LEG REG REVIEW
2018, 5th Issue *** February 5, 2018

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 Pennsylvania legislation and regulations impacting the Insurance and Business Communities. Subscriptions are $100 per year and further information may be obtained by contacting PHILLIPS ASSOCIATES at 717/728-1217 FAX 717/232-7005 or e-mail at 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. Whether you need help meeting your CE or have a particular problem/question, please go to our web site to explore how PHILLIPS ASSOCIATES may be of service to you, your employees, and your clients. www.vphillipsassoc.com

WELCOME TO BUDGET WEEK
On February 6, Governor Tom Wolf will present his proposal for the FY 2018-19 State Budget to the General Assembly. Although there is expected to be a deficit as in recent years, the Governor is not expected to ask for an increase in the rate of the Personal Income Tax (PIT), now at 3.07%, and the Sales & Use Tax, now at 6%. There is speculation that he will once again propose a severance tax of Marcellus Shale natural gas. Spending increases being sought are not known but generally, there is an expectation of an increase for education funding and opioid treatment. Republicans are expected to again push for monies to be taken from dedicated funds instead of a general tax increase.

Since it is also an election year, it is noteworthy that potential Republican opponent Senator Scott Wagner (R-York) has already staked out a position that property taxes should be eliminated and that lost revenues would be made up by increased rates for PIT and Sales Tax and expansion of the Sales Tax to areas not currently taxed. He is a sponsor of Senate Bill 76 (Argall-R-Schuylkill).

BUDGET NUMBERS
As always, it depends on whom you ask as to what budget numbers show. The official figures are put out by the Revenue Department and a second set of numbers is prepared and released by the PA Independent Fiscal Office (IFO), an agency similar to the U.S. Government’s Congressional Budget Office (CBO). Following are comparison numbers of the current fiscal year through January 2018.

Revenue Source         January          Expectations v. Estimate      Year to Date             Expectations
Sales and Use Tax     $920.4 million       $45.4 million below        $6.1 billion      0.5% above
Corporate Income     $139.9 million       $31.7 million above        $1.4 billion          1.6% below
PIT                              $1.5 billion            $52.8 million above        $7.3 billion          1.9% above estimate
Inheritance                 $80.9 million         $5.3 million below          $558.1 million     1.7% below
Realty Transfer         $42.2 million         $2.4 million above          $306.7 million     0.4% above
Other                          $111.9 million       $10.4 million below        $1.1 billion          0.6% below
(Cigarette, beer & liquor, gambling)

General Fund Totals $3.1 billion            $93.8 million above         $17.4 billion       $89.7 million or 0.5%                                                                                             above
In contrast, the Independent Fiscal Office has different numbers. Year-To-Date General Fund numbers were $462 million above estimate. Why is this important? This contrast is exceedingly importance given what happened this fiscal year where a spending budget was passed while a budget showing revenue came later. Republicans have long insisted on curbing spending while generally, Democrats have been more interested in raising more revenue to meet state needs.   Some variables to note: Money from Governor Wolf’s up to $200 million equity loan on the Farm Show has not been finalized and $200 million that was supposed to come from the Joint Underwriting Association (JUA) reserves is held up in court.

SENATE BANKING & INSURANCE COMMITTEE MOVES BILLS
On January 30, the Senate Banking & Insurance Committee amended and reported out two bills.
Senate Bill 1031 (Laughlin-R-Erie) would require a written estimate of insurance company examination costs being given to the carrier along with an estimated timetable for exam completion. In addition, there would have to be a meeting held before the formal examination starts to explain to the carrier the scope of what is to be examined and discuss alternatives to reduce the cost and time the exam takes. This addresses a standing issue by both property/casualty companies (particularly Mutual Insurance Companies) and health insurers. The second bill was Senate Bill 780 (Vogel-R-Beaver) regulating telemedicine, important to underserved rural areas, and requiring insurer coverage of telemedicine treatment.

REGULATORY UPDATES

The Insurance Department rescinded the January 20 Notice 2018-1 regarding proper notice for policy cancellation. Following is a link to Notice 2018-1 for your reference: https://www.pabulletin.com/secure/data/vol48/48-3/121.html
CVS has filed an application to formally acquire Aetna (PA insurance subsidiaries: Aetna Better Health, Inc.; Aetna Health, Inc.; Aetna Health Insurance Company; Aetna HealthAssurance Pennsylvania, Inc; and HealthAssurance Pennsylvania, Inc. Those wishing to comment have 30 days from February 3 to do so. (Cressinda Bybee, Company Licensing Division, PA Insurance Department, 1345 Strawberry Square, Harrisburg, PA 17120, FAX 717-787-8557 or cbybee@pa.gov.

HOUSE INSURANCE COMMITTEE SET TO MOVE
This week the House Insurance Committee is slated to take up three bills. First are Senate Bills 877 and 878 sponsored by Senator Don White (R-Indiana). The two would allow for rebates and inducements when marketing insurance policies. Up to this point, Act 205 (Unfair Insurance Practices Act) and other laws specifically outlawed rebates and inducements except where the item was ‘de minimus’, dependent on the Insurance Department’s judgment as to whether the item was truly of minor value. This legislation sets the cap at $100 of value. They apply both to insurance producers and companies.

The second bill is House Bill 1851 sponsored by House Insurance Committee Chair Rep. Tina Pickett (R-Bradford). It answers long-standing objections by insurance companies and especially by the PA Association of Mutual Insurance Companies (PAMIC). Somewhat similar to Senate Bill 1031 referenced above, HB 1851 goes into more detail about Insurance Department and its subcontractor insurance company examiners’ responsibilities regarding transparency and estimated costs of an examination. It says that the Department must tell the insurer of an increase in the cost or changes in examiner staffing. In addition, it specifies that an invoice must contain detailed descriptions of charges on a quarter-hour basis.

THE LIST, CONTINUED
Additional legislators have announced plans to retire at the end of this term: Rep. Kevin Haggerty (D-Lackawanna); Rep. Stephen Bloom (R-Cumberland) who is running for the U.S. Congress seat being vacated by U.S. Rep. Lou Barletta; Rep. Flo Fabrizio (D-Erie), Minority Chair of the House Health Committee; Rep. Jim Christiana (R-Beaver/Washington); Rep. Mark Mustio (R-Allegheny), Majority Chair of the House Professional Licensure Committee; Rep. Harry Lewis, Jr. (R-Chester); Rep. John McGinnis (R-Blair); Rep. Judy Ward (R-Blair); Rep. Adam Harris (R-Franklin/Juniata/Mifflin), Majority Chair, House Liquor Control Committee; and Rep. Ryan Mackenzie (R-Lehigh/Berks) who is running for the congressional seat held by retiring U.S. Rep. Charlie Dent.

In addition, there is one more congressional retirement. Long-time Democrat Bob Brady (Phila.) has chosen not to run again.