H2098B3231A05966 RLE:JMM 02/28/08 #90 A05966
AMENDMENTS TO HOUSE BILL NO. 2098
Sponsor: REPRESENTATIVE BOYD
Printer's No. 3231
1 Amend Title, page 1, lines 1 through 7, by striking out all
2 of said lines and inserting
3 Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An
4 act relating to insurance; amending, revising, and
5 consolidating the law providing for the incorporation of
6 insurance companies, and the regulation, supervision, and
7 protection of home and foreign insurance companies, Lloyds
8 associations, reciprocal and inter-insurance exchanges, and
9 fire insurance rating bureaus, and the regulation and
10 supervision of insurance carried by such companies,
11 associations, and exchanges, including insurance carried by
12 the State Workmen's Insurance Fund; providing penalties; and
13 repealing existing laws," further providing for effect of act
14 on existing laws and, in insurance holding companies, for
15 definitions, for acquisition of control of or merger with
16 domestic insurer and for acquisitions involving insurers not
17 otherwise covered; establishing the Insurance Restructuring
18 Board; providing for its powers and duties; establishing an
19 account; establishing a system for payment or reduction in
20 payment for preventable serious adverse events within
21 Commonwealth programs; informing health insurers of payment
22 policies used by Medicaid and Medicare; providing for the
23 powers and duties of the Department of Public Welfare, the
24 Insurance Department, the Department of Health and the
25 Department of State; providing for health care reporting; and
26 making an inconsistent repeal.
27 Amend Bill, page 1, lines 10 through 19; pages 2 through 4,
28 lines 1 through 30; page 5, lines 1 through 9, by striking out
29 all of said lines on said pages and inserting
30 Section 1. Section 108 of the act of May 17, 1921 (P.L.682,
31 No.284), known as The Insurance Company Law of 1921, is amended
32 to read:
33 Section 108. Effect of Act on Existing Laws.--The provisions
34 of this act, so far as they are the same as those of existing
35 laws, shall be construed as a continuation of such laws and not
36 as new enactments. The repeal by this act of any provision of
37 law shall not revive any law heretofore repealed or superseded,
38 nor shall such repeal affect any act done, liability incurred,
1 or any right accrued or vested, or any suit or prosecution
2 pending or to be instituted to enforce any right or penalty or
3 punish any offense under the authority of the repealed laws. The
4 provisions of this act shall not limit the jurisdiction and
5 authority of the Office of Attorney General, including, but not
6 limited to, the jurisdiction and authority granted pursuant to
7 the act of October 15, 1980 (P.L.950, No.164), known as the
8 "Commonwealth Attorneys Act."
9 Section 2. The definitions of "insurer" and "person" in
10 section 1401 of the act, amended December 20, 2000 (P.L.967,
11 No.132), are amended and the section is amended by adding a
12 definition to read:
13 Section 1401. Definitions.--As used in this article, and for
14 the purposes of this article only, the following words and
15 phrases shall have the meanings given to them in this section:
16 * * *
17 "Insurer." Any health maintenance organization, preferred
18 provider organization, company, association [or], exchange,
19 hospital plan corporation subject to 40 Pa.C.S. Ch. 61 (relating
20 to hospital plan corporations) or professional health services
21 plan corporation subject to 40 Pa.C.S. Ch. 63 (relating to
22 professional health services plan corporations), authorized by
23 the Insurance Commissioner to transact the business of insurance
24 in this Commonwealth except that the term shall not include:
25 (1) the Commonwealth or any agency or instrumentality
26 thereof;
27 (2) agencies, authorities or instrumentalities of the United
28 States, its possessions and territories, the Commonwealth of
29 Puerto Rico, the District of Columbia or a state or political
30 subdivision; or
31 (3) fraternal benefit societies[; or
32 (4) nonprofit medical and hospital service associations].
33 * * *
34 "Person." An individual, an insurer, a corporation, a
35 partnership, a limited liability company, an association, a
36 joint stock company, a trust, an unincorporated organization,
37 any similar entity or any combination of the foregoing acting in
38 concert. The term shall not include any joint venture
39 partnership exclusively engaged in owning, managing, leasing or
40 developing real or tangible personal property.
41 * * *
42 "Shareholder." A record holder or record owner of shares of
43 an insurer.
44 (1) The term shall include all of the following:
45 (i) A member of an insurer that is a domestic
46 nonstock corporation under 15 Pa.C.S. Ch. 21 (relating to
47 nonstock corporations) or a prior statute.
48 (ii) A member, as defined in 15 Pa.C.S. § 5103
49 (relating to definitions), of an insurer that is a
50 domestic nonprofit corporation under 15 Pa.C.S. Ch. 51
51 (relating to general provisions) or a prior statute.
52 (iii) A subscriber of an insurer that is a domestic
53 reciprocal exchange under Article X or a prior statute.
54 (2) The term shall not include any subscriber, insured
55 or customer of:
56 (i) a hospital plan corporation subject to 40
57 Pa.C.S. Ch. 61 (relating to hospital plan corporations);
58 or
59 (ii) a professional health service plan corporation
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1 subject to 40 Pa.C.S. Ch. 63 (relating to professional
2 health services plan corporations).
3 * * *
4 Section 3. Section 1402 of the act, amended or added
5 December 18, 1992 (P.L.1519, No.178) and December 21, 1998
6 (P.L.1108, No.150), is amended to read:
7 Section 1402. Acquisition of Control of or Merger or
8 Consolidation with Domestic Insurer.--(a) (1) No person other
9 than the issuer shall make a tender offer for or a request or
10 invitation for tenders of, or enter into any agreement to
11 exchange securities or seek to acquire or acquire in the open
12 market or otherwise, any voting security of a domestic insurer
13 if, after the consummation thereof, such person would directly
14 or indirectly or by conversion or by exercise of any right to
15 acquire, be in control of such insurer, and no person shall
16 enter into an agreement to merge or consolidate with or
17 otherwise to acquire control of a domestic insurer or any person
18 controlling a domestic insurer unless, at the time any such
19 offer, request or invitation is made or any such agreement is
20 entered into or prior to the acquisition of such securities if
21 no offer or agreement is involved, such person has filed with
22 the department and has sent to such insurer a statement
23 containing the information required by this section and such
24 offer, request, invitation, agreement or acquisition has been
25 approved by the department in the manner hereinafter prescribed.
26 (2) For purposes of this section, a "domestic insurer" shall
27 include any person controlling a domestic insurer unless such
28 person as determined by the department is either directly or
29 through its affiliates primarily engaged in business other than
30 the business of insurance. Such person shall, however, file a
31 preacquisition notification with the department containing the
32 information set forth in section 1403(c)(2) thirty (30) days
33 prior to the proposed effective date of the acquisition. Failure
34 to file is subject to section 1403(e)(3). For purposes of this
35 section, "person" shall not include any securities broker
36 holding, in the usual and customary manner, less than twenty per
37 centum (20%) of the voting securities of an insurance company or
38 of any person which controls an insurance company.
39 (b) The statement to be filed with the department under this
40 section shall be made under oath or affirmation and shall
41 contain the following information:
42 (1) The name and address of each person by whom or on whose
43 behalf the merger, consolidation or other acquisition of control
44 referred to in subsection (a) is to be effected, hereinafter
45 called "acquiring party," and
46 (i) if such person is an individual, his principal
47 occupation and all offices and positions held during the past
48 five (5) years, and any conviction of crimes other than minor
49 traffic violations during the past ten (10) years; or
50 (ii) if such person is not an individual, a report of the
51 nature of its business operations during the past five (5) years
52 or for such lesser period as the person and any predecessors
53 thereof shall have been in existence; an informative description
54 of the business intended to be done by the person and the
55 person's subsidiaries; and a list of all individuals who are or
56 who have been selected to become directors or executive officers
57 of the person, or who perform or will perform functions
58 appropriate to those positions. This list shall include for each
59 individual the information required by subparagraph (i).
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1 (2) The source, nature and amount of the consideration used
2 or to be used in effecting the merger, consolidation or other
3 acquisition of control, a description of any transaction wherein
4 funds were or are to be obtained for any such purpose, including
5 any pledge of the insurer's stock or the stock of any of its
6 subsidiaries or controlling affiliates, and the identity of
7 persons furnishing such consideration, provided, however, that
8 where a source of such consideration is a loan made in the
9 lender's ordinary course of business, the identity of the lender
10 shall remain confidential if the person filing such statement so
11 requests.
12 (3) Fully audited financial information as to the earnings
13 and financial condition of each acquiring party for the
14 preceding five (5) fiscal years of each such acquiring party, or
15 for such lesser period as such acquiring party and any
16 predecessors thereof shall have been in existence, and similar
17 unaudited information as of a date not earlier than ninety (90)
18 days prior to the filing of the statement.
19 (4) Any plans or proposals which each acquiring party may
20 have to liquidate such insurer, to sell its assets or merge or
21 consolidate it with any person or to make any other material
22 change in its business or corporate structure or management.
23 (5) The number of shares of any security referred to in
24 subsection (a) which each acquiring party proposes to acquire,
25 and the terms of the offer, request, invitation, agreement or
26 acquisition referred to in subsection (a), and a statement as to
27 the method by which the fairness of the proposal was arrived.
28 (6) The amount of each class of any security referred to in
29 subsection (a) which is beneficially owned or concerning which
30 there is a right to acquire beneficial ownership by each
31 acquiring party.
32 (7) A full description of any contracts, arrangements or
33 understandings with respect to any security referred to in
34 subsection (a) in which any acquiring party is involved,
35 including, but not limited to, transfer of any of the
36 securities, joint ventures, loan or option arrangements, puts or
37 calls, guarantees of loans, guarantees against loss or
38 guarantees of profits, division of losses or profits, or the
39 giving or withholding of proxies. Such description shall
40 identify the persons with whom such contracts, arrangements or
41 understandings have been entered into.
42 (8) A description of the purchase of any security referred
43 to in subsection (a) during the twelve calendar months preceding
44 the filing of the statement, by any acquiring party, including
45 the dates of purchase, names of the purchasers and consideration
46 paid or agreed to be paid therefor.
47 (9) A description of any recommendations to purchase any
48 security referred to in subsection (a) made during the twelve
49 calendar months preceding the filing of the statement, by any
50 acquiring party, or by anyone based upon interviews or at the
51 suggestion of such acquiring party.
52 (10) Copies of all tender offers for, requests or
53 invitations for tenders of, exchange offers for and agreements
54 to acquire or exchange any securities referred to in subsection
55 (a) and, if distributed, of additional soliciting material
56 relating thereto.
57 (11) The term of any agreement, contract or understanding
58 made with or proposed to be made with any broker-dealer as to
59 solicitation of securities referred to in subsection (a) for
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1 tender and the amount of any fees, commissions or other
2 compensation to be paid to broker-dealers with regard thereto.
3 (12) Such additional information as the department may by
4 rule or regulation prescribe as necessary or appropriate for the
5 protection of policyholders of the insurer or in the public
6 interest.
7 (c) If the person required to file the statement referred to
8 in subsection (a) is a partnership, limited partnership,
9 syndicate or other group, the department may require that the
10 information called for by subsection (b)(1) through (12) shall
11 be given with respect to each partner of such partnership or
12 limited partnership, each member of such syndicate or group and
13 each person who controls such partner or member. If any such
14 partner, member or person is a corporation or the person
15 required to file the statement referred to in subsection (a) is
16 a corporation, the department may require that the information
17 called for by subsection (b)(1) through (12) shall be given with
18 respect to such corporation, each officer and director of such
19 corporation and each person who is directly or indirectly the
20 beneficial owner of more than ten per centum (10%) of the
21 outstanding voting securities of such corporation.
22 (d) If any material change occurs in the facts set forth in
23 the statement filed with the department and sent to such insurer
24 pursuant to this section, an amendment setting forth such
25 change, together with copies of all documents and other material
26 relevant to such change, shall be filed with the department and
27 sent to such insurer within two (2) business days after the
28 person learns of such change.
29 (e) If any offer, request, invitation, agreement or
30 acquisition referred to in subsection (a) is proposed to be made
31 by means of a registration statement under the Securities Act of
32 1933 (48 Stat. 74, 15 U.S.C. § 77a et seq.), or in circumstances
33 requiring the disclosure of similar information under the
34 Securities Exchange Act of 1934 (48 Stat. 881, 15 U.S.C. § 78a
35 et seq.), or under a State law requiring similar registration or
36 disclosure, the person required to file the statement referred
37 to in subsection (a) may utilize such documents in furnishing
38 the information called for by that statement.
39 (f) (1) The department shall approve any merger,
40 consolidation or other acquisition of control referred to in
41 subsection (a) unless it finds any of the following:
42 (i) After the change of control, the domestic insurer
43 referred to in subsection (a) would not be able to satisfy the
44 requirements for the issuance of a license to write the line or
45 lines of insurance for which it is presently licensed.
46 (ii) The effect of the merger, consolidation or other
47 acquisition of control would be to substantially lessen
48 competition in insurance in this Commonwealth or tend to create
49 a monopoly therein. In applying the competitive standard in this
50 subparagraph:
51 (A) the informational requirements of section 1403(c)(2) and
52 the standards of section 1403(d)(2) shall apply;
53 (B) the merger, consolidation or other acquisition shall not
54 be disapproved if the department finds that any of the
55 situations meeting the criteria provided by section 1403(d)(3)
56 exist; and
57 (C) the department may condition the approval of the merger,
58 consolidation or other acquisition on the removal of the basis
59 of disapproval within a specified period of time.
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1 (iii) The financial condition of any acquiring party is such
2 as might jeopardize the financial stability of the insurer or
3 prejudice the interest of its policyholders.
4 (iv) The plans or proposals which the acquiring party has to
5 liquidate the insurer, sell its assets or consolidate or merge
6 it with any person, or to make any other material change in its
7 business or corporate structure or management, are unfair and
8 unreasonable to policyholders of the insurer and not in the
9 public interest.
10 (v) The competence, experience and integrity of those
11 persons who would control the operation of the insurer are such
12 that it would not be in the interest of policyholders of the
13 insurer and of the public to permit the merger, consolidation or
14 other acquisition of control.
15 (vi) The [acquisition] merger, consolidation or other
16 acquisition of control is likely to be hazardous or prejudicial
17 to the insurance buying public.
18 (vii) The merger, consolidation or other acquisition of
19 control is not in compliance with the laws of this Commonwealth,
20 including Article VIII-A.
21 (2) If the merger, consolidation or other acquisition of
22 control is approved, the department shall so notify the person
23 filing the statement and the insurer [whose stock] that is
24 proposed to be acquired, and such a determination is hereafter
25 referred to as an approving determination. Notice shall also be
26 given by the department of any determination which is not an
27 approving determination. If an approving determination is made
28 by the department and not otherwise, the proposed offer and
29 acquisition may thereafter be made and consummated on the terms
30 and conditions and in the manner described in the statement and
31 subject to such conditions as may be prescribed by the
32 department as hereinafter provided. An approving determination
33 by the department shall be deemed to extend to offers or
34 acquisitions made pursuant thereto within one year following the
35 date of determination. The department may, as a condition of its
36 approving determination, require the inclusion in any offer of
37 provisions requiring the offer to remain open a specified
38 minimum length of time, permitting withdrawal of shares
39 deposited prior to the time the offeror becomes bound to
40 consummate the acquisition and requiring pro rata acceptance of
41 any shares deposited pursuant to the offer. The department shall
42 hold a hearing before making the determination required by this
43 subsection if, within ten (10) days following the filing with
44 the department of the statement, written request for the holding
45 of such hearing is made either by the person proposing to make
46 the acquisition, by the insurer [whose stock] that is proposed
47 to be acquired or, if [such] the issuer of stock proposed to be
48 acquired is not an insurer, by the [insurance company] insurer
49 controlled by such issuer. Otherwise, the department shall
50 determine in its discretion whether such a hearing shall be
51 held. Thirty (30) days' notice of any such hearing shall be
52 given to the person proposing to make the acquisition, to the
53 issuer whose stock is proposed to be acquired and, if such
54 issuer is not an insurer, to the insurance company controlled by
55 such issuer. Notice of any such hearing shall also be given to
56 such other persons, if any, as the department may determine.
57 (3) The department may retain at the acquiring person's
58 expense any attorneys, actuaries, accountants and other experts
59 not otherwise a part of the department's staff as may be
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1 reasonably necessary to assist the department in reviewing the
2 proposed acquisition of control.
3 (g) The provisions of this section shall not apply to any
4 offer, request, invitation, agreement or acquisition which the
5 department by order shall exempt therefrom as:
6 (1) not having been made or entered into for the purpose and
7 not having the effect of changing or influencing the control of
8 a domestic insurer; or
9 (2) as otherwise not comprehended within the purposes of
10 this section.
11 (h) The following shall constitute a violation of this
12 section:
13 (1) the failure to file any statement, amendment or other
14 material required to be filed pursuant to subsection (a) or (b);
15 (2) the effectuation or any attempt to effectuate an
16 acquisition of control of or merger or consolidation with a
17 domestic insurer unless the department has given its approval
18 thereto; or
19 (3) a violation of section 819-A.
20 (i) The department shall, within seventy-two hours of
21 receiving a statement filed under this section, provide
22 notification to the Office of Attorney General that the filing
23 was received.
24 Section 4. Section 1403(a), (b) and (d), added December 18,
25 1992 (P.L.1519, No.178), are amended to read:
26 Section 1403. Acquisitions Involving Insurers not Otherwise
27 Covered.--(a) As used in this section the following words and
28 phrases shall have the meanings given to them in this
29 subsection:
30 "Acquisition." Any agreement, arrangement or activity the
31 consummation of which results in a person acquiring, directly or
32 indirectly, the control of another person and includes, but is
33 not limited to, the acquisition of voting securities, the
34 acquisition of assets, bulk reinsurance [and], mergers and
35 consolidations.
36 "Involved insurer." Includes an insurer which either
37 acquires or is acquired, is affiliated with an acquirer or
38 acquired or is the result of a merger or consolidation.
39 (b) (1) Except as exempted in paragraph (2), this section
40 applies to any acquisition in which there is a change in control
41 of an insurer authorized to do business in this Commonwealth.
42 (2) This section shall not apply to any of the following:
43 (i) An acquisition subject to approval or disapproval by the
44 department pursuant to section 1402.
45 (ii) A purchase of securities solely for investment purposes
46 so long as such securities are not used by voting or otherwise
47 to cause or attempt to cause the substantial lessening of
48 competition in any insurance market in this Commonwealth. If a
49 purchase of securities results in a presumption of control as
50 described in the definition of "control" in section [1301] 1401,
51 it is not solely for investment purposes unless the insurance
52 department of the insurer's state of domicile accepts a
53 disclaimer of control or affirmatively finds that control does
54 not exist and such disclaimer action or affirmative finding is
55 communicated by the domiciliary insurance department to the
56 Insurance Department of the Commonwealth.
57 (iii) The acquisition of a person by another person when
58 both persons are neither directly nor through affiliates
59 primarily engaged in the business of insurance, if
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1 preacquisition notification is filed with the department in
2 accordance with subsection (c)(2) thirty (30) days prior to the
3 proposed effective date of the acquisition. However, such
4 preacquisition notification is not required for exclusion from
5 this section if the acquisition would otherwise be excluded from
6 this section by this paragraph.
7 (iv) The acquisition of already affiliated persons.
8 (v) An acquisition if, as an immediate result of the
9 acquisition:
10 (A) in no market would the combined market share of the
11 involved insurers exceed five per centum (5%) of the total
12 market;
13 (B) there would be no increase in any market share; or
14 (C) in no market would:
15 (I) the combined market share of the involved insurers
16 exceeds twelve per centum (12%) of the total market; and
17 (II) the market share increases by more than two per centum
18 (2%) of the total market.
19 For the purpose of this subparagraph, a market means direct
20 written insurance premium in this Commonwealth for a line of
21 business as contained in the annual statement required to be
22 filed by insurers licensed to do business in this Commonwealth.
23 (vi) An acquisition for which a preacquisition notification
24 would be required pursuant to this section due solely to the
25 resulting effect on the ocean marine insurance line of business.
26 (vii) An acquisition of an insurer whose domiciliary
27 insurance department affirmatively finds that such insurer is in
28 failing condition; there is a lack of feasible alternative to
29 improving such condition; the public benefits of improving such
30 insurer's condition through the acquisition exceed the public
31 benefits that would arise from not lessening competition; and
32 such findings are communicated by the domiciliary insurance
33 department to the Insurance Department of the Commonwealth.
34 (3) Sections 1409(b) and (c) and 1411 shall not apply to
35 acquisitions provided for in this subsection.
36 * * *
37 (d) (1) The department may enter an order under subsection
38 (e)(1) with respect to an acquisition if there is substantial
39 evidence that the effect of the acquisition may be substantially
40 to lessen competition in any line of insurance in this
41 Commonwealth or tend to create a monopoly therein or if the
42 insurer fails to file adequate information in compliance with
43 subsection (c).
44 (2) In determining whether a proposed acquisition would
45 violate the competitive standard of paragraph (1), the
46 department shall consider the following:
47 (i) Any acquisition covered under subsection (b) involving
48 two or more insurers competing in the same market is prima facie
49 evidence of violation of the competitive standards as follows:
50 (A) if the market is highly concentrated and the involved
51 insurers possess the following shares of the market:
52 Insurer A Insurer B
53 4% 4% or more
54 10% 2% or more
55 15% 1% or more; or
56 (B) if the market is not highly concentrated and the
57 involved insurers possess the following shares of the market:
58 Insurer A Insurer B
59 5% 5% or more
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1 10% 4% or more
2 15% 3% or more
3 19% 1% or more.
4 A highly concentrated market is one in which the share of the
5 four largest insurers is seventy-five per centum (75%) or more
6 of the market. Percentages not shown in the tables are
7 interpolated proportionately to the percentages that are shown.
8 If more than two insurers are involved, exceeding the total of
9 the two columns in the table is prima facie evidence of
10 violation of the competitive standard in paragraph (1). For the
11 purpose of this subparagraph, the insurer with the largest share
12 of the market shall be deemed to be insurer A.
13 (ii) There is a significant trend toward increased
14 concentration when the aggregate market share of any grouping of
15 the largest insurers in the market, from the two largest to the
16 eight largest, has increased by seven per centum (7%) or more of
17 the market over a period of time extending from any base year
18 five (5) to ten (10) years prior to the acquisition up to the
19 time of the acquisition. Any acquisition [or merger], merger or
20 consolidation covered under subsection (b) involving two or more
21 insurers competing in the same market is prima facie evidence of
22 violation of the competitive standard in paragraph (1) if:
23 (A) there is a significant trend toward increased
24 concentration in the market;
25 (B) one of the insurers involved is one of the insurers in a
26 grouping of such large insurers showing the requisite increase
27 in the market share; and
28 (C) another involved insurer's market is two per centum (2%)
29 or more.
30 (iii) For the purposes of this paragraph:
31 (A) The term "insurer" includes any company or group of
32 companies under common management, ownership or control.
33 (B) The term "market" means the relevant product and
34 geographical markets. In determining the relevant product and
35 geographical markets, the department shall give due
36 consideration to, among other things, the definitions or
37 guidelines, if any, promulgated by the NAIC and to information,
38 if any, submitted by parties to the acquisition. In the absence
39 of sufficient information to the contrary, the relevant product
40 market is assumed to be the direct written insurance premium for
41 a line of business, such line being that used in the annual
42 statement required to be filed by insurers doing business in
43 this Commonwealth and the relevant geographical market is
44 assumed to be this Commonwealth.
45 (C) The burden of showing prima facie evidence of violation
46 of the competitive standard rests upon the commissioner.
47 (iv) Even though an acquisition is not prima facie violative
48 of the competitive standard under subparagraphs (i) and (ii),
49 the department may establish the requisite anticompetitive
50 effect based upon other substantial evidence. Even though an
51 acquisition is prima facie violative of the competitive standard
52 under subparagraphs (i) and (ii), a party may establish the
53 absence of the requisite anticompetitive effect based upon other
54 substantial evidence. Relevant factors in making a determination
55 under this paragraph include, but are not limited to, the
56 following: market shares, volatility of ranking of market
57 leaders, number of competitors, concentration, trend of
58 concentration in the industry and ease of entry and exit into
59 the market.
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1 (3) [An] Except for a merger, consolidation or acquisition
2 of control involving a hospital plan corporation or professional
3 health services plan corporation, an order may not be entered
4 under subsection (e)(1) if:
5 (i) the acquisition will yield substantial economies of
6 scale or economies in resource utilization that cannot be
7 feasibly achieved in any other way, and the public benefits
8 which would arise from such economies exceed the public benefits
9 which would arise from not lessening competition; or
10 (ii) the acquisition will substantially increase the
11 availability of insurance, and the public benefits of such
12 increase exceed the public benefits which would arise from not
13 lessening competition.
14 * * *
15 Section 5. The act is amended by adding sections to read:
16 Section 1404.1. Insurance Restructuring Public Interest
17 Review Board.--(a) The Insurance Restructuring Public Interest
18 Review Board is established to review the merger, consolidation
19 or other acquisition of control of a hospital plan corporation
20 or professional health services plan corporation as defined in
21 this act and in 40 Pa.C.S. Chs. 61 (relating to hospital plan
22 corporations) and 63 (relating to professional health services
23 plan corporations).
24 (b) The board shall consist of the following members:
25 (1) The Auditor General or a designee.
26 (2) The Secretary of Public Welfare or a designee.
27 (3) The Secretary of Health or a designee.
28 (4) The Majority Leader of the Senate or a designee.
29 (5) The Minority Leader of the Senate or a designee.
30 (6) The Majority Leader of the House of Representatives or a
31 designee.
32 (7) The Minority Leader of the House of Representatives or a
33 designee.
34 (8) A member of the general public who is an individual
35 insured under a hospital plan corporation or professional health
36 services plan corporation appointed by the Governor.
37 (9) A person who is currently or who has been a health care
38 provider pursuant to a contract with a hospital plan corporation
39 or professional health services plan corporation appointed by
40 the Governor.
41 (c) A majority of the members of the board shall select a
42 chairperson and other officers as they shall determine.
43 (d) The board shall convene within 45 days after the
44 effective date of this section. The board shall meet at least
45 four times annually. Additional meetings shall be held at the
46 call of the chairperson or on the submission of a request signed
47 by a majority of the members of the board.
48 (e) A majority of the members of the board shall constitute
49 a quorum. Except as provided in subsection (g) or (h), all
50 business of the board shall be conducted by a quorum.
51 (f) No member of the board shall be entitled to compensation
52 for services performed as a member of the board, but shall be
53 entitled to reimbursement for all necessary and reasonable
54 expenses incurred in connection with the performance of the
55 duties as a member of the board.
56 (g) The board shall have the following powers and duties:
57 (1) To receive and review all filings submitted to the
58 department relating to the merger, consolidation or other
59 acquisition of control of a hospital plan corporation or
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1 professional health services plan corporation and all
2 accompanying data or other information. The department may
3 redact information determined to be a trade secret. Confidential
4 material shall be available for review in executive session of
5 the board. A board member, financial expert or auditor who
6 releases confidential information shall be subject to a civil
7 penalty not to exceed $1,000 per violation.
8 (2) To hold at least one public hearing on a merger,
9 consolidation or other acquisition of control of a hospital plan
10 corporation or professional health services plan corporation at
11 which the department shall present findings relating to the
12 merger, consolidation or other acquisition of control.
13 (3) To make written recommendations to the department.
14 Recommendations under this paragraph must be approved by at
15 least seven members of the board.
16 (4) To appoint such financial experts or auditors as
17 necessary to:
18 (i) Review the merger, consolidation or other acquisition of
19 control.
20 (ii) Determine the amount of net economic benefit, savings,
21 proceeds or other moneys that will be derived from the merger,
22 consolidation or other acquisition of control.
23 (iii) Determine the amount of reserves of the health plan
24 corporation and the professional health services plan
25 corporation and the amount of the reserves of the newly merged,
26 consolidated or acquired entity.
27 (iv) Determine the amount currently dedicated for the
28 hospital plan corporation's and the professional health services
29 plan corporation's social mission, as defined in section 2501,
30 for the prior year and the current year.
31 (v) Review other amounts that will be available for the
32 corporate social mission, as defined in section 2501, following
33 any approval of the merger, consolidation or other acquisition
34 of control.
35 (5) To consider the development of timelines, and any
36 changes thereto, for conducting and completing activities under
37 this subsection.
38 The cost of the financial experts or auditors shall be paid for
39 by the hospital plan corporation or professional health services
40 plan corporation.
41 (h) The department shall present the following to the board:
42 (1) Findings and recommendations on the merger,
43 consolidation or other acquisition of control to the insurance
44 restructuring board, including an analysis of whether the
45 hospital plan corporation or professional health services plan
46 corporation has met all the requirements of sections 1402 and
47 1403.
48 (2) A written response to each recommendation submitted by
49 the board under subsection (g)(3), including a detailed written
50 explanation of the reason the recommendation will or will not be
51 adopted.
52 (3) A written determination that the merger, consolidation
53 or other acquisition of control will result in a sustained
54 reduction in health care premiums for Pennsylvania policyholders
55 and a written finding that describes the reason or reasons the
56 department believes the merger, consolidation or other
57 acquisition of control is consistent with public interest.
58 (i) The board shall have 30 days to review and respond to
59 the written responses to recommendations provided under
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1 subsection (h). The department shall not approve the merger,
2 consolidation or other acquisition of control of a hospital plan
3 corporation or professional health services plan corporation for
4 60 days after it has fully complied with subsection (h).
5 Section 1404.2. Account.--(a) There is hereby established
6 in the State Treasury a restricted receipt account for the
7 deposit of funds under this section.
8 (b) Any net economic benefits, including proceeds, savings,
9 funds or moneys derived from the merger, consolidation or other
10 acquisition of control of a hospital plan corporation or
11 professional health services plan corporation which are to be
12 used to fund any portion of a health care or health care related
13 program of, or to be administered by, the Commonwealth shall be
14 deposited into the restricted receipt account under subsection
15 (a) in the State Treasury.
16 (c) No contracts or written agreements between the
17 Commonwealth and the hospital plan corporation or professional
18 health services plan corporation may be entered into relating to
19 the disbursement or spending of the economic benefits, proceeds,
20 savings, funds or moneys resulting from the merger,
21 consolidation or other acquisition of control of a hospital plan
22 corporation or professional health services plan corporation
23 until the funds are appropriated pursuant to subsection (d).
24 (d) No moneys may be transferred or paid from the account
25 unless appropriated by the General Assembly for health-related
26 purposes.
27 Section 5.1. The act is amended by adding articles to read:
28 ARTICLE XXV
29 PREVENTABLE SERIOUS ADVERSE EVENTS
30 Section 2501. Scope of article.
31 This article relates to preventable serious adverse events.
32 Section 2502. Definitions.
33 The following words and phrases when used in this article
34 shall have the meanings given to them in this section unless the
35 context clearly indicates otherwise:
36 "Centers for Medicare and Medicaid Services" or "CMS." The
37 Centers for Medicare and Medicaid Services within the United
38 States Department of Health and Human Services.
39 "Department." The Insurance Department of the Commonwealth.
40 "Facility." A health care facility as defined in section
41 802.1 of the act of July 19, 1979 (P.L.130, No.48), known as the
42 Health Care Facilities Act, or an entity licensed as a hospital
43 under the act of June 13, 1967 (P.L.31, No.21), known as the
44 Public Welfare Code.
45 "Health care provider." A health care facility or a person,
46 including a corporation, university or other educational
47 institution licensed or approved by the Commonwealth to provide
48 health care or professional medical services as a physician, a
49 certified nurse midwife, a podiatrist, a certified registered
50 nurse practitioner, a physician assistant, a chiropractor, a
51 hospital, an ambulatory surgery center, a nursing home or a
52 birth center.
53 "Health payor." An individual or entity providing a group
54 health, sickness or accident policy, subscriber contract or
55 program issued or provided by an entity under this act or any of
56 the following:
57 (1) The act of June 2, 1915 (P.L.736, No.338), known as
58 the Workers' Compensation Act.
59 (2) The act of December 29, 1972 (P.L.1701, No.364),
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1 known as the Health Maintenance Organization Act.
2 (3) The act of May 18, 1976 (P.L.123, No.54), known as
3 the Individual Accident and Sickness Insurance Minimum
4 Standards Act.
5 (4) 40 Pa.C.S. Ch. 61 (relating to hospital plan
6 corporations).
7 (5) 40 Pa.C.S. Ch. 63 (relating to professional health
8 services plan corporations).
9 "Medical assistance." The Commonwealth's medical assistance
10 program established under the act of June 13, 1967 (P.L.31,
11 No.21), known as the Public Welfare Code.
12 "Preventable serious adverse event." A clearly defined
13 condition or negative consequence of care that results in
14 unintended injury or illness that could have been anticipated
15 and prepared for, but that occurs because of an error or other
16 system failure and results in a patient's death, loss of a body
17 part, disability or loss of bodily function lasting more than
18 seven days.
19 Section 2503. Payment policy for preventable serious adverse
20 events.
21 (a) General rule.--The following criteria shall be used by
22 health payors in determining when payment or partial payment to
23 a health care provider will be withheld:
24 (1) A preventable serious adverse event must occur.
25 (2) The preventable serious adverse event must be within
26 the control of the health care provider.
27 (3) The preventable serious adverse event must occur in
28 a health care facility.
29 (b) Language addressing payment policy.--Payments can only
30 be withheld by health payors for services related to a
31 preventable serious adverse event or care made necessary by the
32 preventable serious adverse event if the agreement or contract
33 between the health payor and health care provider contains
34 language addressing payment policy for preventable serious
35 adverse events.
36 (c) Restriction.--Health care providers shall not seek
37 payment directly from patients or the responsible party of the
38 patient for preventable serious adverse events.
39 Section 2504. Duties of Department of Public Welfare.
40 (a) Department responsibilities.--The Department of Public
41 Welfare is responsible for the following:
42 (1) Determining payment policy under medical assistance
43 with respect to reduced reimbursements to health care
44 providers for preventable serious adverse events. This
45 payment policy includes the criteria and clearly stated
46 payment policies affecting health care providers.
47 (2) Publishing the payment policy in the Pennsylvania
48 Bulletin following a 30-day public comment period.
49 (b) Ongoing reviews.--Nothing in this section shall affect
50 ongoing reviews of medical assistance services conducted by the
51 Department of Public Welfare.
52 (c) Hospital payment policy.--Nothing in this section shall
53 require the department to alter, amend or reissue any payment
54 policy for inpatient hospitals relating to preventable serious
55 adverse events that was promulgated prior to the effective date
56 of this article.
57 Section 2505. Duties of department.
58 The department shall annually notify health payors of the
59 list of preventable serious adverse events that CMS is using
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1 under the Medicare program and for which health payors shall be
2 permitted to withhold reimbursement under section 2503.
3 Section 2506. Duties of Department of Health.
4 In accordance with the act of July 19, 1979 (P.L.130, No.48),
5 known as the Health Care Facilities Act, the Department of
6 Health shall be responsible for investigating patient complaints
7 regarding a health care facility that is seeking payment
8 directly from the patient for a preventable serious adverse
9 event.
10 Section 2507. Duties of Department of State.
11 The Department of State shall be responsible for
12 investigating patient complaints regarding a health care
13 provider that is not a health care facility that is seeking
14 payment directly from the patient for a preventable serious
15 adverse event.
16 ARTICLE XXVI
17 HEALTH CARE REPORTING
18 Section 2601. Definitions.
19 The following words and phrases when used in this article
20 shall have the meanings given to them in this section unless the
21 context clearly indicates otherwise:
22 "Social mission." Services, projects and community
23 activities, including activities to improve health care or make
24 health care more affordable and accessible in the service area,
25 and all other charitable and benevolent activities of a hospital
26 plan corporation or health services plan corporation.
27 Section 2602. Hospital plan corporation.
28 Each hospital plan corporation subject to 40 Pa.C.S. Ch. 61
29 (relating to hospital plan corporations) shall annually provide
30 to the department, the chairman and minority chairman of the
31 Banking and Insurance Committee of the Senate and the chairman
32 and minority chairman of the Insurance Committee of the House of
33 Representatives a list, including a description and cost, of all
34 advertising contracts and all contracts entered into and
35 expenditures made during that calendar year relating to the
36 social mission of the health plan corporation. The information
37 shall be provided by December 1 of each year. The hospital plan
38 corporation shall also provide a list and description of all
39 contracts and expenditures relating to the health plan
40 corporation's social mission planned for the upcoming calendar
41 year.
42 Section 2603. Professional health services plan corporation.
43 Each professional health services plan corporation subject to
44 40 Pa.C.S. Ch. 63 (relating to professional health service plan
45 corporations) shall annually provide to the department, the
46 chairman and minority chairman of the Banking and Insurance
47 Committee of the Senate and the chairman and minority chairman
48 of the Insurance Committee of the House of Representatives a
49 list, including a description and cost, of all advertising
50 contracts and all contracts entered into and expenditures made
51 during the calendar year relating to the social mission of the
52 professional health services plan corporation. The information
53 shall be provided by December 1 of each year. The professional
54 health services plan corporation shall also provide a list and
55 description of all contracts and expenditures relating to the
56 health services plan corporation's social mission planned for
57 the upcoming calendar year.
58 Section 2604. Retroactivity.
59 The provisions of sections 2602 and 2603 shall be retroactive
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1 to January 1, 2005. Reports for the years 2005 and 2006 shall be
2 submitted within 90 days of the effective date of this section.
3 Section 6. The act of December 19, 1990 (P.L.834, No.198),
4 known as the GAA Amendments Act of 1990, is repealed insofar as
5 it is inconsistent with this act.
6 Section 7. This act shall not apply to any merger,
7 consolidation or other acquisition of control completed or
8 consummated prior to the effective date of this section and, if
9 required, following the issuance of an approving determination.
10 Section 8. This act shall apply to any application,
11 statement or other plan or proposal relating to a merger,
12 consolidation or other acquisition of control filed with the
13 Insurance Department on or after January 1, 2007.
14 Section 9. This act shall take effect as follows:
15 (1) The addition of Article XXV of the act shall take
16 effect in 180 days.
17 (2) The remainder of this act shall take effect
18 immediately.
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