MINUTES OF THE

ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT

Sixty-seventh Session

April 1, 1993

The Assembly Committee on Labor and Management was called to order by Chairman Christina R. Giunchigliani, at 3:30 p.m., on April 1, 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. Christina R. Giunchigliani, Chairman

Mr. Bernie Anderson, Vice Chairman

Mr. Douglas A. Bache

Mr. John C. Bonaventura

Mr. Tom Collins, Jr.

Ms. Erin Kenny

Mr. John B. Regan

Mr. Michael A. Schneider

Mr. Peter G. Ernaut

Mr. Lynn Hettrick

COMMITTEE MEMBERS ABSENT:

Mr. John C. Carpenter, Excused

GUEST LEGISLATORS PRESENT:

None

STAFF MEMBERS PRESENT:

Mr. Donald O. Williams, Principal Research Analyst

OTHERS PRESENT:

Ms. Lori Martin, Director of Marketing, Commission on Economic Development

Mr. Pat Coward, Economic Development Authority of Western

Nevada

Mr. Larry Zimmerman, CDA of Nevada

Ms. Teresa P. Froncek Rankin, Commissioner of Insurance

Following roll call, Chairman Giunchigliani asked for the committee's approval of the following minutes: 2/4/93, 2/25/93, 3/2/93, 3/4/93, 3/5/93, 3/8/93, 3/9/93, 3/10/93, 3/16/93, 3/18/93 and 3/23/93.

ASSEMBLYMAN REGAN MOVED FOR APPROVAL OF MINUTES.

ASSEMBLYMAN HETTRICK SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

Chairman Giunchigliani explained the handout material (Assembly Bill 316) to the committee. She stated a copy of AB-316 could be given to groups requesting the bill, but they would have to make the tabs themselves since it was such a large document.

ASSEMBLY BILL 375 - Requires use of employer's previous experience out of state in setting premium for industrial insurance. (BDR 53-900)

Ms. Lori Martin, Director of Marketing, Commission on Economic Development, testified in support of AB-375 (Exhibit C).

Mr. Pat Coward, Economic Development Authority of Western Nevada, testified in support of AB-375. Mr. Coward stated AB-375 would be beneficial to the system.

Chairman Giunchigliani questioned "How do we track the rates, because every state does it differently."

Mr. Mark Hector, Assistant General Manager, State Industrial Insurance System, testified in support of AB-375. Mr. Hector responded Nevada SIIS Reclassification System was basically an expansion and outgrowth of the National Compensation Group (rating bureau for workers compensation) and in areas with similarly situated classifications this could be accomplished with few problems. The language in AB-375 was sufficiently broad to allow the system to penalize persons in fault.

The following exhibit was received pertaining to AB-375 and should be noted for the record:

1. Exhibit D, Donald O. Williams, Principal Research Analyst, Legislative Counsel Bureau.

ASSEMBLYMAN ERNAUT MOVED DO PASS ON AB-375.

ASSEMBLYMAN KENNY SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

ASSEMBLY BILL 287 - Revises provisions regarding self-insured employers and prohibits temporarily commissioner of insurance from certifying employers as self-insured employers. (BDR 53-1694)

Chairman Giunchigliani addressed AB-287 and mentioned Mr. Carpenter's request to explore the idea when companies go self-insured, would the liability go with them. Don Williams will look into this and report back with potential language.

Mr. Larry Zimmerman, CDS of Nevada, testified. Mr. Zimmerman explained his company administered self-insured workers' compensation programs for approximately 50 large employers in the state. He defined AB-287 increased the net worth requirement from $2.5 million to $5 million for employers presently self-insured under the program and the new net worth requirement would have a potential impact on 25-30 presently self-insured employers, meaning they would be forced to go back to SIIS. The $2.5 million net worth requirement was higher then the standard in most states and has not been a problem in Nevada. Mr. Zimmerman stated the Department of Insurance and the statutes and regulations governing self-insurance had a number of built-in safeguards. Self-insured employers were required to have a security deposit in place equal to 105 percent of their incurred losses, plus an amount equal to the administrative fee necessary to run those claims off if a company became insolvent. In addition each self-insured employer was required to have excess insurance in place for catastrophic losses. Another requirement for self-insured employers was to contribute to an insolvency fund on an annual basis. The insolvency fund presently has 100 percent of all money collected since self-insurance was established in 1980 and would total approximately $2.8 million at the end of 1993. Mr. Zimmerman stated he did not see the need to increase the net worth from $2.5 million to $5 million.

Ms. Kenny questioned if self-insurance worked for patients. Mr. Zimmerman responded the quality of medical care was better for the self-insured.

Chairman Giunchigliani inquired if CDS of Nevada handled medical claims and how rehabilitation was handled by the self-insured. She also questioned the capability of the clinics self-insured companies used. Mr. Zimmerman responded CDS handled medical claims. He stated rehabilitation was more easily handled when dealing with larger employers. There was more of an option to ease an employee into a lighter duty position with larger employers. CDS would also hire independent rehabilitation counselors in some instances. Mr. Zimmerman stated the injured worker was informed of the doctors available to him and had the option to change physicians within 90 days. He also explained the injured worker was taken to a clinic in some cases.

Mr. Regan questioned rumors of workers not getting a choice of care and asked if this depended on the type of injury. Chairman Giunchigliani explained if the injury was serious, the injured was taken to an emergency room. The problem of not getting choice care existed when an employee had a minor injury. This directly violates the law.

Following a discussion between committee members and Mr. Zimmerman pertaining to increasing the net worth from $2.5 million to $5 million, Chairman Giunchigliani suggested possibly increasing the percentage for the security deposit and apply the CPI to net worth.

Ms. Teresa P. Froncek Rankin, Commissioner of Insurance, testified. Ms. Rankin provided a package of the financial requirements for self insurance (exhibit E) to the committee. Ms. Rankin explained not only did the employer have to show a tangible net worth which was defined in our regulations, but the statute said the employer must have the financial ability to pay which by regulation was defined as a threshold qualification of a tangible net worth of $2.5 million. Further, what was eliminated to establish the tangible net worth (inventories, leveraged debts, debts to parents, empty parking lots) was also defined. Specific items which were not cash liquid or had an impact on the debt paying ability of a particular employer would be eliminated from the balance sheet. The current ratio of the company was also looked at and whether the company was able to meet its debt obligations. The current income was also taken into consideration. Regulations provide if a company had a loss for the last two years, its deposit could be raised by 20 percent or more at the discretion of the insurance commissioner.

Ms. Rankin stated, "If you do go to the $5 million you should think about just describing it as net worth to allow that flexibility by regulation to describe what would be in fact excluded and increasing the net worth by a CPI or another index per year would probably better fit with the bonding requirement that your chairman mentioned, rather than net worth because it would be unlikely a business would grow as quickly or as slowly as the Consumer Price Index. I don't think that's the adequate match to the debt you are trying to address which is medical benefits or other benefits, as it would be to address reserving, which is their bond or some other increase in their requirements on excess or bonding."

Chairman Giunchigliani commented what needed to be focused on was the bonding. She then questioned if any self-insureds were decertified. Ms. Rankin responded twelve companies presently were under a consent order of review and about twelve since 1981 had been decertified. Chairman Giunchigliani stated the statute said only "may", it did not mandate a company be decertified. Ms. Rankin stated a problem did arise with one self-insured where the Department of Insurance kept leveraging and finally the company filed for bankruptcy. The Department of Insurance then went directly to the bankruptcy court and asked for the protection needed. Ms. Rankin further stated the company was not decertified, but the Department of Insurance had direct access to the bankruptcy court so the employees could be paid. If they were not, part of the bankruptcy order stated the Department of Insurance could immediately drawdown on their bond and excess needed without being stayed by the bankruptcy stay. Ms. Rankin stated the Department of Insurance required the company's assets (the bond, the e1xcess coverage and the continuing ability to pay) unconditionally necessary under the law, or the bankruptcy court would send them back to SIIS.

Chairman Giunchigliani closed the hearing on AB-287.

The following exhibit was received pertaining to AB-287 and should be noted for the record:

1. Exhibit F, Wayne Carlson, Executive Director, Nevada Public Agency Insurance Pool.

Chairman Giunchigliani noted the hearing on AB-316 would be Tuesday, April 6, 1993, 3:30 p.m. in Room 119 and would be teleconferenced. An evening meeting was also scheduled for Thursday, April 8, 1993, 7-8:30 p.m. in Room 119.

There being no further business to come before committee, the meeting was adjourned at 5:00 p.m.

RESPECTFULLY SUBMITTED:

JEANNE PEYTON

Committee Secretary

Assembly Committee on Labor and Management

April 1, 1993

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