohibited.
7 (c) Case law.--The program shall incorporate existing case
8 law protection regarding uninsured and underinsured coverage in
9 order to assure the availability of paid-for excess coverage to
10 the more seriously or catastrophically injured victims whose
11 benefits should be the last to be arbitrarily reduced. When one
12 source of paid-for coverage is used up, this procedure, commonly
13 known as "stacking," enables the seriously injured victim to go
14 to the next level of coverage available.
15 Section 8. Litigation reduction.
16 The program shall offer consumers an option of choosing
17 between a tort policy, as is now available, and a limited
18 nontort policy. The limited nontort plan would prohibit a
19 policyholder from suing to recover noneconomic damages, unless:
20 (1) incurred injuries involve a serious and permanent
21 injury, impairment or disfigurement;
22 (2) medical bills exceed $100,000;
23 (3) the at-fault driver was found to have been legally
24 intoxicated at the time of the accident;
25 (4) the at-fault driver intentionally caused the
26 accident; or
27 (5) product liability is involved.
28 Automatic rate reductions, as determined by the program,
29 shall accompany the nontort selection.
30 Section 9. Body shops.
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1 The program shall include provisions establishing a licensing
2 system for body shops that conduct business in this
3 Commonwealth. Any claimant must have covered repairs done by a
4 licensed body shop. This system shall include the following:
5 (1) Provisions to curb fraud related to automobile
6 claims. Appropriate civil penalties shall be assessed against
7 body shops which are found by the department to be engaging
8 in fraudulent practice. Penalties for repeat offenders shall
9 culminate in the revocation of licensure.
10 (2) Pennsylvania State Police responsibility for the
11 inspection of body shops which perform claim-related repairs.
12 Officers shall ascertain the following:
13 (i) That licenses are up to date and otherwise in
14 order.
15 (ii) That shops represent themselves accurately to
16 claimants with regard to their licensure status.
17 (iii) That repairs are performed and billed in a
18 responsible and ethical manner.
19 (3) Provisions relating to fees. A fee shall be charged
20 for the issuance of each license. This fee would be between
21 $200 and $300, as determined by the commissioner. The
22 proceeds of this fee and those accumulated from any monetary
23 penalties which may be assessed by the department shall be
24 used solely for the implementation of the licensing system,
25 including the inspection duties of the Pennsylvania State
26 Police personnel.
27 Section 10. Uninsured motorists.
28 (a) Proof of coverage.--The program shall require insurance
29 companies to furnish policyholders with cards that cover only
30 the period for which a premium has been paid. Each card must be
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1 clearly stamped with the final date of coverage.
2 (b) Confiscation of tags, etc.--The program shall contain
3 provisions as follows:
4 (1) Motorists stopped for moving violations must provide
5 proof of insurance coverage. In the event that a motorist
6 fails to do so, the police officer involved is authorized to
7 confiscate the license plate and registration card of the
8 vehicle.
9 (2) The owner of the vehicle shall have 48 hours to
10 provide proof of coverage. After this period, if no proof is
11 furnished, the plate and card shall be sent to the Department
12 of Transportation, and the vehicle's registration shall be
13 suspended.
14 (3) All vehicle owners who fail to provide proof of
15 insurance coverage prior to the suspension of their vehicle's
16 registration shall pay a $50 service fee to the Department of
17 Transportation for the reinstatement of registration and the
18 return of tags. For each case, the department in turn must
19 remit half of this fee to the police department involved.
20 This fee shall be in addition to any other fines or penalties
21 arising from the incident.
22 (c) Application of section.--This section shall apply 90
23 days following the implementation of the program promulgated
24 under this act.
25 Section 11. Repeals.
26 All acts and parts of acts are repealed insofar as they are
27 inconsistent with this act.
28 Section 12. Effective date.
29 This act shall take effect in 60 days.
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