SENATE AMENDED

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY D. COSTA, BARRAR, BRADFORD, BRENNAN, CALTAGIRONE, CASORIO, COHEN, CONKLIN, DEASY, DeLUCA, FREEMAN, GEORGE, GOODMAN, GRUCELA, HALUSKA, HARKINS, HENNESSEY, JOSEPHS, MAHONEY, MANN, MELIO, M. O'BRIEN, PASHINSKI, READSHAW, SIPTROTH, K. SMITH, SOLOBAY, J. TAYLOR, VULAKOVICH, WALKO, BELFANTI, FRANKEL, SEIP, KORTZ AND MATZIE, APRIL 13, 2009

SENATOR D. WHITE, BANKING AND INSURANCE, IN SENATE, AS AMENDED, JUNE 8, 2010   

AN ACT

Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An

act relating to insurance; amending, revising, and

consolidating the law providing for the incorporation of

insurance companies, and the regulation, supervision, and

protection of home and foreign insurance companies, Lloyds

associations, reciprocal and inter-insurance exchanges, and

fire insurance rating bureaus, and the regulation and

supervision of insurance carried by such companies,

associations, and exchanges, including insurance carried by

the State Workmen's Insurance Fund; providing penalties; and

repealing existing laws," providing for minimum number of

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covered employees; further providing for duties of insurers

and insurance producers, for investment, for group accident

and sickness insurance and for mini-COBRA small employer

group health policies; providing for continuation of coverage

reinstatement; in long-term care, further providing for

definitions; and providing for appealing an insurer's

determination the benefit trigger is not met, for prompt

payment of clean claims and for applicability.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The definition of "long-term care insurance" in

<--

section 1103 of the act of May 17, 1921 (P.L.682, No.284), known

as The Insurance Company Law of 1921, amended July 17, 2007

(P.L.134, No.40) is amended and the section is amended by adding

definitions to read:

Section 1.  The act of May 17, 1921 (P.L.682, No.284), known

<--

as The Insurance Company Law of 1921, is amended by adding a

section to read:

Section 354.6.  Minimum Number of Covered Employes.--Any

policy of group life insurance issued pursuant to section 2 of

the act of May 11, 1949 (P.L.1210, No.367), referred to as the

Group Life Insurance Policy Law, and any policy of group

accident and health insurance issued pursuant to section 621.2

shall cover at least two or more employes at the date of issue.

Section 2.  Section 404.2(12) and (13) of the act, added June

11, 1986 (P.L.226, No.64), are amended to read:

Section 404.2.  Investment.--Subject to the provisions of

sections 405.2 and 406.1, the assets of any life insurance

company organized under the laws of this Commonwealth shall be

invested in the following classes of investment, provided the

value of which, as determined for annual statement purposes, but

in no event in excess of cost, shall not exceed the specified

percentage of such company's assets as of the thirty-first day

of December next preceding the date of investment:

* * *

[(12)  Put options and call options. The investment practice

of put options and call options issued under terms and

conditions regulated by, or substantially similar to those terms

and conditions required by, a national securities exchange

registered under the Securities Exchange Act of 1934 (48 Stat.

881, 15 U.S.C. § 78a et seq.), as amended, or any board of trade

designated as a contract market by the Commodity Futures Trading

Commission (CFTC) under the Commodity Exchange Act (49 Stat.

1491, 7 U.S.C. § 1 et seq.), as amended, is authorized on the

following conditions:

(i)  A company shall not sell a call option on either:

(A)  securities it does not own; or

(B)  in an amount greater than securities which it presently

owns: Provided, however, That in the case of financial futures

contracts and stock or bond index contracts where it is not

feasible to own the underlying security, a company may sell a

call option only in connection with a hedging transaction;

(ii)  A company shall not sell a put option unless its

obligations under such put option are fully secured by a deposit

by the company with a bank or other custodian of cash or cash

equivalents;

(iii)  A company shall not purchase as opening transactions

under this clause (12) more than ten per centum (10%) of the

excess of its capital and surplus over the minimum requirements

of a new stock or mutual company to qualify for a certificate of

authority to write the kind of insurance which the company is

authorized to write; and

(iv)  The Insurance Commissioner may promulgate reasonable

rules and regulations for transactions under this clause (12),

to include, but not be limited to, rules and regulations which

impose financial solvency standards, valuation standards and

reporting requirements.

(13)  The investment practice of financial futures contracts

issued under terms and conditions regulated by a Federal

regulatory agency is authorized on the following conditions:

(i)  A company shall not enter into financial futures

contracts except as a hedging transaction as that term is

defined in a rule or regulation promulgated pursuant to this

act;

(ii)  A company shall not have initial or maintenance margin

outstanding under this section of more than ten per centum (10%)

of the excess of its capital and surplus over the minimum

requirements of a new stock or mutual company to qualify for a

certificate of authority to write the kind of insurance which

the company is authorized to write; and

(iii)  The Insurance Commissioner may promulgate reasonable

rules and regulations for transactions under this clause (13),

to include, but not be limited to, rules and regulations which

impose financial solvency standards, valuation standards and

reporting requirements.]

(12)  Derivative transactions. An insurer may, directly or

indirectly through an investment subsidiary, engage in

derivative transactions under this section under the conditions

set forth in this section.

(i)  General conditions:

(A)  An insurer may use derivative instruments under this

section to engage in hedging transactions and certain income

generation transactions, as these terms may be further defined

in regulations promulgated by the Insurance Commissioner.

(B)  An insurer shall be able to demonstrate to the Insurance

Commissioner the intended hedging characteristics and the

ongoing effectiveness of the derivative transaction or

combination of the transactions through cash flow testing or

other appropriate analyses.

(ii)  Limitations on hedging transactions. An insurer may

enter into hedging transactions under this section if, as a

result of and after giving effect to the transaction:

(A)  the aggregate statement value of options, caps, floors

and warrants not attached to another financial instrument

purchased and used in hedging transactions does not exceed seven

and one-half per centum (7.5%) of its admitted assets;

(B)  the aggregate statement value of options, caps and

floors written in hedging transactions does not exceed three per

centum (3%) of its admitted assets; and

(C)  the aggregate potential exposure of collars, swaps,

forwards and futures used in hedging transactions does not

exceed six and one-half per centum (6.5%) of its admitted

assets.

(iii)  Limitations on income generation transactions. An

insurer may enter into the following types of income generation

transactions only if, as a result of, and after giving effect to

the transactions, the aggregate statement value of the fixed

income assets that are subject to call or that generate the cash

flows for payments under the caps or floors, plus the face value

of fixed income securities underlying a derivative instrument

subject to call, plus the amount of the purchase obligations

under the puts, does not exceed ten per centum (10%) of its

admitted assets:

(A)  sales of covered call options on noncallable fixed

income securities, callable fixed income securities if the

option expires by its terms prior to the end of the noncallable

period or derivative instruments based on fixed income

securities;

(B)  sales of covered call options on equity securities, if

the insurer holds in its portfolio, or can immediately acquire

through the exercise of options, warrants or conversion rights

already owned, the equity securities subject to call during the

complete term of the call option sold;

(C)  sales of covered puts on investments that the insurer is

permitted to acquire under this section, if the insurer has

escrowed or entered into a custodian agreement segregating cash

or cash equivalents with a market value equal to the amount of

its purchase obligations under the put during the complete term

of the put options sold; or

(D)  sales of covered caps or floors, if the insurer holds in

its portfolio the investments generating the cash flow to make

the required payments under the caps or floors during the

complete term that the cap or floor is outstanding.

(iv)  Counterparty exposure. An insurer shall include all

counterparty exposure amounts in determining compliance with the

limitations of clause (13).

(v)  Additional transactions. Additional transactions may be

approved involving the use of derivative instruments in excess

of the limits of subclause (ii) or for other risk management

purposes under regulations promulgated by the Insurance

Commissioner, but replication transactions shall not be

permitted for other than risk management purposes.

(vi)  Definitions:

(A)  "Call option" means an agreement giving a right to buy

or receive an interest based on the actual or expected price,

level, performance or value of one or more underlying interests.

(B)  "Cap" means an agreement obligating a seller to make

payments to a buyer, with each payment based on the amount by

which a reference price or level or the performance or value of

one or more underlying interests exceeds a predetermined number,

sometimes called the "strike rate" or "strike price."

(C)  "Collar" means an agreement to receive payments as the

buyer of an option, cap or floor and to make payments as the

seller of a different option, cap or floor.

(D)  "Counterparty exposure amount" means:

(I)  The net amount of credit risk attributable to a

derivative instrument entered into with a business entity other

than an over-the-counter derivative instrument. The amount of

credit risk equals:

(a)  the market value of the over-the-counter derivative

instrument if the liquidation of the derivative instrument would

result in a final cash payment to the insurer; or

(b)  zero if the liquidation of the derivative instrument

would not result in a final cash payment to the insurer.

(II)  If over-the-counter derivative instruments are entered

into under a written master agreement that provides for netting

of payments owed by the respective parties, and the domiciliary

jurisdiction of the counterparty is either within the United

States or, if not within the United States, within a foreign

jurisdiction listed in the Purposes and Procedures of the

Securities Valuation Office of the National Association of

Insurance Commissioners as eligible for netting, the amount of

credit risk shall be the greater of zero or the net sum of:

(a)  the market value of the over-the-counter derivative

instruments entered into under the agreement, the liquidation of

which would result in a final cash payment to the insurer; and

(b)  the market value of the over-the-counter derivative

instruments entered into under the agreement, the liquidation of

which would result in a final cash payment by the insurer to the

business entity.

(III)  For open transactions, market value shall be

determined at the end of the most recent quarter of the

insurer's fiscal year and shall be reduced by the market value

of acceptable collateral held by the insurer or placed in escrow

by one or both parties.

(E)  "Covered" means that an insurer owns or can immediately

acquire, through the exercise of options, warrants or conversion

rights already owned, the underlying interest in order to

fulfill or secure its obligations under a call option, cap or

floor it has written, or has set aside under a custodial or

escrow agreement cash or cash equivalents with a market value

equal to the amount required to fulfill its obligations under a

put option it has written, in an income generation transaction.

(F)  "Derivative instrument" means an agreement, option,

instrument or a series or combination of agreements, options or

instruments:

(I)  to make or take delivery of, or assume or relinquish, a

specified amount of one or more underlying interests, or to make

a cash settlement in lieu thereof; or

(II)  that has a price, performance, value or cash flow based

primarily upon the actual or expected price, level, performance,

value or cash flow of one or more underlying interests.

(G)  "Derivative transaction" means a transaction involving

the use of one or more derivative instruments.

(H)  "Floor" means an agreement obligating a seller to make

payments to a buyer in which each payment is based on the amount

that a predetermined number, sometimes called the "floor rate"

or "floor price," exceeds a reference price, level, performance

or value of one or more underlying interests.

(I)  "Forward" means an agreement, other than a future, to

make or take delivery of, or effect a cash settlement based on

the actual or expected price, level, performance or value of,

one or more underlying interests.

(J)  "Future" means an agreement, traded on a qualified

exchange or qualified foreign exchange, to make or take delivery

of, or effect a cash settlement based on the actual or expected

price, level, performance or value of, one or more underlying

interests.

(K)  "Hedging transaction" means a derivative transaction

that is entered into and maintained to reduce:

(I)  the risk of a change in the value, yield, price, cash

flow or quantity of assets or liabilities that the insurer has

acquired or incurred or anticipates acquiring or incurring; or

(II)  the currency exchange rate risk or the degree of

exposure as to assets or liabilities that an insurer has

acquired or incurred or anticipates acquiring or incurring.

(L)  "Income generation transaction" means a derivative

transaction involving the writing of covered call options,

covered put options, covered caps or covered floors that is

intended to generate income or enhance return.

(M)  "Investment subsidiary" means a subsidiary of an insurer

engaged or organized to engage exclusively in the ownership and

management of assets authorized as investments for the insurer

if the subsidiary agrees to limit its investment in any asset so

that its investment will not cause the amount of the total

investment of the insurer to exceed any of the investment

limitations or violate any other provision applicable to the

insurer. As used in this definition, the total investment of the

insurer shall include:

(I)  direct investment by the insurer in an asset; and

(II)  the insurer's proportionate share of an investment in

an asset by an investment subsidiary of the insurer, which shall

be calculated by multiplying the amount of the subsidiary's

investment by the percentage of the insurer's ownership interest

in the subsidiary.

(N)  "Option" means an agreement giving a right to buy or

receive, sell or deliver, enter into, extend or terminate or

effect a cash settlement based on the actual or expected price,

level, performance or value of one or more underlying interests.

(O)  "Over-the-counter derivative instrument" means a

derivative instrument entered into through a qualified exchange,

qualified foreign exchange or cleared through a qualified

clearinghouse.

(P)  "Put option" means an agreement giving a right to sell

or deliver an interest based on the actual or expected price,

level, performance or value of one or more underlying interests.

(Q)  "Replication transaction" means a derivative transaction

that is intended to replicate the performance of one or more

assets that an insurer is authorized to acquire under this

article. A derivative transaction that is entered into as a

hedging transaction shall not be considered a replication

transaction.

(R)  "Swap" means an agreement to exchange or to net payments

at one or more times based on the actual or expected price,

level, performance or value of one or more underlying interests.

(S)  "Warrant" means an instrument that gives the holder the

right to purchase an underlying financial instrument at a given

price and time or at a series of prices and times outlined in

the warrant agreement. Warrants may be issued alone or in

connection with the sale of other securities, for example, as

part of a merger or recapitalization agreement, or to facilitate

divestiture of the securities of another business entity.

(13)  General three per centum (3%) diversification.

(i)  Except as otherwise specified in this section, an

insurer shall not acquire, directly or indirectly through an

investment subsidiary, an investment under this section if, as a

result of and after giving effect to the investment, the insurer

would hold more than three per centum (3%) of its admitted

assets in investments of all kinds issued, assumed, accepted,

insured or guaranteed by a single person, or five per centum

(5%) of its admitted assets in investment in the voting

securities of a depository institution or any company that

controls the institution.

(ii)  The three per centum (3%) limitation under subclause

(i) shall not apply to the aggregate amounts insured by a single

financial guaranty insurer with the highest generic rating

issued by a nationally recognized statistical rating

organization.

(iii)  Asset-backed securities shall not be subject to the

limitations of subclause (i), but an insurer shall not acquire

an asset-backed security if, as a result of an after giving

effect to the investment, the aggregate amount of asset-backed

securities secured by or evidencing an interest in a single

asset or single pool of assets held by a trust or other business

entity then held by the insurer would exceed three per centum

(3%) of its admitted assets.

* * *

Section 3.  Section 403-B(e) of the act, added March 22, 2010

(P.L.147, No.14), is amended to read:

Section 403-B.  Duties of insurers and insurance producers.

* * *

(e)  Compliance with other rules.--[Compliance with the

Financial Industry Regulatory Authority Conduct Rules pertaining

to suitability shall satisfy the requirements under this section

for the recommendation of annuities registered under the

Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77a et seq.) or

rules and regulations adopted under the Securities Act of 1933.]

Sales made by an insurance producer subject to and in compliance

with the Financial Industry Regulatory Authority Conduct Rules

pertaining to suitability shall satisfy the requirements under

this section for the recommendation of annuities. Nothing in

this subsection shall limit the commissioner's ability to

enforce the provisions of this article.

* * *

Section 4.  Section 621.2(a)(1) of the act, amended February

17, 1994 (P.L.92, No.9), is amended to read:

Section 621.2.  Group Accident and Sickness Insurance.--(a)

Group accident and sickness insurance is hereby declared to be

that form of accident and sickness insurance covering groups of

persons defined in this section with or without one or more

members of their families or one or more of their dependents, or

covering one or more members of the families or one or more

dependents of such groups or persons and issued upon the

following basis:

(1)  Under a policy issued to an employer or trustees of a

fund established by an employer, who shall be deemed the

policyholder insuring at least [ten] two employes of such

employer for the benefit of persons other than the employer. The

term "employes," as used herein, shall be deemed to include the

officers, managers and employes of the employer, the individual

proprietor or partner, if the employer is an individual

proprietor or partnership, the officers, managers and employes

of subsidiary or affiliated corporations, the individual

proprietors, partners and employes of individuals and firms, if

the business of the employer and such individual or firm is

under common control through stock ownership, contract or

otherwise. The term "employes," as used herein, may include

retired employes. A policy issued to insure employes of a public

body may provide that the term "employes" shall include elected

or appointed officials.

* * *

Section 5.  Section 635.4(a)(6)(i) of the act of May 17, 1921

(P.L.682, No.284), known as The Insurance Company Law of 1921,

added June 10, 2009 (P.L.5, No.2), is amended to read:

Section 635.4.  Mini-COBRA Small Employer Group Health

Policies.--(a)  A group policy in effect or delivered or issued

for delivery in this Commonwealth on or after the effective date

of this section by an insurer which insures employes and their

eligible dependents for hospital, surgical or major medical

insurance shall provide that covered employes, or eligible

dependents whose coverage under the group policy would otherwise

terminate because of a qualifying event, shall be entitled to

continue their hospital, surgical or major medical coverage

under that group policy subject to the following terms and

conditions:

* * *

(6)  (i)  Continuation of coverage under the group policy for

any covered employe or eligible dependent shall terminate upon

failure to satisfy paragraph (2) or, if earlier, at the first to

occur of the following:

(A)  [the] The end date, determined as the later of the

following:

(i)  nine months after the date the covered employe's or

eligible dependent's coverage under the group policy would have

terminated because of a qualifying event; or

(ii)  if, during the pendency of a covered employe's or

dependent's receipt of continuation of coverage under a group

policy, the department publishes a notice in the Pennsylvania

Bulletin stating that a Federal premium assistance program is in

existence, including premium assistance under the American

Recovery and Reinvestment Act of 2009 (Public Law 111-5, 123

Stat. 115) or any successor extension act, the maximum number of

months for which the program would make premium assistance

available to the covered employe or eligible dependent because

of the qualifying event, taking into account all prior months of

the continuation of coverage from and after the date of the

qualifying event.

(B)  [if] If the employe or member fails to make timely

payment of a required premium contribution, the end of the

period for which contributions were made[;].

(C)  [the] The date on which the group policy is terminated.

* * *

Section 6.  The act is amended by adding a section to read:

Section 635.5.  Continuation of Coverage Reinstatement.--

Subject to the limitations of section 635.4(a)(2) and the

requirements of this section, a covered employe or eligible

dependent whose continuation of coverage terminated upon the

expiration of a period of months as provided in section 635.4(a)

(6)(i)(A) prior to the effective date of this section shall have

the right to reinstate continuation of coverage for an

additional period of six months commencing on the effective date

of this section. Reinstatement shall be available to the covered

employes and dependents under the same terms and conditions

applicable to covered employes and covered dependents who lost

coverage under a plan due to a qualifying event on the effective

date of this section, including the notice and election

procedure described in section 635.4(a)(4)(ii), (iii), (iv) and

(v) and the premium contribution requirements of section

635.4(a)(5).

Section 7.  The definition of "long-term care insurance" in

section 1103 of the act, amended July 17, 2007 (P.L.134, No.40),

is amended and the section is amended by adding definitions to

read:

Section 1103.  Definitions.--As used in this article, the

following words and phrases shall have the meanings given to

them in this section:

* * *

"Benefit trigger."  A contractual provision in the insured's

policy of long-term care insurance conditioning the payment of

benefits on a determination of the insured's ability to perform

activities of daily living and on cognitive impairment. For the

purposes of a qualified long-term care insurance contract as

defined in section 7702B of the Internal Revenue Code of 1986

(Public Law 99-514, 26 U.S.C. § 7702B), the term shall include a

determination by a licensed health care practitioner the insured

is a chronically ill individual.

* * *

"Independent review organization."  An organization that

conducts independent reviews of long-term care benefit trigger

decisions.

"Long-term care insurance."  Any insurance policy or rider

advertised, marketed, offered or designed to provide

comprehensive coverage for each covered person on an expense-

incurred, indemnity, prepaid or other basis for functionally

necessary or medically necessary diagnostic, preventive,

therapeutic, rehabilitative, maintenance or personal care

services provided in a setting other than an acute care unit of

a hospital. The term includes a policy, rider or prepaid home

health or personal care service policy [which provides for

payment of benefits based upon cognitive impairment or the loss

of functional capacity]. The term includes group and individual

policies or riders issued by insurers, fraternal benefit

societies, nonprofit health, hospital and medical service

corporations, health maintenance organizations or similar

organizations. The term does not include any insurance policy

which is offered primarily to provide basic Medicare supplement

coverage, basic hospital expense coverage, basic medical-

surgical expense coverage, hospital confinement indemnity

coverage, major medical expense coverage, disability income

protection coverage, accident-only coverage, specified disease

or specified accident coverage or limited benefit health

coverage. 

* * *

Section 2 8.  The act is amended by adding sections to read:

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Section 1111.1.  Appealing An Insurer's Determination the

Benefit Trigger Is Not Met.--(a)  An authorized representative

is authorized to act as the covered person's personal

representative within the meaning of 45 CFR § 164.502(g)

(relating to uses and disclosures of protected health

information: general rules) promulgated under the administrative

simplification provisions of the Health Insurance Portability

and Accountability Act of 1996 (Public Law 104-191, 110 Stat.

1936) and means the following:

(1)  a person to whom a covered person has given express

written consent to represent the covered person in an external

review;

(2)  a person authorized by law to provide substituted

consent for a covered person; or

(3)  a family member of the covered person or the covered

person's treating health care professional only when the covered

person is unable to provide consent.

(b)  If an insurer determines the benefit trigger of a long-

term care insurance policy has not been met, it shall provide a

clear, written notice to the insured and the insured's

authorized representative, if applicable, of the following:

(1)  The reason the insurer determined the insured's benefit

trigger has not been met.

(2)  The insured's right to internal appeal under subsection

(c) and the right to submit new or additional information

relating to the benefit trigger denial with the appeal request.

(3)  The insured's right to have the benefit trigger

determination reviewed under the independent review process

under subsection (d) after the exhaustion of the insurer's

internal appeal process.

(c)  The insured or the insured's authorized representative

may appeal the insurer's adverse benefit trigger determination

by sending a written request to the insurer, along with any

additional supporting information, within one hundred twenty

(120) calendar days after the insured and the insured's

authorized representative, if applicable, received the insurer's

benefit determination notice. The internal appeal shall be

considered by an individual or group of individuals designated

by the insurer provided the individual making the internal

appeal decision may not be the same individual who made the

initial benefit determination. The internal appeal shall be

completed and written notice of the internal appeal decision

shall be sent to the insured and the insured's authorized

representative, if applicable, within thirty (30) calendar days

of the insurer's receipt of the necessary information upon which

a final determination can be made:

(1)  If the insurer's original determination is upheld upon

internal appeal, the notice of the internal appeal decision

shall describe  additional internal appeal rights offered by the

insurer. Nothing in this section shall require the insurer to

offer internal appeal rights other than those described in this

subsection.

(2)  If the insurer's original determination is upheld after

the internal appeal process has been exhausted and new or

additional information has not been provided to the insurer, the

insurer shall provide a written description of the insured's

right to request an independent review of the benefit

determination as described in subsection (d) to the insured and

the insured's authorized representative, if applicable.

(3)  As part of the written description of the insured's

right to request an independent review, an insurer shall include

the following or substantially equivalent language:

We have determined that the benefit eligibility criteria

("benefit trigger") of your (policy) (certificate) has not

been met. You may have the right to an independent review of

our decision conducted by long-term care professionals who

are not associated with us. Please send a written request for

independent review to us at (address). You must inform us, in

writing, of your election to have this decision reviewed

within 120 days of receipt of this letter. Listed below are

the names and contact information of the independent review

organizations approved or certified by your state insurance

department's office to conduct long-term care insurance

benefit eligibility reviews. If you wish to request an

independent review, please choose one of the listed

organizations and include its name with your request for

independent review. If you elect independent review, but do

not choose an independent review organization with your

request, we will choose one of the independent review

organizations for you and refer the request for independent

review to it.

(4)  If the insurer does not believe the benefit trigger

decision is eligible for independent review, the insurer shall

inform the insured, the insured's authorized representative, if

applicable, and the department in writing and include in the

notice the reasons for its determination of independent review

ineligibility.

(5)  The appeal process described in this subsection does not

include a notice requirement as to the availability of new long-

term care services or providers.

(d)  (1)  The insured or the insured's authorized

representative may request an independent review of the

insurer's benefit trigger determination after the internal

appeal process outlined in subsection (c) has been exhausted. A

written request for independent review may be made by the

insured or the insured's authorized representative to the

insurer within one hundred twenty (120) calendar days after the

insurer's written notice of the final internal appeal decision

is received by the insured and the insured's authorized

representative, if applicable.

(2)  The cost of the independent review shall be borne by the

insurer.

(3)  (i)  Within five (5) business days of receiving a

written request for independent review, the insurer shall refer

the request to the independent review organization the insured

or the insured's authorized representative has chosen from the

list of certified or approved organizations the insurer has

provided to the insured. If the insured or the insured's

authorized representative does not choose an approved

independent review organization to perform the review, the

insurer shall choose an independent review organization approved

or certified by the Commonwealth. The insurer shall vary its

selection of authorized independent review organizations on a

rotating basis.

(ii)  The insurer shall refer the request for independent

review of a benefit trigger determination to an independent

review organization, subject to the following:

(A)  The independent review organization shall be on a list

of certified or approved independent review organizations that

satisfy the requirements of a qualified long-term care insurance

independent review organization contained in this section.

(B)  The independent review organization shall not have any

conflicts of interest with the insured, the insured's authorized

representative, if applicable, or the insurer.

(C)  The review shall be limited to the information or

documentation provided to and considered by the insurer in

making its determination, including any information or

documentation considered as part of the internal appeal process.

(iii)  If the insured or the insured's authorized

representative has new or additional information not previously

provided to the insurer, whether submitted to the insurer or the

independent review organization, the information shall first be

considered in the internal review process, as set forth in

subsection (c).

(A)  While this information is being reviewed by the insurer,

the independent review organization shall suspend its review and

the time period for review is suspended until the insurer

completes its review.

(B)  The insurer shall complete its review of the information

and provide written notice of the results of the review to the

insured and the insured's authorized representative, if

applicable, and the independent review organization within five

(5) business days of the insurer's receipt of the new or

additional information.

(C)  If the insurer maintains its denial after such review,

the independent review organization shall continue its review

and render its decision within the time period specified in

subparagraph (ix). If the insurer overturns its decision

following its review, the independent review request shall be

considered withdrawn.

(iv)  The insurer shall acknowledge in writing to the

insured, the insured's authorized representative, if applicable,

and the department the request for independent review has been

received, accepted and forwarded to an independent review

organization for review. The notice will include the name and

address of the independent review organization.

(v)  Within five (5) business days of receipt of the request

for independent review, the independent review organization

assigned under this paragraph shall notify the insured and the

insured's authorized representative, if applicable, the insurer

and the department it has accepted the independent review

request and identify the type of licensed health care

professional assigned to the review. The assigned independent

review organization shall include in the notice a statement the

insured or insured's authorized representative may submit in

writing to the independent review organization within seven (7)

days following the date of receipt of the notice additional

information and supporting documentation the independent review

organization should consider when conducting its review.

(vi)  The independent review organization shall review all of

the information and documents received under subparagraph (v)

that have been provided to the independent review organization.

The independent review organization shall provide copies of the

documentation or information provided by the insured or the

insured's authorized representative to the insurer for its

review if it is not part of the information or documentation

submitted by the insurer to the independent review organization.

The insurer shall review the information and provide its

analysis of the new information under subparagraph (viii).

(vii)  The insured or the insured's authorized representative

may submit, at any time, new or additional information not

previously provided to the insurer but pertinent to the benefit

trigger denial. The insurer shall consider the information and

affirm or overturn its benefit trigger determination. If the

insurer affirms its benefit trigger determination, the insurer

shall promptly provide the new or additional information to the

independent review organization for its review along with the

insurer's analysis of the information.

(viii)  If the insurer overturns its benefit trigger

determination:

(A)  The insurer shall provide notice to the independent

review organization and the insured, the insured's authorized

representative, if applicable, and the commissioner of its

decision.

(B)  The independent review process shall immediately cease.

(ix)  The independent review organization shall provide the

insured, the insured's authorized representative, if applicable,

the insurer and the department written notice of its decision

within thirty (30) calendar days from receipt of the referral

referenced in paragraph (3)(ii). If the independent review

organization overturns the insurer's decision, it shall:

(A)  Establish the precise date within the specific period of

time under review the benefit trigger was deemed to have been

met.

(B)  Specify the specific period of time under review for

which the insurer declined eligibility, but during which the

independent review organization deemed the benefit trigger to

have been met.

(C)  For qualified long-term care insurance contracts,

provide a certification the insured is a chronically ill

individual. The certification shall be made only by a licensed

health care practitioner as defined in section 7702B(c)(4) of

the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C.

§ 7702B(c)(4)).

(x)  The decision of the independent review organization

regarding whether the insured met the benefit trigger shall be

subject to appeal to a court of competent jurisdiction within

sixty (60) days of receipt of notice of the independent review

organization's decision. There shall be a rebuttable presumption

in favor of the decision of the independent review organization. 

(xi)  The independent review organization's determination

shall be used solely to establish liability for benefit trigger

decisions and is intended to be admissible in a proceeding only

to the extent it establishes the eligibility of benefits

payable.

(xii)  Nothing in this section shall restrict the insured's

right to submit a new request for benefit trigger determination

after the independent review decision, if the independent review

organization upholds the insurer's decision.

(xiii)  The department shall utilize the criteria established

by the National Association of Insurance Commissioners for its

guidelines for Long-Term Care Independent Review Entities in

certifying entities to review long-term care insurance benefit

trigger decisions.

(xiv)  The department shall accept another state's

certification of an independent review organization, provided

the state requires the independent review organization to meet

substantially similar qualifications as those established by the

National Association of Insurance Commissioners.

(xv)  The department shall maintain and periodically update a

list of approved independent review organizations.

(e)  The department shall certify or approve a qualified

long-term care insurance independent review organization,

provided the independent review organization demonstrates to the

satisfaction of the commissioner that it is unbiased and meets

the following qualifications:

(1)  Has on staff or contracts with a qualified and licensed

health care professional in an appropriate field, such as

physical therapy, occupational therapy, neurology, physical

medicine or rehabilitation, for determining an insured's

functional or cognitive impairment to conduct the review.

(2)  Shall not be related to or affiliated with an entity

previously providing medical care to the insured.

(3)  Utilizes a licensed health care professional who is not

an employe of the insurer or related to the insured.

(4)  Shall not receive compensation of any type that is

dependent on the outcome of the review and shall not utilize a

licensed health care professional who receives compensation of

any type that is dependent on the outcome of the review.

(5)  Is approved or certified by the Commonwealth to conduct

the reviews if the Commonwealth requires the approvals or

certifications.

(6)  Provides a description of the fees to be charged by it

for independent reviews of a long-term care insurance benefit

trigger decision. The fees shall be reasonable and customary for

the type of long-term care insurance benefit trigger decision

under review.

(7)  Provides the name of the medical director or health care

professional responsible for the supervision and oversight of

the independent review procedure.

(8)  Has on staff or contracts with a licensed health care

practitioner as defined under section 7702B(c)(4) of the

Internal Revenue Code of 1986 who is qualified to certify that

an individual is chronically ill for purposes of a qualified

long-term care insurance contract.

(f)  Each certified independent review organization shall

comply with the following:

(1)  Maintain written documentation establishing the date it

receives a request for independent review, the date each review

is conducted, the resolution, the date the resolution was

communicated to the insurer and the insured, the name and

professional status of the reviewer conducting the review in an

easily accessible and retrievable format for the year in which

it received the information plus two calendar years.

(2)  Be able to document measures taken to appropriately

safeguard the confidentiality of the records and prevent

unauthorized use and disclosures under applicable Federal and

State law.

(3)  Report annually to the department by June 1 in the

aggregate and for each long-term care insurer the following:

(i)  The total number of requests received for independent

review of long-term care benefit trigger decisions.

(ii)  The total number of reviews conducted and the

resolution of the reviews such as the number of reviews that

upheld or overturned the long-term care insurer's determination

the benefit trigger was not met.

(iii)  The number of reviews withdrawn prior to review.

(iv)  The percentage of reviews conducted within the

prescribed timeframe set forth in subsection (c)(3).

(v)  The other information the department may require.

(4)  Report immediately to the department a change in its

status which would cause it to cease meeting a qualification

required of an independent review organization performing

independent reviews of long-term care benefit trigger decisions.

(g)  Nothing in this section shall limit the ability of an

insurer to assert rights an insurer may have under the policy

related to:

(1)  An insured's misrepresentation.

(2)  Changes in the insured's benefit eligibility.

(3)  Terms, conditions and exclusions of the policy other

than failure to meet the benefit trigger.

(h)  The department shall compile and maintain a list of

certified, qualified long-term care insurance independent review

organizations and shall publish the list on its Internet website

and annually in the Pennsylvania Bulletin by July 1.

(i)  This section shall not apply to long-term care insurance

claims made under a group long-term care insurance policy that

is governed by the Employee Retirement Income Security Act of

1974 (Public Law 93-406, 88 Stat. 829), referred to as ERISA.

Section 1111.2.  Prompt Payment of Clean Claims.--(a)  Within

thirty (30) business days after receipt of a claim for benefits

under a long-term care insurance policy or certificate, an

insurer shall pay the claim if it is a clean claim or send a

written notice acknowledging the date of receipt of the claim

and one of the following:

(1)  the insurer is declining to pay all or part of the claim

and the specific reason for denial; or

(2)  additional information is necessary to determine if all

or part of the claim is payable and the specific additional

information that is necessary.

(b)  Within thirty (30) business days after receipt of the

requested additional information, an insurer shall pay a claim

for benefits under a long-term care insurance policy or

certificate if it is a clean claim or send a written notice the

insurer is declining to pay all or part of a claim and the

specific reason or reasons for denial.

(c)  If an insurer fails to comply with subsection (a) or

(b), the insurer shall pay interest at the rate of one per

centum (1%) per month on the amount of the claim that should

have been paid but remains unpaid forty-five (45) business days

after the receipt of the claim with respect to subsection (a) or

all requested additional information with respect to subsection

(b). The interest payable under this subsection shall be

included in a late reimbursement without requiring the person

who filed the original claim to make an additional claim for the

interest.

(d)  The provisions of this section shall not apply to where

the insurer has reasonable basis supported by specific

information the claim was fraudulently submitted.

(e)  A violation of section 1111.1 or this section by an

insurer if committed flagrantly and in conscious disregard of

the provisions of this act or with frequency sufficient to

constitute a general business practice shall be considered a

violation of the act of July 22, 1974 (P.L.589, No.205), known

as the "Unfair Insurance Practices Act." A violation of section

1111.1 or this section is deemed an unfair method of competition

and an unfair deceptive act or practice pursuant to the "Unfair

Insurance Practices Act."

(f)  As used in this section the following words and phrases

shall have the meanings given to them in this subsection:

"Claim" means a request for payment of benefits under a

policy in effect regardless of whether the benefit claimed is

covered under the policy or terms or conditions of the policy

have been met.

"Clean claim" means a claim that has no defect or

impropriety, including any lack of required substantiating

documentation, such as satisfactory evidence of expenses

incurred, or a particular circumstance requiring special

treatment that prevents timely payment from being made on the

claim.

Section 3.  The provisions of this act shall apply to benefit

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Section 9.  Repeals are as follows:

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(1)  The General Assembly declares that the repeal under

paragraph (2) is necessary to effectuate the addition of

section 354.6 of the act.

(2)  Section 2(3) of the act of May 11, 1949 (P.L.1210,

No.367), referred to as the Group Life Insurance Policy Law,

is repealed.

Section 10.  This act shall apply as follows:

(1)  The provisions of section 1111.1 of the act shall

apply to benefit trigger requests made on or after 60 days

after the effective date of this act.

Section 4.  This act shall take effect in 60 days.

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(2)  The addition of section 635.5 of the act shall apply

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retroactively to July 10, 2009.

Section 11.  This act shall take effect as follows:

(1)  The amendment of section 403-B(e) of the act shall

take effect September 24, 2010.

(2)  The amendment or addition of sections 1103 and

1111.1 of the act shall take effect in 60 days.

(3)  The remainder of this act shall take effect

immediately.