LEG REG REVIEW
2018, 19th Issue *** June 4, 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.

WELCOME TO BUDGET MONTH
June is Budget Month in Harrisburg where the hopeful believe that a balanced State Budget can be crafted and signed into law by month’s end. Despite hopeful comments from legislative leaders, there are still a number of pitfalls before reaching that goal:

JUA Lawsuit -- $200 million shortfall: In the State Budget for the current fiscal year, the General Assembly took $200 million out of the reserves of the Joint Underwriting Association (JUA), the insurer of last resort for medical malpractice insurance. JUA sued, saying that the money in its reserves came from policyholders and that even though the General Assembly created the JUA, it had no authority to seize an insurance company’s reserves. So far, a Federal District Court Justice has agreed with JUA. What does that mean? It means there is a $200 million shortfall in this year’s budget that will have to be made up even as lawmakers ponder the numbers for FY 2018-19.
One-time devices were used to balance the current budget. These include a $250 advance on future payments coming to Pennsylvania from the Tobacco Settlement, a $200 million equity loan taken out by the Wolf Administration on the Farm Show Complex, and a $300 million authority given to the Governor to pull monies out of dedicated funds at his discretion with no requirement to repay. What does that mean? It means that there are fewer one-time budget options. One option is borrowing from the reserves of the Underground Storage Tank Indemnification Fund (USTIF) which pays claims for oil and gasoline tank leakage or ruptures but PA has not paid the Fund back for ‘loans’ it took out years ago.
Increase taxes: In an election year? Really?
Cut spending on social services and don’t increase education in an election year? Really?
Tax Marcellus Shale natural gas extraction: This is a long-term goal of Governor Wolf’s but it has thus far met with no success with the General Assembly. For those wanting an extraction tax, there is some encouragement from several House Republicans led by Rep. Gene DiGirolamo (R-Bucks) who have broken with their party’s leadership to advocate such a tax in House Bill 1401.

Underlying these issues is whether revenue will meet levels required to balance the State Budget. On May 1, 2018, the Independent Fiscal Office projected a $244 million shortfall by June 30, the end of this fiscal year. The Revenue Department reported on June 1 that May revenues of $2.5 billion were $42.6 million off predictions but that for the first eleven months of the fiscal year, revenues were $121.5 million , or 0.4 percent above estimate.

REP. CORR WILL NOT RUN FOR RE-ELECTION
On May 31, Rep. Michael Corr (R-Montgomery) announced that he is not seeking re-election due to the need to devote more time to his family. He explained that balancing family and General Assembly is always a challenge but after the news of a fourth child on the way, he felt that the district would be better served with someone who can devote the time to do the job more effectively. In his announcement, Rep. Corr also pledged to continue working diligently through the remainder of his term. He was unopposed in the May Republican primary. What makes this announcement particularly relevant to the Insurance Industry is that he is one of the few legislators with an insurance producer’s license, bringing that expertise to bear on policy decisions affecting insurance.

POLITICS: SCOTT WAGNER RESIGNS
PA Senator Scott Wagner (R-York) resigned his position in the PA Senate effective immediately in order to focus on his campaign for Governor. Recently, he came under fire for missing a number of Senate votes on child protection issues and his resignation may have been prompted to prevent a recurrence. That leaves York County without an elected Senator for now, although Governor Wolf could call a special election. Wagner was completing his first term as senator. The resignation was met with mixed reviews with supporters applauding his decision and Wolf supporters chiding him for not completing his elected term of office.

An immediate consequence is that Senate leadership will have to fill Wagner’s seat as Majority Chair of the Senate Local Government Committee. It is uncertain if other Senators will fill his other Committee slots (Appropriations, Intergovernmental Operations, Labor & Industry, and Transportation).

ON THE CALENDAR
With the General Assembly back in Harrisburg, following are a number of agenda items to watch:
In the Senate, the following bills with insurance impact are on second consideration. This means that they must be considered one more time before a final vote is taken.

House Bill 152 (Quinn-R-Bucks) which provides more guidance on whether an annuity is suitable for a particular client. NOTE: Annuity suitability is also on the House Insurance Committee agenda this week. House Bill 2434 is sponsored by Rep. Tony DeLuca (D-Allegheny), the Minority Chair of the House Insurance Committee.
Senate Bill 780 (Vogel-R-Beaver) authorizes telemedicine and requires insurer coverage
House Bill 544 (Moul-R-Franklin) to limit liability of property owners allowing recreational use of their property without charging a fee
Senate Bill 963 (Ward-R-Westmoreland) reverses the Protz Supreme Court decision which invalidated part of PA’s Workers Compensation Act regarding Impairment Rating Evaluations (IRE)
Senate Bill 819 (Aument-R-Lancaster) provides limited immunity from legal action in an agri-tourism environment. Its companion, SB 820, may be considered by the Senate Judiciary Committee in early June.

In the House, there are four insurance bills on second consideration:

House Bill 1286 (Mentzer-R-Lancaster) to require a study of punitive damage awards in MCARE (medical malpractice liability)
House Bill 1576 (Pickett-R-Bradford) providing for limited line for travel insurance sale by unlicensed retail clerks at travel agencies. NOTE: This was superseded by enactment of Senate Bill 630 (Reschenthaler-R-Allegheny/Washington) as Act 26 of 2018 on May 31, 2018 but it still appears on the agenda.
House Bill 1933 (Topper-R-Franklin/Fulton/Bedford) to prohibit CHIP coverage for transgender services
House Bill 1142 (Briggs-D-Phila.) removing an obstacle for small municipalities with small pension plans wishing to change their financial/pension advisor.

NAHU ADDRESSES EMPLOYER MANDATE PENALTY PROCESS
In a May 30 letter to officials in the Trump Administration, the National Association of Health Underwriters (NAHU) joined 21 other groups to protest the assessing of tax penalties under the Affordable Care Act’s employer mandate. It said that the issuance of so-called “226 J” letters was based on flawed or incomplete information and cited April 17 House Oversight & Government Reform Committee IRS testimony as documentation. The letter also said that the IRS was not in compliance with employer appeal requirements in the ACA. Letter signers ranged from NFIB to Associated General Contractors to the National Restaurant Association. NAHU was the only insurance group on the letter.