THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY GODSHALL, BEYER, BOBACK, BRENNAN, CLYMER, MOUL, PASHINSKI, PICKETT, ROAE, SCHRODER, SWANGER AND J. TAYLOR, JUNE 17, 2009

REFERRED TO COMMITTEE ON INSURANCE, JUNE 17, 2009  

AN ACT

Amending the act of May 17, 1921 (P.L.789, No.285), entitled, as

amended, "An act relating to insurance; establishing an

insurance department; and amending, revising, and

consolidating the law relating to the licensing,

qualification, regulation, examination, suspension, and

dissolution of insurance companies, Lloyds associations,

reciprocal and inter-insurance exchanges, and certain

societies and orders, the examination and regulation of fire

insurance rating bureaus, and the licensing and regulation of

insurance agents and brokers; the service of legal process

upon foreign insurance companies, associations or exchanges;

providing penalties, and repealing existing laws," further

providing for powers and duties of the Insurance Fraud

Prevention Authority and for the Insurance Fraud Prevention

Trust Fund.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Sections 1122 and 1123 of the act of May 17, 1921

(P.L.789, No.285), known as The Insurance Department Act of

1921, added December 6, 2002 (P.L.1183, No.147), are amended to

read:

Section 1122.  Powers and duties.

The authority shall have the powers necessary and convenient

to carry out and effectuate the purposes and provisions of this

article and the purposes of the authority and the powers

delegated by other laws, including, but not limited to:

(1)  Employ administrative, professional, clerical and

other personnel as may be required and organize the staff as

may be appropriate to effectuate the purposes of this

article.

(2)  Have a seal and alter the same at pleasure, have

perpetual succession, make, execute and deliver contracts,

conveyances and other instruments necessary or convenient to

the exercise of its powers and make and amend bylaws.

(3)  Procure insurance against any loss in connection

with its property, assets or activities.

(4)  Apply for, solicit, receive, establish priorities

for, allocate, disburse, contract for, administer and spend

funds in the fund and other funds that are made available to

the authority from any source consistent with the purposes of

this article.

(5)  Make grants to and provide financial support for the

Section of Insurance Fraud, the unit of insurance fraud in

the Philadelphia District Attorney's Office, other county

district attorneys' offices, other government agencies,

community, consumer and business organizations consistent

with the purposes of this article and considering the extent

of the insurance fraud problem in each county of this

Commonwealth.

(6)  Advise the State Treasurer in relation to the

investment of any money held in the fund and any funds held

in reserve or sinking funds and any money not required for

immediate use or disbursement and to advise the State

Treasurer in relation to the use of depositories for moneys

of the fund.

(7)  Assess the scope of the problem of insurance fraud,

including areas of this Commonwealth where the problem is

greatest, and review State and local criminal justice

policies, programs and plans dealing with insurance fraud.

(8)  Develop and sponsor the implementation of Statewide

plans, programs and strategies to combat insurance fraud,

improve the administration of the insurance fraud laws and

provide a forum for identification of critical problems for

those persons dealing with insurance fraud. In conjunction

with this power, the authority shall require health care

facilities to place posters in each facility announcing that

a $25,000 reward will be paid to persons reporting insurance

fraud when the report leads to an arrest and conviction.

Rewards pursuant to this provision shall be paid from the

Insurance Fraud Prevention Trust Fund.

(9)  Coordinate the development, adoption and

implementation of plans, programs and strategies relating to

interagency and intergovernmental cooperation with respect to

insurance fraud law enforcement.

(10)  Promulgate rules or regulations related to the

expenditure of moneys held in the fund in order to assist and

support those agencies, units of government, county district

attorneys' offices and other organizations charged with the

responsibility of reducing insurance fraud or interested and

involved in achieving this goal.

(11)  Audit at its discretion the plans and programs that

it has funded in whole or in part in order to evaluate the

effectiveness of the plans and programs and withdraw funding

should the authority determine that a plan or program is

ineffective or is no longer in need of further financial

support from the fund.

(12)  Report annually on or before the first day of April

to the Governor and the General Assembly on the authority's

activities in the preceding period of operation.

(13)  Meet with the Section of Insurance Fraud on at

least a quarterly basis in order to advise and assist it in

implementing its statutory mandate.

(14)  Advise the General Assembly on matters relating to

insurance fraud and recommend to the General Assembly on an

annual basis any changes to the operation of the Section of

Insurance Fraud. The report shall be available for public

inspection.

(15)  Establish either alone or in cooperation with

authorized insurance companies and licensed agents and

producers a fund to reward persons not connected with the

insurance industry who provide information or furnish

evidence leading to the arrest and conviction of persons

responsible for insurance fraud.

(16)  Require as a condition of every application and

request for financial support, including every application

for ongoing renewal of a multiyear grant under section

1123(f), that the applicant describe both the nature of and

the amount of funding for the activities, if any, devoted to

the investigation and prosecution of insurance fraud at the

time of the application or request.

(17)  Require as a condition of every application and

request for financial support that every recipient of funding

report annually within four months of the close of each

funding cycle to the authority on the use of the funds

obtained from the authority during the previous year,

including a description of programs implemented and results

obtained. The authority will include this information on the

use of funds by grantees in its annual report under paragraph

(12) and send a copy specifically to the chairman and the

minority chairman of the standing committees of the Senate

and the chairman and the minority chairman of the standing

committees of the House of Representatives with jurisdiction

over insurance matters.

Section 1123.  Insurance Fraud Prevention Trust Fund.

(a)  Establishment.--There is hereby established a separate

account in the State Treasury to be known as the Insurance Fraud

Prevention Trust Fund. This fund shall be administered by the

State Treasurer with the advice of the authority. All interest

earned from the investment or deposit of moneys accumulated in

the fund shall be deposited in the fund for the same use.

(b)  Funds.--All moneys deposited into the fund shall be held

in trust and shall not be considered general revenue of the

Commonwealth but shall be used only to effectuate the purposes

of this article as determined by the authority and shall be

subject to audit by the Auditor General.

(c)  Assessment.--

(1)  Annually on or before the first day of April, each

insurer engaged in the writing of the insurance coverages

listed below, as a condition of its authorization to transact

business in this Commonwealth, shall pay into the fund in

trust an amount equal to the product obtained by multiplying

$8,000,000 by a fraction, the numerator of which is the

direct premium collected for those coverages listed below by

that insurer in this Commonwealth during the preceding

calendar year and the denominator of which is the direct

premium written on such coverages in this Commonwealth by all

insurers in the same period.

(2)  The following coverages, as listed in the Annual

Statistical Report of the Insurance Department, shall be

considered in determining assessments: all fire and casualty

direct business written and accident and health and credit

accident and health written under life/annuity/accident and

health direct business written. Assessments made under this

section shall not be considered burdens and prohibitions

under section 212.

(3)  Assessments for health plan corporations and

professional health services plan corporations when added

together shall not be more than 10% of the total assessment

authorized by this subsection. If the total assessment for

these organizations is more than 10%, such organizations will

share the assessment up to the 10% limit among themselves in

the same proportion as they would otherwise have shared their

calculated assessment absent this limit. Any deficiency in

the total assessment caused by the application of this limit

will be shared by all other entities being assessed in the

same proportions as they are sharing the rest of the

assessment.

(d)  Base amount.--In succeeding years the authority may vary

the base amount of $8,000,000, provided, however, that any

increase which on an annual basis exceeds the increase in the

Consumer Price Index for this Commonwealth must be approved by

three of the four insurance representatives on the board.

(d.1)  Forfeiture proceedings.--In addition to other sources

of moneys set forth in this section, the fund shall receive the

proceeds derived from forfeiture proceedings relating to

insurance fraud.

(e)  Expenditures.--Moneys in the fund may be expended by the

authority for the following purposes:

(1)  Effectuate the powers, duties and responsibilities

of the authority as set forth in this article.

(2)  Pay the costs of administration and operation of the

Section of Insurance Fraud and the unit for insurance fraud

in the Philadelphia District Attorney's Office.

(3)  Provide financial support to law enforcement,

correctional agencies and county district attorneys' offices

for programs designed to reduce insurance fraud and to

improve the administration of insurance fraud laws.

(4)  Provide financial support for other governmental

agencies, community, consumer and business organizations for

programs designed to reduce insurance fraud and to improve

the administration of insurance fraud laws.

(5)  Provide financial support to programs designed to

inform insurance consumers about the costs of insurance fraud

to individuals and to society and to suggest methods for

preventing insurance fraud.

(6)  Provide financial support for reward programs

leading to the arrest and conviction of persons and

organizations engaged in insurance fraud.

(7)  Provide financial support for other plans, programs

and strategies consistent with the purposes of this article.

(f)  Multiyear grants.--In funding the Section of Insurance

Fraud, the Unit for Insurance Fraud in the Philadelphia District

Attorney's Office and in funding grant requests, the authority

may consider and approve requests for multiyear grants of not

more than four years in length, although extensions of such

multiyear commitments may be renewed from year to year. No

funding reduction under subsection (d) can be imposed by the

authority in any given year which would operate to reduce

funding for any multiyear approved program for which persons

have been hired for full-time positions to a funding level where

such positions must be terminated unless the organization

employing such persons certifies either that other equivalent

positions are available or that such positions with the

antifraud program can be funded from other sources.

(g)  Dissolution.--In the event that the trust fund is

discontinued or the authority is dissolved by operation of law,

any balance remaining in the fund, after deducting

administrative costs for liquidation, shall be returned to

insurers in proportion to their financial contributions to the

fund in the preceding calendar year.

Section 2.  This act shall take effect in 60 days.