PRINTER'S NO. 1738
No. 1459 Session of 1997
INTRODUCED BY MICOZZIE, ADOLPH, GANNON, CHADWICK, NICKOL, MELIO,
SATHER, GODSHALL, PESCI, BAKER, KENNEY, LEH, SERAFINI, BROWN,
CIVERA, SEMMEL, WAUGH, PLATTS, MUNDY, TULLI, SAYLOR, BARD,
E. Z. TAYLOR AND STERN, MAY 6, 1997
REFERRED TO COMMITTEE ON INSURANCE, MAY 6, 1997
AN ACT
1 Amending the act of October 15, 1975 (P.L.390, No.111), entitled
2 "An act relating to medical and health related malpractice
3 insurance, prescribing the powers and duties of the Insurance
4 Department; providing for a joint underwriting plan; the
5 Arbitration Panels for Health Care, compulsory screening of
6 claims; collateral sources requirement; limitation on
7 contingent fee compensation; establishing a Catastrophe Loss
8 Fund; and prescribing penalties," further providing for the
9 transfer of the Medical Professional Liability Catastrophe
10 Loss Fund coverage to the private sector.
11 The General Assembly of the Commonwealth of Pennsylvania
12 hereby enacts as follows:
13 Section 1. Section 605 of the act of October 15, 1975
14 (P.L.390, No.111), known as the Health Care Services Malpractice
15 Act, is repealed.
16 Section 2. Section 701 of the act, amended November 26, 1996
17 (P.L.776, No.135), is amended to read:
18 Section 701. Professional Liability Insurance and Fund.--(a)
19 Every health care provider as defined in this act, practicing
20 medicine or podiatry or otherwise providing health care services
21 in the Commonwealth shall insure his professional liability only
1 with an insurer licensed or approved by the Commonwealth of
2 Pennsylvania, or provide proof of self-insurance in accordance
3 with this section.
4 (1) (i) For policies issued or renewed in the calendar years
5 1997 through 1998, a health care provider, other than hospitals,
6 who conducts more than 50% of its health care business or
7 practice within the Commonwealth of Pennsylvania shall annually
8 insure or self-insure its professional liability in the amount
9 of $300,000 per occurrence and $900,000 per annual aggregate,
10 and hospitals located in the Commonwealth shall insure or self-
11 insure their professional liability in the amount of $300,000
12 per occurrence, and $1,500,000 per annual aggregate, hereinafter
13 known as "basic coverage insurance" and they shall be entitled
14 to participate in the fund.
15 (ii) For policies issued or renewed in the calendar years
16 1999 through 2000, a health care provider, other than hospitals,
17 who conducts more than 50% of its health care business or
18 practice within this Commonwealth shall annually insure or self-
19 insure its professional liability in the amount of $400,000 per
20 occurrence and $1,200,000 per annual aggregate, and hospitals
21 located in this Commonwealth shall insure or self-insure their
22 professional liability in the amount of $400,000 per occurrence
23 and $2,000,000 per annual aggregate.
24 (iii) For policies issued or renewed in the calendar year
25 2001, [and each year thereafter,] a health care provider, other
26 than hospitals, who conducts more than 50% of its health care,
27 business or practice within this Commonwealth shall annually
28 insure or self-insure its professional liability in the amount
29 of $500,000 per occurrence and $1,500,000 per annual aggregate,
30 and hospitals located in this Commonwealth shall insure or self-
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1 insure their professional liability in the amount of $500,000
2 per occurrence and $2,500,000 per annual aggregate.
3 (iv) For policies issued or renewed in the calendar year
4 2002, a health care provider, other than hospitals, who conducts
5 more than 50% of its health care business or practice within
6 this Commonwealth shall insure or self-insure its professional
7 liability in the amount of $800,000 per occurrence and
8 $2,400,000 per annual aggregate, and hospitals located in this
9 Commonwealth shall insure or self-insure their professional
10 liability in the amount of $800,000 per occurrence and
11 $4,000,000 per annual aggregate.
12 (v) For policies issued or renewed in the calendar year
13 2003, and each year thereafter, a health care provider, other
14 than hospitals, who conducts more than 50% of its health care
15 business or practice within this Commonwealth shall insure or
16 self-insure its professional liability in the amount of
17 $1,200,000 per occurrence and $4,000,000 per annual aggregate,
18 and hospitals located in this Commonwealth shall insure or self-
19 insure their professional liability in the amount of $1,200,000
20 per occurrence and $5,000,000 per annual aggregate.
21 (2) (i) A health care provider who conducts 50% or less of
22 its health care business or practice within the Commonwealth
23 shall insure or self-insure its professional liability in the
24 amounts listed in subparagraphs (ii)[, (iii) and (iv)] through
25 (vi) and shall not be required to contribute to or be entitled
26 to participate in the fund set forth in Article VII of this act
27 or the plan set forth in Article VIII of this act.
28 (ii) For calendar years 1997 through 1998, basic insurance
29 coverage shall, on an annual basis, be in the amount of $300,000
30 per occurrence and $900,000 per annual aggregate.
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1 (iii) For calendar years 1999 through 2000, basic insurance
2 coverage shall, on an annual basis, be in the amount of $400,000
3 per occurrence and $1,200,000 per annual aggregate.
4 (iv) For calendar year 2001, [and each year thereafter,]
5 basic insurance coverage shall, on an annual basis, be in the
6 amount of $500,000 per occurrence and $1,500,000 per annual
7 aggregate.
8 (v) For calendar year 2002, basic insurance coverage shall,
9 on an annual basis, be in the amount of $800,000 per occurrence
10 and $2,400,000 per annual aggregate.
11 (vi) For calendar year 2003, and each year thereafter, basic
12 insurance coverage shall, on an annual basis, be in the amount
13 of $1,200,000 per occurrence and $4,000,000 per annual
14 aggregate.
15 (3) For the purposes of this section, "health care business
16 or practice" shall mean the number of patients to whom health
17 care services are rendered by a health care provider within an
18 annual period.
19 (4) All self-insurance plans shall be submitted with such
20 information as the commissioner shall require for approval and
21 shall be approved by the commissioner upon his finding that the
22 plan constitutes protection equivalent to the insurance
23 requirements of a health care provider.
24 (5) A fee shall be charged by the Insurance Department to
25 all self-insurers for examination and approval of their plans.
26 (6) Self-insured health care providers and hospitals if
27 exempt from this act shall submit the information required under
28 section 809 to the commissioner.
29 (b) (1) No insurer providing professional liability
30 insurance shall be liable for payment of any claim against a
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1 health care provider for any loss or damages awarded in a
2 professional liability action in excess of the basic coverage
3 insurance, as provided in subsection (a)(1) for each health care
4 provider against whom an award is made unless the health care
5 provider's professional liability policy or self-insurance plan
6 provides for a higher annual aggregate limit.
7 (2) If a claim exceeds the aggregate limits of an insurer or
8 a self-insurance plan, the fund shall be responsible for the
9 payment of the claim up to the fund coverage limits.
10 (c) A government may satisfy its obligations pursuant to
11 this act, as well as the obligations of its employees to the
12 extent of their employment, by either purchasing insurance or
13 assuming such obligation as a self-insurer and including the
14 payment of all surcharges under this act.
15 (d) There is hereby created a contingency fund for the
16 purpose of paying all awards, judgments and settlements for loss
17 or damages against a health care provider entitled to
18 participate in the fund as a consequence of any claim for
19 professional liability brought against such health care provider
20 as a defendant or an additional defendant to the extent such
21 health care provider's share exceeds its basic coverage
22 insurance in effect at the time of occurrence as provided in
23 subsection (a)(1). The limit of liability of the fund shall be
24 as follows:
25 (1) For calendar years 1997 through 1998, the limit of
26 liability of the fund shall be $900,000 for each occurrence for
27 each health care provider and $2,700,000 per annual aggregate
28 for each health care provider.
29 (2) For calendar years 1999 through 2000, the limit of
30 liability of the fund shall be $800,000 for each occurrence for
19970H1459B1738 - 5 -
1 each health care provider and $2,400,000 per annual aggregate
2 for each health care provider.
3 (3) For calendar year 2001, [and each year thereafter,] the
4 limit of liability of the fund shall be $700,000 for each
5 occurrence for each health care provider and $2,100,000 per
6 annual aggregate for each health care provider.
7 (4) For calendar year 2002, the limit of liability of the
8 fund shall be $400,000 for each occurrence for each health care
9 provider and $1,200,000 per annual aggregate for each health
10 care provider.
11 (5) For calendar year 2003, and each year thereafter, the
12 limit of liability of the fund shall be $0 for each occurrence
13 for each health care provider and $0 per annual aggregate for
14 each health care provider.
15 (e) (1) After December 31, 1996, the fund shall be funded
16 by the levying of an annual surcharge on or after January 1 of
17 every year on all health care providers entitled to participate
18 in the fund. The surcharge shall be determined by the fund,
19 filed with the commissioner and communicated to all basic
20 insurance coverage carriers and self-insured providers. The
21 surcharge shall be based on the prevailing primary premium for
22 each health care provider for maintenance of professional
23 liability insurance and shall be the appropriate percentage
24 thereof, necessary to produce an amount sufficient to reimburse
25 the fund for the payment of final claims and expenses incurred
26 during the preceding claims period and to provide an amount
27 necessary to maintain an additional 15% of the final claims and
28 expenses incurred during the preceding claims period.
29 (2) The Joint Underwriting Association shall file updated
30 rates for all health care providers with the commissioner by May
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1 1 of each year.
2 (3) The fund shall review and may adjust the prevailing
3 primary premium in line with any applicable changes to the
4 prevailing primary premium made in filings by the Joint
5 Underwriting Association and approved by the commissioner.
6 (4) The fund [may] shall adjust the applicable prevailing
7 primary premium of any hospital, including a hospital associated
8 with a university or other education institution, through an
9 increase or decrease in the individual hospital's prevailing
10 primary premium not to exceed [20%] 50%. Any such adjustment
11 shall be based upon the frequency and severity of claims paid by
12 the fund on behalf of other hospitals of similar class, size,
13 risk and kind within the same defined region during the past
14 five most recent claims periods. All premium adjustments
15 pursuant to this subsection shall require the approval of the
16 commissioner.
17 (5) For health care providers that do not engage in direct
18 clinical practice on a full-time basis, the prevailing primary
19 premium rate shall be adjusted by the fund to reflect the lower
20 risk associated with the less-than-full-time direct clinical
21 practice.
22 (6) The surcharge provided in paragraph (1) shall be
23 reviewed by the commissioner within 30 days of submission. After
24 review, the commissioner may only disapprove a surcharge if it
25 is inadequate or excessive. If so disapproved, the fund shall
26 make an adjustment to the next surcharge calculation to reflect
27 the appropriate increase or decrease.
28 (7) When a health care provider changes the term of its
29 professional liability coverage, the surcharge shall be
30 calculated on an annual base and shall reflect the surcharge
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1 percentages in effect for all the surcharge periods over which
2 the policy is in effect.
3 (8) Health care providers having approved self-insurance
4 plans shall be surcharged an amount equal to the surcharge
5 imposed on a health care provider of like class, size, risk and
6 kind as determined by the director. The fund and all income from
7 the fund shall be held in trust, deposited in a segregated
8 account, invested and reinvested by the director, and shall not
9 become a part of the General Fund of the Commonwealth. All
10 claims shall be computed on August 31 for all claims which
11 became final between that date and September 1 of the preceding
12 year. All such claims shall be paid on or before December 31
13 following the August 31 by which they became final, as provided
14 above.
15 (9) Notwithstanding the above provisions relating to an
16 annual surcharge, the commissioner shall have the authority,
17 during September of each year, if the fund would be exhausted by
18 the payment in full of all claims which have become final and
19 the expenses of the fund, to determine and levy an emergency
20 surcharge on all health care providers then entitled to
21 participate in the fund. Such emergency surcharge shall be the
22 appropriate percentage of the cost to each health care provider
23 for maintenance of professional liability insurance necessary to
24 produce an amount sufficient to allow the fund to pay in full
25 all claims determined to be final as of August 31 of each year
26 and the expenses of the fund as of December 31 of each year.
27 (10) The annual and emergency surcharges on health care
28 providers and any income realized by investment or reinvestment
29 shall constitute the sole and exclusive sources of funding for
30 the fund. No claims or expenses against the fund shall be deemed
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1 to constitute a debt of the Commonwealth or a charge against the
2 General Fund of the Commonwealth.
3 (11) The director shall issue rules and regulations
4 consistent with this section regarding the establishment and
5 operation of the fund including all procedures and the levying,
6 payment and collection of the surcharges except that the
7 commissioner shall issue rules and regulations regarding the
8 imposition of the emergency surcharge.
9 (12) Upon the effective date of this section, the fund shall
10 immediately notify all insurers writing professional liability
11 insurance of the schedule of occurrence rates approved by the
12 commissioner and in effect for the Joint Underwriting
13 Association.
14 (13) Within 20 days of the effective date of this section,
15 the fund shall recalculate the surcharge for health care
16 providers for the surcharge period beginning January 1, 1997,
17 based upon the prevailing primary premium.
18 (14) A health care provider may elect to pay the annual
19 surcharge in equal installments, not exceeding four, if the
20 health care provider informs the primary carrier of the option
21 to pay in installments and the entire annual surcharge is
22 collected and remitted to the fund by December 10, with four
23 equal installments commencing 60 days from the date of policy
24 inception or renewal with payment due each 60 days thereafter
25 until the full remittance is paid. This paragraph shall apply to
26 surcharges for 1997. This paragraph shall expire January 1,
27 1998.
28 (f) The failure of any health care provider to comply with
29 any of the provisions of this section or any of the rules and
30 regulations issued by the director shall result in the
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1 suspension or revocation of the health care provider's license
2 by the licensure board.
3 (g) Any physician who exclusively practices the specialty of
4 forensic pathology shall be exempt from the provisions of this
5 act.
6 (h) All health care providers who are members of the
7 Pennsylvania military forces are exempt from the provisions of
8 this act while in the performance of their assigned duty in the
9 Pennsylvania military forces under orders.
10 Section 3. This act shall take effect as follows:
11 (1) The repeal of section 605 of the act shall take
12 effect December 31, 2001.
13 (2) The remainder of this act shall take effect
14 immediately.
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