MINUTES OF MEETING
ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT
Sixty-seventh Session
January 28, 1993
The Assembly Committee on Labor and Management was called to order by Chairman Chris Giunchigliani at 3:30 p.m., January 28, 1993, in Room 321 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda, Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Ms. Chris Giunchigliani, Chairman
Mr. Bernie Anderson, Vice Chairman
Mr. Douglas A. Bache
Mr John C. Bonaventura
Mr. Tom Collins, Jr.
Mrs. Erin Kenny
Mr. John B. Regan
Mr. Michael A. Schneider
Mr. John C. Carpenter
Mr. Peter G. Ernaut
Mr. Lynn Hettrick
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
None
STAFF MEMBERS PRESENT:
Mr. Don Williams, Principal Research Analyst, LCB
OTHERS PRESENT:
Mr. Stan Jones, Exec. Dir., Employment Security Department
Mr. Frank MacDonald, State Labor Commissioner
Ms. Barbara Weinberg, Director, State Job Training Office
Mr. Steven A. Shaw, Administrator, Rehabilitation Division
Ms. Teresa P. Froncek-Rankin, Commissioner, Department of
Insurance
Mr. Bryan Nix, Sr. Appeals Officer, Hearings Division,
Department of Administration
Ms. Nancyann Leeder, Nevada Attorney for Injured Workers
Ms. Carol Jackson, Director, Department of Industrial Relations
Mr. Jim Jeppson, Administrator, Department of Industrial
Insurance Regulation
Mr. Don Jayne, General Manager, State Industrial Insurance
System
Mr. Scott Young, General Counsel, State Industrial
Insurance
As an introduction to workers' compensation, various state agencies had been asked to testify, each summarizing its involvement with workers' compensation.
Mr. Stan Jones, Executive Director, Employment Security Department (ESD), explained ESD administrative costs were federally funded by the U.S. Department of Labor.
The Employment Service Division of ESD matched jobs with job seekers through numerous programs such as career counselling, general aptitude testing/evaluation, veteran services, job training and labor market information. ESD serviced over 97,000 Nevadans in 1992.
The Unemployment Insurance Division, as explained by Mr. Jones, collected unemployment insurance taxes, paid benefits to qualified persons and offered an appeals process for employees/employers disagreeing with the department's findings. The tax, paid by employers, was experience rated ranging from .25 to 5.4 percent of the employee's first $14,800. The tax was deposited into a trust fund and used solely for payment of benefits. The present trust fund balance was $248.7 million, with a projected balance of $219.6 million in September 1993. Weekly benefits ranged from $16 to $217 and averaged 14 weeks.
A discussion developed as to the solvency of ESD. Mr. Jones ascertained the department is and would be solvent by federal standards when next tested in 1993.
Mr. Jones explained the Administrative Service Division provided support services to the other two divisions through data processing, financial management, personnel, labor market information and research/development.
Responding to a question by the Chair, Mr. Jones maintained as a result of 1991 legislation ESD did match its records against those of SIIS and self-insureds to verify against fraud, or double collection of benefits.
ESD interfaced with State Job Training Office, National Business Services and Job Opportunities and SIIS.
Mr. Carpenter questioned whether employees could legally obtain benefits from both SIIS and unemployment. Mr. Jones related the employee must be able and available to work, therefore, not if he collected temporary total disability.
To clarify, Mr. Scott Young, General Counsel, State Industrial Insurance System (SIIS), indicated it was possible to receive both ESD disability benefits and rehab benefits from SIIS. This was an area, he explained, SIIS would like to see corrected this legislative session.
To a question on the appeals process, Mr. Jones explained a chief appeals referee along with a three-person review board appointed by the Governor selected the appeals referees numbering about 16.
In response to an inquiry from Mr. Anderson, Mr. Jones contended benefits could only be garnished by the District Attorney for child support payments.
Mr. Frank MacDonald, State Labor Commissioner, summarized the sole purpose of the Labor Commission was to act as advocate for the Nevada worker. This was established by the enforcement of eight chapters of the Nevada Revised Statutes (NRS) by the 14 employees of the Commission. Mr. MacDonald briefly reviewed the following chapters:
- NRS 607 commission operation
- NRS 608 employee rights
/ minimum wage
/ discharge of employees
/ meal periods
/ overtime
/ uniforms
- NRS 609 child labor laws
- NRS 610 apprenticeship programs
- NRS 611 licensing of private employment agencies
- NRS 613 fraudulent employment practices & right to work laws
- NRS 614 mediation services
- NRS 338 prevailing wage
Amazement was expressed by Mr. Collins by lack of personnel available to monitor and protect all the employees of Nevada.
Ms. Barbara Weinberg, Director, State Job Training Office, related her office provided employers an applicant pool of qualified workers and potential employees necessary training and services to succeed in the labor force. She further interpreted these programs were considered a second chance system, assisting the economically disadvantaged and dislocated worker. The Federal Job Training Partnership Act provides approximately $9 million annually to this program which enables only 5 percent of those eligible to be serviced. Federal government awards were based on a three part formula: relative number of economically disadvantaged compared nationally; relative number of excess unemployed (above the national average); relative number of unemployed residing in areas of substantial unemployment. Ms. Weinberg pointed out because Nevada's unemployment rate was lower nationally, it received less than most states of comparable population. In addition, the economically disadvantaged data was based on the 1980 census.
Nevada's two program operators were Job Opportunities in Nevada (JOIN) for the northern area, and Nevada Business Services (NBS) in the south. Ms. Weinberg explained each office provided programs for:
- economically disadvantaged youths (ages 16-21)
- economically disadvantaged adults (over 22)
- summer youth program
- older worker program for economically disadvantaged adults 55 and older
- dislocated workers
In response to Mr. Bache, Ms. Weinberg contended there were instances where it was more appropriate to put SIIS' vocational rehabilitation clients into the State Job Training Office program.
Mr. Steven A. Shaw, Administrator, Rehabilitation Division,
briefed from a prepared paper (Exhibit C). In the interest of time the two bureaus discussed in detail were the Bureau of Vocational Rehabilitation and Bureau of Services to the Blind. Both were eligibility not entitlement programs, funded 80 percent federal money and 20 percent state. Mr. Shaw estimated dollar-for-dollar returns ranged from a conservative 4:1 to 11:1. The eligibility criteria was physical or mental impairment which constituted a substantial impediment to employment. Competitive employment was the goal and clients must benefit in terms of employment outcome.
Referencing 1991 legislation, Ms. Giunchigliani noted SB 7 required an interagency agreement be entered between the Rehabilitation Division and SIIS to better service outlying areas. Mr. Shaw explained a cooperative agreement had been entered between the two agencies and appeared to be working well with 40 cases referred to the Rehabilitation Division in the past six months.
Responding to a committee question, Mr. Shaw maintained the two agencies basically had the same priorities and did not foresee potential problems in that area.
Explaining the difference between the two bureaus, Mr. Shaw indicated although the Bureau of Services to the Blind had the same priority of competitive employment, it first had to adjust the person to his disability.
Mr. Hettrick inquired what agency oversaw the Rehabilitation Division, noting the program appeared to be very successful and wondered how the operation could be compared to other agencies.
Ms. Teresa P. Froncek Rankin, Commissioner, Department of Insurance, advised the committee of her handout (Exhibit D). The Department of Insurance was the state's third largest revenue producer with funds provided by the insurance premium tax. It licensed all state insurance companies and related entities with no federal regulation. The Department of Insurance, she explained, reviewed preferred provider organizations (PPO's) offered by insurance companies but not the preferred provider entity itself. It did license health maintenance organizations, single service organizations, utilization review entities and third party administrators for health and workers' compensation. A major concern was solvency with examinations performed by 23 contracted examiners. Ms. Rankin explained Nevada Revised Statutes (NRS) 616 and 617 were responsible for SIIS rate review and the solvency of self-insured employers.
The Department of Insurance approved self-insured employers, monitored their financial ability to continue self-insured, and revoked licenses as necessary. The market concept, or handling of claims, was monitored by the Department of Industrial Relations. In approving self-insured employers the Department of Insurance used a combination of statutory principles. The $2.5 million net worth requirement was calculated based on specific standards in regulations based on experience with governmental accounting standards, regular generally accepted accounting standards and the Department's experience with statutory accounting principles. Self-insureds were reviewed once a year through their financial statements, and audited on-site at least once every three years. Revoking of self-insured licenses was performed by first an informal review, then a formal hearing process which could be appealed to court.
Copies of the Department of Insurance's report on the Solvency Investigation of the Nevada State Industrial Insurance System (Exhibit E) were provided to each committee member. SIIS' response to the investigation was found in the back of this document.
Ms. Rankin summarized the Department of Insurance worked with troubled insurance companies in order to protect the consumer and assure the solvency of the insurer. On the topic of managed care, Ms. Rankin suggested the committee continue the licensing requirement to protect the public.
A short discussion developed on PPO's which Ms. Rankin pointed out were not licensed. However, NRS 689B provided the standards on how insureds used PPOs.
To explain the difference between adjusters and third party administrators (TPA's), Ms. Rankin clarified adjusters handled property casualty claims whereas TPA's handled health insurance or workers' compensation.
Chairman Giunchigliani maintained other than HMO and the Blues Act there was no definition of managed care organizations, thus this area needed additional work.
A question was raised by Mr. Anderson regarding legislation to provide open access to information concerning employers. Ms. Rankin noted there was reference to employers in the Governor's bill. She indicated SIIS might include the question of rate review in one of its bills or it could be added to the section of the Governor's bill contemplating what parts of the insurance code applied to SIIS.
Ms. Rankin, in reference to a question by Mr Anderson, noted in theory SIIS' current rates should cover the long-term and reopening cost of employers leaving the system to become self-insured. This was intended to be included in their rate increases and should have been sufficient. The problem was inadequate rates were charged over the past ten years.
In conclusion, Ms. Rankin pointed out a piece of clean-up legislation was needed regarding NRS 342/343 which dealt with "Grandfathered Employers." The last of these employers, J.C. Penney, recently went self-insured, hence the law could be done away with.
Mr. Bryan Nix, representing the Hearing Division of the Department of Administration, provided the committee with a synopsis of the division (Exhibit F). Its primary function was to hear contested industrial insurance appeals from either SIIS or self-insureds. The first level of appeal was the hearing officer review, which was an informal proceeding before a lay person whose duty it was to bring the parties together in an attempt to resolve the issue. If dissatisfied with the outcome at the hearing officer level, the decision was taken to the second level, an appeals officer appointed by the Governor. This hearing was "de novo," meaning it was not a review of the hearing officer's decision, but a new hearing with new evidence.
The next level of appeal was to the District Court which was "on the record" which meant evidence was transmitted from the Appels Division to the District Court where it was reviewed by the judge for determination. No new trial or evidence was presented at this level. Subsequently any review of the District Court decision was by the Supreme Court.
Concerning the of number appeals decided in favor of the claimant, Mr. Nix indicated records pointed to about half. He explained statistics of the past year would be provided to the committee as soon as they were made available.
Nancyann Leeder, Nevada Attorney for Injured Workers, briefed the committee on the background of appealing workers' compensation decisions. She illustrated it became apparent workers needed some sort of protection to obtain fair decisions against insurers and employers, who of necessity were represented by agents. In 1977 the Nevada Legislature established the State Industrial Attorney, which represented indigent injured workers. It quickly became apparent persons on compensation or denied benefits altogether could be presumed indigent. Therefore, in 1983, the program was allowed to represent all workers. In 1991, the name of the program was changed to the Nevada Attorney for Injured Workers to delineate a separation from the State Industrial Insurance System.
Additionally, Ms. Leeder stated her office advised injured workers of the pros and cons of accepting a vocational rehabilitation buyout as these individuals waived certain rights. She further explained her office was now authorized to advise claimants at the hearing officer level. However, due to present caseloads advice was now limited to the Injured Workers pamphlet (Exhibit G).
Chairman Giunchigliani apologized for the time constraints put on those agencies testifying, noting both the Department of Industrial Relations and the State Industrial Insurance System would be invited back to testify again in the near future.
Ms. Carol Jackson, Director, Department of Industrial Relations (DIR), explained her agency was responsible for regulation of the workers' compensation industry. Its mission was to promote the health and safety of Nevada's working men and women and ensure worker's received all entitled benefits. The department investigated and regulated workers' compensation insurers to assure compliance with mandatory coverage provisions required by the Nevada Industrial Insurance Act, enforced health and safety regulations, assisted employers in identifying unsafe working conditions, and inspected all active mining properties throughout the State. Ms. Jackson further detailed the Department briefing from a prepared report (Exhibit H).
Mr. Anderson expressed disappointment with DIR's investigation of ACR 76 (1991 Session) which dealt with the OSHA Standards Adoption Study (Exhibit I). He noted the purpose of the request was to make Nevada more proactive in eliminating injuries in the workplace. He directed attention to the report's lateness and noted the states represented did not reflect the business competition existing in Nevada, such as mining. Ms. Jackson requested she and Mr. Anderson meet to further discuss his areas of concern, indicating a more appropriate report might be generated.
In response to committee questioning, Mr. Jim Jeppson, Administrator, Department of Industrial Insurance Regulation (DIIR), noted only one physician had been removed from the panel of physicians. Over-utilization of treatment, he explained, had not specifically been addressed with regard to this issue.
Mr. Jeppson stressed the distribution of citations and fines had no defined target or goal, however, as of July 1991, over 1,500 had been issued. Responding to Mr. Collins inquiry of how many of those fines had been collected, Mr. Jeppson indicated approximately 40 percent with another 20 percent pending.
It was pointed out by Mr. Jeppson that physician's names removed from the board were required to be published in the doctor's area of practice, whereas those fined or cited were not published, but were public record.
Because of the time constraint, Mr. Don Jayne, General Manager, State Industrial Insurance System, noted the committee would receive copies of the overview of AB 392 of the 1991 legislative session. He also indicated the newly released Stress Study (Exhibit J) would be made available to the committee, along with the SIIS Business Plan of 1992. Chairman Giunchigliani suggested the committee review these documents and respond to SIIS at a later date.
Mr. Jayne very briefly described SIIS' responsibilities as providing compensation benefits to injured workers, returning injured workers to gainful employment as soon as possible, and paying medical bills resulting from work related injury. The System was also responsible for providing industrial insurance coverage to its policyholders at a reasonable premium and maintaining an equitable risk classification structure. Additionally, the system actively promoted safety in the workplace through its loss control sections.
Due to the lack of time Mr. Jayne indicated Mr. Scott Young, General Counsel for SIIS, would brief the committee at a later date on the system's activities resulting from SB 7 of the 1991 legislative session.
There being no further business to come before committee, the meeting was adjourned at 5:55 p.m.
RESPECTFULLY SUBMITTED:
BARBARA DOKE
Committee Secretary
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Assembly Committee on Labor and Management
January 28, 1993
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