RULES AND REGULATIONS
Title 31--INSURANCE
INSURANCE DEPARTMENT
[31 PA. CODE CH. 165]
Workers' Compensation Security Fund
[33 Pa.B. 24] The Insurance Department (Department) adopts Chapter 165 (relating to Workers' Compensation Security Fund) to read as set forth at 32 Pa.B. 3398 (July 13, 2002) and as set forth in Annex A.
Statutory Authority
This final-form rulemaking is adopted under the authority of sections 205, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S. §§ 66, 186, 411 and 412); and the Workers Compensation Security Fund Act (act) (77 P. S. §§ 1051--1066).
Comments and Response
Notice of proposed rulemaking was published at 32 Pa.B. 3398 with a 30-day comment period. During the 30-day comment period, comments were received from the Alliance of American Insurers (AAI) and the Insurance Federation of Pennsylvania, Inc. (IFP).
During its regulatory review, the Independent Regulatory Review Commission (IRRC) submitted comments to the Department. The following is a response to those comments.
The AAI stated that the Department's regulation, particularly § 165.7 (relating to assessment) should be consistent with the statute provisions under section 5 of the act (77 P. S. § 1055) which limits the assessment on an insurer to 1% of its net written premiums for the period covered by its annual return. The statute also provides for the elimination of the assessment when the aggregate amount of payments into the fund, along with accumulated interest, less expenditures and known liabilities, is equal to 5% of the loss reserves of all insurers and reciprocal exchanges. The AAI then stated that when the amount in the fund is reduced below the 5% of the loss reserves, the assessment on insurers is resumed. And since the remainder of the rule mirrors the statutory provisions, § 165.7 should also mirror the statutory provisions relating to the contribution made to the fund by insurers.
Apparently, the AAI was not aware that the intent of the General Assembly was to eliminate an assessment unless absolutely needed. The act indicates that the amendments to section 5 of the act and section 10 of the act (77 P. S. § 1060) would take effect on the effective date of the regulations promulgated under section 9(1) of the act (77 P. S. § 1059(1)). It is the Department's intent to eliminate the assessment, in accordance to the General Assembly's wishes, until absolutely necessary. The formula that the Department has suggested in § 165.7 meets that intention and is appropriate; therefore, the Department has not changed the section as requested by the AAI.
The IFP stated that as the Department has closely followed the language of Act 49, the Federation had no comments to the Department's proposed language. The IFP supported the prompt promulgation of the chapter and looks forward to working with the Department on areas of mutual concern during its implementation.
Department Thanks the IFP for its Support on this Rulemaking
IRRC during its review had only two concerns. First, in § 165.7, subsection (c) stated, ''The assessment, when necessary, will be billed by December 31 of the year subsequently, used in the actuarial study.'' The reference to ''the year subsequently used in the actuarial study'' is confusing. It was IRRC's understanding that the bill will be issued by December 31 of the year in which the actuarial study is completed. IRRC suggested that subsection (c) should be amended in the final-form rulemaking to clearly reflect the timing of the bill. IRRC also wanted the Department to consider using an example to clarify this subsection.
Second, IRRC noted that in subsection (d), the word ''be'' should be deleted in the phrase ''is be due by March 31.''
The Department has no problem with the clarification as requested and has changed subsection (c) to read ''The assessment, when necessary, will be billed by December 31 of the year that the actuarial study is completed. (Example: Data from the 2002 calendar year is used, the actuarial study is completed in 2003, then the assessment will be made by December 31, 2003.)''
The Department also corrected subsection (d). This error was due to a change that was made in the publishing of the proposed rulemaking and was not in the original proposed rulemaking as submitted by the Department to the Legislative Committees and IRRC.
Affected Parties
The final-form rulemaking applies to insurance companies doing the business of workers' compensation insurance companies in this Commonwealth.
Fiscal Impact
State Government
There will be no increase in cost to the Department due to the adoption of this final-form rulemaking.
General Public
The adoption of this final-form rulemaking will not impose additional costs on the general public.
Political Subdivisions
The adoption of this final-form rulemaking will not impose additional costs on political subdivisions.
Private Sector
This rulemaking may result in a savings of $1 million dollars to the private sector (insurance industry) over a 5-year period.
Paperwork
This final-form rulemaking will not result in any additional paperwork requirement on the Department.
Effectiveness/Sunset Date
This rulemaking will become effective upon final publication in the Pennsylvania Bulletin as final-form regulations. No sunset date has been assigned.
Contact person
Questions regarding this final-form rulemaking should be directed to Peter J. Salvatore, Regulatory Coordinator, Office of Special Projects, 1326 Strawberry Square, Harrisburg, PA 17120, (717) 787-4429. In addition, questions may be e-mailed to psalvatore@state.pa.us or faxed to (717) 705-3873.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on October 25, 2002, the Department submitted a copy of the proposed rulemaking to IRRC and to the Chairpersons of the House Insurance Committee and the Senate Banking and Insurance Committee. In addition to the submitted proposed rulemaking, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the agency in compliance with Executive Order 1996-1, ''Regulatory Review and Promulgation.'' A copy of that material is available to the public upon request.
In preparing these final-form regulations, the Department considered all comments received from IRRC, the Committees and the public. Under section 5.1(d) of the Regulatory Review Act (71 P. S. § 745.5a(d)), this final form rulemaking was deemed approved by the House and Senate Committees on November 14, 2002. Under section 5.1(e) of the Regulatory Review Act, IRRC met on November 21, 2002, and approved the final-form rulemaking.
Findings
The Commissioner finds that:
(1) Public notice of intention to adopt this final-form rulemaking as amended by this order has been given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) The adoption of this rulemaking in the manner provided in this order is necessary and appropriate for the administration and enforcement of the authorizing statutes.
Order
The Commissioner, acting under the authorizing statutes, orders that:
(a) The regulations of the Department, 31 Pa. Code, are amended by adding §§ 165.1--165.6 and 165.8 to read as set forth at 32 Pa.B. 3398; and by adding § 165.7 to read as set forth in Annex A.
(b) The Commissioner shall submit this order, 32 Pa.B. 3398 and Annex A to the Office of General Counsel and Office of Attorney General for approval as to form and legality as required by law.
(c) The Commissioner shall certify this order, 32 Pa.B. 3398 and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(d) The rulemaking adopted by this order shall take effect upon final-form publication in the Pennsylvania Bulletin.
M. DIANE KOKEN,
Insurance Commissioner(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 32 Pa.B. 6016 (December 7, 2002).)
Fiscal Note: Fiscal Note 11-210 remains valid for the final adoption of the subject regulations.
Annex A
TITLE 31. INSURANCE
PART VIII. MISCELLANEOUS PROVISIONS
CHAPTER 165. WORKERS' COMPENSATION SECURITY FUND § 165.7. Assessment.
(a) The amount of an assessment will be determined by using the actuarial services described in § 165.5 (relating to administration).
(b) Every carrier, doing the business of workers' compensation insurance in this Commonwealth, will be assessed, based on a prorata share of the total amount of net-written premiums of workers' compensation insurance reported as written in the previous calendar year's annual statement.
(c) The assessment, when necessary, will be billed by December 31 of the year that the actuarial study is completed. (Example: Data from the 2002 calendar year is used, the actuarial study is completed in 2003, then the assessment will be made by December 31, 2003.)
(d) Payment of the assessment, when applicable, is due by March 31 of the year following the assessment.
[Pa.B. Doc. No. 03-11. Filed for public inspection January 3, 2003, 9:00 a.m.]
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