LEG REG REVIEW is a periodic newsletter produced by PHILLIPS ASSOCIATES, a professional lobbying and consultant firm located near the State Capitol. It contains news on the legislative and regulatory scene in Pennsylvania that may be of interest to the Insurance and Business Communities. It is a free member benefit for those who are members of the Pennsylvania Association of Health Underwriters (PAHU). Subscription information may be obtained by contacting PHILLIPS ASSOCIATES at 717/728-1217 FAX 717/232-7005 or e-mail to email@example.com. Please email firstname.lastname@example.org supplying both your name and e-mail address if you wish to be removed from or added to this list.
GOVERNOR WOLF PROPOSES BUDGET
Governor Tom Wolf presented his FY 2015-16 State Budget proposal to a joint session of the House and Senate March 3. Following are some general highlights reported by the media, followed by Budget details of particular interest to the insurance industry.
General Highlights: General Fund revenues from various taxes (corporation, personal income, sales, etc.) are budgeted at $30 billion compared to $28.889 million in the current FY 2014-15. Property taxes at the local level would be reduced as would Corporate Net Income Taxes and a continued reduction in the Capital Stock & Franchise Tax. These would be offset by increasing the PA Sales Tax and Personal Income Tax as well as requiring a wide range of services to pay the Sales Tax. Spending would increase by several billion dollars.
BUDGET ALERT: Numbers of professional services will be taxed if the Budget is adopted. The Governor’s Budget Director stated that these services would be modeled on the list contained within House Bill 76 and Senate Bill 76 from the last session of the General Assembly. Link to House Bill 76: https://www.legis.state.pa.us/cfdocs/billInfo/billInfo.cfm?sYear=2013&sInd=0&body=h&type=b&bn=76
The concern that this proposal will mean imposing a sales tax on fee-based services provided by insurance producers is a major policy issue for the PA Association of Health Underwriters and will be a major focus of their April 21 Day on the Hill in Harrisburg.
- PA Insurance Department saw an increase in its operating budget from $22.842 million in FY 2014-15 (current fiscal year) to $24.269 million. Per Act 46 of 2013, the Department’s operating budget was moved from the General Fund to a specific fund, the Insurance Regulation & Oversight Fund. This Fund has monies generated from 50% of fees and fines collected by the Insurance Department — including producer licensing fees.
- Number of Insurance Department job slots authorized by the Budget drops by one to 272 employees.
- The Insurance Fraud Prevention Trust Fund would allocate $14.1 million for operations of the Insurance Fraud Prevention Authority. Monies for this come from insurance carrier assessments for this purpose.
- The Insurance Liquidation Fund is the Department’s reserve fund to handle liquidations of insolvent Pennsylvania insurance carriers. For FY 2015-16, it is expected to have a balance of $69.1 million, down slightly from the current fiscal year’s $70.264 million. In the current fiscal year, $2.6 million is budgeted for disbursements but nothing has been spent so far. For FY 2015-16, the amount budgeted for disbursement is $200,000.
- The Insurance Department administers:
– CHIP is budgeted for $382 million. $331 million of that comes from the Federal Government.
– MCARE expects to have $335.977 million in FY 2015-16.
– Underground Storage Tank Indemnification Fund (USTIF): The proposed Budget resumes repayment of a $100 million loan taken from this fund in 2002. $32.5 million has been repaid and another $7 million repayment is expected for FY 2015-16.
– Auto CAT Fund expects to pay out $5.5 million in FY 2015-16
Workers’ Compensation Funds
- Department of Labor & Industry General Government Operations is $12.572 million in FY 2015-16, a figure consistent with this fiscal year.
- The Workers’ Compensation Administration Fund is increased slightly from $71.066 million this year to $71.913 million for FY 2015-16.
- Worker’s Compensation Security Fund pays WC claims for those who are insured by an insolvent stock company. Insurers contribute to this fund if the balance drops below $500 million. No worries, total funds for FY 2015-16 are expected to be $781.726 million.
- Uninsured Employers Guaranty Fund pays WC benefits to workers whose employers failed to provide WC coverage. To keep it solvent, $5 million will be transferred into it from the Workmens’ Compensation Administration Fund in FY 2015-16
- State Workers Insurance Fund (SWIF) remains PA’s largest insurer of Workers’ Compensation. It expects to take in $305.3 million (of which $240 million is premium) and anticipates paying $331.475 million in claims and $4.8 million in premium taxes. Cash balance at the end of FY 2015-16 is projected to be $1.428 billion.
- The PA Department of Agriculture receives $2 million to help educate farmers about the importance of Crop Insurance.
- The eHealth Partnership Authority (medical data base which is intended to reduce duplicative medical treatment) will see its total from all funds reduced from $13.279 million this fiscal year to $7.7 for FY 2015-16.
- PA Health Care Cost Containment Council (PHC4) will have $2.71 million for FY 2015-16, constant with this fiscal year.
- The Tobacco Fund (part of the Master Settlement with cigarette companies in 2001) continues to shrink from $832.447 million total funds available in FY 2014-15 to $494.782 in FY 2015-16. Uncompensated care payments drops from $38.4 million to $25.9 million while Medicaid long-term care monies from this fund decline to $106.609 million for FY 2015-16 from $238.929 million this fiscal year.
BUDGET HEARINGS THIS WEEK
Aging 3/9 House Appropriations Committee
Agriculture 3/10 House Appropriations Committee
DCED 3/10 House Appropriations Committee
DEP 3/10 House Appropriations Committee
Schedule details for the PCN broadcast of Appropriations Committee hearings are found at https://pcntv.com/schedule/?d=2 . Details of the Governor’s proposed Budget are available at https://www.budget.state.pa.us/portal/server.pt/community/office_of_the_budget____home/4408
MARKET NOTES…The February 23, 2015 Insurance Journal has an article by IA&B president and CEO of IA&B Rick Russell where he called for increasing the minimum levels of PA auto insurance coverage… …HealthCare.gov is distributing its March 2015 Experience Survey. Sample questions: The tax breaks available on HealthCare.gov make the plans more affordable (Agree/Disagree); It’s important to have health insurance because it’s required under the law (Agree/Disagree); Many important preventive care services are available with no extra payment when you’re insured (Agree/Disagree) ; The HealthCare.gov website works better now than it did when it first opened (Agree/Disagree).