PRIOR PRINTER'S NOS. 1, 447, 788, PRINTER'S NO. 1486
934
No. 1 Session of 1993
Report of the Committee of Conference
To the Members of the Senate and House of Representatives:
We, the undersigned, Committee of Conference on the part of
the Senate and House of Representatives for the purpose of
considering Senate Bill No. 1, entitled:
"An act amending the act of June 2, 1915 (P.L.736, No.338),
entitled, as reenacted and amended, 'An act defining the
liability of an employer to pay damages for injuries received by
an employe in the course of employment; establishing an elective
schedule of compensation; * * *; and prescribing penalties,'
adding and amending certain definitions; redesignating referees
as workers' compensation judges; * * *; adding provisions
relating to insurance, self-insurance pooling, self-insurance
guaranty fund, health and safety, AND the prevention of
insurance fraud; further providing for certain penalties; making
repeals; and making editorial changes,"
respectfully submit the following bill as our report:
ROBERT J.MELLOW
J. WILLIAM LINCOLN
ROGER A. MADIGAN
(Committee on the part of the Senate.)
MICHAEL R. VEON
WILLIAM R. LLOYD, JR.
JOSEPH M. GLADECK, JR.
(Committee on the part of the House of Representatives.)
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AN ACT
1 Amending the act of June 2, 1915 (P.L.736, No.338), entitled, as
2 reenacted and amended, "An act defining the liability of an
3 employer to pay damages for injuries received by an employe
4 in the course of employment; establishing an elective
5 schedule of compensation; providing procedure for the
6 determination of liability and compensation thereunder; and
7 prescribing penalties," adding and amending certain
8 definitions; redesignating referees as workers' compensation
9 judges; further providing for contractors, for insurance and
10 self-insurance, for compensation and for payments for medical
11 services; providing for coordinated care organizations;
12 further providing for procedures for the payment of
13 compensation and for medical services and for procedures of
14 the department, referees and the board; adding provisions
15 relating to insurance, self-insurance pooling, self-insurance
16 guaranty fund, health and safety and the prevention of
17 insurance fraud; further providing for certain penalties;
18 making repeals; and making editorial changes.
19 The General Assembly of the Commonwealth of Pennsylvania
20 hereby enacts as follows:
21 Section 1. Section 101 of the act of June 2, 1915 (P.L.736,
22 No.338), known as The Pennsylvania Workmen's Compensation Act,
23 reenacted and amended June 21, 1939 (P.L.520, No.281) and
24 amended December 5, 1974 (P.L.782, No.263), is amended to read:
25 Section 101. That this act shall be called and cited as [The
26 Pennsylvania Workmen's] the Workers' Compensation Act, and shall
27 apply to all injuries occurring within this Commonwealth,
28 irrespective of the place where the contract of hiring was made,
29 renewed, or extended, and extraterritorially as provided by
30 section 305.2.
31 Section 2. Section 104 of the act, amended March 29, 1972
32 (P.L.159, No.61), is amended to read:
33 Section 104. The term "employe," as used in this act is
34 declared to be synonymous with servant, and includes--
35 All natural persons who perform services for another for a
36 valuable consideration, exclusive of persons whose employment is
37 casual in character and not in the regular course of the
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1 business of the employer, and exclusive of persons to whom
2 articles or materials are given out to be made up, cleaned,
3 washed, altered, ornamented, finished or repaired, or adapted
4 for sale in the worker's own home, or on other premises, not
5 under the control or management of the employer. [Every] Except
6 as hereinafter provided in clause (c) of section 302 and
7 sections 305 and 321 of this act, every executive officer of a
8 corporation elected or appointed in accordance with the charter
9 and by-laws of the corporation, except elected officers of the
10 Commonwealth or any of its political subdivisions, shall be an
11 employe of the corporation [except as hereinafter provided in
12 sections 302 (c), 305 and 321]. An executive officer of a
13 corporation may, however, elect not to be an "employe" of the
14 corporation for the purposes of this act. For purposes of this
15 section, an executive officer is an individual who has an
16 ownership interest in the corporation, in the case of a
17 Subchapter S corporation as defined by the act of March 4, 1971
18 (P.L.6, No.2), known as the "Tax Reform Code of 1971," or an
19 ownership interest in the corporation of at least five per
20 centum, in the case of a Subchapter C corporation as defined by
21 the Tax Reform Code of 1971.
22 Section 3. The act is amended by adding sections to read:
23 Section 105.3. The term "construction design professional,"
24 as used in this act, means a professional engineer or land
25 surveyor licensed by the State Registration Board for
26 Professional Engineers and Professional Land Surveyors under the
27 act of May 23, 1945 (P.L.913, No.367), known as the
28 "Professional Engineers and Professional Land Surveyors
29 Registration Law," a landscape architect who is licensed by the
30 State Board of Landscape Architects under the act of January 24,
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1 1966 (1965 P.L.1527, No.535), known as the "Landscape
2 Architects' Registration Law," an architect who is licensed by
3 the Architects Licensure Board under the act of December 14,
4 1982 (P.L.1227, No.281), known as the "Architects Licensure
5 Law," or any corporation or association (including professional
6 corporations) organized or registered under the act of December
7 21, 1988 (P.L.1444, No.177), known as the "General Association
8 Act of 1988," practicing engineering, architecture, landscape
9 architecture or surveying in this Commonwealth.
10 Section 109. In addition to the definitions set forth in
11 this Article, the following words and phrases when used in this
12 act shall have the meanings given to them in this section unless
13 the context clearly indicates otherwise:
14 "Bill" means a statement or invoice for payment of services
15 under clause (f) of section 306 of this act which identifies the
16 claimant, the date of injury, the payment codes referred to in
17 clause (f) of section 306 of this act and a description of the
18 services provided on or in standard form prescribed by the
19 Department of Labor and Industry.
20 "Burn facility" means a facility which meets the service
21 standards of the American Burn Association.
22 "Commissioner" means the Insurance Commissioner of the
23 Commonwealth.
24 "Coordinated care organization" or "CCO" means an
25 organization licensed in Pennsylvania and certified by the
26 Secretary of Health on the basis of established criteria
27 possessing the capacity to provide medical services to an
28 injured worker.
29 "DRG" means diagnosis related groups.
30 "HCFA" means the Health Care Financing Administration.
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1 "Health care provider" means any person, corporation,
2 facility or institution licensed or otherwise authorized by the
3 Commonwealth to provide health care services, including, but not
4 limited to, any physician, coordinated care organization,
5 hospital, health care facility, dentist, nurse, optometrist,
6 podiatrist, physical therapist, psychologist, chiropractor or
7 pharmacist and an officer, employe or agent of such person
8 acting in the course and scope of employment or agency related
9 to health care services.
10 "Health maintenance organization" means an entity defined in
11 and subject to the act of December 29, 1972 (P.L.1701, No.364),
12 known as the "Health Maintenance Organization Act."
13 "Hospital plan corporation" means an entity defined in and
14 subject to Chapter 61 (relating to hospital plan corporations)
15 of Title 40 (relating to insurance) of the Pennsylvania
16 Consolidated Statutes.
17 "Insurance Company Law of 1921" means the act of May 17, 1921
18 (P.L.682, No.284), known as "The Insurance Company Law of 1921."
19 "Insurer" means an entity subject to the act of May 17, 1921
20 (P.L.682, No.284), known as "The Insurance Company Law of 1921,"
21 including the State Workmen's Insurance Fund, with which an
22 employer has insured liability under this act pursuant to
23 section 305 or a self-insured employer or fund exempted by the
24 Department of Labor and Industry pursuant to section 305 of this
25 act.
26 "Intermediary" means an organization with a contractual
27 relationship with the Health Care Financing Administration to
28 process Medicare Part A or Part B claims.
29 "Life-threatening injury" shall be as defined by the American
30 College of Surgeons' triage guidelines regarding use of trauma
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1 centers for the region where the services are provided.
2 "Occupational Disease Act" means the act of June 21, 1939
3 (P.L.566, No.284), known as "The Pennsylvania Occupational
4 Disease Act."
5 "Pass-through costs" means Medicare reimbursed costs to a
6 hospital that "pass through" the prospective payment system and
7 are not included in the diagnosis related group payments. The
8 term includes medical education, capital expenditures, insurance
9 and interest expense on fixed assets.
10 "Peer review," for the purpose of undertaking reviews and
11 reports pursuant to section 420, means review by:
12 (1) an impartial physician or other health care provider
13 selected by the Secretary of Labor and Industry upon
14 recommendation of the deans of the medical colleges located in
15 this Commonwealth;
16 (2) a panel of such professionals and providers selected by
17 the Secretary of Labor and Industry upon recommendation of the
18 deans of the medical colleges located in this Commonwealth or
19 recommendation of professional associations representing such
20 professionals and providers; or
21 (3) a Peer Review Organization approved by the commissioner
22 and selected by the Secretary of Labor and Industry.
23 "Professional health service corporation" means an entity
24 defined in and subject to Chapter 63 (relating to professional
25 health services plan corporations) of Title 40 (relating to
26 insurance) of the Pennsylvania Consolidated Statutes.
27 "Provider" means a health care provider.
28 "Referee" means a workers' compensation judge, as designated
29 under section 401.
30 "Secretary" means the Secretary of Labor and Industry of the
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1 Commonwealth.
2 "Trauma center" means a facility accredited by the
3 Pennsylvania Trauma Systems Foundation under the act of July 3,
4 1985 (P.L.164, No.45), known as the "Emergency Medical Services
5 Act."
6 "Urgent injury" shall be as defined by the American College
7 of Surgeons' triage guidelines regarding use of trauma centers
8 for the region where the services are provided.
9 "Usual and customary charge" means the charge most often made
10 by providers of similar training, experience and licensure for a
11 specific treatment, accommodation, product or service in the
12 geographic area where the treatment, accommodation, product or
13 service is provided.
14 "Utilization review organizations" shall be those
15 organizations consisting of an impartial physician, surgeon or
16 other health care provider or a panel of such professionals and
17 providers as authorized by the Secretary of Labor and Industry
18 and published as a list in the form of a notice in the
19 Pennsylvania Bulletin, for the purpose of reviewing the
20 reasonableness and necessity of treatment by a health care
21 provider pursuant to section 306(f.1)(6).
22 Section 4. Section 204 of the act, amended December 5, 1974
23 (P.L.782, No.263), is amended to read:
24 Section 204. (a) No agreement, composition, or release of
25 damages made before the date of any injury shall be valid or
26 shall bar a claim for damages resulting therefrom; and any such
27 agreement is declared to be against the public policy of this
28 Commonwealth. The receipt of benefits from any association,
29 society, or fund shall not bar the recovery of damages by action
30 at law, nor the recovery of compensation under article three
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1 hereof; and any release executed in consideration of such
2 benefits shall be void: Provided, however, That if the employe
3 receives unemployment compensation benefits, such amount or
4 amounts so received shall be credited as against the amount of
5 the award made under the provisions of [section 108.] sections
6 108 and 306, except for benefits payable under section 306(c) or
7 307.
8 (b) For the exclusive purpose of determining eligibility for
9 compensation under the "Unemployment Compensation Law," weekly
10 compensation paid to an employe under this act shall be deemed
11 to be a credit week as that term is defined in the "Unemployment
12 Compensation Law."
13 Section 5. Section 301(a) and (c)(1) of the act, amended
14 October 17, 1972 (P.L.930, No.223) and December 5, 1974
15 (P.L.782, No.263), are amended to read:
16 Section 301. (a) Every employer shall be liable for
17 compensation for personal injury to, or for the death of each
18 employe, by an injury in the course of his employment, and such
19 compensation shall be paid in all cases by the employer, without
20 regard to negligence, according to the schedule contained in
21 sections three hundred and six and three hundred and seven of
22 this article: Provided, That no compensation shall be paid when
23 the injury or death is intentionally self inflicted, or is
24 caused by the employe's violation of law, including, but not
25 limited to, the illegal use of drugs, but the burden of proof of
26 such fact shall be upon the employer, and no compensation shall
27 be paid if, during hostile attacks on the United States, injury
28 or death of employes results solely from military activities of
29 the armed forces of the United States or from military
30 activities or enemy sabotage of a foreign power. In cases where
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1 the injury or death is caused by intoxication, no compensation
2 shall be paid if the injury or death would not have occurred but
3 for the employe's intoxication, but the burden of proof of such
4 fact shall be upon the employer.
5 * * *
6 (c) (1) The terms "injury" and "personal injury," as used
7 in this act, shall be construed to mean an injury to an employe,
8 regardless of his previous physical condition, arising in the
9 course of his employment and related thereto, and such disease
10 or infection as naturally results from the injury or is
11 aggravated, reactivated or accelerated by the injury; and
12 wherever death is mentioned as a cause for compensation under
13 this act, it shall mean only death resulting from such injury
14 and its resultant effects, and occurring within three hundred
15 weeks after the injury. The term "injury arising in the course
16 of his employment," as used in this article, shall not include
17 an injury caused by an act of a third person intended to injure
18 the employe because of reasons personal to him, and not directed
19 against him as an employe or because of his employment; nor
20 shall it include injuries sustained while the employe is
21 operating a motor vehicle provided by the employer if the
22 employe is not otherwise in the course of employment at the time
23 of injury; but shall include all other injuries sustained while
24 the employe is actually engaged in the furtherance of the
25 business or affairs of the employer, whether upon the employer's
26 premises or elsewhere, and shall include all injuries caused by
27 the condition of the premises or by the operation of the
28 employer's business or affairs thereon, sustained by the
29 employe, who, though not so engaged, is injured upon the
30 premises occupied by or under the control of the employer, or
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1 upon which the employer's business or affairs are being carried
2 on, the employe's presence thereon being required by the nature
3 of his employment.
4 * * *
5 Section 6. Section 302 of the act, amended December 5, 1974
6 (P.L.782, No.263), is amended to read:
7 Section 302. (a) A contractor who subcontracts all or any
8 part of a contract and his insurer shall be liable for the
9 payment of compensation to the employes of the subcontractor
10 unless the subcontractor primarily liable for the payment of
11 such compensation has secured its payment as provided for in
12 this act. Any contractor or his insurer who shall become liable
13 hereunder for such compensation may recover the amount thereof
14 paid and any necessary expenses from the subcontractor primarily
15 liable therefor.
16 For purposes of this subsection, a person who contracts with
17 another (1) to have work performed consisting of (i) the
18 removal, excavation or drilling of soil, rock or minerals, or
19 (ii) the cutting or removal of timber from lands, or (2) to have
20 work performed of a kind which is a regular or recurrent part of
21 the business, occupation, profession or trade of such person
22 shall be deemed a contractor, and such other person a
23 subcontractor. This subsection shall not apply, however, to an
24 owner or lessee of land principally used for agriculture who is
25 not a covered employer under this act and who contracts for the
26 removal of timber from such land.
27 (b) Any employer who permits the entry upon premises
28 occupied by him or under his control of a laborer or an
29 assistant hired by an employe or contractor, for the performance
30 upon such premises of a part of such employer's regular business
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1 entrusted to that employe or contractor, shall be liable for the
2 payment of compensation to such laborer or assistant unless such
3 hiring employe or contractor, if primarily liable for the
4 payment of such compensation, has secured the payment thereof as
5 provided for in this act. Any employer or his insurer who shall
6 become liable hereunder for such compensation may recover the
7 amount thereof paid and any necessary expenses from another
8 person if the latter is primarily liable therefor.
9 For purposes of this subsection (b), the term "contractor"
10 shall have the meaning ascribed in section 105 of this act.
11 (c) Any employer employing persons in agricultural labor
12 shall be required to provide workmen's compensation coverage for
13 such employes according to the provisions of this act, if such
14 employer is otherwise covered by the provisions of this act or
15 if during the calendar year such employer pays wages to one
16 employe for agricultural labor totaling one hundred fifty
17 dollars ($150) or more or furnishes employment to one employe in
18 agricultural labor on twenty or more days in any of which events
19 the employer shall be required to provide coverage for all
20 employes.
21 (d) A contractor shall not subcontract all or any part of a
22 contract unless the subcontractor has presented proof of
23 insurance under this act.
24 (e) (1) Prior to issuing a building permit to a contractor,
25 a municipality shall require the contractor to present proof of
26 workers' compensation insurance or an affidavit that the
27 contractor does not employ other individuals and is not required
28 to carry workers' compensation insurance.
29 (2) Every building permit issued by a municipality to a
30 contractor shall clearly set forth the name and workers'
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1 compensation policy and the contractor's Federal or State
2 Employer Identification Number. This information shall be in
3 addition to any information required by municipal ordinance. If
4 the building permit is issued to an applicant which affirms it
5 is not obligated to maintain workers' compensation insurance
6 under this act, the permit shall clearly set forth the
7 contractor's Federal or State Employer Identification Number and
8 the substance of the affirmation and that the applicant is not
9 permitted to employ any individual to perform work pursuant to
10 the building permit.
11 (3) Every municipality issuing a building permit shall be
12 named as a workers' compensation policy certificate holder of a
13 contractor-issued building permit. This certificate shall be
14 filed with the municipality's copy of the building permit. An
15 insurer issuing a policy which names a municipality as a
16 workers' compensation policy certificate holder pursuant to this
17 section shall be required to notify that municipality of the
18 expiration or cancellation of any such policy of insurance or
19 policy certificate within three working days of such
20 cancellation or expiration.
21 (4) A municipality shall issue a stop-work order to a
22 contractor who is performing work pursuant to a building permit,
23 upon receiving actual notice that the contractor's workers'
24 compensation insurance or State-approved self-insured status has
25 been cancelled. Also, if the municipality receives actual notice
26 that a permittee, having filed an affidavit of exemption from
27 workers' compensation insurance, has hired persons to perform
28 work pursuant to a building permit and does not maintain
29 required workers' compensation insurance, the municipality shall
30 issue a stop-work order. This order shall remain in effect until
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1 proper workers' compensation coverage is obtained for all work
2 performed pursuant to the building permit.
3 (f) (1) Where a contractor is performing work for a public
4 body or political subdivision, all contractors and
5 subcontractors shall provide proof of workers' compensation
6 insurance to the public body or political subdivision effective
7 for the duration of the work.
8 (2) The public body or political subdivision shall issue a
9 stop work order to any contractor who is performing work for
10 that public body or political subdivision upon receiving notice
11 that any public contractor's workers' compensation insurance, or
12 State-approved self-insurance status, has expired or has been
13 cancelled. If the public body or political subdivision receives
14 actual notice that a contractor, having filed an affidavit of
15 exemption from workers' compensation insurance, has hired
16 persons to perform work for a public body or political
17 subdivision and does not maintain the required workers'
18 compensation insurance or self-insurance, the public body or
19 political subdivision shall issue a stop work order, which order
20 shall remain in effect until proper workers' compensation
21 coverage is obtained for all work performed pursuant to the
22 contract of work for the public body or political subdivision.
23 (g) Should such policy of workers' compensation insurance be
24 cancelled or expire during the duration of the work or should
25 the workers' compensation self-insurance status change during
26 the said period, the contractor shall immediately notify, in
27 writing, the municipality, public body or political subdivision
28 of such cancellation, expiration or change in status.
29 (h) Nothing in this act shall be the basis of any liability
30 on part of the municipality.
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1 (i) For purposes of subsections (d), (e) and (f) of this
2 section, "proof of insurance" shall include a certificate of
3 insurance or self-insurance, demonstrating current coverage and
4 compliance with the requirements of this act, the Occupational
5 Disease Act and the Longshore and Harbor Workers' Compensation
6 Act (44 Stat. 1424, 33 U.S.C. § 901 et seq.), its amendments and
7 supplements, where applicable.
8 (j) For purposes of subsections (d), (e) and (f) of this
9 section, "proof of insurance" shall not be required when the
10 employer has been exempted pursuant to section 304.2 of this
11 act.
12 Section 7. Section 305 of the act, amended December 5, 1974
13 (P.L.782, No.263) and repealed in part April 28, 1978 (P.L.202,
14 No.53), is amended to read:
15 Section 305. (a) (1) Every employer liable under this act
16 to pay compensation shall insure the payment of compensation in
17 the State Workmen's Insurance Fund, or in any insurance company,
18 or mutual association or company, authorized to insure such
19 liability in this Commonwealth, unless such employer shall be
20 exempted by the department from such insurance. Such insurer
21 shall assume the employer's liability hereunder and shall be
22 entitled to all of the employer's immunities and protection
23 hereunder except, that whenever any employer shall have
24 purchased insurance to provide benefits under this act to
25 persons engaged in domestic service, neither the employer nor
26 the insurer may invoke the provisions of section 321 as a
27 defense. An employer desiring to be exempt from insuring the
28 whole or any part of his liability for compensation shall make
29 application to the department, showing his financial ability to
30 pay such compensation, whereupon the department, if satisfied of
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1 the applicant's financial ability, shall, upon the payment of a
2 fee of [one hundred dollars ($100.00)] five hundred dollars
3 ($500), issue to the applicant a permit authorizing such
4 exemption.
5 (2) In securing the payment of benefits, the department
6 shall require an employer wishing to self-insure its liability
7 to establish sufficient security by posting a bond or other
8 security, including letters of credit drawn on commercial banks
9 with a Thomson Bank Watch rating of B or better or a CD rating
10 of BBB or better by Standard and Poor's or Baa 2 or better by
11 Moody's. This paragraph shall not apply to municipalities.
12 (3) The department shall establish a period of twelve (12)
13 calendar months, to begin and end at such times as the
14 department shall prescribe, which shall be known as the annual
15 exemption period. Unless previously revoked, all permits issued
16 under this section shall expire and terminate on the last day of
17 the annual exemption period for which they were issued. Permits
18 issued under this act shall be renewed upon the filing of an
19 application, and the payment of a renewal fee of one hundred
20 dollars ($100.00). The department may, from time to time,
21 require further statements of the financial ability of such
22 employer, and, if at any time such employer appear no longer
23 able to pay compensation, shall revoke its permit granting
24 exemption, in which case the employer shall immediately
25 subscribe to the State Workmen's Insurance Fund, or insure his
26 liability in any insurance company or mutual association or
27 company, as aforesaid.
28 (b) Any employer who fails to comply with the provisions of
29 this section for every such failure, shall, upon [summary
30 conviction before any official of competent jurisdiction, be
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1 sentenced to pay a fine of not less than five hundred dollars
2 ($500) nor more than two thousand dollars ($2,000), and costs of
3 prosecution, or imprisonment for a period of not more than one
4 (1) year, or both.] conviction in the court of common pleas, be
5 guilty of a misdemeanor of the third degree. If the failure to
6 comply with this section is found by the court to be
7 intentional, the employer shall be guilty of a felony of the
8 third degree. Every day's violation shall constitute a separate
9 offense. A judge of the court of common pleas may, in addition
10 to imposing fines and imprisonment, include restitution in his
11 order: Provided, That there is an injured employe who has
12 obtained an award of compensation. The amount of restitution
13 shall be limited to that specified in the award of compensation.
14 It shall be the duty of the department to enforce the provisions
15 of this section; and it shall investigate all violations that
16 are brought to its notice and shall institute prosecutions for
17 violations thereof. All fines recovered under the provisions of
18 this section shall be paid to the department, and by it paid
19 into the State Treasury if the prosecutor is the Attorney
20 General and to the operating fund of the county in which the
21 district attorney is elected if the prosecutor is a district
22 attorney.
23 (c) In any proceeding against an employer under this
24 section, a certificate of non-insurance issued by the official
25 Workmen's Compensation Rating and Inspection Bureau and a
26 certificate of the department showing that the defendant has not
27 been exempted from obtaining insurance under this section, shall
28 be prima facie evidence of the facts therein stated.
29 (d) When any employer fails to secure the payment of
30 compensation under this act as provided in sections 305 and
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1 305.2, the injured employe or his dependents may proceed either
2 under this act or in a suit for damages at law as provided by
3 article II.
4 (e) Every employer shall post a notice at its primary place
5 of business and at its sites of employment in a prominent and
6 easily accessible place, including, without limitation, areas
7 used for the treatment of injured employes or for the
8 administration of first aid, containing:
9 (1) Either the name of the employer's carrier and the
10 address and telephone number of such carrier or insurer or, if
11 the employer is self-insured, the name, address and telephone
12 number of the person to whom claims or requests for information
13 are to be addressed.
14 (2) The following statement: "Remember, it is important to
15 tell your employer about your injury."
16 The notice shall be posted in prominent and easily accessible
17 places at the site of employment, including such places as are
18 used for treatment and first aid of injured employes. Such a
19 listing shall contain the information as specified in this
20 section, typed or printed on eight and one-half inch by eleven
21 inch or eight and one-half inch by thirteen inch paper in
22 standard size type or larger.
23 Section 8. Section 306(a) and (f) of the act, amended
24 December 5, 1974 (P.L.782, No.263) and July 1, 1978 (P.L.692,
25 No.119), are amended and the section is amended by adding
26 clauses to read:
27 Section 306. The following schedule of compensation is
28 hereby established:
29 (a) (1) For total disability, sixty-six and two-thirds per
30 centum of the wages of the injured employe as defined in section
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1 three hundred and nine beginning after the seventh day of total
2 disability, and payable for the duration of total disability,
3 but the compensation shall not be more than the maximum
4 compensation payable [nor less than fifty per centum of the
5 Statewide average weekly wage. If at the time of injury, the
6 employe receives wages equal to or less than fifty per centum of
7 the Statewide average weekly wage, then he shall receive ninety
8 per centum of his average weekly wage as compensation, but in no
9 event less than thirty-three and one-third per centum of the
10 maximum weekly compensation payable] as defined in section
11 105.2. Nothing in this clause shall require payment of
12 compensation after disability shall cease. If the benefit so
13 calculated is less than fifty per centum of the Statewide
14 average weekly wage, then the benefit payable shall be the lower
15 of fifty per centum of the Statewide average weekly wage or
16 ninety per centum of the worker's average weekly wage.
17 (2) Nothing in this act shall require payment of
18 compensation for any period during which the employe is
19 incarcerated after a conviction.
20 * * *
21 [(f) (1) The employer shall provide payment for reasonable
22 surgical and medical services, services rendered by duly
23 licensed practitioners of the healing arts, medicines, and
24 supplies, as and when needed: Provided, That if a list of at
25 least five designated physicians or other duly licensed
26 practitioners of the healing arts or a combination thereof is
27 provided by the employer, the employe shall be required to visit
28 one of the physicians or other practitioners so designated and
29 shall continue to visit the same or another physician or
30 practitioner for a period of fourteen days from the date of the
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1 first visit. Subsequent treatment may be provided by any
2 physician or any other duly licensed practitioner of the healing
3 arts or a combination thereof, of the employes own choice, and
4 such treatment shall be paid for by the employer. Any employe
5 who next following the termination of the fourteen-day period is
6 provided treatment from a physician or other duly licensed
7 practitioner of the healing arts who is not one of the
8 physicians or practitioners designated by the employer, shall
9 notify the employer within five days of the first visit to said
10 physician or practitioner. However, if the employe fails to so
11 notify the employer, the employe shall suffer no loss of rights
12 or benefits to which he is otherwise entitled under the act.
13 (2) If and only if the employer has designated at least five
14 physicians or other duly licensed practitioners of the healing
15 arts or a combination thereof as permitted by the preceding
16 paragraph, the following reporting provisions shall apply.
17 Nothing in the following paragraphs shall eliminate rights of
18 the employer to obtain all records and data as permitted under
19 any other sections of this act.
20 (i) The physician or other duly licensed practitioner of the
21 healing arts shall be required to file periodic reports with the
22 employer on a form prescribed by the department which shall
23 include, where pertinent, history, diagnosis, treatment,
24 prognosis and physical findings. The report shall be filed
25 within twenty-one days of commencing treatment and at least once
26 a month thereafter, as long as treatment continues. The employer
27 shall not be liable to pay for such treatment until a report has
28 been filed.
29 (ii) The employer shall have the right to petition the
30 department for review of the necessity or frequency of treatment
19930S0001B1486 - 20 -
1 or reasonableness of fees for services provided by a physician
2 or other duly licensed practitioner of the healing arts. Such a
3 petition shall in no event act as a supersedeas, and during the
4 pendency of any such petition the employer shall pay all medical
5 bills if the physician or other practitioner of the healing arts
6 files a report or reports as required by subparagraph (i) of
7 paragraph (2) of this subsection.
8 (3) After an employe has elected to be treated by a
9 physician or other duly licensed practitioner of the healing
10 arts who is not one of the physicians or practitioners
11 designated by the employer, he may thereafter elect to be
12 treated by another physician or other duly licensed practitioner
13 of the healing arts upon notice to his employer: Provided,
14 however, That no such notice shall be required in emergencies,
15 or in cases of referrals by one physician or practitioner to
16 another physician or practitioner or if the new physician or
17 practitioner makes a timely report to the employer within
18 twenty-one days after commencing treatment.
19 (4) In addition to the above service, the employer shall
20 provide payment for medicines and supplies, hospital treatment,
21 services and supplies and orthopedic appliances, and prostheses.
22 The cost for such hospital treatment, service and supplies shall
23 not in any case exceed the prevailing charge in the hospital for
24 like services to other individuals. If the employe shall refuse
25 reasonable services of duly licensed practitioners of the
26 healing arts, surgical, medical and hospital services,
27 treatment, medicines and supplies, he shall forfeit all rights
28 to compensation for any injury or any increase in his incapacity
29 shown to have resulted from such refusal. Whenever an employe
30 shall have suffered the loss of a limb, part of a limb, or an
19930S0001B1486 - 21 -
1 eye, the employer shall also provide payment for an artificial
2 limb or eye or other prostheses of a type and kind recommended
3 by the doctor attending such employe in connection with such
4 injury and any replacements for an artificial limb or eye which
5 the employe may require at any time thereafter, together with
6 such continued medical care as may be prescribed by the doctor
7 attending such employe in connection with such injury as well as
8 such training as may be required in the proper use of such
9 prostheses. The provisions of this section shall apply in
10 injuries whether or not loss of earning power occurs. If
11 hospital confinement is required, the employe shall be entitled
12 to semi-private accommodations but if no such facilities are
13 available, regardless of the patient's condition, the employer,
14 not the patient, shall be liable for the additional costs for
15 the facilities in a private room.
16 (5) The payment by an insurer for any medical, surgical or
17 hospital services or supplies after any statute of limitations
18 provided for in this act shall have expired shall not act to
19 reopen or review the compensation rights for purposes of such
20 limitations.]
21 (f.1) (1) (i) The employer shall provide payment in
22 accordance with this section for reasonable surgical and medical
23 services, services rendered by physicians or other health care
24 providers, medicines and supplies, as and when needed. Provided
25 an employer establishes a list of at least six designated health
26 care providers, no more than two of whom may be a coordinated
27 care organization and no fewer than three of whom shall be
28 physicians, the employe shall be required to visit one of the
29 physicians or other health care providers so designated and
30 shall continue to visit the same or another designated physician
19930S0001B1486 - 22 -
1 or health care provider for a period of thirty days from the
2 date of the first visit: Provided, however, That the employer
3 shall not include on the list a physician or other health care
4 provider who is employed, owned or controlled by the employer or
5 the employer's insurer unless employment, ownership or control
6 is disclosed on the list. Should the employe not comply with the
7 foregoing, the employer will be relieved from liability for the
8 payment for the services rendered during such applicable period.
9 It shall be the duty of the employer to provide a clearly
10 written notification of the employe's rights and duties under
11 this section to the employe. The employer shall further ensure
12 that the employe has been informed and that he understands these
13 rights and duties. This duty shall be evidenced only by the
14 employe's written acknowledgment of having been informed and
15 having understood his rights and duties. Any failure of the
16 employer to provide and evidence such notification shall relieve
17 the employe from any notification duty owed, notwithstanding any
18 provision of this act to the contrary, and the employer shall
19 remain liable for all rendered treatment. Subsequent treatment
20 may be provided by any health care provider of the employe's own
21 choice. Any employe who, next following termination of the
22 applicable period, is provided treatment from a nondesignated
23 health care provider shall notify the employer within five days
24 of the first visit to said health care provider. Failure to so
25 notify the employer will relieve the employer from liability for
26 the payment for the services rendered prior to appropriate
27 notice if such services are determined pursuant to paragraph (6)
28 to have been unreasonable or unnecessary.
29 (ii) In addition to the above service, the employer shall
30 provide payment for medicines and supplies, hospital treatment,
19930S0001B1486 - 23 -
1 services and supplies and orthopedic appliances, and prostheses
2 in accordance with this section. Whenever an employe shall have
3 suffered the loss of a limb, part of a limb, or an eye, the
4 employer shall also provide for an artificial limb or eye or
5 other prostheses of a type and kind recommended by the doctor
6 attending such employe in connection with such injury and any
7 replacements for an artificial limb or eye which the employe may
8 require at any time thereafter, together with such continued
9 medical care as may be prescribed by the doctor attending such
10 employe in connection with such injury as well as such training
11 as may be required in the proper use of such prostheses. The
12 provisions of this section shall apply to injuries whether or
13 not loss of earning power occurs. If hospital confinement is
14 required, the employe shall be entitled to semi-private
15 accommodations but if no such facilities are available,
16 regardless of the patient's condition, the employer, not the
17 patient, shall be liable for the additional costs for the
18 facilities in a private room.
19 (iii) Nothing in this section shall prohibit an insurer or
20 an employer from contracting with any individual, partnership,
21 association or corporation to provide case management and
22 coordination of services with regard to injured employes.
23 (2) Any provider who treats an injured employe shall be
24 required to file periodic reports with the employer on a form
25 prescribed by the department which shall include, where
26 pertinent, history, diagnosis, treatment, prognosis and physical
27 findings. The report shall be filed within ten days of
28 commencing treatment and at least once a month thereafter, as
29 long as treatment continues. The employer shall not be liable to
30 pay for such treatment until a report has been filed.
19930S0001B1486 - 24 -
1 (3) (i) For purposes of this clause, a provider shall not
2 require, request or accept payment for the treatment,
3 accommodations, products or services in excess of one hundred
4 thirteen per centum of the prevailing charge at the seventy-
5 fifth percentile; one hundred thirteen per centum of the
6 applicable fee schedule, the recommended fee or the inflation
7 index charge; one hundred thirteen per centum of the DRG
8 payment, plus pass-through costs and applicable cost or day
9 outliers; or one hundred thirteen per centum of any other
10 Medicare reimbursement mechanism, as determined by the Medicare
11 carrier or intermediary, whichever pertains to the specialty
12 service involved, determined to be applicable in this
13 Commonwealth under the Medicare program for comparable services
14 rendered. If the commissioner determines that an allowance for a
15 particular provider group or service under the Medicare program
16 is not reasonable, it may adopt, by regulation, a new allowance.
17 If the prevailing charge, fee schedule, recommended fee,
18 inflation index charge, DRG payment or any other reimbursement
19 has not been calculated under the Medicare program for a
20 particular treatment, accommodation, product or service, the
21 amount of the payment may not exceed eighty per centum of the
22 charge most often made by providers of similar training,
23 experience and licensure for a specific treatment,
24 accommodation, product or service in the geographic area where
25 the treatment, accommodation, product or service is provided.
26 (ii) Commencing on January 1, 1995, the maximum allowance
27 for a health care service covered by subparagraph (i) of this
28 paragraph shall be updated as of the first day of January of
29 each year. The update, which shall be applied to all services
30 performed after January 1 of each year, shall be equal to the
19930S0001B1486 - 25 -
1 percentage change in the Statewide average weekly wage. Such
2 updates shall be cumulative.
3 (iii) Notwithstanding any other provision of law, it is
4 unlawful for a provider to refer a person for laboratory,
5 physical therapy, rehabilitation, chiropractic, radiation
6 oncology, psychometric, home infusion therapy, or diagnostic
7 imaging, goods or services pursuant to this section if the
8 provider has a financial interest with the person, or in the
9 entity, that receives the referral. It is unlawful for a
10 provider to enter into an arrangement or scheme such as a cross-
11 referral arrangement, which the provider knows, or should know,
12 has a principal purpose of assuring referrals by the provider to
13 a particular entity which, if the provider directly made
14 referrals to such entity, would be in violation of this section.
15 No claim for payment shall be presented by an entity to any
16 individual, third-party payer, or other entity for a service
17 furnished pursuant to a referral prohibited under this section.
18 (iv) The secretary shall retain the services of an
19 independent consulting firm to perform an annual accessibility
20 study of health care provided under this act. The study shall
21 include information as to whether there is adequate access to
22 quality health care and products for injured workers and a
23 review of the information that is provided. If the secretary
24 determines based on this study that as a result of the health
25 care fee schedule there is not sufficient access to quality
26 health care or products for persons suffering injuries covered
27 by this act, the secretary may recommend to the commissioner the
28 adoption of regulations providing for a new allowance.
29 (v) An allowance shall be reviewed for reasonableness
30 whenever the commissioner determines that the use of the
19930S0001B1486 - 26 -
1 allowance would result in payments more than ten per centum
2 lower than the average level of reimbursement the provider would
3 receive from coordinated care insurers, including those entities
4 subject to the act of December 29, 1972 (P.L.1701, No.364),
5 known as the "Health Maintenance Organization Act," and those
6 entities known as preferred provider organizations which are
7 subject to section 630 of the Insurance Company Law of 1921 for
8 like treatments, accommodations, products or services. In making
9 this determination, the commissioner shall consider the extent
10 to which allowances applicable to other providers under this
11 section deviate from the reimbursement such providers would
12 receive from coordinated care insurers. Any information received
13 as a result of this subparagraph shall be confidential.
14 (vi) The reimbursement for prescription drugs and
15 professional pharmaceutical services shall be limited to one
16 hundred ten per centum of the average wholesale price of the
17 product.
18 (vii) The applicable Medicare fee schedule shall include
19 fees associated with all permissible procedure codes. If the
20 Medicare fee schedule also includes a larger grouping of
21 procedure codes and corresponding charges than are specifically
22 reimbursed by Medicare, a provider may use these codes, and
23 corresponding charges shall be paid by insurers or employers. If
24 a Medicare code exists for application to a specific provider
25 specialty, that code shall be used.
26 (viii) A provider shall not fragment or unbundle charges
27 imposed for specific care except as consistent with Medicare.
28 Changes to a provider's codes by an insurer shall be made only
29 as consistent with Medicare and when the insurer has sufficient
30 information to make the changes and following consultation with
19930S0001B1486 - 27 -
1 the provider.
2 (4) Nothing in this act shall prohibit the self-insured
3 employer, employer or insurer from contracting with a
4 coordinated care organization for reimbursement levels different
5 from those identified above.
6 (5) The employer or insurer shall make payment, and
7 providers shall submit bills and records, in accordance with the
8 provisions of this section. All payments to providers for
9 treatment provided pursuant to this act shall be made within
10 thirty days of receipt of such bills and records unless the
11 employer or insurer disputes the reasonableness or necessity of
12 the treatment provided pursuant to paragraph (6). A provider who
13 has submitted the reports and bills required by this section and
14 who disputes the amount or timeliness of the payment from the
15 employer or insurer shall file an application for fee review
16 with the department. Within thirty days of the filing of such an
17 application, the department shall render an administrative
18 decision.
19 (6) Except in those cases in which a referee asks for an
20 opinion from peer review under section 420 of this act, disputes
21 as to reasonableness or necessity of treatment by a health care
22 provider shall be resolved in accordance with the following
23 provisions:
24 (i) The reasonableness or necessity of all treatment
25 provided by a health care provider under this act may be subject
26 to prospective, concurrent or retrospective utilization review
27 at the request of an employe, employer or insurer. The
28 department shall authorize utilization review organizations to
29 perform utilization review under this act. Organizations not
30 authorized by the department may not engage in such utilization
19930S0001B1486 - 28 -
1 review.
2 (ii) The utilization review organization shall issue a
3 written report of its findings and conclusions within thirty
4 days of a request. If the provider, employer, employe or insurer
5 disagrees with the finding of the utilization review
6 organization, a request for reconsideration must be filed no
7 later than thirty days after receipt of the utilization review
8 report. The request for reconsideration must be in writing.
9 (iii) The employer or the insurer shall pay the cost of the
10 initial utilization review. The party which does not prevail on
11 reconsideration of an initial review shall bear the costs of
12 such reconsideration.
13 (iv) If the provider, employer, employe or insurer disagrees
14 with the finding of the utilization review organization on
15 reconsideration, a petition for review by the department must be
16 filed within thirty days after receipt of the reconsideration
17 report. The department shall assign the petition to a referee
18 for a hearing.
19 (7) A provider shall not hold an employe liable for costs
20 related to care or service rendered in connection with a
21 compensable injury under this act. A provider shall not bill or
22 otherwise attempt to recover from the employe the difference
23 between the provider's charge and the amount paid by the
24 employer or the insurer.
25 (8) If the employe shall refuse reasonable services of
26 health care providers, surgical, medical and hospital services,
27 treatment, medicines and supplies, he shall forfeit all rights
28 to compensation for any injury or increase in his incapacity
29 shown to have resulted from such refusal.
30 (9) The payment by an insurer or employer for any medical,
19930S0001B1486 - 29 -
1 surgical or hospital services or supplies after any statute of
2 limitations provided for in this act shall have expired shall
3 not act to reopen or revive the compensation rights for purposes
4 of such limitations.
5 (10) If acute care is provided in an acute care facility to
6 a patient with an immediately life threatening or urgent injury
7 by a Level I or Level II trauma center accredited by the
8 Pennsylvania Trauma Systems Foundation under the act of July 3,
9 1985 (P.L.164, No.45), known as the "Emergency Medical Services
10 Act," or to a burn injury patient by a burn facility which meets
11 all the service standards of the American Burn Association, or
12 if basic or advanced life support services, as defined and
13 licensed under the "Emergency Medical Services Act," are
14 provided the amount of payment shall be the usual and customary
15 charge.
16 (f.2) (1) Medical services required by the act may be
17 provided through a coordinated care organization which is
18 certified by the Secretary of Health subject to the following:
19 (i) Each application for certification shall be accompanied
20 by a reasonable fee prescribed by the Department of Health. A
21 certificate is valid for such period as the Department of Health
22 may prescribe unless sooner revoked or suspended.
23 (ii) Application for certification shall be made in such
24 form and manner as the Department of Health shall require and
25 shall set forth information regarding the proposed plan for
26 providing services.
27 (2) The coordinated care organization shall include an
28 adequate number and specialty distribution of licensed health
29 care providers in order to assure appropriate and timely
30 delivery of services required under the act and an appropriate
19930S0001B1486 - 30 -
1 flexibility to workers in selecting providers. Services may be
2 provided directly, through affiliates or through contractual
3 referral arrangements with other health care providers.
4 (3) The Secretary of Health shall certify an entity as a
5 coordinated care organization if the Secretary of Health finds
6 that the entity:
7 (i) Possesses the capacity to provide all primary medical
8 services as designated by the Secretary of Health in a manner
9 that is timely and effective.
10 (ii) Maintains a referral capacity to treat other injuries
11 and illnesses not covered by primary services but which are
12 covered by this act.
13 (iii) Provides a case management and evaluation system which
14 includes continuous monitoring of treatment from onset of injury
15 or illness until final resolution.
16 (iv) Provides a case communication system which relates
17 necessary and appropriate information among the employe,
18 employer, health care providers and insurer.
19 (v) Provides appropriate peer and utilization review and a
20 care dispute resolution system.
21 (vi) Meets quality of care and cost-effectiveness standards
22 based upon accepted standards in the profession, including
23 health care effectiveness measures of the Pennsylvania Health
24 Care Cost Containment Council and recommendations on quality of
25 care by the Workers' Compensation Advisory Council.
26 (vii) Complies with any other requirements of law regarding
27 delivery of health care services.
28 (viii) Establishes a written grievance procedure for prompt
29 and effective resolution of patient grievances.
30 (4) The Secretary of Health shall refuse to certify or may
19930S0001B1486 - 31 -
1 revoke or suspend certification of any coordinated care
2 organization if the Secretary of Health finds that:
3 (i) the plan for providing health care services fails to
4 meet the requirements of this section;
5 (ii) service under the plan is not being provided in
6 accordance with terms of the plan as certified; or
7 (iii) services under the plan do not meet accepted
8 professional standards for quality, cost-effective health care.
9 (5) A person participating in utilization review, quality
10 assurance or peer review activities pursuant to this section
11 shall not be examined as to any communication made in the course
12 of such activities or the findings thereof, nor shall any person
13 be subject to an action for civil damages for actions taken or
14 statements made in good faith.
15 (6) Health care providers designated as rural by HCFA or
16 located in a county with a rural Health Professional Shortage
17 Area, who are attempting to form or operate a coordinated care
18 organization, may be excluded from meeting some or all of the
19 minimum requirements set forth in paragraphs (2) and (3) of this
20 clause, as shall be determined in rules or regulations
21 promulgated by the Department of Health.
22 (7) The Department of Health shall have the power and
23 authority to promulgate, adopt, publish and use regulations for
24 the implementation of this section.
25 * * *
26 Section 9. Section 307 of the act, amended December 5, 1974
27 (P.L.782, No.263), is amended to read:
28 Section 307. In case of death, compensation shall be
29 computed on the following basis, and distributed to the
30 following persons: Provided, That in no case shall the wages of
19930S0001B1486 - 32 -
1 the deceased be taken to be less than fifty per centum of the
2 Statewide average weekly wage for purposes of this section:
3 1. If there be no widow nor widower entitled to
4 compensation, compensation shall be paid to the guardian of the
5 child or children, or, if there be no guardian, to such other
6 persons as may be designated by the board as hereinafter
7 provided as follows:
8 (a) If there be one child, thirty-two per centum of wages of
9 deceased, but not in excess of the Statewide average weekly
10 wage.
11 (b) If there be two children, forty-two per centum of wages
12 of deceased, but not in excess of the Statewide average weekly
13 wage.
14 (c) If there be three children, fifty-two per centum of
15 wages of deceased, but not in excess of the Statewide average
16 weekly wage.
17 (d) If there be four children, sixty-two per centum of wages
18 of deceased, but not in excess of the Statewide average weekly
19 wage.
20 (e) If there be five children, sixty-four per centum of
21 wages of deceased, but not in excess of the Statewide average
22 weekly wage.
23 (f) If there be six or more children, sixty-six and two-
24 thirds per centum of wages of deceased, but not in excess of the
25 Statewide average weekly wage.
26 2. To the widow or widower, if there be no children, fifty-
27 one per centum of wages, but not in excess of the Statewide
28 average weekly wage.
29 3. To the widow or widower, if there be one child, sixty per
30 centum of wages, but not in excess of the Statewide average
19930S0001B1486 - 33 -
1 weekly wage.
2 4. To the widow or widower, if there be two children, sixty-
3 six and two-thirds per centum of wages but not in excess of the
4 Statewide average weekly wage.
5 4 1/2. To the widow or widower, if there be three or more
6 children, sixty-six and two thirds per centum of wages, but not
7 in excess of the Statewide average weekly wage.
8 5. If there be neither widow, widower, nor children entitled
9 to compensation, then to the father or mother, if dependent to
10 any extent upon the employe at the time of the injury, thirty-
11 two per centum of wages but not in excess of the Statewide
12 average weekly wage: Provided, however, That in the case of a
13 minor child who has been contributing to his parents, the
14 dependency of said parents shall be presumed: And provided
15 further, That if the father or mother was totally dependent upon
16 the deceased employe at the time of the injury, the compensation
17 payable to such father or mother shall be fifty-two per centum
18 of wages, but not in excess of the Statewide average weekly
19 wage.
20 6. If there be neither widow, widower, children, nor
21 dependent parent, entitled to compensation, then to the brothers
22 and sisters, if actually dependent upon the decedent for support
23 at the time of his death, twenty-two per centum of wages for one
24 brother or sister, and five per centum additional for each
25 additional brother or sister, with a maximum of thirty-two per
26 centum of wages of deceased, but not in excess of the Statewide
27 average wage, such compensation to be paid to their guardian, or
28 if there be no guardian, to such other person as may be
29 designated by the board, as hereinafter provided.
30 7. Whether or not there be dependents as aforesaid, the
19930S0001B1486 - 34 -
1 reasonable expense of burial, not exceeding [one thousand five
2 hundred dollars] three thousand dollars ($3,000), which shall be
3 paid by the employer or insurer directly to the undertaker
4 (without deduction of any amounts theretofore paid for
5 compensation or for medical expenses).
6 Compensation shall be payable under this section to or on
7 account of any child, brother, or sister, only if and while such
8 child, brother, or sister, is under the age of eighteen unless
9 such child, brother or sister is dependent because of disability
10 when compensation shall continue or be paid during such
11 disability of a child, brother or sister over eighteen years of
12 age or unless such child is enrolled as a full-time student in
13 any accredited educational institution when compensation shall
14 continue until such student becomes twenty-three. No
15 compensation shall be payable under this section to a widow,
16 unless she was living with her deceased husband at the time of
17 his death, or was then actually dependent upon him and receiving
18 from him a substantial portion of her support. No compensation
19 shall be payable under this section to a widower, unless he be
20 incapable of self-support at the time of his wife's death and be
21 at such time dependent upon her for support. If members of
22 decedent's household at the time of his death, the terms "child"
23 and "children" shall include step-children, adopted children and
24 children to whom he stood in loco parentis, and children of the
25 deceased and shall include posthumous children. Should any
26 dependent of a deceased employe die or remarry, or should the
27 widower become capable of self-support, the right of such
28 dependent or widower to compensation under this section shall
29 cease except that if a widow remarries, she shall receive one
30 hundred four weeks compensation at a rate computed in accordance
19930S0001B1486 - 35 -
1 with clause 2. of section 307 in a lump sum after which
2 compensation shall cease: Provided, however, That if, upon
3 investigation and hearing, it shall be ascertained that the
4 widow or widower is living with a man or woman, as the case may
5 be, in meretricious relationship and not married, or the widow
6 living a life of prostitution, the board may order the
7 termination of compensation payable to such widow or widower. If
8 the compensation payable under this section to any person shall,
9 for any cause, cease, the compensation to the remaining persons
10 entitled thereunder shall thereafter be the same as would have
11 been payable to them had they been the only persons entitled to
12 compensation at the time of the death of the deceased.
13 The board may, if the best interest of a child or children
14 shall so require, at any time order and direct the compensation
15 payable to a child or children, or to a widow or widower on
16 account of any child or children, to be paid to the guardian of
17 such child or children, or, if there be no guardian, to such
18 other person as the board as hereinafter provided may direct. If
19 there be no guardian or committee of any minor, dependent, or
20 insane employe, or dependent, on whose account compensation is
21 payable, the amount payable on account of such minor, dependent,
22 or insane employe, or dependent may be paid to any surviving
23 parent, or such other person as the board may order and direct,
24 and the board may require any person, other than a guardian or
25 committee, to whom it has directed compensation for a minor,
26 dependent, or insane employe, or dependent to be paid, to
27 render, as and when it shall so order, accounts of the receipts
28 and disbursements of such person, and to file with it a
29 satisfactory bond in a sum sufficient to secure the proper
30 application of the moneys received by such person.
19930S0001B1486 - 36 -
1 Section 10. The act is amended by adding a section to read:
2 Section 308.1. (a) The eligibility of professional athletes
3 for compensation under this act shall be limited as provided in
4 this section.
5 (b) The term "professional athlete," as used in this
6 section, shall mean a natural person employed as a professional
7 athlete by a franchise of the National Football League, the
8 National Basketball Association, the National Hockey League, the
9 National League of Professional Baseball Clubs or the American
10 League of Professional Baseball Clubs, under a contract for hire
11 or a collective bargaining agreement, whose wages as defined in
12 section 309 are more than eight times the Statewide average
13 weekly wage.
14 (c) In the case of a professional athlete, any compensation
15 payable under this act with respect to partial disability shall
16 be reduced by the after-tax amount of any:
17 (1) Wages payable by the employer during the period of
18 disability under a contract for hire or collective bargaining
19 agreement.
20 (2) Payments under a self-insurance, wage continuation,
21 disability insurance or similar plan funded by the employer.
22 (3) Injury protection or other injury benefits payable by
23 the employer under a contract for hire or collective bargaining
24 agreement.
25 (d) No reduction shall be made pursuant to clause (c)
26 against any compensation payable under this act which becomes
27 due and payable on a date after the expiration or termination of
28 the professional athlete's employment contract, except for any
29 amounts paid by the employer pursuant to the contract.
30 (e) In the case of a professional athlete, the term "wages
19930S0001B1486 - 37 -
1 of the injured employe" as used in section 306(b) for the
2 purpose of computing compensation for partial disability shall
3 mean two times the Statewide average weekly wage.
4 Section 11. Section 314 of the act, amended February 28,
5 1956 (1955 P.L.1120, No.356), is amended to read:
6 Section 314. (a) At any time after an injury the employe,
7 if so requested by his employer, must submit himself for
8 examination, at some reasonable time and place, to a physician
9 or physicians legally authorized to practice under the laws of
10 such place, who shall be selected and paid by the employer. If
11 the employe shall refuse upon the request of the employer, to
12 submit to the examination by the physician or physicians
13 selected by the employer, [the board] a referee assigned by the
14 department may, upon petition of the employer, order the employe
15 to submit to an examination at a time and place set by [it] the
16 referee, and by the physician or physicians selected and paid by
17 the employer, or by a physician or physicians designated by [it]
18 the referee and paid by the employer. The [board] referee may at
19 any time after such first examination, upon petition of the
20 employer, order the employe to submit himself to such further
21 examinations as [it] the referee shall deem reasonable and
22 necessary, at such times and places and by such physicians as
23 [it] the referee may designate; and in such case, the employer
24 shall pay the fees and expenses of the examining physician or
25 physicians, and the reasonable traveling expenses and loss of
26 wages incurred by the employe in order to submit himself to such
27 examination. The refusal or neglect, without reasonable cause or
28 excuse, of the employe to submit to such examination ordered by
29 the [board] referee, either before or after an agreement or
30 award, shall deprive him of the right to compensation, under
19930S0001B1486 - 38 -
1 this article, during the continuance of such refusal or neglect,
2 and the period of such neglect or refusal shall be deducted from
3 the period during which compensation would otherwise be payable.
4 (b) The employe shall be entitled to have a physician or
5 physicians of his own selection, to be paid by him, participate
6 in any examination requested by his employer or ordered by the
7 [board] referee.
8 Section 12. Section 321 of the act, added March 29, 1972
9 (P.L.159, No.61), is amended to read:
10 Section 321. [Nothing contained in this act shall apply to
11 or in any way affect any person who at the time of injury is
12 engaged in domestic service: Provided, however, That in cases
13 where the employer of any such person shall have, prior to such
14 injury, by application to the Workmen's Compensation Board,
15 approved by the board, elected to come within the provisions of
16 the act, such exemption shall not apply.] Nothing contained in
17 this act shall apply to or in any way affect:
18 (1) Any person who at the time of injury is engaged in
19 domestic service: Provided, however, That in cases where the
20 employer of any such person shall have, prior to such injury, by
21 application to the department, and approved by the department,
22 elected to come within the provisions of the act, such exemption
23 shall not apply.
24 (2) Any person who is a licensed real estate salesperson or
25 an associate real estate broker, affiliated with a licensed real
26 estate broker, under a written agreement, remunerated on a
27 commission only basis and who qualifies as an independent
28 contractor for State tax purposes under the act of March 4, 1971
29 (P.L.6, No.2), known as the "Tax Reform Code of 1971."
30 Section 13. The act is amended by adding sections to read:
19930S0001B1486 - 39 -
1 Section 322. It shall be unlawful for any employe to receive
2 compensation under this act if he is at the same time receiving
3 workers' compensation under the laws of the Federal Government
4 or any other state for the same injury. Further, it shall be
5 unlawful for an employe receiving compensation under this act
6 simultaneously from two or more employers or insurers during any
7 period of total disability to receive total compensation in
8 excess of the maximum benefit under this act. Nothing in this
9 section shall be deemed to prohibit payment of workers'
10 compensation on a pro-rata basis, where an employe suffers from
11 more than one injury while in the employ of more than one
12 employer: Provided, however, That the total compensation paid
13 shall not exceed the maximum weekly compensation payable under
14 this act: And, Provided further, That any such pro rata
15 calculation shall be based upon the earnings by such an employe
16 in the employ of each such employer and that all wage losses
17 suffered as a result of any injury which is compensable under
18 this act shall be used as the basis for calculating the total
19 compensation to be paid on a pro rata basis.
20 Section 323. (a) A construction design professional who is
21 retained to perform professional services on a construction
22 project, or any employe of a construction design professional
23 who is assisting or representing the construction design
24 professional in the performance of professional services on the
25 site of the construction project, shall not be liable under this
26 act for any injury or death of a worker not an employe of such
27 design professional on the construction project for which
28 workers' compensation is payable under the provisions of this
29 act.
30 (b) Notwithstanding any provisions to the contrary, this
19930S0001B1486 - 40 -
1 section shall apply to claims for compensation based on injuries
2 or death which occurred after the effective date of this
3 section.
4 Section 14. The first paragraph of section 401 of the act,
5 amended February 8, 1972 (P.L.25, No.12), is amended to read:
6 Section 401. The term "referee," when used in this [article]
7 act, shall mean [Workmen's Compensation Referee] a Workers'
8 Compensation Judge of the Department of Labor and Industry,
9 appointed by and subject to the general supervision of the
10 Secretary of Labor and Industry for the purpose of conducting
11 departmental hearings under this act. The secretary may
12 establish different classes of [referees.] these judges. Any
13 reference in any statute to a workmen's compensation referee
14 shall be deemed to be a reference to a workers' compensation
15 judge.
16 * * *
17 Section 15. Sections 406.1 and 420 of the act, amended or
18 added February 8, 1972 (P.L.25, No.12), are amended to read:
19 Section 406.1. (a) The employer and insurer shall promptly
20 investigate each injury reported or known to the employer and
21 shall proceed promptly to commence the payment of compensation
22 due either pursuant to an agreement upon the compensation
23 payable or a notice of compensation payable as provided in
24 section 407 or pursuant to a notice of temporary compensation
25 payable as set forth in clause (d) of this section, on forms
26 prescribed by the department and furnished by the insurer. The
27 first installment of compensation shall be paid not later than
28 the twenty-first day after the employer has notice or knowledge
29 of the employe's disability. Interest shall accrue on all due
30 and unpaid compensation at the rate of ten per centum per annum.
19930S0001B1486 - 41 -
1 Any payment of compensation prior or subsequent to an agreement
2 or notice of compensation payable or a notice of temporary
3 compensation payable or greater in amount than provided therein
4 shall, to the extent of the amount of such payment or payments,
5 discharge the liability of the employer with respect to such
6 case.
7 (b) Payments of compensation pursuant to an agreement or
8 notice of compensation payable may be suspended, terminated,
9 reduced or otherwise modified by petition and subject to right
10 of hearing as provided in section 413.
11 (c) If the insurer controverts the right to compensation it
12 shall promptly notify the employe or his dependent, on a form
13 prescribed by the department, stating the grounds upon which the
14 right to compensation is controverted and shall forthwith
15 furnish a copy or copies to the department.
16 (d) (1) In any instance where an employer is uncertain
17 whether a claim is compensable under this act or is uncertain of
18 the extent of its liability under this act, the employer may
19 initiate compensation payments without prejudice and without
20 admitting liability pursuant to a notice of temporary
21 compensation payable as prescribed by the department.
22 (2) The notice of temporary compensation payable shall be
23 sent to the claimant and a copy filed with the department and
24 shall notify the claimant that the payment of temporary
25 compensation is not an admission of liability of the employer
26 with respect to the injury which is the subject of the notice of
27 temporary compensation payable. The department shall, upon
28 receipt of a notice of temporary compensation payable, send a
29 notice to the claimant informing the claimant that:
30 (i) the payment of temporary compensation and the claimant's
19930S0001B1486 - 42 -
1 acceptance of that compensation does not mean the claimant's
2 employer is accepting responsibility for the injury or that a
3 compensation claim has been filed or commenced;
4 (ii) the payment of temporary compensation entitles the
5 claimant to a maximum of six weeks of compensation; and
6 (iii) the claimant may need to file a claim petition in a
7 timely fashion under section 315 of this act, enter into an
8 agreement with his employer or receive a notice of compensation
9 payable from his employer to ensure continuation of compensation
10 payments.
11 (3) Payments of temporary compensation shall commence, and
12 the notice of temporary compensation payable shall be sent
13 within the time set forth in clause (a) of this section.
14 (4) Payments of temporary compensation may continue until
15 such time as the employer decides to controvert the claim or six
16 weeks from the date the employer has notice or knowledge of the
17 employe's disability, whichever shall first occur.
18 (5) (i) If the employer ceases making payments pursuant to
19 a notice of temporary compensation payable, a notice in the form
20 prescribed by the department shall be sent to the claimant and a
21 copy filed with the department, but in no event shall this
22 notice be sent or filed later than five days after the last
23 payment.
24 (ii) This notice shall advise the claimant that if the
25 employer is ceasing payment of temporary compensation that the
26 payment of temporary compensation was not an admission of
27 liability of the employer with respect to the injury subject to
28 the notice of temporary compensation payable, and the employe
29 must file a claim to establish the liability of the employer.
30 (iii) If the employer ceases making payments pursuant to a
19930S0001B1486 - 43 -
1 notice of temporary compensation payable, after complying with
2 this clause, the employer and employe retain all the rights,
3 defenses and obligations with regard to the claim subject to the
4 notice of temporary compensation payable, and the payment of
5 temporary compensation may not be used to support a claim for
6 compensation.
7 (iv) Payment of temporary compensation shall be considered
8 compensation for purposes of tolling the statute of limitations
9 under section 315 of this act.
10 (6) If the employer does not file a notice under paragraph
11 (5) of clause (d) of this section within the six-week period
12 during which temporary compensation is paid or payable, the
13 employer shall be deemed to have admitted liability and the
14 notice of temporary compensation payable shall be converted to a
15 notice of compensation payable.
16 Section 420. (a) The board, the department or a referee, if
17 it or he deem it necessary, may, of its or his own motion,
18 either before, during, or after any hearing, make or cause to be
19 made an investigation of the facts set forth in the petition or
20 answer or facts pertinent in any injury under this act. The
21 board, department or referee may appoint one or more impartial
22 physicians or surgeons to examine the injuries of the plaintiff
23 and report thereon, or may employ the services of such other
24 experts as shall appear necessary to ascertain the facts. The
25 referee when necessary or appropriate or upon request of a party
26 in order to rule on requests for review filed under clause (f.1)
27 of section 306 of this act, or under other provisions of this
28 act, may ask for an opinion from peer review about the necessity
29 or frequency of treatment under clause (f.1) of section 306 of
30 this act. The peer review report or the peer report of any
19930S0001B1486 - 44 -
1 physician, surgeon, or expert appointed by the department or by
2 a referee, including the report of a peer review organization,
3 shall be filed with the board or referee, as the case may be,
4 and shall be a part of the record and open to inspection as
5 such. The referee shall consider the report as evidence but
6 shall not be bound by such report.
7 (b) The board or referee, as the case may be, shall fix the
8 compensation of such physicians, surgeons, and experts, and
9 other peer review organizations which, when so fixed, shall be
10 paid out of the [sum appropriated to the Department of Labor and
11 Industry for such purpose.] Workmen's Compensation
12 Administration Fund.
13 Section 16. Section 422 of the act, amended February 8, 1972
14 (P.L.25, No.12) and March 29, 1972 (P.L.159, No.61), is amended
15 to read:
16 Section 422. (a) Neither the board nor any of its members
17 nor any referee shall be bound by the common law or statutory
18 rules of evidence in conducting any hearing or investigation,
19 but all findings of fact shall be based upon sufficient
20 competent evidence to justify same. All parties to an
21 adjudicatory proceeding are entitled to a reasoned decision,
22 containing findings of fact and conclusions of law based upon
23 the evidence as a whole which clearly and concisely states and
24 explains the rationale for the decisions so that all can
25 determine why and how a particular result was reached. The
26 adjudicator shall specify the evidence upon which the
27 adjudicator relies in conformity with this section. The
28 adjudication shall provide the basis for meaningful appellate
29 review.
30 (b) If any party or witness resides outside of the
19930S0001B1486 - 45 -
1 Commonwealth, or through illness or other cause is unable to
2 testify before the board or a referee, his or her testimony or
3 deposition may be taken, within or without this Commonwealth, in
4 such manner and in such form as the department may, by special
5 order or general rule, prescribe. The records kept by a hospital
6 of the medical or surgical treatment given to an employe in such
7 hospital shall be admissible as evidence of the medical and
8 surgical matters stated therein.
9 (c) Where any claim for compensation at issue before a
10 referee involves [twenty-five] fifty-two weeks or less of
11 disability, either the employe or the employer may submit a
12 certificate by any qualified physician as to the history,
13 examination, treatment, diagnosis and cause of the condition,
14 and sworn reports by other witnesses as to any other facts and
15 such statements shall be admissible as evidence of medical and
16 surgical or other matters therein stated and findings of fact
17 may be based upon such certificates or such reports.
18 (d) Where an employer shall have furnished surgical and
19 medical services or hospitalization in accordance with the
20 provisions of [subsection (f) of] section 306(f.1), or where the
21 employe has himself procured them, the employer or employe
22 shall, upon request, in any pending proceeding, be furnished
23 with, or have made available, a true and complete record of the
24 medical and surgical services and hospital treatment, including
25 X rays, laboratory tests, and all other medical and surgical
26 data in the possession or under the control of the party
27 requested to furnish or make available such data.
28 (e) The department may adopt rules and regulations governing
29 the conduct of all hearings held pursuant to any provisions of
30 this act, and hearings shall be conducted in accordance
19930S0001B1486 - 46 -
1 therewith, and in such manner as best to ascertain the
2 substantial rights of the parties.
3 Section 17. Sections 438 and 440 of the act, added February
4 8, 1972 (P.L.25, No.12), are amended to read:
5 Section 438. (a) An employer shall report all injuries
6 received by employes in the course of or resulting from their
7 employment immediately to the employer's insurer. If the
8 employer is self-insured such injuries shall be reported to the
9 person responsible for management of the employer's compensation
10 program.
11 (b) An employer shall report such injuries to the Department
12 of Labor and Industry by filing directly with the department on
13 the form it prescribes a report of injury within forty-eight
14 hours for every injury resulting in death, and mailing within
15 [three] seven days after the date of injury for all other
16 injuries except those resulting in disability continuing less
17 than the day, shift, or turn in which the injury was received. A
18 copy of this report to the department shall be mailed to the
19 employer's insurer forthwith.
20 (c) Reports of injuries filed with the department under this
21 section shall not be evidence against the employer or the
22 employer's insurer in any proceeding either under this act or
23 otherwise. Such reports may be made available by the department
24 to other State or Federal agencies for study or informational
25 purposes.
26 Section 440. (a) In any contested case where the insurer
27 has contested liability in whole or in part, including contested
28 cases involving petitions to terminate, reinstate, increase,
29 reduce or otherwise modify compensation awards, agreements or
30 other payment arrangements or to set aside final receipts, the
19930S0001B1486 - 47 -
1 employe or his dependent, as the case may be, in whose favor the
2 matter at issue has been finally determined in whole or in part
3 shall be awarded, in addition to the award for compensation, a
4 reasonable sum for costs incurred for attorney's fee, witnesses,
5 necessary medical examination, and the value of unreimbursed
6 lost time to attend the proceedings: Provided, That cost for
7 attorney fees may be excluded when a reasonable basis for the
8 contest has been established[: And provided further, That if] by
9 the employer or the insurer.
10 (b) If counsel fees are awarded and assessed against the
11 insurer or employer, then the referee must make a finding as to
12 the amount and the length of time for which such counsel fee is
13 payable, based upon the complexity of the factual and legal
14 issues involved, the skill required, the duration of the
15 proceedings and the time and effort required and actually
16 expended: If the insurer has paid or tendered payment of
17 compensation and the controversy relates to the amount of
18 compensation due, costs for attorney's fee shall be based only
19 on the difference between the final award of compensation and
20 the compensation paid or tendered by the insurer.
21 [In contested cases involving petitions to terminate,
22 reinstate, increase, reduce or otherwise modify compensation
23 awards, agreements or other payment arrangements or to set aside
24 final receipts, where the contested issue, in whole or part, is
25 resolved in favor of the claimant, the claimant shall be
26 entitled to an award of reasonable costs as hereinabove set
27 forth.]
28 Section 18. Section 447 of the act, added May 20, 1976
29 (P.L.135, No.61) is amended to read:
30 Section 447. (a) There is hereby created an advisory
19930S0001B1486 - 48 -
1 council, to be known as the Pennsylvania [Workmen's] Workers'
2 Compensation Advisory Council[, and to be composed of men and
3 women with an equal number of employer, employe, and public
4 representatives who may fairly be representative because of
5 their vocation, employment, or affiliations]. The council shall
6 [consist] be comprised of [a maximum of seven] eight members
7 [including the], with four members being employe representatives
8 and four members being employer representatives. The Secretary
9 of the Department of Labor and Industry[, who] shall be an ex
10 officio member. The members of such council shall be appointed
11 as follows: one employe representative and one employer
12 representative by the [secretary within thirty days of the
13 effective date of this amendatory act and shall serve a term of
14 two years and until their successors have been appointed and
15 qualified] President pro tempore of the Senate, one employe
16 representative and one employer representative by the Speaker of
17 the House of Representatives, one employe representative and one
18 employer representative by the Minority Leader of the Senate and
19 one employe representative and one employer representative by
20 the Minority Leader of the House of Representatives. The members
21 of the council shall select one of their number to be chairman.
22 [Such council shall consider and advise the department upon all
23 matters related to the administration of The Pennsylvania
24 Workmen's Compensation Act and The Pennsylvania Occupational
25 Disease Act. Such council may recommend to the secretary upon
26 its own initiative such changes in the provisions of these acts
27 and the administration thereof as it deems necessary and shall
28 make periodic reports to the secretary regarding the performance
29 of its duties and functions.]
30 (b) [In the performance of its duties, the] (1) The council
19930S0001B1486 - 49 -
1 may hold hearings, receive testimony, solicit and receive
2 comments [and information] from interested parties and the
3 general public and shall have full access to information
4 relating to the [purpose of these acts] administration of this
5 act by the Department of Labor and Industry. The council shall
6 not have access to confidential medical information pertaining
7 to individual claimants, but may develop statistical studies and
8 surveys concerning [the] aspects of incidence of [occupational]
9 injuries [and diseases generally.], claims management,
10 litigation, and adherence to the provisions of this act and the
11 Occupational Disease Act.
12 (2) The council shall review annually any requests for
13 funding by the department and any assessments against employers
14 or insurers related thereto and provide a report to the
15 Governor, the secretary and the General Assembly regarding the
16 appropriateness of such requests.
17 (3) The council shall review proposed legislation and
18 regulations pertaining to this act and provide comment at least
19 quarterly to the Governor, the secretary and the General
20 Assembly on the effects of such proposals.
21 (4) The council shall provide to the Governor, the secretary
22 and the General Assembly, on an annual basis, a report on the
23 activities of the council, making recommendations concerning
24 needed improvements in the workers' compensation system and the
25 administration of the system. The report under this paragraph
26 shall be made during the General Assembly's consideration of the
27 General Appropriations Act for the succeeding fiscal year. The
28 report shall be due no later than May 1.
29 (5) The council shall make recommendations to the Secretary
30 of Health regarding quality and cost-effective health care.
19930S0001B1486 - 50 -
1 (6) The council shall review the annual accessibility study
2 required by section 306(f.1)(iii) of this act and shall make
3 recommendations to the Secretary of Health regarding the need
4 for new allowances for health care providers.
5 (7) The council shall make recommendations to the Secretary
6 of Health regarding the certification of coordinated care
7 organizations and the approval of utilization review
8 organizations and persons qualified to perform peer review.
9 (8) The council shall consult with health care providers and
10 professional associations representing health care providers
11 with regard to its recommendations under paragraphs (5), (6) and
12 (7).
13 (c) The members of the advisory council, once appointed,
14 shall serve until the expiration of the terms of office of their
15 appointing authority. Members shall serve without compensation,
16 but shall be entitled to be reimbursed for all necessary
17 expenses incurred in the discharge of their duties. The
18 secretary shall [appoint an executive secretary and such other
19 personnel as he shall deem necessary to aid] provide facilities
20 and clerical and professional support as needed by the council
21 in the performance of its [functions] duties. The compensation
22 of such [employes] staff and the amounts allowed them and to
23 members of the council for traveling and other council expenses
24 shall be deemed part of the expenses incurred in connection with
25 the administration of [The Pennsylvania Workmen's Compensation
26 and The Pennsylvania Occupational Disease Acts] this act.
27 Section 19. The act is amended by adding sections to read:
28 Section 448. (a) An insurer issuing a workers' compensation
29 and employers' liability insurance policy shall offer, upon
30 request, as part of the policy or by endorsement, deductibles
19930S0001B1486 - 51 -
1 optional to the policyholder for benefits payable under the
2 policy, subject to approval by the commissioner and subject to
3 underwriting by the insurer consistent with the principles in
4 clause (b). The commissioner shall promulgate at least three
5 plans with varying deductible options, the least amount of which
6 shall be no less than one thousand dollars ($1,000), nor more
7 than two thousand five hundred dollars ($2,500). The
8 commissioner's authority to promulgate any such plans shall not
9 preclude an insurer from negotiating a deductible in excess of
10 the largest deductible plan herein authorized, subject to
11 approval by the commissioner and subject to underwriting by the
12 insurer consistent with the principles in subsection (b) of this
13 section.
14 (b) The following standards shall govern the commissioner's
15 promulgation, and an insurer's offer, of deductible plans:
16 (1) Claimants' rights are properly protected and claimants'
17 benefits are paid without regard to any such deductible.
18 (2) Appropriate premium reductions reflect the type and
19 level of any deductible approved by the commissioner and
20 selected by the policyholder.
21 (3) Premium reductions for deductibles are determined before
22 application of any experience modification, premium surcharge or
23 premium discount.
24 (4) Recognition is given to policyholder characteristics,
25 including size, financial capabilities, nature of activities and
26 number of employes.
27 (5) If the policyholder selects a deductible, the
28 policyholder is liable to the insurer for the deductible amount
29 in regard to benefits paid for compensable claims.
30 (6) The insurer pays all of the deductible amount,
19930S0001B1486 - 52 -
1 applicable to a compensable claim, to the person or provider
2 entitled to benefits and then seeks reimbursement from the
3 policyholder for the applicable deductible amount.
4 (7) Failure to reimburse deductible amounts by the
5 policyholder to the insurer is treated under the policy in the
6 same manner as non-payment of premiums.
7 Section 20. The act is amended by adding articles to read:
8 ARTICLE VII
9 INSURANCE RATES
10 Section 701. It is the intent of the General Assembly:
11 (1) To protect policyholders and the public against the
12 adverse effect of excessive, inadequate or unfairly
13 discriminatory rates.
14 (2) To encourage, as the most effective way to produce rates
15 that conform to the standards of paragraph (1) of this section,
16 independent action by and reasonable price competition among
17 insurers.
18 (3) To provide formal regulatory controls for use if price
19 competition fails.
20 (4) To authorize cooperative action among insurers in the
21 ratemaking process, and to regulate such cooperation in order to
22 prevent practices that tend to bring about monopoly or to lessen
23 or destroy competition.
24 (5) To provide rates that are responsive to competitive
25 market conditions and to improve the availability of insurance
26 in this Commonwealth.
27 Section 702. This article applies to the classification of
28 risks, underwriting rules, expenses, losses and profits for
29 insurance of employers and employes under this act, for
30 insurance under the Occupational Disease Act and for insurance
19930S0001B1486 - 53 -
1 with respect to the Commonwealth as to liability under the
2 Federal Coal Mine Health and Safety Act of 1969 (Public Law 91-
3 173, 30 U.S.C. § 801 et seq.).
4 Section 703. As used in this article:
5 "Classification system" or "classification" means the plan,
6 system or arrangement for recognizing differences in exposure to
7 hazards among industries, occupations or operations of insurance
8 policyholders.
9 "Department" means the Insurance Department of the
10 Commonwealth.
11 "Experience rating" means a rating procedure utilizing past
12 insurance experience of the individual policyholder to forecast
13 future losses by measuring the policyholder's loss experience
14 against the loss experience of policyholders in the same
15 classification to produce a prospective premium credit, debit or
16 unity modification.
17 "Market" means the interaction in this State, between buyers
18 and sellers of workers' compensation and employers' liability
19 insurance within this Commonwealth pursuant to the provisions of
20 this article.
21 "Provision for claim payment" means historical aggregate
22 losses projected through development to their ultimate value and
23 through trending to a future point in time, but excluding all
24 loss adjustment or claim management expenses, other operating
25 expenses, assessments, taxes, and profit or contingency
26 allowances.
27 "Rate" or "rates" means rate of premium, policy and
28 membership fee, or any other charge made by an insurer for or in
29 connection with a contract or policy of insurance of the kind to
30 which this article applies.
19930S0001B1486 - 54 -
1 "Rating organization" means one or more organizations situate
2 within this Commonwealth, subject to supervision and to
3 examination by the commissioner and approved by the commissioner
4 as adequately equipped to perform the functions specified in
5 this article on an equitable and impartial basis.
6 "Statistical plan" means the plan, system or arrangement used
7 in collecting data.
8 "Supplementary rate information" means any manual or plan of
9 rates, statistical plan, classification system, rating schedule,
10 minimum premium policy fee, rating rule, rate-related
11 underwriting rule, and any other information, not otherwise
12 inconsistent with the purposes of this article, prescribed by
13 rule of the commissioner.
14 "Supporting information" means the experience and judgment of
15 the filer and the experience or data of other insurers or
16 organizations relied on by the filer, the interpretation of any
17 statistical data relied on by the filer, description or methods
18 used in making the rates, and any other similar information
19 required to be filed by the commissioner.
20 Section 704. (a) The following standards shall apply to the
21 making and use of rates under this article:
22 (1) Rates may not be:
23 (i) excessive or inadequate, as defined under this article;
24 or
25 (ii) unfairly discriminatory.
26 (2) A rate may not be held to be excessive unless it is
27 likely to produce a long run profit that is unreasonably high in
28 relation to the risk undertaken and the services to be rendered.
29 (3) A rate may not be held to be inadequate unless:
30 (i) it is unreasonably low for the insurance provided and
19930S0001B1486 - 55 -
1 continued use of it would endanger solvency of the insurer; or
2 (ii) the rate is unreasonably low for the insurance provided
3 and the use of the rate by the insurer has had or, if continued,
4 will have the effect of destroying competition or of creating
5 monopoly.
6 (b) In determining whether rates comply with standards under
7 clause (a), due consideration shall be given to:
8 (1) Past and prospective loss experience within and outside
9 this Commonwealth in accordance with sound actuarial principles.
10 (2) Catastrophe hazards.
11 (3) A reasonable margin for underwriting profit and
12 contingencies.
13 (4) Dividends, savings or unabsorbed premium deposits
14 allowed or returned by insurers to their policyholders or
15 members or subscribers.
16 (5) Past and prospective expenses, both countrywide and
17 those specially applicable to this Commonwealth.
18 (6) Investment income earned or realized by insurers both
19 from their unearned premium and from their loss reserve funds.
20 (7) All relevant factors within and outside this
21 Commonwealth in accordance with sound actuarial principles.
22 (c) As to the kinds of insurance to which this article
23 applies, the systems of expense provisions included in the rates
24 for use by an insurer or group of insurers may differ from those
25 of any other insurers or groups of insurers to reflect the
26 requirements of the operating methods of the insurer or group of
27 insurers.
28 Section 705. (a) Each authorized insurer shall file with
29 the commissioner all rates and supplementary rate information
30 and all changes and amendments thereof made by it for use in
19930S0001B1486 - 56 -
1 this Commonwealth by the date they become effective. Each rating
2 organization shall file with the commissioner a filing for the
3 provision for claim payment and such other filings as are
4 authorized pursuant to this article. The Secretary of Labor and
5 Industry shall be a member of the board of directors or
6 governing body of any rating organization.
7 (b) An insurer may not make or issue a contract or policy of
8 insurance of the kind to which this article applies, except in
9 accordance with the filings which are in effect for the insurer
10 as provided in this article.
11 Section 706. Each filing and any supporting information
12 filed under this article shall, as soon as filed, be open to
13 public inspection. Copies may be obtained by any person on
14 request and upon payment of a reasonable charge.
15 Section 707. (a) Each workers' compensation insurer shall
16 be a member of a rating organization. Each workers' compensation
17 insurer shall adhere to the policy forms filed by the rating
18 organization.
19 (b) (1) Every workers' compensation insurer shall adhere to
20 the uniform classification system and uniform experience rating
21 plan filed with the commissioner by the rating organization to
22 which it belongs: Provided, That the system and plan have been
23 approved by the commissioner as part of the approval of the
24 rating organization's most recent filing for the provision for
25 claim payment.
26 (2) (i) Subject to the conditions of this paragraph, an
27 insurer may develop subclassifications of the uniform
28 classification system upon which a rate may be made.
29 (ii) Any subclassification developed under subparagraph (i)
30 shall be filed with the rating organization and the commissioner
19930S0001B1486 - 57 -
1 thirty days prior to its use.
2 (iii) If the insurer fails to demonstrate that the data
3 produced under a subclassification can be reported in a manner
4 consistent with the rating organization's uniform statistical
5 plan and classification system, the commissioner shall
6 disapprove the subclassification.
7 (c) Every workers' compensation insurer shall record and
8 report its workers' compensation experience to a rating
9 organization as set forth in the rating organization's uniform
10 statistical plan approved by the commissioner.
11 (d) (1) Subject to the approval of the commissioner, a
12 rating organization shall develop and file rules reasonably
13 related to the recording and reporting of data pursuant to the
14 uniform statistical plan, uniform experience rating plan, and
15 the uniform classification system.
16 (2) Every workers' compensation insurer shall adhere to the
17 approved rules and experience rating plan in writing and
18 reporting its business.
19 (3) An insurer shall not agree with any other insurer or
20 with a rating organization to adhere to rules which are not
21 reasonably related to the recording and reporting of data
22 pursuant to the uniform classification system or the uniform
23 statistical plan.
24 (e) The experience rating plan shall have as a basis:
25 (1) reasonable eligibility standards;
26 (2) adequate incentives for loss prevention;
27 (3) sufficient premium differential so as to encourage
28 safety; and
29 (4) predictive accuracy.
30 (f) (1) The uniform experience rating plan shall be the
19930S0001B1486 - 58 -
1 exclusive means of providing prospective premium adjustment
2 based upon measurement of the loss producing characteristics of
3 an individual insured.
4 (2) An insurer may file a rating plan that provides for
5 retrospective premium adjustments based upon an insured's past
6 experience.
7 Section 708. (a) The commissioner may investigate and
8 determine whether or not rates in this Commonwealth under this
9 article are excessive, inadequate or unfairly discriminatory.
10 (b) In any such investigation and determination the
11 commissioner shall follow the procedures specified in sections
12 709 and 710.
13 Section 709. (a) (1) Except as provided in clause (d), the
14 commissioner shall review each workers' compensation insurance
15 filing made by a rating organization or an insurer as soon as
16 reasonably possible after the filing has been made in order to
17 determine whether it meets the requirements of this article. No
18 filing for the provision for claim payment shall become
19 effective prior to its approval by the commissioner unless the
20 commissioner fails to approve or disapprove the filing within
21 the time period described in clause (b)(1) or any extension of
22 that period under clause (b)(2).
23 (2) Notwithstanding the provisions of paragraph (1), any
24 insurer filing for loss adjustment or claim management expenses,
25 other operating expenses, assessments, taxes and profits or
26 contingency allowances filed with the commissioner with respect
27 to the period after December 1, 1994, shall not be subject to
28 the commissioner's approval unless such insurer's rates are
29 found to be in violation of sections 704 and 711.
30 (b) (1) The effective date of each filing under this
19930S0001B1486 - 59 -
1 article shall be the date specified in the filing. The effective
2 date of the filing may not be earlier than thirty days after the
3 date the filing is received by the commissioner or the date of
4 receipt of the information furnished in support of the filing if
5 such supporting information is required by the commissioner.
6 (2) The period during which the filing may not become
7 effective may be extended by the commissioner for an additional
8 period not to exceed one hundred fifty days if the commissioner
9 gives written notice within the period described in paragraph
10 (1) to the insurer or rating organization which made the filing
11 that the commissioner needs additional time for the
12 consideration of the filing. No filing shall be made effective
13 for any period prior to the later of the proposed effective date
14 or the expiration of an extension by the commissioner pursuant
15 to this clause.
16 (3) Upon written application by an insurer or rating
17 organization, the commissioner may authorize a filing which the
18 commissioner has reviewed to become effective before the
19 expiration of the period described in paragraph (1).
20 (4) A filing shall be deemed to meet the requirements of
21 this article unless disapproved by the commissioner within the
22 period described in paragraph (1) or any extension thereof.
23 (c) (1) Subject to approval or disapproval under clause
24 (b), a rating organization shall file with the commissioner:
25 (i) On an annual basis, workers' compensation rates and
26 rating plans that are limited to provision for claim payment.
27 (ii) Each workers' compensation policy form to be used by
28 its members.
29 (iii) The uniform classification system.
30 (iv) The uniform experience rating plan and related rules.
19930S0001B1486 - 60 -
1 (v) Any other information that the commissioner requests
2 relevant to the foregoing and is otherwise entitled to receive
3 under this article.
4 (2) Notwithstanding any other provisions of this article,
5 the commissioner may approve or disapprove any filing by a
6 rating organization without determining whether a reasonable
7 degree of competition exists within the market.
8 (d) If the loss cost provision in a schedule of workers'
9 compensation rates for specific classifications of risks filed
10 by an insurer does not differ from the provision for claim
11 payment contained in the schedule of workers' compensation rates
12 for those classifications filed by a rating organization under
13 clause (c) and approved pursuant to the provisions of this
14 article, then the schedule of rates filed by the insurer shall
15 not be subject to clause (b) but shall become effective for the
16 purposes of section 705.
17 (e) Notwithstanding clause (d), the commissioner may
18 investigate and evaluate all workers' compensation filings to
19 determine whether the filings meet the requirements of this
20 article.
21 (f) Notwithstanding the provisions of section 705, the
22 commissioner may require any insurer or rating organization to
23 comply with the requirements of clause (b) if the commissioner
24 has found pursuant to section 710, that a reasonable degree of
25 competition does not exist within the workers' compensation
26 insurance market.
27 Section 710. (a) If the commissioner finds after a hearing
28 that a rate is not in compliance with section 704 or that a rate
29 had been set in violation of section 713, the commissioner shall
30 order that its use be discontinued for any policy issued or
19930S0001B1486 - 61 -
1 renewed after a date specified in the order and the order may
2 prospectively provide for premium adjustment of any policy then
3 in force. Except as provided in clause (b), the order shall be
4 issued within thirty days after the close of the hearing or
5 within a reasonable time extension as fixed by the commissioner.
6 The order shall expire one year after its effective date unless
7 rescinded earlier by the commissioner.
8 (b) (1) Pending a hearing, the commissioner may order the
9 suspension prospectively of a rate filed by an insurer and
10 reimpose the last previous rate in effect if the commissioner
11 has reasonable cause to believe that:
12 (i) an insurer is in violation of section 704;
13 (ii) unless the order of suspension is issued, certain
14 insureds will suffer irreparable harm;
15 (iii) the hardship insureds will suffer absent the order of
16 suspension outweighs any hardship the insurer would suffer if
17 the order of suspension were to issue; and
18 (iv) the order of suspension will cause no substantial harm
19 to the public.
20 (2) In the event the commissioner suspends a rate under this
21 clause, the commissioner must, unless waived by the insurer,
22 hold a hearing within fifteen working days after issuing the
23 order suspending the rate. In addition, the commissioner must
24 make a determination and issue the order as to whether or not
25 the rate should be disapproved within fifteen working days after
26 the close of the hearing.
27 (c) (1) At any hearing to determine compliance with section
28 704, pursuant to clause (a), the commissioner may first
29 determine whether a reasonable degree of competition exists
30 within the market, and shall give a ruling to that effect. All
19930S0001B1486 - 62 -
1 insurers operating within such market shall have the burden of
2 establishing that a reasonable degree of competition exists
3 within that market. The commissioner shall consider all relevant
4 factors in determining the competitiveness of the market,
5 including:
6 (i) the number of insurers actively engaged in providing
7 coverage;
8 (ii) market shares;
9 (iii) changes in market shares; and
10 (iv) ease of entry.
11 (2) If the commissioner determines that a reasonable degree
12 of competition does not exist in the market, any insurer
13 designated by the commissioner shall have the burden of
14 justifying its rate in such market.
15 (3) All determinations made by the commissioner shall be on
16 the basis of findings of fact and conclusions of law.
17 (4) If the commissioner disapproves a rate, the disapproval
18 shall take effect not less than fifteen days after his order and
19 the last previous rate in effect for the insurer shall be
20 reimposed for a period of one year unless the commissioner
21 approves a rate under clause (d) or (e).
22 (d) Within one year after the effective date of a
23 disapproval order, no rate adopted to replace one disapproved
24 under such order may be used until it has been filed with the
25 commissioner and not disapproved within thirty days thereafter.
26 (e) Whenever an insurer has no legally effective rates as a
27 result of the commissioner's disapproval of rates, the
28 commissioner shall, on the insurer's request, specify interim
29 rates for the insurer that are high enough to protect the
30 interests of all parties and may order that a specified portion
19930S0001B1486 - 63 -
1 of the premiums be placed in a special reserve established by
2 the insurer. When new rates become legally effective, the
3 commissioner shall order the specially reserved funds or any
4 overcharge, in the interim rates to be distributed appropriately
5 to the insureds or insurer as the case may be, except that
6 refunds to policyholders that are minimal may not be required.
7 Section 711. (a) (1) If the commissioner finds after
8 hearing that competition is not an effective regulator of the
9 rates charged or that a substantial number of companies are
10 competing irresponsibly through the rates charged, or that there
11 are widespread violations of this article, the commissioner may
12 adopt a rule requiring that any subsequent changes in the rates
13 or supplementary rate information be filed with the commissioner
14 at least thirty working days before they become effective.
15 (2) In the event that the waiting period is imposed pursuant
16 to paragraph (1), the commissioner may extend the waiting period
17 for a period not to exceed thirty additional working days by
18 written notice to the filer before the first thirty-day period
19 expires.
20 (b) In the event that the commissioner has entered an order
21 pursuant to paragraph (1) of clause (a), the commissioner may
22 require the filing of supporting data as the commissioner deems
23 necessary for the proper functioning of the rate monitoring and
24 regulating process. The supporting data shall include:
25 (1) the experience and judgment of the filer, and to the
26 extent the filer wishes or the commissioner requires, the
27 experience and judgment of other insurers or rate service
28 organizations;
29 (2) the filer's interpretation of any statistical data
30 relied upon;
19930S0001B1486 - 64 -
1 (3) a description of the actuarial and statistical methods
2 employed in setting the rate; and
3 (4) any other relevant matters required by the commissioner.
4 (c) A rule adopted under this section shall expire not more
5 than one year after issue. The commissioner may renew it for an
6 additional one-year period after a hearing and appropriate
7 findings under this section.
8 (d) Whenever a filing is not accompanied by the information
9 as the commissioner has required under clause (a), the
10 commissioner may so inform the insurer and the filing shall be
11 deemed to be made when the information is furnished.
12 Section 712. (a) No rating organization shall provide any
13 service relating to the rates of any insurance subject to this
14 article, and no insurer shall utilize the service of such
15 organization for those purposes unless the organization has
16 obtained a license pursuant to this article.
17 (b) No rating organization shall refuse to supply services
18 for which it is licensed in this Commonwealth to any insurer
19 authorized to do business in this Commonwealth and offering to
20 pay the fair and usual compensation for the services.
21 Section 713. (a) As used in this section, the word
22 "insurer" includes two or more affiliated insurers:
23 (1) under common management; or
24 (2) under common controlling ownership or under other common
25 effective legal control and in fact engaged in joint or
26 cooperative underwriting, investment management, marketing,
27 servicing or administration of their business and affairs as
28 insurers.
29 (b) An insurer or rating organization may not:
30 (1) monopolize or attempt to monopolize, or combine or
19930S0001B1486 - 65 -
1 conspire with any other person or persons, or monopolize the
2 business of insurance of any kind, subdivision, or class
3 thereof;
4 (2) agree with any other insurer or rating organization to
5 charge or adhere to any rate, although insurers and rating
6 organizations may continue to exchange statistical information;
7 (3) make any agreement with any other insurer, rating
8 organization or other person to unreasonably restrain trade;
9 (4) make any agreement with any other insurer, rating
10 organization, or other person where the effect of the agreement
11 may be substantially to lessen competition in the business of
12 insurance of any kind, subdivision, or class; or
13 (5) make any agreement with any other insurer or rating
14 organization to refuse to deal with any person in connection
15 with the sale of insurance.
16 (c) An insurer may not acquire or retain any capital stock
17 or assets of, or have any common management with, any other
18 insurer if such acquisition, retention, or common management
19 substantially lessens competition in the business of insurance
20 of any kind, subdivision, or class.
21 (d) A rating organization or member or subscriber thereof
22 may not interfere with the right of any insurer to make its
23 rates independently of that rating organization or to charge
24 rates different from the rates made by that rating organization.
25 (e) Except as required under section 707, a rating
26 organization may not have or adopt any rule or exact any
27 agreement, formulate or engage in any program which would
28 require any member, subscriber or other insurer to:
29 (1) utilize some or all of its services;
30 (2) adhere to its rates, rating plan, rating systems,
19930S0001B1486 - 66 -
1 underwriting rules; or
2 (3) prevent any insurer from acting independently.
3 Section 714. Any rate in violation of section 713 shall be
4 disapproved by the commissioner in accordance with the
5 procedures prescribed in section 710, and each violator shall be
6 subject to the penalties provided in section 720.
7 Section 715. The commissioner may maintain an action to
8 enjoin any violation of section 713.
9 Section 716. Notwithstanding any other provision of this
10 article, upon written application of an insurer stating its
11 reasons therefor, accompanied by the written consent of the
12 insured or prospective insured, filed with and approved by the
13 commissioner, a rate in excess of that provided by a filing
14 otherwise applicable may be used as to any specific risk.
15 Section 717. (a) Each rating organization and every insurer
16 to which this article applies which makes its own rates shall
17 provide within this Commonwealth reasonable means whereby any
18 person aggrieved by the application of its rating system may be
19 heard in person or by the person's authorized representative on
20 the person's written request to review the manner in which such
21 rating system has been applied in connection with the insurance
22 afforded the aggrieved person.
23 (b) If the rating organization or insurer fails to grant or
24 reject the aggrieved person's request within thirty days after
25 it is made, the applicant may proceed in the same manner as if
26 the application had been rejected.
27 (c) Any party affected by the action of that rating
28 organization or insurer on the request may, within thirty days
29 after written notice of that action, make application, in
30 writing, for an appeal to the commissioner, setting forth the
19930S0001B1486 - 67 -
1 basis for the appeal and the grounds to be relied upon by the
2 applicant.
3 (d) The commissioner shall review the application, and if
4 the commissioner finds that the application is made in good
5 faith, and that it sets forth on its face grounds which
6 reasonably justify holding a hearing, the commissioner shall
7 conduct a hearing held on not less than ten days' written notice
8 to the applicant and to the rating organization or insurer. The
9 commissioner, after hearing, shall affirm or reverse the action.
10 Section 718. (a) Cooperation among rating organizations or
11 among rating organizations and insurers in ratemaking or in
12 other matters within the scope of this article is authorized, if
13 the filings resulting from that cooperation are subject to all
14 the provisions of this article which are applicable to filings
15 generally.
16 (b) The commissioner may review these cooperative activities
17 and practices, and if, after hearing, the commissioner finds
18 that any activity or practice is unfair, unreasonable, or
19 otherwise inconsistent with this article, the commissioner may
20 issue a written order specifying in what respects that activity
21 or practice is unfair, unreasonable, or otherwise inconsistent
22 with this article, and requiring the discontinuance of that
23 activity or practice.
24 Section 719. (a) A person or organization may not wilfully
25 withhold information from or knowingly give false or misleading
26 information which will affect the rates or premiums chargeable
27 under this article to:
28 (1) the commissioner; or
29 (2) any rating organization or any insurer.
30 (b) A violation of this section shall subject the one who
19930S0001B1486 - 68 -
1 commits that violation to the penalties provided in section 720,
2 and anyone who violates this section with intent to deceive
3 commits perjury, and is subject to prosecution therefor in a
4 court of competent jurisdiction.
5 Section 720. (a) Any person, organization, or insurer found
6 by the commissioner after notice and hearing to be guilty of a
7 violation of any provision of this article, including a
8 regulation of the commissioner adopted under this article may be
9 ordered to pay a penalty of five hundred dollars ($500) for each
10 violation. Upon finding such violation to be wilful, the
11 commissioner may impose a penalty of not more than one thousand
12 dollars ($1,000) for each such violation in addition to any
13 other penalty provided by law. The commissioner has the right to
14 suspend or revoke or refuse to renew the license of any person,
15 organization, or insurer for violation of any of the provisions
16 of this article.
17 (b) The commissioner may determine when a suspension or
18 revocation of license will become effective, and the suspension
19 or revocation shall remain in effect for the period fixed by the
20 commissioner unless the commissioner modifies or rescinds the
21 suspension or revocation, or until the order upon which the
22 suspension or revocation is based is modified or reversed as the
23 result of an appeal therefrom.
24 (c) A fine may not be imposed nor a license suspended or
25 revoked by the commissioner except upon written order stating
26 the commissioner's findings, made after a hearing held on not
27 less than ten days' written notice to the person, organization,
28 or insurer specifying the alleged violation.
29 Section 721. All decisions and findings of the commissioner
30 under this article shall be subject to judicial review in
19930S0001B1486 - 69 -
1 accordance with 2 Pa.C.S. (relating to administrative law and
2 procedure).
3 Section 722. The commissioner shall report to the General
4 Assembly annually, beginning on December 31, 1993, on the
5 status, operation and procedures for the determination of
6 classification systems as they apply to this article.
7 ARTICLE VIII
8 SELF-INSURANCE POOLING
9 Section 801. The following words and phrases when used in
10 this article shall have the meanings given to them in this
11 section unless the context clearly indicates otherwise:
12 "Actuarially appropriate loss reserves" shall mean those
13 reserves needed to pay known claims for compensation and
14 expenses associated therewith and claims for compensation
15 incurred but not reported and expenses associated therewith.
16 "Administrator" means an individual, partnership or
17 corporation engaged by a fund's plan committee to carry out the
18 policies established by the plan committee and to provide day-
19 to-day management of the fund.
20 "Compensation" includes compensation paid under this act or
21 the Occupational Disease Act.
22 "Department" means the Department of Labor and Industry of
23 the Commonwealth.
24 "Employer" means an employer as defined in section 103 of
25 this act or as defined in section 103 of the Occupational
26 Disease Act, where applicable.
27 "Excess insurance" means insurance, purchased from an
28 insurance company appropriately approved or authorized or
29 licensed in this Commonwealth covering losses in excess of an
30 amount established between the group and the insurer up to the
19930S0001B1486 - 70 -
1 limits of coverage set forth in the insurance contract on a
2 specific per occurrence or per accident or annual aggregate
3 basis.
4 "Fund" means a group self-insurance fund organized by
5 employers to pool workers' compensation liabilities and approved
6 by the department under the authority of this act. A fund shall
7 not be deemed to be an insurer or insurance company and shall
8 not be subject to the provisions of the insurance laws and
9 regulations, except as specifically otherwise provided herein.
10 "Homogeneous employer" means employers who have been assigned
11 to the same classification series for at least one year or are
12 engaged in the same or similar types of business, including
13 political subdivisions.
14 "Independent actuary" means a member in good standing of the
15 Casualty Actuarial Society or a member in good standing of the
16 American Academy of Actuaries who has been identified by the
17 Academy as meeting its qualification standards for signing
18 casualty loss reserve opinions. Said actuary must not be an
19 officer, director or employe of the fund or a member of the fund
20 for which he or she is providing reports, certifications or
21 services.
22 "Insolvent fund" means the inability of a fund to pay its
23 outstanding liabilities as they mature, as may be shown either
24 by an excess of its required reserves and other liabilities over
25 its assets or by not having sufficient assets to reinsure all of
26 its outstanding liabilities after paying all accrued claims owed
27 by it.
28 "Permit" means the document issued by the department to a
29 fund which authorizes the fund to operate as a fund under the
30 provisions of this act.
19930S0001B1486 - 71 -
1 "Plan committee" means a committee composed of
2 representatives of each employer participating in a fund.
3 "Political subdivision" means any county, city, borough,
4 incorporated town, township, school district, vocational school
5 district and county institution district, municipal authority or
6 other entity created by a political subdivision pursuant to law.
7 "Security" means surety bonds, cash, negotiable securities of
8 the United States Government or the Commonwealth or other
9 negotiable securities, such as letters of credit, acceptable to
10 the department which are posted by the fund to guaranty the
11 payment of compensation.
12 "Surplus" means that amount of moneys found in the trust to
13 be in excess of all fixed costs and incurred losses attributed
14 to the pool net any occurrence or aggregate excess insurance.
15 "Trust" means a written contract signed by the members of the
16 fund which separates the legal and equitable rights to the
17 moneys held by an independent trustee as a fiduciary for the
18 benefit of employes of employers participating in the fund.
19 Section 802. (a) Employers shall be permitted to pool their
20 liabilities under this act and the Occupational Disease Act and
21 their employers' liability through participation in a fund
22 approved by the department.
23 (b) A group of homogeneous employers may be approved by the
24 department to act as a fund if the proposed group:
25 (1) Includes five or more homogeneous employers.
26 (2) Is comprised of at least five members of which each have
27 been employers for at least three years prior to the filing of
28 the group's application.
29 (3) Has been created in good faith for the purpose of
30 becoming a fund.
19930S0001B1486 - 72 -
1 (4) Has, except for political subdivisions, an aggregate net
2 worth of the employers participating calculated according to
3 generally accepted accounting principles which equals or exceeds
4 one million dollars ($1,000,000) or such amount as may be
5 adjusted and promulgated annually by the department and
6 published in the Pennsylvania Bulletin to take effect January 1
7 of each year.
8 (5) Has a combined annual payroll of fund members multiplied
9 by the rate utilized by the State Workmen's Insurance Fund which
10 is equal to or greater than five hundred thousand dollars
11 ($500,000) as adjusted annually by the percentage increase in
12 the Statewide average weekly wage or such amount as may be
13 adjusted and promulgated annually by the department and
14 published in the Pennsylvania Bulletin to take effect January 1
15 of each year.
16 (6) Guarantees benefit levels equal to those required by
17 this act and the Occupational Disease Act.
18 (7) Demonstrates sufficient aggregate financial strength and
19 liquidity to assure that all obligations under this act and the
20 Occupational Disease Act will be met as required by that act and
21 proposes a plan for the prompt payment of such benefits.
22 Information documenting an individual member's financial
23 strength and liquidity shall be presented to the department upon
24 the department's request or with the application as required by
25 the department.
26 (8) Executes a trust agreement under which each member
27 agrees to jointly and severally assume and discharge the
28 liabilities arising under this act and the Occupational Disease
29 Act of each and every party to such agreement.
30 (9) Files with the department the proposed trust agreement.
19930S0001B1486 - 73 -
1 (10) Provides for excess insurance with retention amounts in
2 such amount as the department deems acceptable on a single
3 accident (single occurrence) and aggregate excess basis. The
4 department may waive the requirement for one or both types of
5 excess insurance if convinced that the fund's financial strength
6 is sufficient to assure payment of its obligations under this
7 act and the Occupational Disease Act.
8 (11) Provides security in a form and amount prescribed by
9 the department.
10 (12) Provides letters of intent from prospective fund
11 members and evidence that each prospective member:
12 (i) Has never defaulted on compensation due under this act
13 or the Occupational Disease Act as an individual self-insurer.
14 (ii) Has not been delinquent in payment of or canceled for
15 non-payment of workers' compensation premiums for a period of at
16 least two years prior to application.
17 (iii) Has not been found to have violated section 305 or
18 section 435 of this act or the Occupational Disease Act as an
19 individual self-insurer.
20 (iv) Has not been and is not in default on or owes money
21 assessed under this act or the Occupational Disease Act.
22 (13) Provides that the fund will initiate and maintain a
23 loss prevention and safety program of the nature and extent that
24 would be required of members under the provisions of this act,
25 the Occupational Disease Act or regulations promulgated
26 hereunder.
27 (14) Provides for assessment upon employers participating in
28 the fund to establish and maintain actuarially appropriate loss
29 reserves and a plan for payment of such assessments.
30 (15) Provides proof of competent personnel and ample
19930S0001B1486 - 74 -
1 facilities within its own organization with respect to claims
2 administration, underwriting matters, loss prevention and safety
3 engineering or presents a contract with a reputable service
4 company to provide such assistance.
5 (16) Meets the other criteria established by this act or by
6 the department pursuant to regulations promulgated under this
7 act or the Occupational Disease Act.
8 (c) Each application for approval of a fund shall be
9 accompanied by a nonrefundable fee of one thousand dollars
10 ($1,000), payable to the department which shall be deposited in
11 the Workmen's Compensation Administration Fund.
12 Section 803. (a) (1) The department shall, in accordance
13 with section 802, review, approve or disapprove fund
14 applications under such rules and requirements relating to
15 applications under section 305 of this act and the Occupational
16 Disease Act as may be applicable and such rules and regulations
17 as are specifically adopted with regard to fund applications.
18 (2) During the pendency of the processing of any fund
19 application, the group of employers shall not operate as a fund.
20 (b) Permits shall identify an annual reporting period for
21 the fund as established by the department.
22 Section 804. All permits issued under this article shall
23 remain in effect unless terminated at the request of the fund or
24 revoked by the department.
25 Section 805. (a) If at any time the fund is found to be
26 insolvent, fails to pay any required assessments under this act
27 or the Occupational Disease Act, or fails to comply with any
28 provision of this act or the Occupational Disease Act or with
29 any rules promulgated thereunder, the department may revoke its
30 permit after notice and opportunity for a hearing.
19930S0001B1486 - 75 -
1 (b) In the case of revocation of a permit, the department
2 may require the fund to insure or reinsure all incurred
3 liability with an authorized insurer. All fund members shall
4 immediately obtain coverage required by this act.
5 Section 806. (a) Members of said fund shall pay a minimum
6 of twenty-five per centum of their annual assessment into the
7 fund on or before the inception of the fund. The balance of the
8 annual assessments shall be paid to the fund on a monthly,
9 quarterly or semiannual basis as required by the fund's bylaws
10 and approved by the department.
11 (b) Each member's annual assessment to the fund shall equal
12 such member's annual payroll times the applicable rates utilized
13 by the State Workmen's Insurance Fund minus the premium discount
14 specified in Schedule Y as approved by the commissioner.
15 Dividends may be returned to members in accordance with section
16 809.
17 (c) Nothing contained in this section shall preclude the
18 assessment and payment of supplemental assessments as provided
19 in section 810.
20 Section 807. After the final permit approval date of the
21 fund, prospective new members of the fund shall submit an
22 application for membership to the fund's plan committee or
23 administrator in a form approved by the department. This
24 application shall include an agreement of joint and several
25 liability as required in section 803. The administrator or plan
26 committee may approve the application for membership pursuant to
27 the bylaws of the fund. The application approved by the fund
28 shall be filed with the department. The fund shall retain the
29 authority to reject any applicant.
30 Section 808. (a) Individual members may elect to terminate
19930S0001B1486 - 76 -
1 their participation in a fund or be subject to cancellation by
2 the fund pursuant to the bylaws of the fund for non-payment of
3 premium or other violations. Any member withdrawing from a fund
4 or member terminated by the fund for non-payment of assessments
5 shall remain fully obligated for claims incurred during the
6 period of its membership in accord with fund bylaws, including,
7 but not limited to, amounts owed as annual or supplemental
8 assessments. Notice of termination of any participant shall be
9 filed with the fund. The fund shall attach any such notices of
10 termination to the renewal application filed with the
11 department.
12 (b) The fund shall notify the department immediately if
13 termination of a member causes the fund to fail to meet the
14 requirements of clause (b) of section 802. Within fifteen days
15 of the notice of withdrawal or decision to expel, the fund shall
16 advise the department of its plan to bring the fund into
17 compliance with clause (b) of section 802. If the plan does not
18 bring the fund into compliance with the requirements, the
19 department shall immediately review and revoke its permit.
20 (c) The department shall not grant the request of any fund
21 to terminate its permit unless the fund has insured or reinsured
22 all incurred workers' compensation obligations with an
23 authorized insurer under an agreement filed with and approved in
24 writing by the department. These obligations shall include both
25 known claims and expenses associated therewith and claims
26 incurred but not reported and expenses associated therewith.
27 These same requirements shall apply where the department revokes
28 a permit.
29 Section 809. Any fund may return to its members dividends
30 based upon the recommendation of an independent actuary.
19930S0001B1486 - 77 -
1 Dividends shall not be returned if the payment of such dividends
2 would impair the fund's ability to meet its obligations under
3 this act or the Occupational Disease Act, nor shall dividends be
4 returned prior to the beginning of the thirteenth month
5 following the expiration of the preceding annual reporting
6 period. The initial dividend payment for any annual reporting
7 period shall not exceed thirty per centum of the surplus
8 available for the applicable annual reporting period. The fund
9 may, however, seek annual approval for payment of dividends from
10 the surplus remaining from any annual reporting period which has
11 been completed for at least twenty-five months or longer and may
12 include such dividend payments with initial dividend payments
13 from the subsequent annual reporting period.
14 Section 810. (a) If the assets of a fund are at any time
15 insufficient to enable the fund to discharge its legal
16 liabilities and other obligations and to maintain the
17 actuarially appropriate loss reserves required of it under
18 paragraph (14) of clause (b) of section 802, the fund shall
19 forthwith make up the deficiency or levy an assessment upon the
20 fund members for the amount needed to make up the deficiency.
21 (b) In the event of a deficiency in any annual reporting
22 period, such deficiency shall be made up immediately, either
23 from surplus from a year other than the current year, assessment
24 of the fund members if ordered by the fund or such alternate
25 method as the department may approve or direct.
26 (c) If the fund fails to assess its members or to otherwise
27 make up such deficit within thirty days the department shall
28 order it to do so.
29 (d) If the fund fails to make the required assessment of its
30 members within thirty days after the department orders it to do
19930S0001B1486 - 78 -
1 so, or if the deficiency is not fully made up within sixty days
2 after the date on which such assessment is made or within such
3 longer period of time as may be specified by the department, the
4 fund shall be deemed to be insolvent.
5 (e) The department shall proceed against an insolvent fund
6 in the same manner as the department would proceed against a
7 self-insurer under Article IX.
8 (f) In addition, in the event of the liquidation or default
9 of a fund, the department may levy an assessment upon the fund
10 members for such an amount as the department determines to be
11 necessary to discharge all liabilities of the fund including the
12 reasonable cost of liquidation and shall deposit such
13 assessments into the Self-insurance Guaranty Fund for
14 distribution and payment by the Guaranty Fund as provided for in
15 Article IX.
16 Section 811. The annual assessment of each fund member shall
17 be based upon the annual payroll of fund members multiplied by
18 the rates as utilized by the State Workmen's Insurance Fund for
19 members minus any premium discounts. A fund may deviate from
20 these rates and establish its own rates with the approval of an
21 independent actuary and the department.
22 Section 812. Each fund shall request classifications for its
23 participants from the bureau or bureaus approved by the
24 commissioner and shall utilize those classifications making
25 assessments based upon rates as utilized by the State Workmen's
26 Insurance Fund for such classification except as provided in
27 section 811. The fund shall pay the appropriate bureau a
28 reasonable charge, approved by the commissioner, for this
29 service. The fund may appeal classifications as provided in the
30 applicable sections of the Insurance Company Law of 1921 for
19930S0001B1486 - 79 -
1 other employers.
2 Section 813. Each fund may invest any surplus moneys not
3 needed for current obligations in United States Government
4 obligations, United States Treasury Notes, investment share
5 accounts in any savings and loan association whose deposits are
6 insured by a Federal agency and certificates of deposit issued
7 by a duly chartered commercial bank. Deposits in savings and
8 loan associations and commercial banks shall be limited to
9 institutions in this Commonwealth and shall not exceed the
10 federally insured amount in any one account. Investments may
11 also be made in any permitted investments of capital or surplus
12 of stock casualty insurance companies set forth in section 602
13 or 603 of the Insurance Company Law of 1921, as may be
14 authorized by regulation approved by the commissioner.
15 Section 814. (a) Funds approved under this article shall
16 purchase excess insurance by reason of any single accident or
17 any single occurrence as provided in section 653 of the
18 Insurance Company Law of 1921 and aggregate excess insurance.
19 The department may waive the requirement for either single
20 accident (single occurrence) or aggregate excess insurance or
21 the requirement for both single accident (single occurrence) and
22 aggregate excess insurance.
23 (b) A policy of insurance by an insurance carrier may
24 include provisions for aggregate excess insurance in addition to
25 the single accident (single occurrence) excess insurance which
26 is authorized under section 653 of the Insurance Company Law of
27 1921.
28 Section 815. (a) A report shall be prepared by each fund
29 for each annual reporting period and shall be filed with the
30 department and made available to each fund member.
19930S0001B1486 - 80 -
1 (b) The information contained in the annual report shall
2 include, for each member of the fund and the fund itself:
3 (1) Summary loss reports.
4 (2) An annual statement of the financial condition of the
5 fund prepared by a certified public accountant and performed in
6 accordance with generally accepted accounting principles.
7 (3) Reports of outstanding liabilities showing the number of
8 claims, amounts paid to date and current reserves as certified
9 by an independent actuary.
10 (4) Such other information as required by regulation of the
11 department as may be applicable to applicants for self-insurance
12 under section 305 of this act and the Occupational Disease Act
13 or regulations in regard to fund applications.
14 (c) The annual report shall be accompanied by a one thousand
15 dollar evaluation fee.
16 (d) The department may, at any time, examine the affairs,
17 transactions, accounts, records and assets of a fund and the
18 fund shall make all such items as are needed for such
19 examination available to the department. The department shall
20 bill the fund for the reasonable costs associated with such
21 examinations.
22 (e) If at any time there is a change in the fund, during an
23 annual reporting period other than as set forth in section 808,
24 that affects the ability of the fund to comply with the
25 requirements of clause (b) of section 802, the fund shall notify
26 the department of the change within thirty days after such
27 change.
28 Section 816. Each fund shall be assessed annually by the
29 department in a like manner and amount as other insurers or
30 self-insurers are now or hereafter assessed under this act and
19930S0001B1486 - 81 -
1 the Occupational Disease Act and shall pay such assessment in
2 accordance with this act and the Occupational Disease Act. All
3 contributions received in accordance with this section shall be
4 deposited into the appropriate fund as required by the
5 applicable provision of law.
6 Section 817. Any group of five homogeneous employers who
7 will provide to the fund an annual volume of premium of at least
8 five hundred thousand dollars ($500,000) may become subscribers
9 as a group to the State Workmen's Insurance Fund for the purpose
10 of insuring therein their liability to those of their employes.
11 Such group shall become legally obligated to pay any employe
12 compensation required by this act because of bodily injury by
13 accident or disease, including death at any time resulting
14 therefrom, sustained by such employe arising out of and in the
15 course of his employment. Such group shall make a written
16 application for subscription for group insurance to the board.
17 Such application shall designate the name of the group
18 subscriber and shall include such information as determined by
19 the board as will allow the board to identify the employers and
20 to adequately assess risks and premiums to be charged to
21 employers to be insured by the fund under the group
22 subscription.
23 Section 818. The department is authorized to promulgate
24 rules and regulations for the administration and enforcement of
25 this article.
26 ARTICLE IX
27 SELF-INSURANCE GUARANTY FUND
28 Section 901. The following words and phrases when used in
29 this article shall have the meanings given to them in this
30 section unless the context clearly indicates otherwise:
19930S0001B1486 - 82 -
1 "Compensation" means benefits paid pursuant to sections 306
2 and 307.
3 "Employer" means a self-insured employer or the employer as
4 defined in this act.
5 "Guaranty Fund" or "fund" means the Self-Insurance Guaranty
6 Fund established in section 902 for injuries and exposures
7 occurring on or after the establishment of the Self-Insurance
8 Guaranty Fund.
9 "Security" means surety bonds, cash, negotiable securities of
10 the United States Government or the Commonwealth or other
11 negotiable securities, such as letter of credit, acceptable to
12 the department which are posted by the fund to guaranty the
13 payment of workers' compensation benefits.
14 "Self-insurer" means an employer exempted under section 305
15 or a group self-insurance fund permitted to operate under
16 Article VIII.
17 Section 902. (a) (1) There is hereby established a special
18 fund to be known as the Self-Insurance Guaranty Fund.
19 (2) The fund shall be maintained as two distinct custodial
20 accounts in the State Treasury as separate and distinct accounts
21 subject to the procedures and provisions set forth in this
22 article.
23 (b) The moneys in each custodial account shall consist of
24 security and assessments, as defined in section 907 and interest
25 accumulated thereon.
26 (c) The administrator shall establish and maintain the
27 following two distinct and separate custodial accounts. The
28 moneys and other assets in each account are not to be commingled
29 or used to pay claims from the other account.
30 (1) Custodial account for self-insured employers for the
19930S0001B1486 - 83 -
1 exclusive benefit of claims arising from defaulting individual
2 self-insured employers.
3 (2) Custodial account for self-insurance pooling as defined
4 under section 801 for the exclusive benefit of claims arising
5 from defaulting members of pooling arrangements.
6 (d) The secretary shall be the administrator of the fund and
7 shall have the power to collect, dispense and disperse money
8 from the fund.
9 Section 903. The fund shall be maintained to make payments
10 to any claimant or his dependents upon the default of the self-
11 insurer liable to pay compensation due under this act and the
12 Occupational Disease Act or costs associated therewith and shall
13 be maintained in an amount sufficient to pay such compensation
14 and costs or reasonably anticipated to be needed by virtue of
15 default by self-insurers.
16 Section 904. (a) When a self-insurer fails to pay
17 compensation when due, the department shall determine the
18 reasons for such failure.
19 (b) If the department determines that the failure to pay
20 compensation is due to the self-insurer's financial inability to
21 pay compensation, the department shall notify the self-insurer
22 of same and direct compensation to be paid within fifteen days
23 of such notice.
24 (c) If the self-insurer fails to pay the compensation as
25 directed and within the time set forth in this section, the
26 department shall declare the self-insurer in default.
27 (d) Whenever the department determines that a default has
28 occurred it shall:
29 (1) Investigate the circumstances surrounding the default,
30 the amount of security available and the ability of the self-
19930S0001B1486 - 84 -
1 insured to cure the default.
2 (2) Determine whether the liabilities of the self-insurer
3 for compensation exceed or are less than the security:
4 (i) If the liabilities are less than the security, the
5 department shall demand the custodian of the security utilize
6 the security to cure the default and the department shall
7 monitor the situation to insure that compensation is paid as due
8 under this act or the Occupational Disease Act.
9 (ii) If at any time the liabilities exceed or can reasonably
10 be expected to exceed the security, in the opinion of the
11 department, the department may order payment of the security
12 into the fund's appropriate custodial account, and shall order
13 payment from the Guaranty Fund, as appropriate, to cure the
14 default and insure that compensation is paid as due under this
15 act or the Occupational Disease Act.
16 Section 905. (a) When payments are ordered from the
17 Guaranty Fund's appropriate custodial account, the fund assumes
18 the rights and obligations of the self-insurer under this act or
19 the Occupational Disease Act with regard to the payment of
20 compensation and shall have and may exercise the rights set
21 forth in this section.
22 (b) The Guaranty Fund shall have the right to:
23 (1) Institute and prosecute legal action against any self-
24 insurer and each and every member of a fund, jointly and
25 severally, on behalf of the employes of the self-insured
26 employer or fund members' employes and their dependents to
27 require the payment of compensation and the performance of any
28 other obligations of the self-insurer under this act or the
29 Occupational Disease Act.
30 (2) Appear and represent the Guaranty Fund in any
19930S0001B1486 - 85 -
1 proceedings in bankruptcy involving the self-insurer on whose
2 behalf payments were made, including the ability to appear and
3 move to lift any stay orders affecting payment of compensation.
4 (3) Obtain, in any manner or by the use of any process or
5 procedure, including, but not limited to, the commencement and
6 prosecution of legal action, reimbursement from a self-insurer
7 and its successors, assigns and estate all moneys paid on
8 account of the self-insurer's obligation assumed by the fund,
9 including, but not limited to, reimbursement for all
10 compensation paid as well as reasonable administrative and legal
11 costs associated with such payment.
12 (4) Purchase reinsurance and take any and all other action
13 which effects the purpose of the Guaranty Fund.
14 Section 906. (a) (1) Security or funds from security
15 demanded and paid to the department under section 904 shall be
16 deposited into the Guaranty Fund.
17 (2) These funds and interest thereon shall be segregated in
18 individual custodial accounts within the Guaranty Fund by the
19 custodian and maintained solely for the payment of compensation
20 or costs associated therewith upon order of the department to
21 the employes of the defaulting self-insurer providing the
22 security from the appropriate custodial account.
23 (3) If there are funds from security or interest thereon
24 remaining in the individual account after all outstanding
25 obligations of the insolvent self-insurer have been satisfied
26 and the costs of administration and defense have been paid, such
27 amount as remains shall be returned upon order of the department
28 from the Guaranty Fund individual account to the self-insurer.
29 (b) Assessments made under section 907 and interest thereon
30 shall be deposited into the Guaranty Fund's appropriate
19930S0001B1486 - 86 -
1 custodial account.
2 Section 907. (a) On a date to be determined by the
3 department following the effective date of this article,
4 employers who are self-insurers as of that effective date shall
5 pay an initial assessment of one-half per centum of the
6 compensation paid by each self-insurer in the year preceding the
7 assessment. Self-insurers who, prior to such effective date,
8 were not self-insurers, shall pay an assessment based on one-
9 half per centum of their modified manual premium for the twelve
10 months immediately prior to becoming self-insurers.
11 (b) (1) The department may, in addition to the initial
12 assessment, from time to time, assess each self-insurer a pro
13 rata share of the amounts needed for the fund to carry out the
14 requirements of this article.
15 (2) Such assessments shall be based on the ratio that each
16 self-insurer's payments of compensation bears to the total
17 compensation paid by all self-insurers in the year preceding the
18 year of assessment.
19 (3) In no event shall a self-insurer be assessed in any one
20 calendar year more than one per centum of the compensation paid
21 by that self-insurer during the previous calendar year.
22 (c) A self-insurer which ceases to be a self-insurer shall
23 be liable for any and all assessments made pursuant to this
24 section during the period following the date its authority to
25 self-insure is withdrawn, revoked or surrendered until such time
26 as it has discharged all obligations to pay compensation which
27 arose during the period of time said former self-insurer was
28 self-insured. Assessments of such a former self-insurer shall be
29 based on the compensation paid by the former self-insurer during
30 the preceding calendar year on claims that arose during the
19930S0001B1486 - 87 -
1 period of time said former self-insurer was self-insured.
2 Section 908. The department may promulgate rules and
3 regulations for the administration and enforcement of this
4 article.
5 ARTICLE X
6 HEALTH AND SAFETY
7 Section 1001. (a) Notwithstanding any other provision of
8 law, an insurer desiring to write workers' compensation
9 insurance in this Commonwealth shall maintain or provide
10 accident and illness prevention services as a prerequisite for a
11 license to write such insurance. Proof of compliance with this
12 section shall be provided to the commissioner. Such services
13 shall be adequate to furnish accident prevention required by the
14 nature of its business or its policyholders' operations and
15 shall include surveys, recommendations, training programs,
16 consultations, analyses of accident causes, industrial hygiene
17 and industrial health services to implement the program of
18 accident prevention services. The insurer, pursuant to its
19 responsibilities under this section, shall employ or otherwise
20 make available qualified accident and illness prevention
21 personnel. Such personnel shall meet the qualifications set
22 forth in regulations issued by the department.
23 (b) A self-insured employer shall maintain an accident and
24 illness prevention program as a prerequisite for retention of
25 its self-insured status. Such program shall be adequate to
26 furnish accident prevention required by the nature of its
27 business and shall include surveys, recommendations, training
28 programs, consultations, analyses of accident causes, industrial
29 hygiene and industrial health services. The self-insured
30 employer pursuant to its responsibilities under this section,
19930S0001B1486 - 88 -
1 shall employ or otherwise make available qualified accident and
2 illness prevention personnel. Such personnel shall meet the
3 qualifications set forth in regulations issued by the
4 department.
5 (c) The department may conduct inspections to determine the
6 adequacy of the accident prevention services required by this
7 section at least once every two years for each insurer.
8 (d) Notice that services required by this section are
9 available to the employer from an insurer must appear in no less
10 than ten-point bold type and must accompany each workers'
11 compensation insurance policy delivered or issued for delivery
12 in this Commonwealth.
13 (e) At least once each year each insurer must submit to the
14 department detailed information on the type of accident
15 prevention services offered or provided to the insurer's
16 policyholders. The information must include:
17 (1) The amount of money spent by the insurer on accident
18 prevention services.
19 (2) The number and qualifications of field safety
20 representatives employed by the insurer.
21 (3) The number of site inspections performed.
22 (4) Any accident prevention services for which the insurer
23 contracts.
24 (5) A breakdown of the premium size of the risks to which
25 the insurer provided services.
26 (6) Evidence of the effectiveness of and accomplishments in
27 accident prevention.
28 (f) Failure to maintain or provide the accident prevention
29 services required by this section shall constitute a continuing
30 civil violation subject to a maximum fine of two thousand
19930S0001B1486 - 89 -
1 dollars ($2,000) per day for each day the accident prevention
2 services are not maintained or provided. Each day of
3 noncompliance with this section is a separate violation. All
4 fines recovered under this section shall be paid to the
5 department and deposited by the department into the Workmen's
6 Compensation Administration Fund created by section 446 of this
7 act.
8 (g) The insurer, the agent, servant or employe of the
9 insurer and the past and present employer and employe members of
10 the safety committee established under section 1002 and any
11 collective bargaining representative shall not be liable on any
12 cause of action or in any proceeding, civil or criminal, arising
13 out of or based upon allegations and pleadings relating to the
14 performance of services under or in compliance with this
15 article. This immunity shall not, however, affect the liability
16 of the employer or the insurer for compensation as otherwise
17 provided in this act. The recommendations, findings and minutes
18 of a safety committee shall not be admissible evidence in any
19 civil action filed on behalf of an employe against a third party
20 regarding any injury incurred in the course and scope of
21 employment.
22 Section 1002. (a) An insured employer may make application
23 to the department for the certification of any established
24 safety committee operative within its workplace, developed for
25 the purpose of hazard detection and accident prevention. The
26 department shall develop such certification criteria.
27 (b) Upon the renewal of the employer's workers' compensation
28 policy next following receipt of department certification, the
29 employer shall receive a five per centum discount in the rate or
30 rates applicable to the policy for a period of one year.
19930S0001B1486 - 90 -
1 ARTICLE XI
2 INSURANCE FRAUD
3 Section 1101. The following words and phrases when used in
4 this article shall have the meanings given to them in this
5 section unless the context clearly indicates otherwise:
6 "Attorney" means an individual admitted by the Pennsylvania
7 Supreme Court to practice law in this Commonwealth.
8 "Health care provider" means a person licensed or certified
9 pursuant to law to perform health care activities.
10 "Insurance claim" means a claim for payment or other benefits
11 pursuant to an insurance policy for workers' compensation.
12 "Insurance policy" means a document setting forth the terms
13 and conditions of a contract of insurance or agreement for
14 workers' compensation.
15 "Insurer" means a company, association or exchange defined by
16 section 101 of the Insurance Company Law of 1921 and the State
17 Workmen's Insurance Fund; an unincorporated association of
18 underwriting members; a hospital plan corporation; a
19 professional health services plan corporation; a health
20 maintenance organization; a fraternal benefit society; and a
21 self-insured health care entity under the act of October 15,
22 1975 (P.L.390, No.111), known as the "Health Care Services
23 Malpractice Act."
24 "Person" means an individual, corporation, partnership,
25 association, joint-stock company, trust or unincorporated
26 organization. The term includes any individual, corporation,
27 association, partnership, reciprocal exchange, interinsurer,
28 Lloyd's insurer, fraternal benefit society, beneficial
29 association and any other legal entity engaged or proposing to
30 become engaged, either directly or indirectly, in the business
19930S0001B1486 - 91 -
1 of insurance, including agents, brokers, adjusters and health
2 care plans as defined in 40 Pa.C.S. Chs. 61 (relating to
3 hospital plan corporations), 63 (relating to professional health
4 services plan corporations), 65 (relating to fraternal benefit
5 societies) and 67 (relating to beneficial societies) and the act
6 of December 29, 1972 (P.L.1701, No.364), known as the "Health
7 Maintenance Organization Act." For purposes of this article,
8 health care plans, fraternal benefit societies and beneficial
9 societies shall be deemed to be engaged in the business of
10 insurance.
11 "Statement" means any oral or written presentation or other
12 evidence of loss, injury or expense, including, but not limited
13 to, any notice, statement, proof of loss, bill of lading,
14 receipt for payment, invoice, account, estimate of property
15 damages, bill for services, diagnosis, prescription, hospital or
16 doctor records, X-ray, test result or computer-generated
17 documents.
18 Section 1102. A person, including, but not limited to, the
19 employer, the employe, the health care provider, the attorney,
20 the insurer, the State Workmen's Insurance Fund and self-
21 insureds, commits an offense if the person does any of the
22 following:
23 (1) Knowingly and with the intent to defraud a State or
24 local government agency files, presents or causes to be filed
25 with or presented to the government agency a document that
26 contains false, incomplete or misleading information concerning
27 any fact or thing material to the agency's determination in
28 approving or disapproving a workers' compensation insurance rate
29 filing, a workers' compensation transaction or other workers'
30 compensation insurance action which is required or filed in
19930S0001B1486 - 92 -
1 response to an agency's request.
2 (2) Knowingly and with the intent to defraud any insurer,
3 presents or causes to be presented to any insurer any statement
4 forming a part of, or in support of, a workers' compensation
5 insurance claim that contains any false, incomplete or
6 misleading information concerning any fact or thing material to
7 the workers' compensation insurance claim.
8 (3) Knowingly and with the intent to defraud any insurer,
9 assists, abets, solicits or conspires with another to prepare or
10 make any statement that is intended to be presented to any
11 insurer in connection with, or in support of, a workers'
12 compensation insurance claim that contains any false, incomplete
13 or misleading information concerning any fact or thing material
14 to the workers' compensation insurance claim.
15 (4) Engages in unlicensed agent or broker activity as
16 defined by the act of May 17, 1921 (P.L.789, No.285), known as
17 "The Insurance Department Act of one thousand nine hundred and
18 twenty-one," knowingly and with the intent to defraud an insurer
19 or the public.
20 (5) Knowingly benefits, directly or indirectly, from the
21 proceeds derived from a violation of this section due to the
22 assistance, conspiracy or urging of any person.
23 (6) Is the owner, administrator or employe of any health
24 care facility and knowingly allows the use of such facility by
25 any person in furtherance of a scheme or conspiracy to violate
26 any of the provisions of this section.
27 (7) Knowingly and with the intent to defraud assists, abets,
28 solicits or conspires with any person who engages in an unlawful
29 act under this section.
30 (8) Makes or causes to be made any knowingly false or
19930S0001B1486 - 93 -
1 fraudulent statement with regard to entitlement to benefits with
2 the intent to discourage an injured worker from claiming
3 benefits or pursuing a claim.
4 (9) Knowingly and with the intent to defraud makes any false
5 statement for the purpose of avoiding or diminishing the amount
6 of the payment in premiums to an insurer or self-insurance fund.
7 Section 1103. (a) A lawyer may not compensate or give
8 anything of value to a nonlawyer to recommend or secure
9 employment by a client or as a reward for having made a
10 recommendation resulting in employment by a client; except that
11 the lawyer may pay:
12 (1) the reasonable cost of advertising or written
13 communication as permitted by the rules of professional conduct;
14 or
15 (2) the usual charges of a not-for-profit lawyer referral
16 service or other legal service organization.
17 Upon a conviction of an offense under this clause, the
18 prosecutor shall certify the conviction to the disciplinary
19 board of the Supreme Court for appropriate action, including
20 suspension or disbarment.
21 (b) With respect to a workers' compensation insurance
22 benefit or claim, a health care provider may not compensate or
23 give anything of value to a person to recommend or secure the
24 provider's service to or employment by a patient or as a reward
25 for having made a recommendation resulting in the provider's
26 service to or employment by a patient; except that the provider
27 may pay the reasonable cost of advertising or written
28 communication as permitted by rules of professional conduct.
29 Upon a conviction of an offense under this clause, the
30 prosecutor shall certify the conviction to the appropriate
19930S0001B1486 - 94 -
1 licensing board in the Department of State which shall suspend
2 or revoke the health care provider's license.
3 (c) A lawyer or health care provider may not compensate or
4 give anything of value to a person for providing names,
5 addresses, telephone numbers or other identifying information of
6 individuals seeking or receiving medical or rehabilitative care
7 for accident, sickness or disease, except to the extent a
8 referral and receipt of compensation is permitted under
9 applicable professional rules of conduct. A person may not
10 knowingly transmit such referral information to a lawyer or
11 health care professional for the purpose of receiving
12 compensation or anything of value. Attempts to circumvent this
13 clause through use of any other person, including, but not
14 limited to, employes, agents or servants, shall also be
15 prohibited.
16 Section 1104. If an insurance claim is made by means of
17 computer billing tapes or other electronic means, it shall be a
18 rebuttable presumption that the person knowingly made the claim
19 if the person has advised the insurer in writing that claims
20 will be submitted by use of computer billing tapes or other
21 electronic means.
22 Section 1105. (a) A person who violates section 1102 shall
23 be guilty of a felony of the third degree, and, upon conviction
24 thereof, shall be sentenced to pay a fine of not more than fifty
25 thousand dollars ($50,000) or double the value of the fraud, or
26 to undergo imprisonment for a period of not more than seven
27 years, or both.
28 (b) A person who violates section 1103 shall be guilty of a
29 misdemeanor of the first degree, and, upon conviction thereof,
30 shall be sentenced to pay a fine of not more than twenty
19930S0001B1486 - 95 -
1 thousand dollars ($20,000) or double the amount of the fraud, or
2 both.
3 (c) A health care provider or lawyer who is guilty of an
4 offense under section 1102 while acting on behalf of others
5 shall be subject to disciplinary action, including suspension or
6 revocation of a license or certificate or recommendation for
7 suspension or disbarment to the Supreme Court, on the same basis
8 as a health care provider or lawyer who is guilty of an offense
9 under section 1103.
10 Section 1106. The court may, in addition to any other
11 sentence authorized by law, sentence a person convicted of
12 violating this section to make restitution under 18 Pa.C.S §
13 1106 (relating to restitution for injuries to person or
14 property).
15 Section 1107. An insurer and any agent, servant or employe
16 thereof acting in the course and scope of his employment shall
17 be immune from civil or criminal liability arising from the
18 supply or release of written or oral information to any entity
19 duly authorized to receive such information by Federal or State
20 law, or by Insurance Department regulations, only if the
21 information is supplied to the agency in connection with an
22 allegation of fraudulent conduct on the part of any person
23 relating to a violation of this article and the insurer, agent,
24 servant or employe has reason to believe that the information
25 supplied is related to the allegation of fraud.
26 Section 1108. Nothing in this article shall be construed to
27 prohibit any conduct by an attorney or law firm which is
28 expressly permitted by the Rules of Professional Conduct of the
29 Supreme Court, by statute or by regulation, or prohibit any
30 conduct by a health care provider which is expressly permitted
19930S0001B1486 - 96 -
1 by law or regulation.
2 Section 1109. (a) The district attorneys of the several
3 counties shall have authority to investigate and to institute
4 criminal proceedings for any violation of this article.
5 (b) In addition to the authority conferred upon the Attorney
6 General by the act of October 15, 1980 (P.L.950, No.164), known
7 as the "Commonwealth Attorneys Act," the Attorney General shall
8 have the authority to investigate and to institute criminal
9 proceedings for any violation of this section or any series of
10 such violations involving more than one county of this
11 Commonwealth or involving any county of this Commonwealth and
12 another state. No person charged with a violation of this
13 article by the Attorney General shall have standing to challenge
14 the authority of the Attorney General to investigate or
15 prosecute the case, and, if any such challenge is made, the
16 challenge shall be dismissed and no relief shall be available in
17 the courts of the Commonwealth to the person making the
18 challenge.
19 Section 1110. Nothing contained in this article shall be
20 construed to limit the regulatory or investigative authority of
21 any department or agency of the Commonwealth whose functions
22 might relate to persons, enterprises or matters falling within
23 the scope of this article.
24 Section 1111. All fines and penalties imposed following a
25 conviction for a violation of this article shall be collected in
26 the manner provided by law and shall be paid in the following
27 manner:
28 (1) If the prosecutor is a district attorney, the fines and
29 penalties shall be paid into the operating fund of the county in
30 which the district attorney is elected.
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1 (2) If the prosecutor is the Attorney General, the fines and
2 penalties shall be paid into the State Treasury.
3 ARTICLE XII
4 FRAUD ENFORCEMENT
5 Section 1201. The following words and phrases when used in
6 this article shall have the meanings given to them in this
7 section unless the context clearly indicates otherwise:
8 "Antifraud plan" means the insurance antifraud plan required
9 to be filed and maintained pursuant to this article.
10 "Commissioner" means the Insurance Commissioner of the
11 Commonwealth.
12 "Department" means the Insurance Department of the
13 Commonwealth.
14 Section 1202. (a) The department is authorized to refer to
15 the appropriate law enforcement official violations of Article
16 XI if the department has reason to believe that a person has
17 engaged in or is engaging in an act or practice that violates
18 Article XI.
19 (b) The department shall furnish all papers, documents,
20 reports, complaints or other facts or evidence to any police,
21 sheriff or other law enforcement agency or governmental entity
22 duly authorized to receive such information, when so requested,
23 and shall assist and cooperate with those agencies.
24 Section 1203. A workers' compensation insurer shall
25 institute and maintain an insurance antifraud plan.
26 Section 1204. All workers' compensation insurers shall
27 annually provide to the department a summary report on actions
28 taken under an antifraud plan to prevent and combat insurance
29 fraud, including, but not limited to, measures taken to protect
30 and ensure the integrity of electronic data processing-generated
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1 data and manually compiled data, statistical data on the amount
2 of resources committed to combating fraud and the amount of
3 fraud identified and recovered during the reporting period.
4 Section 1205. (a) Every workers' compensation insurer, and
5 its employes, agents and brokers, are authorized to refer to the
6 appropriate law enforcement official violations of Article XI if
7 the insurer, employe, agent or broker has reason to believe that
8 a person has engaged in or is engaging in an act or practice
9 that violates Article XI.
10 (b) The insurer, its employes, agents and brokers, shall
11 furnish all papers, documents, reports, complaints or other
12 facts or evidence to any police, sheriff or other law
13 enforcement agency or governmental entity duly authorized to
14 receive such information, when so requested, and shall assist
15 and cooperate with those agencies.
16 ARTICLE XIII
17 SMALL BUSINESS ADVOCATE
18 Section 1301. As used in this article:
19 "Department" means the Insurance Department of the
20 Commonwealth.
21 Section 1302. In addition to his powers and duties under the
22 act of December 21, 1988 (P.L.1871, No.181), known as the "Small
23 Business Advocate Act," the small business advocate shall have
24 standing to represent the interest of employers as a party in
25 proceedings before the department or any court involving filings
26 by rating organizations and insurers pursuant to Article VII of
27 this act.
28 Section 1303. In addition to any other assessment authorized
29 by section 446, an additional annual assessment shall be made on
30 insurers, including the State Workmen's Insurance Fund but not
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1 including self-insureds, as a percentage of the total
2 compensation paid, for the purpose of funding the operations of
3 the Office of Small Business Advocate pursuant to this act.
4 Assessments under this section shall be made by the department
5 and deposited into the Workmen's Compensation Administration
6 Fund in a restricted account to be used by the Office of Small
7 Business Advocate. The total amount assessed shall be the amount
8 of the budget approved annually by the General Assembly for the
9 operations of the Office of Small Business Advocate pursuant to
10 this act.
11 Section 1304. Nothing contained in this article shall in any
12 way limit the right of any person to bring a proceeding before
13 either the department or a court.
14 Section 21. No later than December 31, 1993, the Secretary
15 of Labor and Industry shall submit to the General Assembly an
16 analysis of the average workload per workers' compensation judge
17 and a plan to reduce the delays in deciding workers'
18 compensation petitions, including any necessary increases in the
19 number of judges and supporting staff.
20 Section 22. Notwithstanding any other provision of law to
21 the contrary, regulations promulgated under the authority of
22 section 306(f.1)(3)(ii) of the act, as amended by this act,
23 shall not be subject to the provisions of the act of October 15,
24 1980 (P.L.950, No.164), known as the Commonwealth Attorneys Act,
25 or the act of June 25, 1982 (P.L.633, No.181), known as the
26 Regulatory Review Act.
27 Section 23. The Commonwealth, its political subdivisions,
28 their officials and employees acting within the scope of their
29 duties shall enjoy and benefit from sovereign and official
30 immunity from claims of subrogation or reimbursement from a
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1 claimant's tort recovery with respect to workers' compensation
2 benefits.
3 Section 24. For purposes of the initial filing only,
4 notwithstanding any other provisions of this act, the following
5 provision shall apply:
6 (1) Each rating organization shall file, within 60 days
7 after enactment of this act, a loss cost filing pursuant to
8 section 709(c) of Article VII of the act for new and renewal
9 policies for workers' compensation insurance to be effective
10 on and after December 1, 1993. Such filing shall be subject
11 to approval or disapproval by the Insurance Commissioner
12 pursuant to Article VII of the act, but such approval or
13 disapproval shall be made not later than 60 calendar days
14 after first receipt of the loss cost filing.
15 (2) In the absence of an order approving or disapproving
16 the loss cost filing within 60 calendar days of its first
17 receipt, the filing shall be deemed to meet all the
18 requirements of this act.
19 (3) No later than 30 days from the date of the actual or
20 deemed approval of the above loss cost filing, each
21 individual insurer shall file for the commissioner's approval
22 or disapproval provisions for loss adjustment, or claim
23 management expenses, other operating expenses, assessments,
24 taxes and profit or contingency allowances for new and
25 renewal policies to be effective on and after December 1,
26 1993, but such approval or disapproval shall be made not
27 later than 30 days after the first receipt of the filing. The
28 effective date of such filings shall be the date specified in
29 the filing, but shall not be earlier than 30 days after the
30 filing is received by the commissioner.
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1 (4) In the absence of an order approving or disapproving
2 any filing for loss adjustment, or claim management expenses,
3 other operating expenses, assessments, taxes and profit or
4 contingency allowances within 30 days of its first receipt,
5 such filing shall be deemed to meet all the requirements of
6 this act.
7 (5) No later than the approval date of the loss cost
8 filing, the commissioner shall publish an aggregate factor
9 reflecting the experience of stock insurance companies and
10 including the effect of applicable premium discount programs,
11 for loss adjustment, or claim management expenses, other
12 operating expenses, assessments, taxes and profit or
13 contingency allowances which all insurers may use in the
14 foregoing initial filings. Any insurer filing which uses an
15 aggregate factor not in excess of the appropriate foregoing
16 factor shall be deemed approved upon filing for purposes of
17 this section.
18 (6) Subsequent to the approval of rates pursuant to
19 paragraphs (1) through (5), no loss cost filing or filings
20 for loss adjustment, or claim management expenses, other
21 operating expenses, assessments, taxes and profit or
22 contingency allowances shall be made prior to December 1,
23 1994, except as the commissioner deems necessary in
24 extraordinary circumstances.
25 Section 25. (a) The following act and parts of acts are
26 repealed to the extent specified:
27 Section 654 of the act of May 17, 1921 (P.L.682, No.284),
28 known as The Insurance Company Law of 1921, except with regard
29 to insurance as to liability under the Longshore and Harbor
30 Workers' Compensation Act (44 Stat. 1424, 23 U.S.C. § 901 et
19930S0001B1486 - 102 -
1 seq.).
2 75 Pa.C.S. §§ 1735 and 1737, absolutely.
3 (b) The provisions of 75 Pa.C.S. §§ 1720 and 1722 are
4 repealed insofar as they relate to workers' compensation
5 payments or other benefits under the Workers' Compensation Act.
6 (c) All other acts and parts of acts are repealed insofar as
7 they are inconsistent with this act.
8 Section 26. No changes in indemnity compensation payable by
9 this act shall affect payments of indemnity compensation for
10 injuries sustained prior to the effective date of this section.
11 Section 27. This act shall take effect as follows:
12 (1) The addition of Article VII of the act shall take
13 effect immediately.
14 (2) The addition of Articles VIII and IX of the act
15 shall take effect in 120 days.
16 (3) Sections 24 and 25(a) of this act shall take effect
17 immediately.
18 (4) This section shall take immediately.
19 (5) The remainder of this act shall take effect in 60
20 days.
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