I received a 1099R for a 2012 insurance contract distribution ( I cashed out the policy). Do I need to claim the amount in box 2a (taxable amount) on my PA State Tax return?

Probably. The insurance companies know all the ins and out of the tax laws concerning their products, so if they say it is taxable, it probably IS taxable.

I know that the amount in box 2a is taxable. The specific question is whether it's Pennsylvania State taxable.

If it is taxable on the federal level, almost always, it will be taxable on the state level.