H2005B2837A06040 AJM:JSL 03/10/08 #90 A06040
AMENDMENTS TO HOUSE BILL NO. 2005
Sponsor: REPRESENTATIVE HARPER
Printer's No. 2837
1 Amend Title, page 1, line 11, by inserting after "for"
2 effect of act on existing laws and, in insurance
3 holding companies, for definitions and for
4 Amend Title, page 1, line 12, by striking out "and"
5 Amend Title, page 1, line 14, by inserting after "parents"
6 ; further providing for acquisition of control of or merger with
7 domestic insurer and for acquisitions involving insurers not
8 otherwise covered; establishing the Insurance Restructuring
9 Board; providing for its powers and duties; establishing an
10 account; providing for health care reporting
11 Amend Title, page 1, line 14, by removing the period after
12 "coverage" and inserting
13 ; and making inconsistent repeals.
14 Amend Bill, page 1, lines 17 through 20, by striking out all
15 of said lines and inserting
16 Section 1. Section 108 of the act of May 17, 1921 (P.L.682,
17 No.284), known as The Insurance Company Law of 1921, is amended
18 to read:
19 Section 108. Effect of Act on Existing Laws.--The provisions
20 of this act, so far as they are the same as those of existing
21 laws, shall be construed as a continuation of such laws and not
22 as new enactments. The repeal by this act of any provision of
23 law shall not revive any law heretofore repealed or superseded,
24 nor shall such repeal affect any act done, liability incurred,
25 or any right accrued or vested, or any suit or prosecution
26 pending or to be instituted to enforce any right or penalty or
27 punish any offense under the authority of the repealed laws. The
28 provisions of this act shall not limit the jurisdiction and
29 authority of the Office of Attorney General, including, but not
30 limited to, the jurisdiction and authority granted pursuant to
31 the act of October 15, 1980 (P.L.950, No.164), known as the
32 "Commonwealth Attorneys Act."
33 Section 2. Section 617(a)(3) and (9) of the act, repealed
34 and added May 25, 1951 (P.L.417, No.99) and January 18, 1968
1 (1967 P.L.969, No.433), are amended to read:
2 Amend Sec. 2, page 3, line 6, by striking out "2" and
3 inserting
4 3
5 Amend Bill, page 4, line 12, by striking out all of said line
6 and inserting
7 Section 4. The definitions of "insurer" and "person" in
8 section 1401 of the act, amended December 20, 2000 (P.L.967,
9 No.132), are amended and the section is amended by adding a
10 definition to read:
11 Section 1401. Definitions.--As used in this article, and for
12 the purposes of this article only, the following words and
13 phrases shall have the meanings given to them in this section:
14 * * *
15 "Insurer." Any health maintenance organization, preferred
16 provider organization, company, association [or], exchange,
17 hospital plan corporation subject to 40 Pa.C.S. Ch. 61 (relating
18 to hospital plan corporations) or professional health services
19 plan corporation subject to 40 Pa.C.S. Ch. 63 (relating to
20 professional health services plan corporations), authorized by
21 the Insurance Commissioner to transact the business of insurance
22 in this Commonwealth except that the term shall not include:
23 (1) the Commonwealth or any agency or instrumentality
24 thereof;
25 (2) agencies, authorities or instrumentalities of the United
26 States, its possessions and territories, the Commonwealth of
27 Puerto Rico, the District of Columbia or a state or political
28 subdivision; or
29 (3) fraternal benefit societies[; or
30 (4) nonprofit medical and hospital service associations].
31 * * *
32 "Person." An individual, an insurer, a corporation, a
33 partnership, a limited liability company, an association, a
34 joint stock company, a trust, an unincorporated organization,
35 any similar entity or any combination of the foregoing acting in
36 concert. The term shall not include any joint venture
37 partnership exclusively engaged in owning, managing, leasing or
38 developing real or tangible personal property.
39 * * *
40 "Shareholder." A record holder or record owner of shares of
41 an insurer.
42 (1) The term shall include all of the following:
43 (i) A member of an insurer that is a domestic
44 nonstock corporation under 15 Pa.C.S. Ch. 21 (relating to
45 nonstock corporations) or a prior statute.
46 (ii) A member, as defined in 15 Pa.C.S. § 5103
47 (relating to definitions), of an insurer that is a
48 domestic nonprofit corporation under 15 Pa.C.S. Ch. 51
49 (relating to general provisions) or a prior statute.
50 (iii) A subscriber of an insurer that is a domestic
51 reciprocal exchange under Article X or a prior statute.
52 (2) The term shall not include any subscriber, insured
53 or customer of:
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1 (i) a hospital plan corporation subject to 40
2 Pa.C.S. Ch. 61 (relating to hospital plan corporations);
3 or
4 (ii) a professional health service plan corporation
5 subject to 40 Pa.C.S. Ch. 63 (relating to professional
6 health services plan corporations).
7 * * *
8 Section 5. Section 1402 of the act, amended or added
9 December 18, 1992 (P.L.1519, No.178) and December 21, 1998
10 (P.L.1108, No.150), is amended to read:
11 Section 1402. Acquisition of Control of or Merger or
12 Consolidation with Domestic Insurer.--(a) (1) No person other
13 than the issuer shall make a tender offer for or a request or
14 invitation for tenders of, or enter into any agreement to
15 exchange securities or seek to acquire or acquire in the open
16 market or otherwise, any voting security of a domestic insurer
17 if, after the consummation thereof, such person would directly
18 or indirectly or by conversion or by exercise of any right to
19 acquire, be in control of such insurer, and no person shall
20 enter into an agreement to merge or consolidate with or
21 otherwise to acquire control of a domestic insurer or any person
22 controlling a domestic insurer unless, at the time any such
23 offer, request or invitation is made or any such agreement is
24 entered into or prior to the acquisition of such securities if
25 no offer or agreement is involved, such person has filed with
26 the department and has sent to such insurer a statement
27 containing the information required by this section and such
28 offer, request, invitation, agreement or acquisition has been
29 approved by the department in the manner hereinafter prescribed.
30 (2) For purposes of this section, a "domestic insurer" shall
31 include any person controlling a domestic insurer unless such
32 person as determined by the department is either directly or
33 through its affiliates primarily engaged in business other than
34 the business of insurance. Such person shall, however, file a
35 preacquisition notification with the department containing the
36 information set forth in section 1403(c)(2) thirty (30) days
37 prior to the proposed effective date of the acquisition. Failure
38 to file is subject to section 1403(e)(3). For purposes of this
39 section, "person" shall not include any securities broker
40 holding, in the usual and customary manner, less than twenty per
41 centum (20%) of the voting securities of an insurance company or
42 of any person which controls an insurance company.
43 (b) The statement to be filed with the department under this
44 section shall be made under oath or affirmation and shall
45 contain the following information:
46 (1) The name and address of each person by whom or on whose
47 behalf the merger, consolidation or other acquisition of control
48 referred to in subsection (a) is to be effected, hereinafter
49 called "acquiring party," and
50 (i) if such person is an individual, his principal
51 occupation and all offices and positions held during the past
52 five (5) years, and any conviction of crimes other than minor
53 traffic violations during the past ten (10) years; or
54 (ii) if such person is not an individual, a report of the
55 nature of its business operations during the past five (5) years
56 or for such lesser period as the person and any predecessors
57 thereof shall have been in existence; an informative description
58 of the business intended to be done by the person and the
59 person's subsidiaries; and a list of all individuals who are or
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1 who have been selected to become directors or executive officers
2 of the person, or who perform or will perform functions
3 appropriate to those positions. This list shall include for each
4 individual the information required by subparagraph (i).
5 (2) The source, nature and amount of the consideration used
6 or to be used in effecting the merger, consolidation or other
7 acquisition of control, a description of any transaction wherein
8 funds were or are to be obtained for any such purpose, including
9 any pledge of the insurer's stock or the stock of any of its
10 subsidiaries or controlling affiliates, and the identity of
11 persons furnishing such consideration, provided, however, that
12 where a source of such consideration is a loan made in the
13 lender's ordinary course of business, the identity of the lender
14 shall remain confidential if the person filing such statement so
15 requests.
16 (3) Fully audited financial information as to the earnings
17 and financial condition of each acquiring party for the
18 preceding five (5) fiscal years of each such acquiring party, or
19 for such lesser period as such acquiring party and any
20 predecessors thereof shall have been in existence, and similar
21 unaudited information as of a date not earlier than ninety (90)
22 days prior to the filing of the statement.
23 (4) Any plans or proposals which each acquiring party may
24 have to liquidate such insurer, to sell its assets or merge or
25 consolidate it with any person or to make any other material
26 change in its business or corporate structure or management.
27 (5) The number of shares of any security referred to in
28 subsection (a) which each acquiring party proposes to acquire,
29 and the terms of the offer, request, invitation, agreement or
30 acquisition referred to in subsection (a), and a statement as to
31 the method by which the fairness of the proposal was arrived.
32 (6) The amount of each class of any security referred to in
33 subsection (a) which is beneficially owned or concerning which
34 there is a right to acquire beneficial ownership by each
35 acquiring party.
36 (7) A full description of any contracts, arrangements or
37 understandings with respect to any security referred to in
38 subsection (a) in which any acquiring party is involved,
39 including, but not limited to, transfer of any of the
40 securities, joint ventures, loan or option arrangements, puts or
41 calls, guarantees of loans, guarantees against loss or
42 guarantees of profits, division of losses or profits, or the
43 giving or withholding of proxies. Such description shall
44 identify the persons with whom such contracts, arrangements or
45 understandings have been entered into.
46 (8) A description of the purchase of any security referred
47 to in subsection (a) during the twelve calendar months preceding
48 the filing of the statement, by any acquiring party, including
49 the dates of purchase, names of the purchasers and consideration
50 paid or agreed to be paid therefor.
51 (9) A description of any recommendations to purchase any
52 security referred to in subsection (a) made during the twelve
53 calendar months preceding the filing of the statement, by any
54 acquiring party, or by anyone based upon interviews or at the
55 suggestion of such acquiring party.
56 (10) Copies of all tender offers for, requests or
57 invitations for tenders of, exchange offers for and agreements
58 to acquire or exchange any securities referred to in subsection
59 (a) and, if distributed, of additional soliciting material
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1 relating thereto.
2 (11) The term of any agreement, contract or understanding
3 made with or proposed to be made with any broker-dealer as to
4 solicitation of securities referred to in subsection (a) for
5 tender and the amount of any fees, commissions or other
6 compensation to be paid to broker-dealers with regard thereto.
7 (12) Such additional information as the department may by
8 rule or regulation prescribe as necessary or appropriate for the
9 protection of policyholders of the insurer or in the public
10 interest.
11 (c) If the person required to file the statement referred to
12 in subsection (a) is a partnership, limited partnership,
13 syndicate or other group, the department may require that the
14 information called for by subsection (b)(1) through (12) shall
15 be given with respect to each partner of such partnership or
16 limited partnership, each member of such syndicate or group and
17 each person who controls such partner or member. If any such
18 partner, member or person is a corporation or the person
19 required to file the statement referred to in subsection (a) is
20 a corporation, the department may require that the information
21 called for by subsection (b)(1) through (12) shall be given with
22 respect to such corporation, each officer and director of such
23 corporation and each person who is directly or indirectly the
24 beneficial owner of more than ten per centum (10%) of the
25 outstanding voting securities of such corporation.
26 (d) If any material change occurs in the facts set forth in
27 the statement filed with the department and sent to such insurer
28 pursuant to this section, an amendment setting forth such
29 change, together with copies of all documents and other material
30 relevant to such change, shall be filed with the department and
31 sent to such insurer within two (2) business days after the
32 person learns of such change.
33 (e) If any offer, request, invitation, agreement or
34 acquisition referred to in subsection (a) is proposed to be made
35 by means of a registration statement under the Securities Act of
36 1933 (48 Stat. 74, 15 U.S.C. § 77a et seq.), or in circumstances
37 requiring the disclosure of similar information under the
38 Securities Exchange Act of 1934 (48 Stat. 881, 15 U.S.C. § 78a
39 et seq.), or under a State law requiring similar registration or
40 disclosure, the person required to file the statement referred
41 to in subsection (a) may utilize such documents in furnishing
42 the information called for by that statement.
43 (f) (1) The department shall approve any merger,
44 consolidation or other acquisition of control referred to in
45 subsection (a) unless it finds any of the following:
46 (i) After the change of control, the domestic insurer
47 referred to in subsection (a) would not be able to satisfy the
48 requirements for the issuance of a license to write the line or
49 lines of insurance for which it is presently licensed.
50 (ii) The effect of the merger, consolidation or other
51 acquisition of control would be to substantially lessen
52 competition in insurance in this Commonwealth or tend to create
53 a monopoly therein. In applying the competitive standard in this
54 subparagraph:
55 (A) the informational requirements of section 1403(c)(2) and
56 the standards of section 1403(d)(2) shall apply;
57 (B) the merger, consolidation or other acquisition shall not
58 be disapproved if the department finds that any of the
59 situations meeting the criteria provided by section 1403(d)(3)
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1 exist; and
2 (C) the department may condition the approval of the merger,
3 consolidation or other acquisition on the removal of the basis
4 of disapproval within a specified period of time.
5 (iii) The financial condition of any acquiring party is such
6 as might jeopardize the financial stability of the insurer or
7 prejudice the interest of its policyholders.
8 (iv) The plans or proposals which the acquiring party has to
9 liquidate the insurer, sell its assets or consolidate or merge
10 it with any person, or to make any other material change in its
11 business or corporate structure or management, are unfair and
12 unreasonable to policyholders of the insurer and not in the
13 public interest.
14 (v) The competence, experience and integrity of those
15 persons who would control the operation of the insurer are such
16 that it would not be in the interest of policyholders of the
17 insurer and of the public to permit the merger, consolidation or
18 other acquisition of control.
19 (vi) The [acquisition] merger, consolidation or other
20 acquisition of control is likely to be hazardous or prejudicial
21 to the insurance buying public.
22 (vii) The merger, consolidation or other acquisition of
23 control is not in compliance with the laws of this Commonwealth,
24 including Article VIII-A.
25 (2) If the merger, consolidation or other acquisition of
26 control is approved, the department shall so notify the person
27 filing the statement and the insurer [whose stock] that is
28 proposed to be acquired, and such a determination is hereafter
29 referred to as an approving determination. Notice shall also be
30 given by the department of any determination which is not an
31 approving determination. If an approving determination is made
32 by the department and not otherwise, the proposed offer and
33 acquisition may thereafter be made and consummated on the terms
34 and conditions and in the manner described in the statement and
35 subject to such conditions as may be prescribed by the
36 department as hereinafter provided. An approving determination
37 by the department shall be deemed to extend to offers or
38 acquisitions made pursuant thereto within one year following the
39 date of determination. The department may, as a condition of its
40 approving determination, require the inclusion in any offer of
41 provisions requiring the offer to remain open a specified
42 minimum length of time, permitting withdrawal of shares
43 deposited prior to the time the offeror becomes bound to
44 consummate the acquisition and requiring pro rata acceptance of
45 any shares deposited pursuant to the offer. The department shall
46 hold a hearing before making the determination required by this
47 subsection if, within ten (10) days following the filing with
48 the department of the statement, written request for the holding
49 of such hearing is made either by the person proposing to make
50 the acquisition, by the insurer [whose stock] that is proposed
51 to be acquired or, if [such] the issuer of stock proposed to be
52 acquired is not an insurer, by the [insurance company] insurer
53 controlled by such issuer. Otherwise, the department shall
54 determine in its discretion whether such a hearing shall be
55 held. Thirty (30) days' notice of any such hearing shall be
56 given to the person proposing to make the acquisition, to the
57 issuer whose stock is proposed to be acquired and, if such
58 issuer is not an insurer, to the insurance company controlled by
59 such issuer. Notice of any such hearing shall also be given to
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1 such other persons, if any, as the department may determine.
2 (3) The department may retain at the acquiring person's
3 expense any attorneys, actuaries, accountants and other experts
4 not otherwise a part of the department's staff as may be
5 reasonably necessary to assist the department in reviewing the
6 proposed acquisition of control.
7 (g) The provisions of this section shall not apply to any
8 offer, request, invitation, agreement or acquisition which the
9 department by order shall exempt therefrom as:
10 (1) not having been made or entered into for the purpose and
11 not having the effect of changing or influencing the control of
12 a domestic insurer; or
13 (2) as otherwise not comprehended within the purposes of
14 this section.
15 (h) The following shall constitute a violation of this
16 section:
17 (1) the failure to file any statement, amendment or other
18 material required to be filed pursuant to subsection (a) or (b);
19 (2) the effectuation or any attempt to effectuate an
20 acquisition of control of or merger or consolidation with a
21 domestic insurer unless the department has given its approval
22 thereto; or
23 (3) a violation of section 819-A.
24 (i) The department shall, within seventy-two hours of
25 receiving a statement filed under this section, provide
26 notification to the Office of Attorney General that the filing
27 was received.
28 Section 6. Section 1403(a), (b) and (d), added December 18,
29 1992 (P.L.1519, No.178), are amended to read:
30 Section 1403. Acquisitions Involving Insurers not Otherwise
31 Covered.--(a) As used in this section the following words and
32 phrases shall have the meanings given to them in this
33 subsection:
34 "Acquisition." Any agreement, arrangement or activity the
35 consummation of which results in a person acquiring, directly or
36 indirectly, the control of another person and includes, but is
37 not limited to, the acquisition of voting securities, the
38 acquisition of assets, bulk reinsurance [and], mergers and
39 consolidations.
40 "Involved insurer." Includes an insurer which either
41 acquires or is acquired, is affiliated with an acquirer or
42 acquired or is the result of a merger or consolidation.
43 (b) (1) Except as exempted in paragraph (2), this section
44 applies to any acquisition in which there is a change in control
45 of an insurer authorized to do business in this Commonwealth.
46 (2) This section shall not apply to any of the following:
47 (i) An acquisition subject to approval or disapproval by the
48 department pursuant to section 1402.
49 (ii) A purchase of securities solely for investment purposes
50 so long as such securities are not used by voting or otherwise
51 to cause or attempt to cause the substantial lessening of
52 competition in any insurance market in this Commonwealth. If a
53 purchase of securities results in a presumption of control as
54 described in the definition of "control" in section [1301] 1401,
55 it is not solely for investment purposes unless the insurance
56 department of the insurer's state of domicile accepts a
57 disclaimer of control or affirmatively finds that control does
58 not exist and such disclaimer action or affirmative finding is
59 communicated by the domiciliary insurance department to the
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1 Insurance Department of the Commonwealth.
2 (iii) The acquisition of a person by another person when
3 both persons are neither directly nor through affiliates
4 primarily engaged in the business of insurance, if
5 preacquisition notification is filed with the department in
6 accordance with subsection (c)(2) thirty (30) days prior to the
7 proposed effective date of the acquisition. However, such
8 preacquisition notification is not required for exclusion from
9 this section if the acquisition would otherwise be excluded from
10 this section by this paragraph.
11 (iv) The acquisition of already affiliated persons.
12 (v) An acquisition if, as an immediate result of the
13 acquisition:
14 (A) in no market would the combined market share of the
15 involved insurers exceed five per centum (5%) of the total
16 market;
17 (B) there would be no increase in any market share; or
18 (C) in no market would:
19 (I) the combined market share of the involved insurers
20 exceeds twelve per centum (12%) of the total market; and
21 (II) the market share increases by more than two per centum
22 (2%) of the total market.
23 For the purpose of this subparagraph, a market means direct
24 written insurance premium in this Commonwealth for a line of
25 business as contained in the annual statement required to be
26 filed by insurers licensed to do business in this Commonwealth.
27 (vi) An acquisition for which a preacquisition notification
28 would be required pursuant to this section due solely to the
29 resulting effect on the ocean marine insurance line of business.
30 (vii) An acquisition of an insurer whose domiciliary
31 insurance department affirmatively finds that such insurer is in
32 failing condition; there is a lack of feasible alternative to
33 improving such condition; the public benefits of improving such
34 insurer's condition through the acquisition exceed the public
35 benefits that would arise from not lessening competition; and
36 such findings are communicated by the domiciliary insurance
37 department to the Insurance Department of the Commonwealth.
38 (3) Sections 1409(b) and (c) and 1411 shall not apply to
39 acquisitions provided for in this subsection.
40 * * *
41 (d) (1) The department may enter an order under subsection
42 (e)(1) with respect to an acquisition if there is substantial
43 evidence that the effect of the acquisition may be substantially
44 to lessen competition in any line of insurance in this
45 Commonwealth or tend to create a monopoly therein or if the
46 insurer fails to file adequate information in compliance with
47 subsection (c).
48 (2) In determining whether a proposed acquisition would
49 violate the competitive standard of paragraph (1), the
50 department shall consider the following:
51 (i) Any acquisition covered under subsection (b) involving
52 two or more insurers competing in the same market is prima facie
53 evidence of violation of the competitive standards as follows:
54 (A) if the market is highly concentrated and the involved
55 insurers possess the following shares of the market:
56 Insurer A Insurer B
57 4% 4% or more
58 10% 2% or more
59 15% 1% or more; or
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1 (B) if the market is not highly concentrated and the
2 involved insurers possess the following shares of the market:
3 Insurer A Insurer B
4 5% 5% or more
5 10% 4% or more
6 15% 3% or more
7 19% 1% or more.
8 A highly concentrated market is one in which the share of the
9 four largest insurers is seventy-five per centum (75%) or more
10 of the market. Percentages not shown in the tables are
11 interpolated proportionately to the percentages that are shown.
12 If more than two insurers are involved, exceeding the total of
13 the two columns in the table is prima facie evidence of
14 violation of the competitive standard in paragraph (1). For the
15 purpose of this subparagraph, the insurer with the largest share
16 of the market shall be deemed to be insurer A.
17 (ii) There is a significant trend toward increased
18 concentration when the aggregate market share of any grouping of
19 the largest insurers in the market, from the two largest to the
20 eight largest, has increased by seven per centum (7%) or more of
21 the market over a period of time extending from any base year
22 five (5) to ten (10) years prior to the acquisition up to the
23 time of the acquisition. Any acquisition [or merger], merger or
24 consolidation covered under subsection (b) involving two or more
25 insurers competing in the same market is prima facie evidence of
26 violation of the competitive standard in paragraph (1) if:
27 (A) there is a significant trend toward increased
28 concentration in the market;
29 (B) one of the insurers involved is one of the insurers in a
30 grouping of such large insurers showing the requisite increase
31 in the market share; and
32 (C) another involved insurer's market is two per centum (2%)
33 or more.
34 (iii) For the purposes of this paragraph:
35 (A) The term "insurer" includes any company or group of
36 companies under common management, ownership or control.
37 (B) The term "market" means the relevant product and
38 geographical markets. In determining the relevant product and
39 geographical markets, the department shall give due
40 consideration to, among other things, the definitions or
41 guidelines, if any, promulgated by the NAIC and to information,
42 if any, submitted by parties to the acquisition. In the absence
43 of sufficient information to the contrary, the relevant product
44 market is assumed to be the direct written insurance premium for
45 a line of business, such line being that used in the annual
46 statement required to be filed by insurers doing business in
47 this Commonwealth and the relevant geographical market is
48 assumed to be this Commonwealth.
49 (C) The burden of showing prima facie evidence of violation
50 of the competitive standard rests upon the commissioner.
51 (iv) Even though an acquisition is not prima facie violative
52 of the competitive standard under subparagraphs (i) and (ii),
53 the department may establish the requisite anticompetitive
54 effect based upon other substantial evidence. Even though an
55 acquisition is prima facie violative of the competitive standard
56 under subparagraphs (i) and (ii), a party may establish the
57 absence of the requisite anticompetitive effect based upon other
58 substantial evidence. Relevant factors in making a determination
59 under this paragraph include, but are not limited to, the
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1 following: market shares, volatility of ranking of market
2 leaders, number of competitors, concentration, trend of
3 concentration in the industry and ease of entry and exit into
4 the market.
5 (3) [An] Except for a merger, consolidation or acquisition
6 of control involving a hospital plan corporation or professional
7 health services plan corporation, an order may not be entered
8 under subsection (e)(1) if:
9 (i) the acquisition will yield substantial economies of
10 scale or economies in resource utilization that cannot be
11 feasibly achieved in any other way, and the public benefits
12 which would arise from such economies exceed the public benefits
13 which would arise from not lessening competition; or
14 (ii) the acquisition will substantially increase the
15 availability of insurance, and the public benefits of such
16 increase exceed the public benefits which would arise from not
17 lessening competition.
18 * * *
19 Section 7. The act is amended by adding sections to read:
20 Section 1404.1. Insurance Restructuring Public Interest
21 Review Board.--(a) The Insurance Restructuring Public Interest
22 Review Board is established to review the merger, consolidation
23 or other acquisition of control of a hospital plan corporation
24 or professional health services plan corporation as defined in
25 this act and in 40 Pa.C.S. Chs. 61 (relating to hospital plan
26 corporations) and 63 (relating to professional health services
27 plan corporations).
28 (b) The board shall consist of the following members:
29 (1) The Auditor General or a designee.
30 (2) The Secretary of Public Welfare or a designee.
31 (3) The Secretary of Health or a designee.
32 (4) The Majority Leader of the Senate or a designee.
33 (5) The Minority Leader of the Senate or a designee.
34 (6) The Majority Leader of the House of Representatives or a
35 designee.
36 (7) The Minority Leader of the House of Representatives or a
37 designee.
38 (8) A member of the general public who is an individual
39 insured under a hospital plan corporation or professional health
40 services plan corporation appointed by the Governor.
41 (9) A person who is currently or who has been a health care
42 provider pursuant to a contract with a hospital plan corporation
43 or professional health services plan corporation appointed by
44 the Governor.
45 (c) A majority of the members of the board shall select a
46 chairperson and other officers as they shall determine.
47 (d) The board shall convene within 45 days after the
48 effective date of this section. The board shall meet at least
49 four times annually. Additional meetings shall be held at the
50 call of the chairperson or on the submission of a request signed
51 by a majority of the members of the board.
52 (e) A majority of the members of the board shall constitute
53 a quorum. Except as provided in subsection (g) or (h), all
54 business of the board shall be conducted by a quorum.
55 (f) No member of the board shall be entitled to compensation
56 for services performed as a member of the board, but shall be
57 entitled to reimbursement for all necessary and reasonable
58 expenses incurred in connection with the performance of the
59 duties as a member of the board.
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1 (g) The board shall have the following powers and duties:
2 (1) To receive and review all filings submitted to the
3 department relating to the merger, consolidation or other
4 acquisition of control of a hospital plan corporation or
5 professional health services plan corporation and all
6 accompanying data or other information. The department may
7 redact information determined to be a trade secret. Confidential
8 material shall be available for review in executive session of
9 the board. A board member, financial expert or auditor who
10 releases confidential information shall be subject to a civil
11 penalty not to exceed $1,000 per violation.
12 (2) To hold at least one public hearing on a merger,
13 consolidation or other acquisition of control of a hospital plan
14 corporation or professional health services plan corporation at
15 which the department shall present findings relating to the
16 merger, consolidation or other acquisition of control.
17 (3) To make written recommendations to the department.
18 Recommendations under this paragraph must be approved by at
19 least seven members of the board.
20 (4) To appoint such financial experts or auditors as
21 necessary to:
22 (i) Review the merger, consolidation or other acquisition of
23 control.
24 (ii) Determine the amount of net economic benefit, savings,
25 proceeds or other moneys that will be derived from the merger,
26 consolidation or other acquisition of control.
27 (iii) Determine the amount of reserves of the health plan
28 corporation and the professional health services plan
29 corporation and the amount of the reserves of the newly merged,
30 consolidated or acquired entity.
31 (iv) Determine the amount currently dedicated for the
32 hospital plan corporation's and the professional health services
33 plan corporation's social mission, as defined in section 2501,
34 for the prior year and the current year.
35 (v) Review other amounts that will be available for the
36 corporate social mission, as defined in section 2501, following
37 any approval of the merger, consolidation or other acquisition
38 of control.
39 (5) To consider the development of timelines, and any
40 changes thereto, for conducting and completing activities under
41 this subsection.
42 The cost of the financial experts or auditors shall be paid for
43 by the hospital plan corporation or professional health services
44 plan corporation.
45 (h) The department shall present the following to the board:
46 (1) Findings and recommendations on the merger,
47 consolidation or other acquisition of control to the insurance
48 restructuring board, including an analysis of whether the
49 hospital plan corporation or professional health services plan
50 corporation has met all the requirements of sections 1402 and
51 1403.
52 (2) A written response to each recommendation submitted by
53 the board under subsection (g)(3), including a detailed written
54 explanation of the reason the recommendation will or will not be
55 adopted.
56 (3) A written determination that the merger, consolidation
57 or other acquisition of control will result in a sustained
58 reduction in health care premiums for Pennsylvania policyholders
59 and a written finding that describes the reason or reasons the
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1 department believes the merger, consolidation or other
2 acquisition of control is consistent with public interest.
3 (i) The board shall have 30 days to review and respond to
4 the written responses to recommendations provided under
5 subsection (h). The department shall not approve the merger,
6 consolidation or other acquisition of control of a hospital plan
7 corporation or professional health services plan corporation for
8 60 days after it has fully complied with subsection (h).
9 Section 1404.2. Account.--(a) There is hereby established
10 in the State Treasury a restricted receipt account for the
11 deposit of funds under this section.
12 (b) Any net economic benefits, including proceeds, savings,
13 funds or moneys derived from the merger, consolidation or other
14 acquisition of control of a hospital plan corporation or
15 professional health services plan corporation which are to be
16 used to fund any portion of a health care or health care related
17 program of, or to be administered by, the Commonwealth shall be
18 deposited into the restricted receipt account under subsection
19 (a) in the State Treasury.
20 (c) No contracts or written agreements between the
21 Commonwealth and the hospital plan corporation or professional
22 health services plan corporation may be entered into relating to
23 the disbursement or spending of the economic benefits, proceeds,
24 savings, funds or moneys resulting from the merger,
25 consolidation or other acquisition of control of a hospital plan
26 corporation or professional health services plan corporation
27 until the funds are appropriated pursuant to subsection (d).
28 (d) No moneys may be transferred or paid from the account
29 unless appropriated by the General Assembly for health-related
30 purposes.
31 Section 8. The act is amended by adding articles to read:
32 ARTICLE XXV
33 HEALTH CARE REPORTING
34 Section 2501. Definitions.
35 The following words and phrases when used in this act shall
36 have the meanings given to them in this section unless the
37 context clearly indicates otherwise:
38 "Social mission." Services, projects and community
39 activities, including activities to improve health care or make
40 health care more affordable and accessible in the service area,
41 and all other charitable and benevolent activities of a hospital
42 plan corporation or health services plan corporation.
43 Section 2502. Hospital plan corporation.
44 Each hospital plan corporation subject to 40 Pa.C.S. Ch. 61
45 (relating to hospital plan corporations) shall annually provide
46 to the department, the chairman and minority chairman of the
47 Banking and Insurance Committee of the Senate and the chairman
48 and minority chairman of the Insurance Committee of the House of
49 Representatives a list, including a description and cost, of all
50 advertising contracts and all contracts entered into and
51 expenditures made during that calendar year relating to the
52 social mission of the health plan corporation. The information
53 shall be provided by December 1 of each year. The hospital plan
54 corporation shall also provide a list and description of all
55 contracts and expenditures relating to the health plan
56 corporation's social mission planned for the upcoming calendar
57 year.
58 Section 2503. Professional health services plan corporation.
59 Each professional health services plan corporation subject to
HB2005A06040 - 12 -
1 40 Pa.C.S. Ch. 63 (relating to professional health service plan
2 corporations) shall annually provide to the department, the
3 chairman and minority chairman of the Banking and Insurance
4 Committee of the Senate and the chairman and minority chairman
5 of the Insurance Committee of the House of Representatives a
6 list, including a description and cost, of all advertising
7 contracts and all contracts entered into and expenditures made
8 during the calendar year relating to the social mission of the
9 professional health services plan corporation. The information
10 shall be provided by December 1 of each year. The professional
11 health services plan corporation shall also provide a list and
12 description of all contracts and expenditures relating to the
13 health services plan corporation's social mission planned for
14 the upcoming calendar year.
15 Section 2504. Retroactivity.
16 The provisions of sections 2502 and 2503 shall be retroactive
17 to January 1, 2005. Reports for the years 2005 and 2006 shall be
18 submitted within 90 days of the effective date of this section.
19 Amend Sec. 4, page 23, line 2, by striking out "4" and
20 inserting
21 9
22 Amend Sec. 4, page 23, by inserting between lines 9 and 10
23 (3) The act of December 19, 1990 (P.L.834, No.198),
24 known as the GAA Amendments Act of 1990, is repealed insofar
25 as it is inconsistent with this act.
26 Amend Sec. 4, page 23, line 10, by striking out "(3)" and
27 inserting
28 (4)
29 Amend Bill, page 23, by inserting between lines 12 and 13
30 Section 10. This act shall not apply to any merger,
31 consolidation or other acquisition of control completed or
32 consummated prior to the effective date of this section and, if
33 required, following the issuance of an approving determination.
34 Section 11. This act shall apply to any application,
35 statement or other plan or proposal relating to a merger,
36 consolidation or other acquisition of control filed with the
37 Insurance Department on or after January 1, 2007.
38 Amend Sec. 5, page 23, line 13, by striking out "5" and
39 inserting
40 12
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