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 xenobun@aol.com. Please email jtrout2792@aol.com supplying both your name and e-mail address if you wish to be removed from or added to this list.
WOLF CALLS FOR 33-PLUS BILLION BUDGET
On February 9, Governor Tom Wolf presented his proposal to the General Assembly for the State Budget in the fiscal year beginning July 1, 2016. This may be another conflict-ridden budget cycle, building on the fact that part of the current fiscal year budget has not been finalized pending legislative actions relative to the Governor’s line-item veto in December of numbers of budget items.
In his address, the Governor admonished the General Assembly for the FY 2015-16 State Budget, saying “The budget they sent me relied on the same gimmicks and quick fixes that had gotten us in trouble in the first place…(If) you took a budget like this to your banker, you would be laughed out of the room…So do not send me another budget full of gimmicks that are too cute by half. Do not send me another budget where the numbers don’t add up. I will not be amused. I will not be fooled. I will not be convinced that dime-store magic tricks are a substitute for a real, responsible budget.” Republicans were quick to counter that the Governor’s budget request was another tax and spend budget. House Majority Leader Dave Reed (R-Indiana) called it a ‘Neverland’ budget. Now, House and Senate Appropriations Committee convene hearings which extend through early March.
Resources: Governor’s Budget and committee hearing schedules
https://www.budget.pa.gov/Pages/default.aspx#.VsHFVE9qPxo
https://www.legis.state.pa.us/cfdocs/legis/cms/index.cfm?chamber=S (Senate)
https://www.legis.state.pa.us//cfdocs/legis/cms/index.cfm?chamber=H (House)
This year, the Governor is proposing $33.3 billion in spending with $842.6 new money going to education and $989.99 million new money going to human services (formerly known as Department of Public Welfare). These increases would be funded by increasing the Personal Income Tax from the current 3.07% to 3.4% (retroactive to January 1, 2016) and increasing the reach of the Sales Tax to new transactions (basic cable, motion picture/video, digital downloads) – NOTE: Last year, the Governor asked for imposition of the Sales Tax on numerous additional services including many fee-based services provided by insurance agencies. Those do not appear this year. Other taxation areas for FY 2016-17 include increased cigarette taxes, smokeless tobacco tax, tax on personal Lottery winnings, natural gas severance tax.
INSURANCE PREMIUM TAX
The proposed budget would increase the insurance premium tax on property, fire and casualty premiums by point-five percent to 2.5%. It is projected to raise an additional $100.9 million with $10 million going to a dedicated fund to support Volunteer Fire Companies. Insurance companies are concerned that this tax will add to the cost of insurance premiums and that PA insurers will be forced to pay the increased tax in other states because of reciprocity – ‘If you tax us, we will tax you accordingly.’
FLOOD INSURANCE HIGHLIGHTED
Commissioner Teresa Miller has been active in the area of Flood Insurance. First, she testified before a subcommittee of the House Financial Services Committee in January in her new capacity as Chair of NAIC’s Property/Casualty Committee. In Pennsylvania, she has followed up by stressing to consumers that there is a viable private Flood Insurance option separate from the National Flood Insurance Program (NFIP) which is also known as ‘Write Your Own’ program. This is a Surplus Lines product, meaning that first, it is on the Export List (usual declinations not needed) and second, a retail insurance producer must utilize a surplus lines licensee to place the product. Those licensed in the surplus lines active in this market who wish to be added to the Department’s list should contact ra-in-producer@pa.gov. The Commissioner referenced the dramatic spike in NFIP premiums due to the Biggert-Waters Act which placed property owners in flood-prone zones and tried to make NFIP actuarially sound. She is advocating a look at the private sector Flood Insurance option. She also announced that the Insurance Department created a one-stop shop webpage listing flood coverage available to PA homeowners and renters. (www.insurance.pa.gov, then click on ‘Flood’ under Top Pages.) The example she cited was a person in Hershey, PA who paid $2,700 per year under the NFIP but was able to find private coverage for $718.00.
Separately, Governor Wolf signed Senate Bill 494 (Ward-R-Westmoreland) into law as Act 3 of 2016. It eliminates a hard copy report on Flood Insurance going to the General assembly each year.
REGULATORY UPDATE
- The PA Insurance Department issued a Special Schedule “W” Data Call for Workers’ Compensation carriers due to the Department by April 15, 2016. Details: www.insurance.pa.gov (Select ‘Companies, then ‘Industry Activity’, then ‘Data Call’.
- Published February 6, 2016 in the PA Bulletin was the list of eligible Surplus Lines Insurers. www.pabulletin.com
- The Title Insurance Rating Bureau seeks a 12.5% rate increase for Title Insurance effective April 1.
- The Independent Regulatory Review Commission (IRRC) approved Insurance Department regulation #11-253 Requirements for Qualified and Certified Reinsurers.
EXPORT LIST OPEN FOR SUGGESTIONS
The PA Insurance Department issued its annual call for recommendations as to types of coverage not available in the standard (admitted) insurance market that would not need three declinations before a producer could access a Surplus Lines product. In the past, such coverage as monoline liquor liability and private (non NFIP) Flood Insurance have been added to the list. Recommendations should go to Cressinda Bybee, Office of Corporate & Financial Regulation, Insurance Department, 1345 Strawberry Square, Harrisburg, PA 17120 or FAX 717-787-8557 or email to cbybee@pa.gov.
MEETINGS
- The 15th Annual Workers’ Compensation Conference will be held May 16-17 in Hershey sponsored by the PA Department of Labor & Industry. The Keynote Address will feature Senators Mike Folmer (R-Lebanon) and Daylin Leach (D-Delaware/Montgomery, sponsors of Senate Bill 3 to legalize medical marijuana. Details: 800/482-2383
- Reading I-Day is set for April 19, 2016 in Wyomissing. Details: Rick Angstadt 610-582-0531 or ReadingIDay@yahoo.com
- On March 1, the Insurance Department and PSI are presenting a webinar on Pennsylvania’s pre-licensing program. Among other things, it will show the pass/fail ratios on the various licensing tests and review exam outline changes. Details: Jason McCartney at jmccartney@psionline.com or 800-367-1565 x7318
- The National Association of Health Underwriters (NAHU) convenes its 2016 Capitol Conference in Washington, Dc February 21-24. Details: www.nahu.org