MINUTES OF MEETING

      ASSEMBLY COMMITTEE ON COMMERCE

 

      Sixty-seventh Session

      June 4, 1993

 

 

 

The Assembly Committee on Commerce was called to order by Chairman Gene T. Porter at 1:20 p.m., on Friday, June 4, 1993, in Room 332 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Meeting Agenda, Exhibit B is the Attendance Roster.

 

 

COMMITTEE MEMBERS PRESENT:

 

      Mr. Gene T. Porter, Chairman

      Mr. Morse Arberry, Jr., Vice Chairman

      Ms. Kathy M. Augustine

      Mr. Rick C. Bennett

      Mr. John Bonaventura

      Mr. Val Z. Garner

      Ms. Chris Giunchigliani

      Mr. Dean A. Heller

      Mr. David E. Humke

      Ms. Erin Kenny

      Mr. Richard Perkins

      Mr. Scott Scherer

      Ms. Myrna T. Williams

 

 

COMMITTEE MEMBERS ABSENT:

 

      None

 

GUEST LEGISLATORS PRESENT:

 

      None

 

STAFF MEMBERS PRESENT:

 

      Mr. Paul Mouritsen, Senior Staff Analyst, Legislative    Counsel Bureau

 

OTHERS PRESENT:

 

      Mr. Pat Coward, Nevada Land Title Association and Grocery Industry Council of the Retail Association of Nevada; Mr. Charles T. Cook, Legislative Chairman, Nevada Land Title Association; Captain Randy Oaks, Legislative Liaison, Las Vegas Metropolitan Police Department; Mr. David Reese, Nevada State Contractor's Board; Mr. Mark Brown, Associated General Contractors; Mr. Larry Struve, Director, Department of Commerce; Mr. Fred Hillerby, Nevada State Board of Pharmacy; Mr. Jeff Monahan, President, Nevada State Board of Pharmacy; Ms. Bobbie Gang, Nevada Pharmacists Association and Nevada Society of Hospital Pharmacists;  Ms. Mary Santina, Executive Director of Retail Association of Nevada; Mr. Dennis Stein, President and C.E.O., Nevada Development Authority; Mr. David Chen; Mr. Joseph Brown, National RX Services; Ms. Laurie Squartsoff, Pharmaceutical Consultant, Medicaid Office, Welfare Division, Department of Human Resources; Mr. Danny Thompson, AFL/CIO; Mr. Bill Webb; Ms. Teresa Rankin, Insurance Commissioner; Mr. Frank Collins, General Counsel, Sierra Health Services, Inc.; Ms. Marie Soldo, Sierra Health Services, Inc.; Mr. Robert Byrd, President, NML Insurance Company (See also Exhibit B attached hereto).

 

 

ASSEMBLY BILL 669Makes various changes relating to title to real property.

 

Mr. Pat Coward, Nevada Land Title Association, introduced Mr. Charles T. Cook, Legislative Chairman, Nevada Land Title Association.

 

Mr. Charles T. Cook testified.  He advised Sections 1 through 5 of AB 669 contained definitions and the primary purpose of those sections was to distinguish between insurance products and abstracts of title.  He said definitions of "commitment to insurer," "preliminary report of title" and "policy of title insurance" were contained in Sections 4 and 5.

 

He stated Section 7 was "a housekeeping measure to bring within the permitted exceptions the title agent as well as the title insurer."

 

He indicated Section 2, subsection (b), of Section 8 added "closing letters" to those documents which need not be filed.  He advised that addition was made because closing letters were referred to in the definitions included under the business of title insurance and because it was common practice in the industry not to file such closing letters with the commissioner.

 

Mr. Cook said Section 9 was designed to address "earnest money" disputes which arose when escrows failed to close and to motivate individuals not to refuse to sign escrow documents without good reason.

 

Chairman Porter referred to the provision contained in Section 9, at lines 46 through 48 on page 3, and asked if that provision precluded an action for specific performance to enforce a real estate contract.  Mr. Cook said it was not intended to preclude such an action.  Chairman Porter asked why, then, the provision under discussion was included in Chapter 40 of NRS which dealt with actions concerning real property.  Mr. Cook replied the Legislative Counsel Bureau had chosen Chapter 40 as the chapter in which to include that provision. 

 

Mr. Cook advised in Sections 10 and 11, the words "discharge or release" were being replaced by the word "conveyance," which term was used in the real estate industry.  He said Section 11 also added a provision which would allow a title insurance company to issue a release of a deed of trust, which would operate as a reconveyance, if the company was unable to obtain a request for reconveyance.

 

Mr. Cook explained Chapter 12 added the language "two or more parcels, lots or tracts of land" to NRS 108.231 which dealt with mechanics liens.  He said the purpose of adding that language was to dissuade mechanics lien claimants from filing a mechanics lien on an entire subdivision when they had performed work only on certain lots within that subdivision.

 

Mr. Cook said Section 13 pertained to preparation of subdivision maps.  He stated under present statute, a title company was required to certify certain things.  He contended such certification constituted a guarantee to an unlimited number of people for an unlimited sum of money.  He advised, "...we already have an insurance product that's on file, called a guarantee, which addresses those matters..," and therefore, Section 13 would change the certification provision to provide a title company certify it had issued the appropriate guarantee.

 

Mr. Bonaventura referred to Section 9, subsection 2(a).  He asked if that provision would require an individual who deposited (in escrow) the sum of $5,000 as proof of his earnest intention (to purchase real property) to pay to the seller of the property the sum of $15,000 if the individual first breached his contract and then refused to sign those papers necessary to relinquish his deposit to the seller.  Mr. Cook replied he believed the provision could be interpreted to require the individual to do so, but he said such a situation would not arise unless no good faith dispute existed.

 

Chairman Porter commented Section 9, basically, would rewrite a contract between parties and would attempt to determine the intent of those parties in the event their contract did not set forth that intent.  He suggested Section 9 be deleted from AB 669.

 

Chairman Porter closed the hearing on AB 669.

 

      ASSEMBLYMAN BENNETT MOVED TO AMEND AB 669 BY DELETING

      SECTION 9 AND DO PASS.

 

      ASSEMBLYMAN GIUNCHIGLIANI SECONDED THE MOTION.

 

      THE MOTION WAS CARRIED UNANIMOUSLY BY ALL THOSE PRESENT; Assemblymen Augustine, Heller, Scherer and Williams were absent at the time of the vote.

 

ASSEMBLY BILL 674Prohibits county or city from prohibiting certain persons from performing massages on persons of opposite sex in massage establishment.

 

Assemblyman Chris Giunchigliani, District 9, left her chair in the committee to testify in support of AB 674.  She advised she introduced AB 674 at the request of certain salon owners in the Las Vegas area who wished to expand the services their salons provided to include licensed massage as well as hair and nail services.  She said currently, statutes governing massage were applied inconsistently throughout Nevada.  She said AB 674 was intended to provide only that in properly licensed establishments, women could perform massage on men and men could perform massage on women.

 

Mr. Porter asked if his understanding was correct in Clark County massage was governed by county ordinance which prohibited males from giving massages to females and females from giving massages to males.  Ms. Giunchigliani replied affirmatively.  Mr. Porter asked, "What do the other county ordinances deal with?"  Ms. Giunchigliani replied Henderson County and Douglas County allowed it (individuals of one gender to perform massage on individuals of the other gender).  She indicated she did not have information regarding other counties' ordinances, but it appeared what was permitted by those ordinances varied among counties.

 

Captain Randy Oaks, Legislative Liaison, Las Vegas Metropolitan Police Department, testified.  He said the department opposed AB 674.  He stated the department was not opposed to the intent of AB 674 as expressed by Ms. Giunchigliani but advised both Las Vegas and Clark County had ordinances which prohibited "opposite sex massage" because there had been a number of massage parlors in Las Vegas and Clark County which were established as fronts for prostitution.  He said the department feared massage parlors would again become fronts for prostitution if local ordinances were repealed by AB 674.  He stated if there was a way to permit bona fide parlors, involved in such activities as hair and nail services, to provide massage without "...opening the door for the sleaze operators...," the department would be happy to do so.

 

Ms. Giunchigliani asked if anything could be added to AB 674 which would address the department's concern.  Captain Oaks responded he did not know how AB 674 could be amended to "...take care of the sleaze operators..." 

 

A brief colloquy ensued between Ms. Giunchigliani and Captain Oaks.

 

Chairman Porter closed the hearing on AB 674.

 

SENATE BILL 211   Repeals provision authorizing state board of nursing to certify nursing assistants to perform designated acts in medical facilities which provide acute care.

 

No one appeared to testify on SB 211.

 

      ASSEMBLYMN ARBERRY MOVED TO INDEFINITELY POSTPONE SB 211.

 

      ASSEMBLYMAN HUMKE SECONDED THE MOTION.

 

      THE MOTION WAS CARRIED UNANIMOUSLY.

 

SENATE BILL 212   Makes various changes relating to licensing of contractors.

 

Mr. David Reese, Nevada State Contractor's Board, testified in support of SB 212.  He advised one of the things SB 212 would accomplish was to add language to NRS 624.254 which would permit the board to address situations in which the board determined use of a particular name (by a contractor) would mislead the public.  He said some contractors came into Nevada using a specific name, qualified their companies to do business in Nevada and then filed "a fictitious name listing" to do business under another name.  He indicated there was no requirement a company using a fictitious name "qualify that name" with the secretary of state.  He declared the board believed members of the public were entitled to know with whom they were dealing.

 

Chairman Porter referred to Section 2, subsection 2(k), of SB 212 and asked what difference it made whether a contractor was a corporation, partnership, sole proprietorship or other type of business entity.  Mr. Reese replied, "This is simply clean up language because we've got limited liability companies.  We've got any number of entities that can do business now and can be licensed as contractors, and this cleans that language up." 

 

Mr. Reese indicated another thing SB 212 would accomplish was to require licensees who filed insolvency proceedings to notify the board of that fact and to provide the board with copies of both their petitions for bankruptcy or insolvency and any orders relevant to their financial responsibility.  He said the board had the responsibility to ensure contractors had "...the requisite financial responsibility to hold the particular monetary limit that their license has."

 

Chairman Porter again asked what difference it made whether a contractor was a partnership, corporation or sole proprietorship.  Mr. Reese suggested the purpose of the language in Section 2, subsection 2(k), was to enable the board to deal with the many types of business entities which could be licensed. 

 

Mr. Mark Brown, Associated General Contractors, testified.  He said Associated General Contractors supported SB 212.  He advised he too (as well as Mr. Porter) did not understand subsection 2(k) of Section 2 and recommended it be deleted.

 

Chairman Porter closed the hearing on SB 212.

 

      ASSEMBLYMAN BONAVENTURA MOVED TO AMEND SB 212 BY DELETING LINES 12 THROUGH 14 ON PAGE 2 AND DO PASS.

 

      ASSEMBLYMAN AUGUSTINE SECONDED THE MOTION.

 

      THE MOTION WAS CARRIED UNANIMOUSLY.

 

SENATE BILL 422   Increases license fees for real estate brokers, broker-salesmen and salesmen.

 

Mr. Larry Struve, Director, Department of Commerce, testified after first introducing Ms. Joan G. Buchanan, Division Coordinator, Real Estate Division.  He advised SB 422 had been included in the Governor's executive budget and the effect of SB 422 would be to raise $459,000 in additional revenue, which would enable the Real Estate Division's budget to be funded for the next biennium.   

 

      ASSEMBLYMAN WILLIAMS MOVED DO PASS SB 422.

 

      ASSEMBLYMAN GARNER SECONDED THE MOTION.

 

      THE MOTION WAS CARRIED; Assemblyman Bonaventura voted "no."

 

SENATE BILL 399   Provides for regulation of supportive personnel in pharmacies and counseling of patients.

 

Mr. Fred Hillerby, Nevada State Board of Pharmacy, introduced Mr. Jeff Monahan, President, Nevada State Board of Pharmacy. 

 

Mr. Monahan testified.  He said SB 399 accomplished two things, the first of which was to allow patient counseling with regard to medications and the second of which was to address use of supportive personnel in pharmacies to enable such counseling.

 

Mr. Monahan stated patient counseling was a public policy issue. He advised such counseling was federally mandated for "medicated patients" and 45 states currently had regulations which addressed such counseling.

 

Mr. Monahan referred to the first page of a handout he provided  (Exhibit C) and contended there were staggering costs to the health care system as a result of suboptimal prescribing, adverse drug reactions and patient noncompliance.  He pointed out it was estimated of the 1.8 billion prescriptions filled annually, half were not taken properly and failure to take medications properly was the cause of approximately 10 percent of all hospital admissions.

 

Mr. Monahan explained SB 399 also concerned expansion of use of supportive personnel in pharmacies.  He contended without such expansion, pharmacists would not be able to perform needed counseling functions.  He indicated use of supportive personnel in Nevada was not new but had existed since 1973.  He advised there were presently 174 hospital pharmacy technicians in Nevada, use of whom had allowed hospital pharmacists to contribute to better patient care.  He said the board intended to regulate supportive personnel in pharmacies in much the same way as it regulated such personnel in hospitals.  Mr. Monahan declared he was not aware of any patient harm directly attributed to use of pharmacy technicians having occurred during the 18 years in which he had practiced pharmacy in Nevada; he contended in fact, much harm to patients had been averted.

 

Mr. Monahan said the committee might be led to believe incompetent supportive personnel would be employed or supportive personnel would be used outside the regulations passed by the board.  He referred to a document entitled "Statement of Corporate Responsibility" contained in Exhibit C and indicated that document was given to the committee to emphasize the board took seriously the responsibility of corporations to adhere to laws governing pharmacies.  He declared corporations could not require or permit a pharmacist to violate any provision of such laws.

 

Ms. Bobbie Gang, Nevada Pharmacists Association and Nevada Society of Hospital Pharmacists, testified, saying only that both entities she represented supported SB 399.

 

Mr. Pat Coward, Grocery Industry Council of the Retail Association of Nevada, testified.  He said the council supported SB 399, and he presented written testimony (Exhibit D).

 

Ms. Mary Santina, Executive Director of Retail Association of Nevada, testified, saying the association's Chain Drug Council and the association itself supported SB 399.

 

Ms. Augustine asked if the regulations to be adopted by the State Board of Pharmacy would be in effect by the time SB 399 became law (if passed by the legislature).  A colloquy ensued between Ms. Augustine and Mr. Monahan.  Mr. Monahan then said, "We will have those regulations in place."   Mr. Fred Hillerby interjected a further response to Ms. Augustine's question and said pharmacy support personnel could neither be hired nor trained until the board's regulations were "in place."

 

Mr. Scherer suggested minimum standards for supportive personnel, such as "...a maximum ratio and a minimum educational requirements...," should be set forth in statute rather than be left to be determined entirely by the board's regulations.  Mr. Monahan responded, "I think we could approach it that way..."             

Mrs. Williams asked Mr. Monahan to describe the educational background which would be required of pharmacy support personnel.  Mr. Monahan indicated the minimum educational requirement which had been discussed was graduation from high school.  He contended adequate training programs were more important than education and said the board would like to define those training programs by regulation. 

 

Discussions ensued among committee members and various witnesses regarding minimum standards for pharmacy support personnel, inclusion of such standards in statute and adoption of regulations by the board.

 

Mr. Dennis Stein, President and C.E.O., Nevada Development Authority, testified in support of SB 399.  He stated Nevada's pro-business attitude was heavily promoted by the authority in connection with economic diversification.  He contended that attitude was seriously considered by "C.E.Os" in determining where to locate their facilities.

 

He proposed the ability to use pharmacy support personnel to perform technical functions under the supervision of pharmacists, as provided by SB 399, was important to Nevada's ability to continue to attract pharmaceutical companies such as National RX Services.  He advised other states currently allowed use of such support personnel.  He contended if Nevada was not competitive, neither would it be able to attract more companies, such as National RX Services, nor would it be seriously considered by such companies with regard to expansion, and it could experience a reduction in the current operations of such companies. 

 

Mr. Stein advised National RX Services currently had 11 "operations" in 9 states, including Nevada, and was one of Nevada's good corporate citizens.  He stated each of the eight other states in which National RX Services conducted its business operations had legislation which allowed use of technicians.  He said the company was considering major expansion and passage of SB 399 was very important with regard to that consideration.  He suggested other states would provide better business opportunities for National RX Services because those states would allow the company to use technicians in the manner proposed by SB 399.

 

Mr. Stein declared Nevada must continue to send a pro-business message to the corporate world and urged the committee to support the passage of SB 399.

 

Mr. David Chen, testified.  He advised he was a registered pharmacist and general manager of the AARP pharmacy service in Sparks.  He stated he supported SB 399.  He said currently 35 pharmacists worked in his facilities, every one of which looked forward to having support personnel to assist them in performing their work more efficiently.   

 

 

Mrs. Williams asked how pharmacists would perform counseling and whether federal law required each and every person who filled a prescription be counseled.  Mr. Monahan replied what was proposed was an "offer to counsel" and indicated federal law required such an offer. 

 

Mrs. Williams indicated she was uncertain what increase there would be in pharmacists' work loads if people were not aware they had the opportunity to receive counseling.  She inquired what would be done to apprise people of that opportunity.  Mr. Monahan said signs would be displayed to make people aware of the offer of counseling.  He advised approximately 40 to 50 percent of those individuals who had prescriptions filled wished to discuss their medications with a pharmacist.

 

Mrs. Williams suggested many people who received medication were homebound and asked how it could be ensured those people would receive accurate information (regarding their medications).  Mr. Monahan said pharmacists would be allowed to provide written information with medications and telephone numbers (to call for counseling) would be made available.  Mr. Chen indicated the pharmacy service he managed provided people who received medications with an "800" telephone number which they could call in order to speak to a pharmacist. 

 

Mrs. Williams asked how pharmacists would obtain a history of medications patients were receiving in order to counsel those patients.  Mr. Monahan said the board's regulations would address patient records and advised many computer systems (used by pharmacies) would "flag" drug interactions and drug duplications.  Mr. Hillerby interjected the Assembly, that day, had passed a bill which would allow pharmacists to communicate with one another and exchange information regarding drugs being taken by patients.

 

Ms. Kenny asked Mr. Chen whether use of support personnel in pharmacies would result in some pharmacists losing their jobs.  Mr. Chen indicated he did not envision that happening.  Ms. Kenny suggested if the number of pharmacists was not reduced and in addition, support personnel were utilized, pharmacies' overhead would be increased.   She asked if costs to patients would also be increased.  Mr. Chen replied, "No."  Mr. Monahan interjected SB 399 would allow technicians to perform some of the "nonjudgmental" tasks pharmacists presently performed,  thereby freeing pharmacists to give counseling to patients.  He said, "I see it more as a role reversal than adding people."

 

Mr. Pat Coward also responded to Ms. Kenny's question regarding increased cost to patients.  He advised Nevada was one of seven states which did not utilize pharmacy technicians or ancillary personnel.  He indicated the average pharmacist's wage was between $26 and $28 per hour and the average pharmacy technician's wage was between $7 and $8 per hour.  He said chain drug stores and the grocery industry absorbed approximately $1 to $2 per prescription when they used pharmacists to provide counseling.

 

Mr. Coward stated in all areas in which ancillary personnel were utilized, there had been no reduction in pharmacy jobs but there had been a more efficient distribution of work load.

 

Ms. Kenny said perhaps she had missed Mr. Stein's point when he spoke of "competition" and asked for an explanation.

 

Mr. Joseph Brown, National RX Services, responded to Ms. Kenny's question.  He said he believed by "competition," Mr. Stein meant competition from other states.  He said National RX Services had a large facility in Clark County which had approximately 380 employees of which approximately 103 were pharmacists.  He stated in addition to its facility in Clark County, National RX Services had 10 facilities in other states.  He advised National RX Services' business was growing and it would like to double the size of its facility in Clark County.  He said, "...however, because we don't have the supportive personnel bill here and every other state does, that if this bill does not pass, they will have to take it probably to Texas."  He contended Nevada was competing with Texas for 300 to 400 jobs.

 

Ms. Kenny asked if other states had regulations or statutes governing use of supportive personnel in pharmacies.  Mr. Brown implied how use of support personnel in pharmacies was governed varied from state to state.  Ms. Kenny commented it appeared dangerous to fail to provide regulations or educational requirements for support personnel.   

 

Mr. Brown stated in Nevada, facilities for dispensing pharmaceuticals differed and it was believed the board should review each facility when establishing regulations to which  that facility should adhere. 

 

Ms. Augustine contended if pharmacy support personnel were to be regulated, regulations should be uniform.  She asked what regulations existed in other states.  Mr. Brown replied there was no uniform regulation.  Ms. Augustine asked for a general idea of other states' regulations.  Mr. Chen indicated he wished to respond and said in AARP's facilities in Oregon, the educational requirement for pharmacy support technicians was approximately that of a high school education.  He advised those pharmacies had training programs through which to train individuals to work in different pharmacy settings.

 

Ms. Augustine asked why a mail order pharmacy would need to free a pharmacist to provide counseling when such a pharmacy had few or no patients (physically present).  Mr. Chen suggested counseling was only one aspect of use of support personnel and said such personnel helped accomplish much of the work a pharmacist must do.  He said his facilities also had an "800" number for patients to call to receive counseling and it was necessary to free a pharmacist to provide that counseling.

 

Ms. Laurie Squartsoff, Pharmaceutical Consultant, Medicaid Office, Welfare Division, Department of Human Resources, testified by reading from prepared text (Exhibit E).

 

Mr. Danny Thompson, AFL/CIO, testified.  He advised he raised objections to SB 399 when it was heard by the Senate.  He said the Senate passed SB 399 based upon an agreement that pharmacists would confer with representatives of the pharmacy board and attempt to arrive at an agreement prior to SB 399 being heard by the Assembly.  He indicated that conference had not occurred and expressed surprise at the fact SB 399 was being heard by the committee.  He requested no action be taken on SB 399 until an attempt could be made to resolve differences concerning the bill; he stated otherwise, the AFL/CIO opposed SB 399.

 

Mr. Bill Webb testified.  Mr. Webb stated he was a pharmacist in Las Vegas.  He presented a copy of a petition signed by 170 of his colleagues (Exhibit F) and advised he had presented the original petition to the Senate Committee on Commerce and Labor when he testified before that committee.  He also presented a written synopsis of federal regulations regarding the Omnibus Reconciliation Act of 1990 (OBRA 90) together with a copy of California's regulations for pharmacy technicians (jointly, Exhibit G).

 

He advised the petition (Exhibit F) concerned several issues pharmacists believed should be addressed by statute.  He stated some of those issues were addressed by amendments to SB 399 when it was passed by the Senate but several issues remained unresolved.

 

Mr. Webb declared most pharmacists agreed there was a need to counsel patients and said he had always done so and would continue to do so whether or not OBRA 90 was in effect.  He contended OBRA 90 did not mandate use of supportive personnel to accomplish counseling and he believed counseling could be accomplished without the use of such personnel.  He stated he believed the clerical employees most pharmacies currently employed were capable of performing "nondiscretionary tasks" and thereby freeing pharmacists to provide counseling.

 

Mr. Webb contended minimum standards for supportive personnel should be established by statute, not by regulations of the pharmacy board.  He suggested if the committee believed SB 399 was necessary, as a minimum, California's regulations governing pharmacy support personnel should be adopted. 

 

Chairman Porter closed the hearing on SB 399.

 

SENATE BILL 368   Revises definition of "institutional pharmacy".

 

Ms. Bobbie Gang, Nevada Pharmacists Association, testified.  She advised SB 368 would expand the definition of "institutional pharmacy" and would permit the Board of Pharmacy to regulate institutional pharmacies in the same manner in which it presently regulated (pharmacies located in) medical facilities.

 

She stated Section 1 of SB 368 referred to NRS 639 which dealt with pharmacists and pharmacies, Section 2 referred to NRS 453 which dealt with controlled substances and Section 3 referred to NRS 454 which dealt with poisons, dangerous drugs, hypodermics and prophylactics.  She said SB 368 would cause identical language to be inserted in each of those three chapters of NRS for the purpose of expanding the definition of "institutional pharmacy."  She explained institutional pharmacies were those which provided medications to medical facilities.

 

Ms. Gang urged the committee to support SB 368. 

 

Chairman Porter closed the hearing on SB 368.

 

ASSEMBLY BILL 681Changes insurance code for insolvency of insurers and accreditation of department of insurance.

 

Ms. Teresa Rankin, Insurance Commissioner, testified.  Ms. Rankin emphasized the protections for review of solvency of insurance companies provided by AB 681 comprised one of the most important pieces of consumer protection legislation considered by the legislature during the current legislative session.  She said AB 681 would bring the laws under which her department operated up to those standards which the insurance commissioners of all 50 states had agreed were the minimum standards of solvency insurance companies should be required to meet.

 

Ms. Rankin advised the insurance commissioners of the 50 states had agreed upon a program of accreditation for each department of insurance.  She indicated the insurance departments of all states were to be accredited by January, 1994.  She explained any state insurance department which was not accredited could neither participate in nor be in charge of examinations of insurers who conducted business in that department's state but who were domiciled in another state.  She also advised insurance companies domiciled in the state of such an unaccredited insurance department who wished to do business in a state whose insurance department was accredited could be required by the state whose insurance department was accredited to be re-examined or to meet "other financial standards."

 

Ms. Rankin said bills recommended by the National Association of Insurance Commissioners (NAIC) as model acts with regard to financial standards were reviewed and approved by the National Council of Insurance Legislators before being adopted by NAIC.

She advised NAIC was comprised of the insurance commissioners of all 50 states.

 

Ms. Rankin stated Nevada's Department of Insurance had its first pre-accreditation review in November, 1992, and thereafter, received a lengthy memorandum from NAIC describing those things which were lacking in the department's internal procedures and regulations and in Nevada's statutes and which were needed in order that the department might become accredited.  She said

AB 681 was the result of that review.  She advised in order to achieve accreditation, the department had requested certain new positions, consisting of a financial analyst, some actuaries and a chief assistant and said those positions had been approved in the state's budget.

 

Ms. Rankin declared insurance was vital to the infrastructure of Nevada, and the department promoted the accreditation program as a program of economic development as well as one of "...assurance of the financial solvency of every citizen of this state."  She indicated insurers from other states had expressed strong interest in being domiciled in Nevada, but if Nevada's Department of Insurance failed to become accredited, those insurers would have to be reexamined and would have to meet standards other than Nevada's.

 

Ms. Rankin presented a packet of documents (Exhibit H) containing information regarding accreditation standards, information describing how states' insurance departments regulated insurance, and information concerning the accreditation of Utah's insurance department.

 

Ms. Rankin described various sections of AB 681.

 

She advised Sections 2 through 114 completely rewrote the existing chapter of NRS concerning rehabilitation and liquidation of insurance companies and adopted the NAIC model act for liquidation of insurance companies.

 

She stated Sections 116 through 133 addressed producer-controlled property and casualty insurance companies.

 

Mr. Arberry asked, "That's old language...that you're talking about right now?"  Ms. Rankin replied Sections 116 through 133 comprised a completely new chapter of NRS which added provisions to Title 57.

 

Ms. Rankin again spoke of Sections 116 through 133 and advised "under producer control," control was presumed to exist if an individual had direct or indirect control over or the power of proxy to vote 10 percent or more of the stock (of a property casualty company).  She stated if a producer controlling an insurer engaged in fraudulent activity or abused its control, "that can be a voidable transfer in the liquidation."

 

Mrs. Williams asked, "...are we required to do this by federal mandate of any kind?"  Ms. Rankin answered, "No."  She stated federal law left the regulation of insurance to the individual states, but explained in the absence of state regulation of insurance, federal regulation could be imposed. 

 

Mrs. Williams asked in the event AB 681 failed to pass the legislature, could the budget for the Department of Insurance be reopened and the funds (for the newly approved positions) be removed.  Ms. Rankin replied in her opinion, that could not be done.  Mrs. Williams contended if AB 681 failed to pass the legislature, the department would not need the newly approved positions.  Ms. Rankin indicated the department would still need those positions.

 

Ms. Rankin continued her review of various sections of AB 681.

 

She indicated she wished to highlight two sections of those dealing with produced-controlled insurance companies and pointed out Section 125 dealt with regulations regarding risk-base capital and Section 127 provided a five year period "on the premiums for liability."

 

Ms. Rankin said Sections 135 to 137 dealt with examination authority and declared it was critical to the department's operations to be able to go to insurers and conduct on-site examinations.  She stated Section 135 defined the immunity of the commissioner and his authorized examiners.  She explained Section 136 required the commissioner to withhold information regarding filing of an examination report from the public until a hearing was held if the person examined requested such a hearing.  She said Section 137 established the confidentiality of an examiner's working papers, of recorded information and of documents provided to the commissioner during an examination.

 

Ms. Rankin stated Section 138 would become effective on October 1, 1993, and would allow the commissioner a five year period in which to complete an examination rather than a three year period.

 

She advised Section 139 would become effective on January 1, 1994, and would allow the commissioner to accept another state's examination report if "...it complies with our financial standards and that state is accredited."

 

She said Section 140 amended NRS 679B.250 and clarified the commissioner could terminate or suspend an examination in the event legal action or other regulatory action became necessary and could make parts of an examination report or work papers public if it was necessary to do so in connection with such a legal or regulatory action.

 

Ms. Rankin explained Sections 141 and 142 amended existing statute and required an examiner to submit his examination report within 60 days of completing his examination and also clarified the manner in which the commissioner would accept or reject such a report.

 

She stated Section 143 expanded the definition of "hazardous financial condition" and  permitted the commissioner to order an insurance company to take certain corrective action (to remedy a hazardous financial condition).

 

She advised Section 144 was an internal reference.

 

Ms. Rankin stated Section 145 dealt with risk-base capital and would permit the department to review the risk assumed by an insurance company and then assure the company had sufficient reserves in capital and surplus to cover that risk.

 

She said Section 146 dealt with acceptance of special deposits for insurance companies and permitted the department to accept such deposits in Nevada on a discretionary basis rather than a mandatory basis.

 

She stated Section 147 was another internal reference and changed the examination period to 5 years.

 

Ms. Rankin advised Section 148 clarified an administrative fine could apply to "each act or violation," enacted provisions regarding administrative supervision and "brings in the addition of Chapter 696B in the revocation or suspension of the certificate of authority." 

 

She explained Section 149 allowed the department to adopt regulations regarding the kind of CPA permitted to audit financial reports and standardizing such reports.

 

She said Section 150 allowed insurers to file annual statements directly with NAIC.  She stated that section also established the department could keep Insurance Regulatory Information Service (IRIS) ratios reported to the department confidential.

 

Ms. Rankin stated Sections 150 through 164 and Section 200 dealt with credit for reinsurance and Sections 166 to 198 discussed reinsurance intermediaries.

 

She indicated Sections 201 through 203 dealt with valuation of insurance companies' investments and would permit the department to accept valuations done by NAIC.

 

She said Sections 204, 205, 207 and 208 were internal references and advised Section 206 clarified certain language.

 

She stated Sections 210 through 219 amended the act concerned with holding companies and contained some of the most important provisions "...relating to the owners of an insurance company and how they can take money out of an insurance company through dividends or other distributions and how that affects the solvency of the insurer."

 

Ms. Rankin advised Section 220 concerned the moving of insurance companies' books and records.

 

She indicated Section 221 authorized the commissioner to retain experts to examine an individual who controlled an insurer with regard to such individual's control of the insurer.

 

She explained Sections 222 through 228 were, for the most part, internal references regarding rehabilitation and liquidation of insurance companies and pointed out Section 223 concerned the hiring of actuaries and accountants by the commissioner in the event the commissioner needed to review "a change of acquisition or control."

 

Ms. Rankin advised Sections 229 through 239 were amendments regarding risk retention and risk purchasing.

 

She stated Section 240 was an internal reference.

 

She said Sections 242 through 254 amended existing law regarding conservation, rehabilitation and liquidation (of an insurer).

 

She indicated Sections 255 through 258 contained internal references and said Section 259 repealed most of NRS 696B.

 

Ms. Rankin advised Section 260 dealt with a receiver's immunity prior to "the effective date of the act."

 

She explained Section 261 clarified if an existing domestic insurer was found to be insolvent based on the financial standards established by AB 681, such insurer would have approximately three years in which to achieve compliance (with the standards established by AB 681).

 

She stated, "And then in Section 262 are all the transitory sections dealing with the effective provisions."

 

Mrs. Williams asked if work papers of an examiner which were used in lieu of a final report in a legal or regulatory proceeding were then made public.  Ms. Rankin responded that would depend on the type of proceeding in which such papers were used.  She said such papers could be kept confidential if used in an administrative proceeding, but if used in a court proceeding, such papers must be made public unless the court ordered them kept confidential.

 

Discussions ensued between Mrs. Williams and Ms. Rankin regarding confidentiality of examiners' work papers.

 

Mr. Frank Collins, general counsel, Sierra Health Services, Inc. (Sierra), and Ms. Marie Soldo, Sierra Health Services, Inc., introduced themselves.

 

Mr. Collins then testified.  He advised there were provisions in AB 681 which Sierra strongly supported, but there were sections which Sierra found problematic.

 

He referred to Section 246 as the best example of those sections Sierra found problematic, and pointed out under that section, an insurer could be placed under administrative supervision based on the mere appearance the insurer had exceeded its authority and without the insurer being provided a hearing.  He contended there was no materiality test included in that provision.  He proposed AB 681 should include provisions which would specifically identify those instances in which an insurer could be placed under administrative supervision.

 

Mr. Collins indicated he would not review all sections which Sierra found problematic, but would attempt to give the committee "a flavor" of the issues about which Sierra was concerned. 

 

He referred to the fact Section 24 provided for indemnification of individuals appointed by the Commissioner as his agents for the purpose of conducting an audit of an insurer and declared Sierra was concerned about such individuals being indemnified in the event they were grossly negligent.

 

Mr. Collins requested AB 681 be referred to a subcommittee.

 

Mr. Robert Byrd, President, NML Insurance Company, testified.  He concurred in the testimony of the representatives of Sierra Health Services, Inc. 

 

He indicated there was a range of problems with AB 681.  He pointed out the definitions of a "domiciliary state" contained in Sections 5 and 206 differed from one another.  He stated the insurance commissioner had testified one provision of AB 681 contained a formula for risk-based capital; he contended there was no such formula which was workable.  He stated based on the change in extraordinary dividends provided by AB 681 in connection with the holding company act, it appeared to him "...any new venture capital in the insurance business is virtually going to disappear."

 

He indicated his company had not had a sufficient opportunity to review AB 681 and asked it be given that opportunity before the committee took action on the bill.

 

Vice Chairman Arberry closed the hearing on AB 681.

 

 

 

 

 

 

There being no further business to come before the committee, Vice Chairman Arberry adjourned the meeting.

 

                                   RESPECTFULLY SUBMITTED,

 

 

 

                                   ________________________

                                   Sara J. Kaufman

                                   Committee Secretary

 

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Assembly Committee on Commerce

June 4, 1993

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