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2 COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES 3 APPROPRIATIONS COMMITTEE
4 MAIN CAPITOL 5 ROOM 140 HARRISBURG, PENNSYLVANIA 6
7 BUDGET HEARING DEPARTMENT OF INSURANCE 8
9 MONDAY, MARCH 7, 2016 10 2: 47 P. M.
11 BEFORE: 12 HONORABLE WILLIAM F. ADOLPH, JR., 13 Majority Chairman HONORABLE KAREN BOBACK 14 HONORABLE JIM CHRISTIANA HONORABLE GARY DAY 15 HONORABLE GEORGE DUNBAR HONORABLE GARTH EVERETT 16 HONORABLE KEITH GREINER HONORABLE SETH GROVE 17 HONORABLE SUE HELM HONORABLE WARREN KAMPF 18 HONORABLE FRED KELLER HONORABLE TOM KILLION 19 HONORABLE JIM MARSHALL HONORABLE KURT MASSER 20 HONORABLE DAVID MILLARD HONORABLE DUANE MILNE 21 HONORABLE MARK MUSTIO HONORABLE MIKE PEIFER 22 HONORABLE JEFFREY PYLE HONORABLE CURT SONNEY 23 HONORABLE MIKE VEREB HONORABLE JOSEPH MARKOSEK, Minority Chairman 24 HONORABLE LESLIE ACOSTA HONORABLE MATTHEW BRADFORD 25 2
1 BEFORE cont'd! 2 HONORABLE TIM BRIGGS 3 HONORABLE DONNA BULLOCK HONORABLE MARY JO DALEY 4 HONORABLE MADELEINE DEAN HONORABLE STEPHEN KINSEY 5 HONORABLE MICHAEL O'BRIEN HONORABLE MARK ROZZI 6 HONORABLE KEVIN SCHREIBER HONORABLE PETER SCHWEYER 7 ALSO PRESENT 8 HONORABLE CRIS DUSH 9 HONORABLE MATT GABLER HONORABLE ROBERT GODSHALL 10 HONORABLE ADAM HARRIS HONORABLE KRISTIN PHILLIPS HILL 11 HONORABLE DARYL METCALFE HONORABLE SCOTT PETRI 12 HONORABLE TINA PICKETT HONORABLE RICK SACCONE 13 HONORABLE STAN SAYLOR HONORABLE DOM COSTA 14 HONORABLE JARET GIBBONS HONORABLE MARK LONGIETTI 15 HONORABLE EDDIE PASHINSKI
16 DAVID DONLEY, MAJORITY EXECUTIVE DIRECTOR 17 RITCHIE LAFAVER, MAJORITY DEPUTY EXECUTIVE DIRECTOR CURT SCHRODER, MAJORITY CHIEF COUNSEL 18 MIRIAM FOX, MINORITY EXECUTIVE DIRECTOR TARA TREES, MINORITY CHIEF COUNSEL 19
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23 BRENDA J. PARDUN, RPR 24 P. O. BOX 278 MAYTOWN, PA 17550 25 717-426-1596 3
1 INDEX
2 NAME PAGE
3 TERESA MILLER 4 COMMISSIONER 4 DEPARTMENT OF INSURANCE
5 SETH MENDELSOHN 40 EXECUTIVE DEPUTY INSURANCE COMMISSIONER 6 DEPARTMENT OF INSURANCE
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1 P R O C E E D I N G S
2 MAJORITY CHAIRMAN ADOLPH: Thank you.
3 And good afternoon, everyone.
4 I’d like to reconvene the House
5 Appropriations Committee for the budget hearing for
6 the fiscal year '16-'17. With us today is the
7 Department of Insurance. To my right is the
8 vice -- Democrat vice chair of the Appropriations
9 Committee, Representative O ’Brien. And I am Bill
10 Adolph, the Republican chair.
11 Commissioner, the mic is yours.
12 COMMISSIONER MILLER: Thank you,
13 Chairman Adolph and Vice Chair O ’Brien and members
14 of the committee. Thank you for the opportunity to
15 be here today.
16 Before I begin I just want to briefly
17 introduce the people with me. To my left is
18 Jessica Altman, who is the department’s chief of
19 staff, and to my right is Seth Mendelsohn, who’s
20 the department’s executive deputy commissioner.
21 So, thank you again for the opportunity
22 to be here. We’ve been looking forward to talking
23 to you. We had a busy year since we talked to you
24 last, and we’re anxious to come share with you some
25 of the initiatives that we’ve been working on to 5
1 provide your constituents and the consumers of the
2 commonwealth the protection that they need and
3 deserve when they're purchasing and making
4 insurance-related decision.
5 Maintaining a vibrant marketplace is
6 one of the keys to consumer protection, because it
7 means that consumers have a choice of products at
8 competitive prices. Transparency in the way that
9 we do business and providing a level playing field
10 are, I believe, two important means to attract and
11 keep insurers in Pennsylvania.
12 To keep our stakeholders updated and
13 bring more transparency to department ' ' '
14 we began pushing a monthly newsletter last year,
15 describing the of the department over
16 that month.
17 I also think it's important to be open
18 and public about department positions on critical
19 issues. For example, the department has had a
20 long-standing position on an issue called price
21 optimization, where certain consumers who present
22 the same risk as other consumers are charged a
23 higher rate, perhaps based on whether the
24 consumer’s likely to shop for other coverage.
25 We knew that there were a few 6
1 companies, but very few, who were seriously
2 considering including these pricing practices in
3 their rating models, while the vast majority of our
4 companies were not. By issuing a statement and
5 making it clear to all companies that this practice
6 is not allowed in Pennsylvania, we ensured an even
7 playing field for all of our companies and
8 protected consumers from this unfairly
9 discriminatory practice.
10 We’re fortunate in Pennsylvania that we
11 have a competitive market in a number of lines of
12 insurance, including health insurance. Every
13 Pennsylvanian seeking to buy individual health
14 coverage on the exchange had at least four plans
15 from which to choose during open enrollment, and
16 many Pennsylvanians had more choices than that.
17 This strong market is one of the reasons I was able
18 to reduce proposed health insurance rates by nearly
19 81 million dollars.
20 Governor Wolf has made consumer
21 protection the top priority for the Insurance
22 department. And with the governor, we’ve taken
23 several strong stands for consumers this past year.
24 We successfully went to court to protect more than
25 180,000 seniors and allow them to keep their 7
1 doctors and hospitals by preventing UPMC from
2 violating the consent decree.
3 My department also held a public
4 hearing to gather input from stakeholders before
5 approving Highmark’s request to transfer 175
6 million dollars to the Allegheny Health Network.
7 Other important consumer protection
8 actions over the last year include Governor Wolf’s
9 announcement in October that all mammograms,
10 including newer 3D technology mammograms are
11 included in Pennsylvania’s law that covers these
12 often life-savings tests for women at no cost.
13 I announced that my department will not
14 approve any auto rate filings that contain a
15 so-called widow’s penalty, where an insurer charges
16 a widow or widower a higher rate solely due to the
17 loss of a spouse, unless that insurer can provide
18 statistical evidence for this rate.
19 We announced a proposal to protect
20 consumers from surprise balance bills when
21 consumers make good faith efforts to use in-network
22 provides and facilities and end up, somewhere in
23 their course of treatment, receiving services from
24 an out-of-network provider and then get a bill from
25 that provider that they weren’t expecting. 8
1 We held a hearing on this issue last
2 fall and received good input from stakeholders. We
3 recently invited comments on a legislative proposed
4 solution, and are now reviewing that feedback,
5 mindful that the ultimate goal is to protect
6 consumers from these unwanted, unexpected bills.
7 And we look forward to working with you over the
8 coming months to address this issue.
9 The department has also ramped up our
10 outreach efforts. We hired a consumer liaison to
11 enhance our interaction with consumers and consumer
12 advocacy organizations and increased the awareness
13 of the department by getting out into the community
14 more.
15 I participated in various open
16 enrollment events to encourage consumers to
17 purchase health insurance, and we also partnered
18 with the AAA, and with that partnership, I visited
19 several mature driver classes around the state to
20 highlight the importance of these classes in both
21 making our roads safer and saving seniors money on
22 their auto insurance.
23 Recently we announced a web page
24 listing private flood insurance available in
25 Pennsylvania. With the cost of coverage under the 9
1 federal program continuing to go up, we're finding
2 that private coverage is available and much less
3 costly as an alternative for a number of homeowners
4 and wanted to make it easier for Pennsylvanians to
5 shop for this alternative coverage.
6 We continue to provide a place for
7 consumers to bring questions and complaints related
8 to insurance. Our consumer services bureau, in
9 2015, fielded more than 12,000 written complaints
10 and nearly 47,000 phone calls.
11 We also recovered more than 185 million
12 dollars in restitution from more than 12,000
13 Pennsylvanians last year.
14 And finally, I want to thank all of you
15 for working with us to transfer and transition
16 Pennsylvania's CHIP program from the Insurance
17 department to the Department of Human Services. As
18 you know, this program provides excellent coverage
19 to Pennsylvania's children, more than 150,000 of
20 them, but it's now where it belongs, in a service
21 agency as opposed to a regulatory one.
22 Recent changes to federal Medicaid
23 regulations more closely align CHIP with Medicaid,
24 so having both programs run by the same agency will
25 mean better service to CHIP families. And IT 10
1 system upgrades required by the federal government
2 can now be done more efficiently, saving
3 Pennsylvanians tax dollars.
4 Again I appreciate the opportunity to
5 be here today and look forward to your questions
6 and to working with you in the coming years.
7 MAJORITY CHAIRMAN ADOLPH: Thank you,
8 C ommissioner.
9 I have a question which I’ll wait until
10 later on regarding balance billing. But it’s
11 customary that Chairman Markosek and I invite the
12 standing chair of the House committee, and with us
13 this afternoon is the Republican chair of the House
14 Insurance Committee, Representative Tina Picket.
15 REPRESENTATIVE PICKETT: Thank you,
16 Mr. Chairman.
17 And welcome, Commissioner. It’s so
18 nice to see you again and your staff. I appreciate
19 the chance to be here with you today.
20 And I just wanted to talk a little bit
21 about that competitive market that you mentioned
22 that we strive for in Pennsylvania and know that’s
23 important to our consumers. I always say the
24 insurance bill’s a big one for everybody concerned,
25 whether it’s an individual or a business. 11
1 So, in talking a little bit about the
2 governor’s budget proposal for 2016-’17, he has
3 proposed an insurance premium tax by one-half
4 percent, applying it retroactively and going
5 forward. And in the coming fiscal year, he wants
6 to increase this revenue stream by 100 million
7 dollars. This would be increased by taxes for
8 property, casualty, and fire. We have no specific
9 lines of insurance mentioned in the budget. Those
10 areas could include surplus lines, homeowners,
11 auto, workers’ comp, med mal.
12 In addition to a tax like this, other
13 states would probably retaliate and increase their
14 taxes on our Pennsylvania domicile countries when
15 they sell in those other states, making
16 Pennsylvania insurance company products less
17 competitive in out-of-state markets.
18 The governor’s proposed budget
19 increases the premium tax by 25 percent, from 2
20 percent to 2 and a half percent. According to the
21 National Conference of State Legislatures,
22 Pennsylvania’s current premium is set at 2 percent,
23 which is already higher than the national average.
24 Raising it to 2 and a half percent will put
25 Pennsylvania near the top of the list as the most 12
1 punitive regarding premium taxes.
2 Now, according to NAIC reports,
3 Pennsylvania's current premium tax generates about
4 800 million dollars annually. That represents
5 about 2.6 percent of our state budget. Increasing
6 that by 25 percent would generate another 200
7 million dollars, pushing the insurance industry's
8 contribution to 1 billion dollars annually and
9 closer to 3 percent of the commonwealth's budget.
10 What specific lines of insurance is the
11 governor proposing be assessed with this tax
12 increase? Are you able to answer that for us?
13 COMMISSIONER MILLER: Thank you for the
14 question, Chairwoman. And I think the proposed
15 increase is on property and casualty insurers. And
16 let me just -- let me step back just a minute and
17 say that, you know, though this proposal was part
18 of last year's compromised budget agreement, it was
19 not in the governor's initial proposed budget. I
20 think from the governor's perspective, he believes
21 that we need a budget deal that puts us on solid
22 financial footing, makes important investments, and
23 eliminates our structural deficit.
24 In spirit of comprise, he started the
25 budget process this year with where things left off 13
1 for the current year in terms of what was
2 negotiated. But as the governor has publicly
3 stated, he’s open to alternatives so long as the
4 result is the same, a truly balanced budget that
5 invests in programs that are critical to our
6 seniors and children.
7 But in terms of the premium tax, I
8 appreciate the concern that you have about the
9 impact on Pennsylvania insurers, and we’ve actually
10 been reaching out to them and having discussions
11 with them about their concerns and what this tax
12 increase potentially means to them.
13 But, again, I think, from the
14 governor’s perspective, we’re open to other ways of
15 balancing the budget, for sure.
16 REPRESENTATIVE PICKETT: So, while he’s
17 looking for 100 million dollars from this, he
18 hasn’t specifically come down with certain line
19 items that would be hit with this particular tax?
20 He hasn’t really come to that detail?
21 COMMISSIONER MILLER: Chairwoman, I
22 would probably need to check in with the Revenue
23 department, because I think they’ve also been
24 looking at this issue in terms of the lines. But,
25 from our perspective, we look at it as a P and C 14
1 company tax issue, but we probably need to check in
2 with Revenue to go even further in terms of detail
3 on that.
4 REPRESENTATIVE PICKETT: Would it be
5 your understanding that they are seriously
6 considering what might happen in other states with
7 our domiciled companies, that they would not become
8 noncompetitive in that range? It could be right -
9 you know, since we are kind of the same with the
10 other states, it could become kind of an open
11 warfare as far as taxation goes and the ability to
12 compete.
13 COMMISSIONER MILLER: Chairwoman, we
14 are very aware of retaliator tax laws that almost
15 every state has and the impact that those would
16 have on Pennsylvania companies. Absolutely.
17 REPRESENTATIVE PICKETT: Thank you. I
18 am hearing this from pretty much across the
19 industry. They are concerned. So, I really hope
20 those doors are open for discussion with the
21 industry.
22 COMMISSIONER MILLER: Absolutely.
23 REPRESENTATIVE PICKETT: Thank you.
24 Thank you very much.
25 Thank you, Mr. Chairman. 15
1 MAJORITY CHAIRMAN ADOLPH: Thank you.
2 Representative Dean.
3 REPRESENTATIVE DEAN: Good afternoon,
4 Commissioner. How are you?
5 COMMISSIONER MILLER: Good.
6 REPRESENTATIVE DEAN: Good.
7 I have a question in the area of long
8 term care insurance. And I want to thank members
9 of your staff, who've helped me understand this
10 over the last several months.
11 I have a constituent in particular who
12 has come in and complained, I think reasonably so.
13 He's been paying a premium for more than twenty
14 years for both himself and for his wife, and
15 recently saw some substantial increases in his
16 premiums. And he's at a stage in his life, you can
17 imagine, where he thinks that he'd better hold on
18 to this. He's made a substantial investment. He's
19 in his eighties, though he doesn't look it.
20 And his question is the fairness of it
21 and what regulatory processes hang over this to be
22 fair to the consumer. And I learned from you all
23 that it's a really muddy area, because of some
24 predictions that were not realized, some actuarial
25 mistakes. 16
1 So, if you could, bring us up to date
2 on that product, long-term care insurance. And one
3 of his specific questions is, he suffered a, I
4 think, a 25 percent increase. And I think a year
5 later, again a 25 percent increase. So, it’s more
6 than, in his mind, much more than a 50 percent
7 increase.
8 What cap is there on the increase an
9 insurer can get? And what obligation is there for
10 the insurance company, even if that product line is
11 losing them money, to spread that loss over into
12 areas where they are very profitable?
13 COMMISSIONER MILLER: Thank you,
14 Representative, for the question.
15 Long-term care is one of the most
16 challenging markets I think we face. It’s
17 incredibly challenging for regulators, certainly
18 challenging for industry, and I appreciate
19 everything you just said about the challenges
20 facing consumers. I hear from them all the time,
21 because, as you said, many of them are seeing not
22 just a huge increase one year, but they’re seeing a
23 huge increase multiple times.
24 This is actually something we’ve been
25 thinking about and looking at for several months 17
1 now, since I have been here at least. And let me
2 just tell you a little bit of background about kind
3 of the market and talk a little about what we’re
4 doing to try and address some of these challenges,
5 because they’re significant.
6 And you’re right, because of
7 inaccuracies in terms of pricing these products
8 from the very beginning, many of these products are
9 currently very underpriced, which is part of the
10 problem. And that’s resulted in a number of
11 companies ceasing to offer this coverage. And it’s
12 resulted in significant rate increases for the
13 products that are still out there today.
14 As an insurance regulator, we have two
15 primary consumer protection functions that we
16 provide related to long-term care insurance.
17 First, we review and have to approve rate increases
18 on these products. And there is -- there’s no cap,
19 to answer your question, in terms of what we can
20 approve. But we certainly appreciate the impact
21 that some of these -- in many cases, very
22 significant increases — have on consumers. So,
23 that’s something that, as we’re reviewing the rate
24 increases, is at the forefront of our mind always.
25 But, arguably, one of the more 18
1 important consumer protections we always provide is
2 we monitor financial conditions of insurance
3 companies to make sure that they can pay claims
4 long term. And you know, as I said, we are very,
5 very mindful of the impact that these significant
6 proposed increases have on consumers. But we also
7 have to make sure that companies remain financially
8 viable. And that's a real concern and probably a
9 bigger concern in the long-term care market than it
10 is in many of the other areas and other markets, if
11 you look across the board. Because we've seen
12 long-term care companies fail. And, as I
13 mentioned, most of the companies who initially sold
14 this product are not doing so anymore, and there's
15 a reason for that.
16 The department currently has several
17 very significant proposed increases before us that
18 we are looking at in terms of the rate increases.
19 And we announced, I don't know if it was last week
20 or the week before, recently we announced that
21 we're actually going to have a public hearing on
22 these proposed increases, four of them in
23 particular. We have many of them, but four of them
24 are very significant, and we really wanted to give
25 the public the opportunity to come in and consumers 19
1 who have these policies the opportunity to weigh in
2 and talk about it.
3 We also wanted to give the companies an
4 opportunity to publicly talk about why they’re
5 asking for such significant increases, because I
6 think it’s important for people to understand why
7 they’re coming in with these huge increases.
8 As we review rate increases in this
9 market, we also -- in terms of the consumer impact,
10 we also work very closely with them to ensure that
11 they’re offering options to mitigate these rate
12 increases for consumers. So, for example,
13 companies might allow policy holders to adjust
14 their benefits to either lessen or eliminate the
15 increases that they’re potentially facing.
16 But, additionally, you know, given the
17 challenges in the market today, you know, we’ve
18 really started thinking, and as companies were
19 coming in last year, talking about some of the
20 increases they needed, I started asking them
21 questions about what the future of long-term care
22 insurance really looks like. Because clearly the
23 products of the future can’t be the products that
24 we’ve seen in the past. They can’t price them
25 appropriately, it seems. And I don’t know that 20
1 people would buy them if they were priced
2 appropriately.
3 So, you know, industry figures show
4 that, in 2003, we had over a hundred companies
5 across the nation selling long-term care insurance.
6 I’ve seen data that shows, by 2013, only sixteen
7 insurers are still selling. I think it was in the
8 last month or so, we saw MedAmerica Insurance
9 Company announce it was leaving the market. Some
10 people say there’s only a dozen carriers left. So,
11 we have a huge problem in this market today. And
12 at the same time, we’re also seeing data that show
13 the consumers aren’t purchasing this product
14 anymore, or at least the numbers of consumer
15 purchasing it have gone down.
16 So, while all states, including
17 Pennsylvania, are struggling and grappling with the
18 legacy long-term care insurance products and the
19 appropriate pricing and what to do about all the
20 significant increases, which is a very, very big
21 challenge for us, I think it’s equally important to
22 look forward and think about what the future looks
23 like. We know that long-term care costs have a
24 huge impact on state budgets, primarily through
25 Medicaid. So, if we could figure out how to 21
1 increase the role of the private long-term care
2 insurance market in providing long-term benefits, I
3 think we could mitigate the impact, at least a
4 little bit of long-term care costs on state
5 budgets.
6 So, this is actually the goal of an
7 NAIC work group that was just created at our
8 request. Pennsylvania asked that we establish a
9 work group to really think about the future. And
10 we're now chairing a long-term care innovation
11 work group that's really focused on figuring out
12 how we can improve the functioning of this market
13 going forward. So, we're going to be looking at
14 ways we can address some of the current challenges
15 and hopefully developing -- my goal is to come up
16 with some realistic policy options that might
17 result in an increase in the take-up rate of long
18 term care insurance, to try and address the impact
19 on budgets.
20 But, unfortunately, the challenges
21 facing this market are absolutely enormous, so
22 we're not going to fix this overnight, but I think,
23 from the department's perspective, we're trying to
24 be very thoughtful about both how do we address the
25 current challenges with the legacy products and the 22
1 pricing of those products, but also kind of what
2 this market looks like going forward.
3 REPRESENTATIVE DEAN: I appreciate
4 that. And as you point out, there’s a lot of
5 different balancing acts that you have to go
6 through as you’re planning how to protect the
7 consumer but also make sure that there is some
8 sustainable way.
9 When a company goes out of business or
10 it goes out of this area of business, what happens
11 to the people that had policies with them?
12 COMMISSIONER MILLER: So, typically,
13 when an insurance company stops selling these
14 policies, they’re guaranteed renewable products, so
15 they have to keep maintaining those policies, which
16 is why you see a lot more than just twelve or
17 thirteen companies coming in with rate adjustments.
18 We see the broad range of companies that have been
19 selling it, because they have to continue
20 maintaining those policies.
21 And to your question earlier about sort
22 of -- one of the concerns we have is certainly that
23 consumers, I think, in many cases, when they bought
24 these policies, they were told they were not going
25 to be facing increases. And then, to be facing not 23
1 just one increase or two, but one or two or three
2 or more really significant increases, that weighs
3 on us really heavily. And it’s why we look so
4 closely at this.
5 But I think you also see, in a lot of
6 cases, the companies, they are losing money. So,
7 they are paying from other areas of their business
8 into the long-term care business, because I don’t
9 know that any of them are getting enough money to
10 see that this -- that these long-term care policies
11 are actually self-sustaining. They’re not in a lot
12 of cases. So, companies are using money from other
13 areas to supplement this.
14 But the pain, the pain kind of goes
15 around, and it’s a really difficult issue from a
16 regulator’s perspective, because I certainly
17 appreciate where consumers are coming from.
18 REPRESENTATIVE DEAN: I appreciate
19 that. And I offer my constituent as a resource to
20 your department, because he’s very knowledgeable
21 about what has gone on. He, too, had the very
22 clear impression that these were not -- that these
23 were going to be fixed, even though you read,
24 there’s no guarantee of that, but that was
25 certainly the impression when they were sold over 24
1 and over again. And I'm glad you're going to have
2 the hearings.
3 Thanks very much.
4 COMMISSIONER MILLER: Yeah.
5 MAJORITY CHAIRMAN ADOLPH: Thank you,
6 Representative.
7 Representative Mark Mustio.
8 REPRESENTATIVE MUSTIO: Thank you.
9 Mr. Chairman.
10 And, Commissioner, welcome.
11 COMMISSIONER MILLER: Thank you.
12 REPRESENTATIVE MUSTIO: First I want to
13 thank you and your department for the great
14 constituent services that are provided. Any time a
15 constituent has a problem or question, you and your
16 department have been very prompt to respond.
17 I'd like to ask questions in two areas.
18 One being workers' compensation insurance, and the
19 other being the Underground Storage Tank
20 Indemnification Fund, two really exciting topics
21 for a Monday afternoon after a long weekend.
22 First of all, the workers' compensation
23 area is very robust and competitive in
24 Pennsylvania, with a lot of insurance companies, as
25 is evidenced in your introduction, a lot of 25
1 companies want to play in that market.
2 What do you think is responsible for
3 keeping the rates as competitive and level as they
4 have been for the last few years?
5 COMMISSIONER MILLER: That’s a good
6 question. I think what we’re seeing in
7 Pennsylvania, I don’t know that it’s unique in
8 terms of what we see across the country, but -- and
9 I don’t know how long we’re going to see this, but
10 I do think we’re certainly benefiting from -- from
11 decreases, in some cases, and certainly no
12 increases. So, I’d have to look into it more to
13 come up with some really good ideas of terms of
14 what’s causing that, but we’re certainly pleased
15 with the result.
16 REPRESENTATIVE MUSTIO: I think some of
17 it relates to maybe the legislation that’s been
18 passed by the general assembly over the years, with
19 panel physicians and cost containment, and things
20 like that, safety committees, whatnot.
21 But one of the things that has been
22 interesting as the various departments have come
23 through is they are complaining about their own
24 internal costs for their departments as far as the
25 workers’ compensation charge. And one department 26
1 in particular, I think it was the LCB, in one of
2 their press releases earlier in the year, said that
3 a actuarial study done for the department of
4 Administration said that there was an increase or
5 underreserving of 750 million dollars, and that
6 needed to be made up and thus charged to all the
7 departments. And the rates being charged to
8 various departments are significantly higher than
9 what are being charged in the private market,
10 something that, you know, we’re proud to keep those
11 low, but now taxpayers have to pay these
12 differences.
13 So, my question is, is your
14 department -- since you monitor the insurance
15 companies for financial solvency, does your
16 department ever look at or have been asked to look
17 at the self insurance plan that the state employees
18 are covered under? Do you know if that is the
19 case?
20 COMMISSIONER MILLER: I don’t know,
21 Representative.
22 REPRESENTATIVE MUSTIO: Okay. If not,
23 since you’re doing such a great job regulating the
24 private marketplace, it might be something you want
25 to look at to determine whether or not the studies 27
1 that have been done and presented to the
2 administration are actually accurate and those
3 costs being passed on to the taxpayers are
4 appropriate.
5 As far as the Underground Storage Tank
6 Indemnification fund goes, in 2002, there was a
7 loan to the general fund of 100 million dollars.
8 And it's my understanding that that was to have
9 been paid back in ten years, and I think that's
10 been extended to 2029, and what the heck, why don't
11 we just extend it forever and not pay it.
12 How has that impacted the fund? I did
13 notice that your -- in reading your report, which
14 was dated March of 2015, which I assume the next
15 annual report should be coming out soon, that the
16 fund's doing very well. In fact, Global Risk
17 consulting concluded that the underfunded liability
18 of 139 million as of June 30th, 2014, was a
19 significant reduction from 196 million from the
20 year before.
21 So, I guess, in a round-about way, I'm
22 asking, does that hundred million dollars have an
23 impact? And since the department -- the insurance
24 department of this fund, I should say, is issuing
25 grants to DEP -- this was before, I think, you 28
1 became commissioners in 2014 -- 6 million, 600
2 thousand dollars in grants from that fund were
3 given to the DEP. The fund seems to be pretty
4 solvent. And maybe we should be forgiving loans to
5 the general fund if there’s a possibility to do
6 that.
7 What are your thoughts on the fund?
8 COMMISSIONER MILLER: Well,
9 Representative, you know, and I think the unfunded
10 liability has gone down even more. I think, as of
11 the end of the year, we’re at about 132 million
12 dollars, so we do see some progress in the unfunded
13 liability.
14 And in terms of the repayment of the
15 loan, even without the repayment, at least today,
16 USTIF is able to pay their administrative and claim
17 payments for the foreseeable future without an
18 impact. I certainly don’t want to speak for the
19 USTIF board in terms of the future of the loan and
20 whether it should be repaid. But it’s not
21 impacting our ability to pay administrative and
22 claims expenses at this time.
23 REPRESENTATIVE MUSTIO: Am I right that
24 the fund gets their money from a penny or two on
25 gasoline tax? Is that where that comes from? Is 29
1 that right?
2 COMMISSIONER MILLER: I think that’s
3 right. Yes.
4 REPRESENTATIVE MUSTIO: It looks like
5 the amount that comes in is enough annually to
6 payoff approximately what’s been going out, you
7 know, give or take a couple million either way
8 depending on the year.
9 COMMISSIONER MILLER: I think that’s
10 right.
11 RE3PRESENTATIVE MUSTIO: Okay. I
12 think -- has the new report been published yet
13 for —
14 COMMISSIONER MILLER: Not yet.
15 REPRESENTATIVE MUSTIO: Okay. All
16 right. Thank you.
17 MAJORITY CHAIRMAN ADOLPH: At this
18 time, I’d like to acknowledge the presence of
19 Representative Dom Costa, who has joined us.
20 And the next question will be asked by
21 Representative Bullock.
22 REPRESENTATIVE BULLOCK: Thank you,
23 Chairman.
24 Good afternoon, Commissioner. How are
25 you doing today? 30
1 COMMISSIONER MILLER: Good.
2 REPRESENTATIVE BULLOCK: Great.
3 I wanted to first echo my colleague,
4 Representative Dean's concerns about the long-term
5 care insurance premiums, and I appreciate your
6 response and your department's attention to this
7 matter, as it does impact many seniors across my
8 district as well as the commonwealth.
9 I'd like to now take a look at the
10 health insurance exchange and talk a little bit
11 about how we're doing in that area. It's been two
12 years in operation and now looking with the
13 Medicaid expansion.
14 Could you please provide an update on
15 your department's role in administering and
16 regulating the marketplace here in Pennsylvania?
17 COMMISSIONER MILLER: Absolutely.
18 Thank you, Representative.
19 So, Pennsylvania has a federally
20 facilitated marketplace. So, that means that the
21 federal government actually administers the
22 exchange in Pennsylvania. So, in terms of the
23 website, all that's taken care of with the federal
24 government. All eligibility and enrollment
25 functions are performed by the federal government. 31
1 So, any issues that our consumers have in terms of
2 enrolling with the exchange are issues that really,
3 at the end of the day, only the federal government
4 can address.
5 In terms of our role, though, having
6 said that, the state is still the primary regulator
7 of health insurance. The state reviews all
8 individual plans that are sold in Pennsylvania for
9 compliance with state and federal laws. So, the
10 state’s role in terms of the exchange is really
11 that we review and have to approve of all the plans
12 before they’re sold on the exchange.
13 REPRESENTATIVE BULLOCK: Do you also
14 approve and regulate the navigators?
15 COMMISSIONER MILLER: Yes. So, as of
16 last year, legislation was passed that has the
17 department registering navigators and exchange
18 assisters. So, yes, we do that as well.
19 REPRESENTATIVE BULLOCK: And how many
20 have you registered since then?
21 COMMISSIONER MILLER: So far, as of the
22 end of February, we have approved a total of two
23 hundred forty-two registrations that have been
24 processed. And that was -- breaking that down, it
25 was ninety-four individual exchange assister 32
1 registrations, twenty exchange assister entity
2 registrations, a hundred nine individual navigator
3 registrations, and nineteen navigator entity
4 registrations. And we’ve got, currently — or as
5 of the end of February, we have thirty-four
6 registration applications still pending.
7 REPRESENTATIVE BULLOCK: Thank you for
8 sharing that.
9 I’m going to switch gears a little bit.
10 I’ve been asking all of the agencies about their
11 employment practices. And for me, it’s very
12 important that each of our agency’s reflective of
13 the commonwealth population.
14 So, if you could share with me the
15 diversity in your workforce and any efforts that
16 you take, as an employer, to recruit, retain, and
17 promote qualified candidates, both women and
18 minority, within your department.
19 COMMISSIONER MILLER: Thank you for the
20 question, Representative.
21 This is actually an issue that we care
22 a lot about. And I’m really pleased, in the last
23 year, with some of the changes that we’ve seen in
24 the department that I want to talk to you about. I
25 think we have made a conscious effort to diversify 33
1 our workforce. We've sought to attract and retain
2 employees that are diverse in race and age and work
3 experience in the insurance industry.
4 And the first area of change where I
5 think we've noticed just a big difference has been
6 in our senior leadership team. We have more
7 females in leadership positions than ever before.
8 My two special deputies are female. Our policy
9 director is female. Our chief counsel's female.
10 Our legislative liaison is female. And our two
11 newest attorneys happen to also be female.
12 Additionally, when I had an opportunity
13 recently to fill a deputy spot, I was able to
14 appoint the first female deputy that the department
15 has seen in over ten years.
16 Our workforce currently consists of 59
17 percent female employees and 40 percent male.
18 And at one level below our senior
19 leadership team, we have women leading a number of
20 our areas. Our director of Consumer Services, our
21 Bureau of Market Actions, and Company Licensing and
22 Financial Analysis are all women.
23 Age has been another area of diversity
24 that I'm really proud of. Our workforce currently
25 covers five different generations. We have 34
1 employees who range from twenty-two years old to
2 seventy-seven years old.
3 Our senior leadership team experienced
4 a lot of changes, as many of our leaders reached
5 retirement age last year and retired from the
6 department. And we’ve replaced a lot of these
7 individuals with younger employees, who I think
8 will be here to serve for a number of years. And
9 we are making efforts to improve the recruitment of
10 millennials as well.
11 At the same time, we definitely
12 recognize and need to do more to attract minority
13 candidates to the department. The workforce at the
14 department consists right now of a total of 13.4
15 percent minority employees. And that’s a year-to-
16 year improvement of 1 percent, but I think this is
17 an area where we realize we need to do better.
18 We’re currently advertising for eight
19 positions and are attempting to diversify our
20 workforce. Part of it depends, of course, on the
21 candidates we receive from civil service. But
22 we’re also taking efforts to supplement civil
23 service. We’re starting our own recruitment and
24 retention team to continue to aid in attracting and
25 retaining talent in our agency. And we’re looking 35
1 at college fairs and internships in order to get
2 more people in the door.
3 So, we are certainly doing what we can,
4 but this is an area, I think, that we also have
5 some opportunities for improvement.
6 REPRESENTATIVE BULLOCK: Thank you for
7 sharing. I definitely see and recognize your
8 efforts. And it’s very promising that you’re
9 paying attention to this issue, and I look forward
10 to hearing more progress in the coming years.
11 Thank you.
12 COMMISSIONER MILLER: Absolutely.
13 REPRESENTATIVE BULLOCK: Thank you,
14 Chairman.
15 MAJORITY CHAIRMAN ADOLPH: Thank you,
16 Representative.
17 Representative Seth Grove.
18 REPRESENTATIVE GROVE: Thank you,
19 Mr. Chairman.
20 Commissioner, thank you so much for
21 coming in this morning.
22 I want to circle around. Our Insurance
23 chairwoman asked about retaliatory taxes in
24 conjunction with the premium tax. Have you reached
25 out to insurers to see what that price point is, 36
1 what that cost is with the retaliatory taxes as it
2 affects? Because we’re going to bring in revenue
3 to the co mmo nwe al t h wi t h that, but other states
4 will obviously garnish revenue. My understanding
5 there, is it forty-nine states with retaliatory tax
6 language?
7 COMMISSIONER MILLER: I think that’s
8 right.
9 REPRESENTATIVE GROVE: All right. So,
10 there’s one without. So, every other state is
11 going to reap great benefits upon our decision to
12 do that.
13 So, what’s that affect minus the, I
14 guess, the projected hundred million dollars coming
15 into the commonwealth, what’s that affect on the
16 insurance agencies outside of Pennsylvania?
17 COMMISSIONER MILLER: So, thank you for
18 that question, Representative.
19 And we are in the process now of
20 reaching out to companies, and I think companies
21 now are trying to figure out what this might mean
22 for them. And as you said, they’re tallying up,
23 given their business in other states, what the
24 retaliatory taxes will mean to them. So, we’re
25 collecting that sort of on a company-by-company 37
1 basis at this point.
2 REPRESENTATIVE GROVE: I do have one
3 example. I called Erie Insurance, asked them what
4 a .5 percent premium tax would be. Based on the
5 half, and assuming they know the threshold, they're
6 looking at 10.8 million dollars to the
7 commonwealth, 14.5 million dollars to other states.
8 So, they would be paying more out to other states
9 than they would be to Pennsylvania.
10 What's the average insurance premium
11 tax, the national average? Do you know off the top
12 of your head?
13 COMMISSIONER MILLER: I wish it was as
14 simple as that. It depends on the line of
15 insurance. And I’ve seen charts that chart this,
16 but it’s actually a lot more complicated than just
17 saying — I view 2 percent as fairly in the middle
18 in terms of where states are, but it really does
19 depend. It’s hard to say for sure.
20 REPRESENTATIVE GROVE: Okay. And we’re
21 currently at 2 percent. Correct?
22 COMMISSIONER MILLER: We’re at 2
23 percent.
24 REPRESENTATIVE GROVE: All right. So,
25 we’re already at the average, so there’s states 38
1 less than us. Generally, would that — if you’re
2 making a business decision to stay in Pennsylvania,
3 or for a company that wants to come into
4 Pennsylvania, that tax is a bit of an inhibitor,
5 based on that decision. Correct?
6 COMMISSIONER MILLER: I think the
7 premium tax is definitely an issue that companies
8 look at when they're making their decisions. My
9 sense is it's probably one issue of many that they
10 look at. But, yeah.
11 REPRESENTATIVE GROVE: Okay. Please
12 keep us updated on that total cost, because we
13 really have to look at the total impact of that
14 moving forward. So, when you bring that
15 information, can you please forward it to both
16 Chairman Markosek and Chairman Adolph's offices, so
17 we get a full impact, a full picture of how this
18 affects.
19 And you don't know the line of coverage
20 that this is going to cover?
21 COMMISSIONER MILLER: It's property and
22 casualty insurance companies.
23 REPRESENTATIVE GROVE: Okay. So,
24 workers' comp, basically homeowners insurance.
25 COMMISSIONER MILLER: I think those 39
1 were BP and C companies, as far as I know. I think
2 Revenue ran the actual dollars, so I don’t want to
3 speak for Revenue. But as I understand P and C
4 companies, those would be included.
5 REPRESENTATIVE GROVE: Did they run a
6 dollar allocation they wanted to hit, or was this
7 based on actual insurance coverage and what the
8 market bears with that?
9 COMMISSIONER MILLER: I don’t know, to
10 be honest.
11 REPRESENTATIVE GROVE: Okay.
12 COMMISSIONER MILLER: I was not in that
13 conversation. I wasn’t a part of running the
14 numbers, so I don’t know what assumptions they
15 made.
16 REPRESENTATIVE GROVE: Did they consult
17 you on -- as far as insurance coverage and how it
18 currently works now? Were you consulted at all in
19 this decision?
20 COMMISSIONER MILLER: We have had some
21 conversations with Revenue, absolutely. I just
22 don’t know exactly how they came up with their
23 numbers.
24 REPRESENTATIVE GROVE: Okay. I
25 appreciate that. 40
1 Turning to Act 147 waivers. Your
2 department applied for some. Can you kind of
3 review what you requested and what you used that
4 money for? The Act 146 waivers, prior year funds,
5 moving them forward.
6 MR. MENDELSOHN: Representative, thank
7 you.
8 We did learn — the Insurance
9 department learned about the possibility of using
10 waiver funds, and we applied to do that. And we
11 were granted a written waiver to use our prior year
12 funds.
13 I would note, under our dedicated
14 funding, we do return moneys to the general fund
15 every year. We were allocated the ability to use
16 just a little over 2 million dollars in prior
17 year's funds, and we've expended, through the time
18 of the budget being signed, about 1.4, 1.5 million
19 of those dollars.
20 REPRESENTATIVE GROVE: What were those
21 dollars used for, the expenditure of them?
22 MR. MENDELSOHN: Primarily -- we
23 actually had to use part of them to meet payroll at
24 the end of the '14-'15 fiscal year. We had a lease
25 payment for our offices in Strawberry Square, and 41
1 we had about 165 thousand of some prior year
2 commitments that we had to pay for as well.
3 REPRESENTATIVE GROVE: Okay. So, when
4 the budget was passed, your -- was your GGO then -
5 the amount of money that you used for payroll, was
6 that reimbursed upon the completion of the signing
7 of the budget?
8 MR. MENDELSOHN: What we are actually
9 doing, Representative, there are some
10 reconciliations right now that are going on with
11 the budget office.
12 REPRESENTATIVE GROVE: Okay.
13 MR. MENDELSOHN: And we can provide you
14 with details of that. Right now, we don’t have
15 those.
16 REPRESENTATIVE GROVE: Okay. Did the
17 budget office ask for reconciliation?
18 MR. MENDELSOHN: I don’t know. I know
19 the reconciliation is pending on those.
20 REPRESENTATIVE GROVE: Okay. I wasn’t
21 sure, because some said they’ve completed it.
22 Others said they haven’t gotten word for it.
23 One of the waivers specifically was
24 CHIP. And the phrase, I have it over there if you
25 want me to grab it, one of the phrases were, We 42
1 were unsure about the total cost of implementation
2 of the Affordable Care Act.
3 Do you have an analysis of the total
4 cost moving forward? Because the way that wording
5 was phrased within the waiver, it sounded like you
6 didn’t know what the total cost will be and the
7 requirements the federal government has made on the
8 state whether it was passed -- I mean, that was a
9 few months ago that you applied for that.
10 MR. MENDELSOHN: Sure.
11 REPRESENTATIVE GROVE: Are you aware of
12 the cost of the ACA at this point?
13 MR. MENDELSOHN: Representative, we’d
14 have to ask the Department of Health and Human
15 Services. They — with the program being
16 transferred to them, all of the budget dollars, as
17 part of the legislation, went to them as well. So,
18 that issue on the implementation and the costs is
19 all with DHS at this point.
20 REPRESENTATIVE GROVE: Okay. I
21 appreciate that.
22 Thank you, Mr. Chairman.
23 MR. MENDELSOHN: Thank you.
24 MAJORITY CHAIRMAN ADOLPH: Thank you,
25 Representative. 43
1 Representative Karen Boback.
2 REPRESENTATIVE BOBACK: Thank you,
3 Mr. Chairman.
4 Commissioner Miller, can you tell me,
5 if a small medical group or a medical center
6 submits a claim to insurance, how long do they have
7 to submit a claim? Is there a deadline?
8 COMMISSIONER MILLER: Representative, I
9 think, there probably is, and it's probably in the
10 policy. I think insurance companies probably set
11 that policy, and it might vary depending on the
12 policy or the insurance company. But my guess is,
13 in most policies, you would find some sort of
14 deadline for when claims need to be made.
15 REPRESENTATIVE BOBACK: So, that's
16 generally with the insurance company that they're
17 dealing with?
18 COMMISSIONER MILLER: I think that's
19 right.
20 REPRESENTATIVE BOBACK: Okay.
21 Because -- and perhaps you can't answer this, but
22 it was brought to my attention that a look back,
23 for example, if they have two years to submit, say
24 a medical center, but as far as getting it back, an
25 insurance company sometimes has, I guess, maybe 44
1 four or five years before they had come back. I
2 believe they called it recoupment.
3 So, I was concerned if this was policy
4 or statute, or is this something we need to look at
5 as a legislator? Because, when you’re talking
6 about small medical groups, you know, who think
7 that their bills are paid, but all of a sudden
8 they’re getting a bill from three or four years
9 ago, saying, well, we overpaid you or -- is that
10 something you could help me with or address?
11 COMMISSIONER MILLER: I would love to
12 sit down with you or have some staff sit down with
13 you and understand this issue better, and then we
14 can better answer your question. Certainly can
15 look into it and see if something needs to be done.
16 So -
17 REPRESENTATIVE BOBACK: I would
18 appreciate that.
19 COMMISSIONER MILLER: Absolutely.
20 REPRESENTATIVE BOBACK: Thank you,
21 Commissioner.
22 Thank you, Mr. Chairman.
23 MAJORITY CHAIRMAN ADOLPH: Thank you,
24 Representative.
25 Representative Keith Greiner. 45
1 REPRESENTATIVE GREINER: Thanks,
2 Mr. Chairman.
3 And good afternoon, Commissioner. Glad
4 to have you here.
5 I must say I had some questions about
6 the long-term care policies, and I thought —
7 appreciate Representative Dean’s questions. I
8 think it’s a critical area. I’ve worked in
9 accounting for many years, and I know a lot of
10 people purchase those policies, and it’s kind of
11 scary.
12 COMMISSIONER MILLER: Yeah.
13 REPRESENTATIVE GREINER: But, anyway,
14 thank you very much.
15 I’m going to try to switch topic a
16 little bit. Something that you see more and more
17 of today, and you see children being diagnosed on
18 the autism spectrum, and Act 62 of 2008 requires
19 that health insurance policies offered to groups of
20 fifty-one or more provide coverage for the
21 diagnosis and treatment of those people in the
22 spectrum under the age twenty-one. And there’s
23 also a cap of 36,000 dollars per year.
24 So, I have kind of like three questions
25 following up. How do you enforce those 46
1 requirements such as this? And do you get a
2 significant number of complaints concerning autism
3 coverage that would lead you to believe that
4 insurers are not providing the coverage that the
5 general assembly, you know, were hoping in the law?
6 That’s the first question.
7 COMMISSIONER MILLER: Thank you for
8 that question. This was actually a question, I
9 think, that came up last year at this hearing. And
10 so, I’ve had an opportunity to spend some time
11 really looking into it. Because, the way it was
12 presented was, maybe we aren’t enforcing the act or
13 insurers are not complying with the act. So, we
14 have had a chance to look into it.
15 And, you know, if a claim is denied by
16 a private insurer, there is an appeals process that
17 the consumer can go through. But we’re aware of
18 very few appeals that have gone through because of
19 denials.
20 And a few years ago, we actually
21 conducted a data call to try to get a better sense
22 of what was happening in terms of claims payments
23 in this area, and the data that we collected
24 suggested that, in general, insurers are indeed
25 paying claims under the act. 47
1 So, you know, we've also been involved
2 in a few different efforts. We've been working
3 really closely with the Department of Human
4 Services to understand better their process in
5 terms of what Medicaid is paying for. And we've
6 been part of a work group that has been looking at
7 that issue. But I'm not aware that we get a lot of
8 complaints on this.
9 The one issue we have been addressing,
10 though, that I want to just tell you about briefly
11 is, this past December, we filed an amicus brief in
12 support of the plaintiff in the Superior Court case
13 of Burke versus IBC. So, IBC has been denying
14 claims under Act 62 if the service was provided in
15 an educational setting. And the department has had
16 a long-standing position that these denials were
17 inappropriate.
18 So, following the Superior Court's
19 decision, we've been working closely with all the
20 health insurers to ensure that they're in
21 compliance with the court decision and not denying
22 Act 62 claims simply because the services were
23 provided in an educational setting.
24 REPRESENTATIVE GREINER: And I probably
25 wasn't -- I know I wasn't here when we passed this 48
1 piece of legislation, but I would think that would
2 probably be in line with what the other members
3 wanted at that time, and that's something that I
4 could look into.
5 I had a follow-up question. I think
6 you answered it. It sounds like the Insurance
7 department's working with Human Services to try to
8 make sure that there is compliance, that there
9 aren't people out there -- you know, when people
10 want those services, they aren't being denied.
11 And the last question would be -- and I
12 know you're going back eight years ago -- is the
13 3 6,000-dollar cap still applicable under the
14 Affordable Care Act?
15 COMMISSIONER MILLER: So, I do think
16 we've looked at this issue, and at this point in
17 our conversations with Department of Human
18 Services, the cap is still something that the state
19 has embraced in terms of still being effective,
20 even with the Affordable Care Act.
21 REPRESENTATIVE GREINER: Okay. Like I
22 said, I know it's a little bit -- a lot of things
23 going on in the Insurance department. I appreciate
24 you taking the time to answer that question.
25 COMMISSIONER MILLER: Certainly. 49
1 REPRESENTATIVE GREINER: And I
2 appreciate your time, Mr. Chairman.
3 MAJORITY CHAIRMAN ADOLPH: Thank you,
4 Representative.
5 Representative Kinsey.
6 REPRESENTATIVE KINSEY: Thank you,
7 Mr. Chairman.
8 Good afternoon, Commissioner.
9 COMMISSIONER MILLER: Good afternoon.
10 REPRESENTATIVE KINSEY: You recently
11 had an event where you talked about private flood
12 insurance being available to -- being available to
13 Pennsylvanians as an alternative to the sometimes
14 costly National Flood Insurance Program.
15 Can you talk about the alternative and
16 the availability of the private insurance in
17 Pennsylvania and how consumers can learn more about
18 that?
19 COMMISSIONER MILLER: Absolutely.
20 Thank you for the question, Representative.
21 Before the last couple of years, for
22 most people in Pennsylvania, the NFIP, or the
23 National Flood Insurance Program, was really the
24 only place for homeowners to get flood coverage.
25 And the NFIP subsidized many of the highest risk 50
1 properties to keep premiums down. But after
2 Hurricanes Katrina and Sandy, the NFIP was
3 overwhelmed with claims and has fallen more than 20
4 billion dollars in debt, which led Congress to pass
5 legislation that phased out the subsidies.
6 And so, what we’ve seen is, over the
7 last few years, as these subsidies are being phased
8 out, premiums are going up substantially for
9 homeowners, and at the same time, FEMA has redrawn
10 the flood maps and placed properties that have
11 never experienced flooding before in flood zones,
12 which means that people now needed flood coverage
13 when they had never needed it before and maybe
14 didn’t even want it in some cases.
15 So, we began looking at this issue
16 several months ago to try to figure out if there
17 was anything we could do to help these homeowners.
18 And as we researched the issue further, what we
19 learned is that with these rising NFIP premiums,
20 some private insurers were beginning to enter the
21 market because they could compete. Where before
22 they couldn’t compete with subsidized coverage, now
23 that that was ending, we were starting to see them
24 more and more interested in this market.
25 So, we spoke to consumers who ended up 51
1 obtaining private policies at substantial savings
2 over the NFIP policies, which got us thinking, you
3 know, we need to find a way to make sure people
4 know about this alternative option. So, we’ve been
5 working, given what we learned last year, we’ve
6 been working to not only facilitate the entry of
7 additional private flood insurance options, but to
8 make sure Pennsylvanians know that private flood
9 insurance is an option or may be an option for
10 them.
11 This coverage is sold in Pennsylvania
12 now through both licensed and surplus lines
13 insurers. And at this time we know and we’re aware
14 of five surplus lines insurer selling, and they’ve
15 written about a thousand private policies. And we
16 have four admitted insurers that currently write
17 about six hundred flood policies for homeowners.
18 So, what we did is, we announced
19 recently that -- we basically created a one-stop
20 shop for information on flood insurance on our
21 website. So, we now have information about both
22 private market options as well as NFIP insurance.
23 We have websites, phone numbers available, so
24 consumers can reach out and kind of find out if it
25 might be an option for them. 52
1 REPRESENTATIVE KINSEY: Great. Thank
2 you, Commissioner.
3 Also when you mentioned that FEMA had
4 redrew the map lines, will that allow for more home
5 owners to now be eligible for flood insurance? Is
6 that -- I mean, what was the purpose -
7 COMMISSIONER MILLER: Eligible is a
8 nice word. Essentially, if you get redrawn into a
9 flood map, you then have -- if you’ve got a
10 mortgage backed by the federal government, you then
11 have to have flood coverage. So, what we found is,
12 we talked to consumers who, because of the
13 redrawing of the maps, all of sudden they were in a
14 flood zone. They’d never been in a flood zone.
15 They’d never experienced flooding. And they were
16 being told -- they get a letter from their mortgage
17 broker saying, You now need flood insurance. And
18 they didn’t want it, in many cases, but that was
19 the situation.
20 REPRESENTATIVE KINSEY: But, again, all
21 this information pretty much is on the website, and
22 folks can find out through that?
23 COMMISSIONER MILLER: That’s right.
24 REPRESENTATIVE KINSEY: Well, thank you
25 very much, Commissioner. 53
1 COMMISSIONER MILLER: Thank you.
2 REPRESENTATIVE KINSEY: Thank you,
3 Mr. Chairman.
4 MAJORITY CHAIRMAN ADOLPH: Thank you,
5 Representative.
6 Representative Sue Helm.
7 REPRESENTATIVE HELM: Thank you,
8 Mr. Chairman.
9 C ommissioner.
10 COMMISSIONER MILLER: Hi.
11 REPRESENTATIVE HELM: I was going to
12 ask you about flood insurance. I do have one more
13 question with it.
14 With the Susquehanna River in my area,
15 a lot of areas, there’s a lot of houses that are
16 commercial as well as residential. And the
17 commercial are charged so much higher flood
18 insurance. Is this private coverage ever going to
19 extend to commercial?
20 COMMISSIONER MILLER: Representative,
21 my understanding -- and I can go back and confirm
22 with my staff -- but my understanding is the
23 commercial market hasn’t been the issue or the
24 concern as much as the -- as the residential
25 market. We just haven’t had -- I think the 54
1 commercial side has at least been writing flood
2 insurance historically. Historically, at least up
3 until the last couple years, you just didn't really
4 see private carriers offering private flood
5 insurance because they couldn't compete with the
6 NFIP and the subsidized premiums.
7 REPRESENTATIVE HELM: I think you might
8 be starting to hear from commercial people, because
9 it is going up sky high.
10 COMMISSIONER MILLER Interesting.
11 REPRESENTATIVE HELM So, please look
12 into it.
13 COMMISSIONER MILLER: Okay. I hadn't
14 heard that. Thank you.
15 REPRESENTATIVE HELM: Thank you.
16 MAJORITY CHAIRMAN ADOLPH: Thank you.
17 Representative Warren Kampf.
18 REPRESENTATIVE KAMPF: Good afternoon,
19 Commissioner.
20 COMMISSIONER MILLER: Good afternoon.
21 REPRESENTATIVE KAMPF: So, you are
22 the -- I mean, I suppose it's obvious, but let me
23 just state, you are the chief regulator for what
24 seems to me a very large and complex industry and
25 economic ecosystem in Pennsylvania. And I know 55
1 that's a big job. I see you have roughly a hundred
2 ninety people in the department. Is that right?
3 COMMISSIONER MILLER: We've got -- yes.
4 Actually, a little bit more than that. We've got
5 about two hundred seventeen right now.
6 REPRESENTATIVE KAMPF: Okay. And your
7 operating budget's about 24 million?
8 COMMISSIONER MILLER: Right.
9 REPRESENTATIVE KAMPF: All right. I
10 did notice and I was encouraged by this, one of
11 your principle goals -- I think you had sort of
12 four bullet points -- one of them was a competitive
13 and vibrant insurance market. And for many of my
14 constituents, that means competitive premiums, and
15 actually where I am, I'm in Chester and Montgomery
16 counties, whether you're familiar with that. It's
17 a place where there's actually a lot of employees
18 of our insurance company citizens. So, a vibrant
19 corporate economy is important in my area, and it
20 may be everywhere else in Pennsylvania.
21 So, my question to you is, on that
22 first bullet point, what is your department doing,
23 what might they do to make Pennsylvania more
24 hospitable to carriers and also to, say, better
25 rates? 56
1 COMMISSIONER MILLER: So, thank you for
2 the question, Representative.
3 The good news is, you know, we do have
4 a very vibrant, competitive market. And I meet
5 with companies on a very regular basis, and one of
6 the things I hear regularly when a company comes in
7 is: We really like doing business with
8 Pennsylvania.
9 I think as regulators, they know that
10 we’re going to treat them fairly, and that our
11 doors are open for any conversations. They can
12 come talk to us about anything they want to talk
13 about. And I think we try to be very fair.
14 I mentioned in my opening comments
15 that, you know, we strive for an even playing
16 field. I think that’s one of the things that’s
17 really important to industry, is they want to know
18 there’s an even playing field. So, you know, when
19 we come out with things like our position on price
20 optimization, I really did that because I wanted to
21 make sure we did have an even playing field. Most
22 companies were not using those techniques, and so,
23 coming out and being very clear with companies what
24 we’ll allow, what we won’t allow, and trying to be
25 very transparent about our positions. 57
1 One of the things I’ve noticed being a
2 regulator in Oregon and then here is oftentimes -
3 and I think this is something you see across the
4 board with insurance departments -- a lot of times
5 we regulate through conversations with companies,
6 just individual conversations. And companies that
7 are regularly talking to us know where we stand on
8 different issues. But we’re not always great -
9 and, again, I think this is just insurance
10 regulators generally -- we’re not always great
11 about putting out there in writing: Here’s where
12 we stand on this issue.
13 And I’m a big believer that I want to
14 be really transparent with companies, because I
15 want them to know what the rules are. And I don’t
16 want them to have to have an individual
17 conversation with somebody in the department to
18 know that. So, we have tried to be very
19 transparent about where we stand on issues, gather
20 feedback before we make decisions, but then make
21 sure we keep them very much in the loop on kind of
22 where we’re at.
23 But like I say, I’ve been really
24 surprised and pleased that, when folks come in, one
25 of the first things they say is: We just -- We 58
1 really like doing business in Pennsylvania. We
2 deal with a lot of regulators, and we think you’re
3 fair and open and really enjoy working with you.
4 So, I think we always -- I ask them
5 every time they come in: What can we do better?
6 Are there ways we can improve?
7 Because we really do want companies to
8 stay here, we want companies to come here, and I
9 think are doing what we can to create an
10 environment where they feel like they are treated
11 fairly and that they have an open door with their
12 regulator.
13 REPRESENTATIVE KAMPF: Well, maybe,
14 the — I won’t ask this as question. I’ll just
15 say, you know, fairness is certainly important, and
16 I’m glad to hear you talk about that.
17 It does strike me as somewhat
18 counterproductive to that theme to -- to have as a
19 proposal an increase in the premium tax. I think
20 it sort of goes in the wrong direction in terms of
21 saying to people who are here, entities who are
22 here or might want to expand here, you know, we’re
23 welcome, we’re open for business, we’d love to have
24 you.
25 So, if you could carry that back, I’d 59
1 really appreciate it.
2 COMMISSIONER MILLER: I appreciate
3 that.
4 REPRESENTATIVE KAMPF: Thank you.
5 MAJORITY CHAIRMAN ADOLPH: Yes. Thank
6 you, Commissioner.
7 One quick question regarding this
8 balance billing proposal. And this question I’m
9 asking because some of our emergency responders,
10 ambulance corps, how they are they going to stand
11 regarding this? Are they going to be exempt from
12 this? Or could you please take a few minutes and
13 explain that? Thank you.
14 COMMISSIONER MILLER: Thank you for the
15 question, Chairman.
16 So, we came up with -- after having the
17 public hearing last fall, we came up with kind of
18 our best shot at what proposed legislation might
19 look like, but really wanted to make sure that
20 before we turn over legislation to you all, we do
21 our due diligence and make sure we hear from
22 stakeholders and turn it into the best possible
23 proposal.
24 So, we did a public comment period on
25 it. We have heard from some of the folks you just 60
1 described. And, frankly, our -- if we haven’t
2 already, I think we are going to be reaching out to
3 them to say, Come sit down with us, because we
4 understand that they have issues that may be
5 outside of the issues we were really focused on.
6 And so, I want to make sure we hear them out and
7 figure out then -- right now, we’re really in a
8 period, for the next couple of months probably, of
9 trying to sift through all the comments and figure
10 out how do we create the best possible proposal for
11 all of you, and that’s going to involve reading
12 through a lot of comments, because we did get a
13 lot, but also encouraging folks to come in and sit
14 down with us and talk through it.
15 So, I don’t know where we’ll land, but
16 I can tell we’re going to reach out and sit down
17 and make sure we understand their concerns and try
18 and then craft the proposal in such a way that
19 makes sense for you all.
20 MAJORITY CHAIRMAN ADOLPH: Okay. Thank
21 you for that. And I know the many ambulance corps
22 around the commonwealth would certainly appreciate
23 that as well.
24 Chairman Markosek.
25 MINORITY CHAIRMAN MARKOSEK: 61
1 Commissioner Miller, I was at another meeting, and
2 I got here late. The other good-looking guy that
3 was here was Vice Chairman Mike O'Brien, but I
4 didn't get a chance to welcome you, and I'm sorry
5 about that. But welcome.
6 And now that you're finished, hi and
7 goodbye kind of a thing, but, no, we look forward
8 to working with you. And thank you for your
9 testimony.
10 COMMISSIONER MILLER: Thank you,
11 Chairman.
12 MAJORITY CHAIRMAN ADOLPH: Thank you,
13 Chairman.
14 Thank you for your testimony,
15 Commissioner. Appreciate your testimony.
16 Appreciate the job you're doing. And a lot of
17 issues, and we're looking forward to working with
18 you and your staff between now and the end of June.
19 Thank you.
20 COMMISSIONER MILLER: Thank you very
21 much.
22 MAJORITY CHAIRMAN ADOLPH: Members of
23 the committee, the committee will reconvene
24 tomorrow morning at 9:30 a.m., with the Department
25 of Health and the Department of Drug and Alcohol 62
1 programs.
2 Thank you.
3 (Whereupon, the hearing concluded at
4 3:45 p.m.)
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1 REPORTER'S CERTIFICATE
2 I HEREBY CERTIFY that I was present
3 upon the hearing of the above-entitled matter and
4 there reported stenographically the proceedings had
5 and the testimony produced; and I further certify
6 that the foregoing is a true and correct transcript
7 of my said stenographic notes.
8
9 BRENDA J. PARDUN, RPR 10 Court Reporter Notary Public 11
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