Pa. bud­get pack­age hit by $200M suit

The Hazleton Standard-Speaker - - LOCAL / STATE - BY MARC LEVY

HAR­RIS­BURG — A state-cre­ated med­i­cal mal­prac­tice in­surer of last re­sort is ask­ing a fed­eral judge to block the Penn­syl­va­nia gov­ern­ment’ s de­mand for $200 mil­lion from its re­serves and a threat to shut it down if it does not hand over the cash.

The Penn­syl­va­nia Pro­fess ion al Li­a­bil­ity Joint Un­der­writ­ing As­so­ci­a­tion sued last week and said the state’s at­tempt to take most of its re­serves is an un­con­sti­tu­tional na­tion­al­iza­tion of a non­profit or­ga­ni­za­tion.

It said in court pa­pers that los­ing that amount of money would “se­ri­ously im­peril” its abil­ity to make good on its cov­er­age obli­ga­tions to its pol­icy hold­ers.

Bud­get-re­lated leg­is­la­tion signed by Demo­cratic Gov. Tom Wolf last month would shut­down the as­so­ci­a­tion on Dec .1 if it doesn’t hand over the $200 mil­lion, which the state has sought to help stabi - lize its deficit-rid­den fi­nances.

U.S. District Judge Christo­pher C. Con­ner in Har­ris­burg sched­uled a hear­ing today on the as­so­ci­a­tion’ s re­quest for an in­junc­tion.

Block­ing the state’ s de­mand would pre­sum­ably blow a $200 mil­lion hole in a $32 bil­lion state bud­get that al­ready re­lies heav­ily on bor­row­ing and other one-time cash in­fu­sions, a pack­age driven by the Leg­is­la­ture’s huge bloc of anti-tax Repub­li­cans.

In a re­sponse filed Mon­day, the Penn­syl­va­nia at­tor­ney gen­eral’ s of­fice said the state cre­ated the as­so­ci­a­tion and can dis­solve it.

The as­so­ci­a­tion’s re­serves are ex­ces­sive and do not be­long to it, state lawyers said.

The as­so­ci­a­tion, cre­ated by the state in 1975 amid a med­i­cal mal­prac­tice cri­sis, pro­vides cov­er­age to more than 600 health care providers, and it said in court pa­pers that its re­serves were gen­er­ated from pre­mi­ums.

The state has no right to the money, it said, and no reg­u­la­tor, such as the state De par tment of In­sur­ance, has deemed the as­so­ci­a­tion’s re­serves to be ex­ces­sive.

Tax­payer money has never funded any of the as­so­ci­a­tion’ s op­er­a­tions, and its em­ploy­ees are not hired or paid by the state, it said. As of last Dec. 31, it had a sur­plus of $268 mil­lion, it said.

Hand­ing over the $200 mil­lion would also force it to ab­sorb trans­ac­tion costs, such as bro­ker­age fees, and sub­ject it to losses on the value of its in­vest­ments.

Trans­fer ring the $200 mil­lion would threaten the as­so­ci­a­tion’ s tax-ex­empt sta­tus, and the re­sult­ing tax bur­den could leave it with­out enough cash to ful­fill its poli­cies, it said.

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