Bud­get pack­age hit with law­suit

As­so­ci­a­tion chal­lenges de­mand for $200M

The Reporter (Lansdale, PA) - - FRONT PAGE - By Marc Levy

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 Pro­fes­sional 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 abil-

ity to make good on its cov­er­age obli­ga­tions to its pol­icy hold­ers.

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

U.S. Dis­trict Judge Christo­pher C. Con­ner in Harrisburg sched­uled a Tues­day hear­ing 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 an­ti­tax 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 Depart­ment 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.

Trans­fer­ring 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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