MINUTES OF THE
ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT
Sixty-seventh Session
April 6, 1993
The Assembly Committee on Labor and Management was called to order by Chairman Christina R. Giunchigliani, at 3:30 p.m., on April 6, , 1993, in Room 119 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. John C. Carpenter
Mr. Tom Collins, Jr.
Mr. Peter G. Ernaut
Ms. Lynn Hettrick
Ms. Erin Kenny
Mr. John B. Regan
Mr. Michael A. Schneider
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
None
STAFF MEMBERS PRESENT:
Mr. Donald O. Williams, Principal Research Analyst
Mr. Frank R. Krajewski, Senior Research Analyst
Ms. Kimberly Morgan, Assembly Bill Drafting Advisor
OTHERS PRESENT:
The Honorable Bob Miller, Governor of the State of Nevada
Mr. Ed Goodrich
Mr. Richard Cusynski, Iron Workers #118
Mr. Charlie Cox, President, United Auto Workers Local Union #2162
Mr. Claude Evans, Executive Treasurer, AFL-CIO
Mr. Jack Jeffrey, Southern Nevada Building & Construction
Trades Council
Mr. Danny Thompson, AFL-CIO
Mr. Larry Larson, Carpenter, Local 971
Following roll call, Chairman Giunchigliani addressed the committee and explained the tentative monthly calendar for April. She explained that it was set up by subject area and actual postings should still be followed in case of changes. Chairman Giunchigliani then opened the hearing on SB-316.
SENATE BILL 316 -Makes various changes to provisions governing industrial insurance. (BDR 53-1764)
Chairman Giunchigliani thanked the Senate Commerce and Labor Committee for its hard work on SB-316. She stated the Assembly Committee on Labor and Management would focus on reforming the system and concentrate on what was driving the costs. She explained an insurance system which was responsible to both the injured workers and the employers was needed. Chairman Giunchigliani mentioned public testimony would be held on SB-316 at each meeting so people could testify or bring suggested amendments on areas they were personally concerned with rather than have to sit through all the hearings. She stated no time limit could be committed to, but the Assembly would move deliberately and conscientiously in order to do the job right and in order to ensure public participation. Chairman Giunchigliani further explained small businesses and injured workers have voiced many concerns. The public wanted to be assured managed care would not create a monopoly or violate free enterprise. Chairman Giunchigliani stressed, "While this is a crisis I do not think we can afford to govern by fear. Therefore, we will be working very hard to work with the Senate Committee as well as the Governor in any way, shape or form that we can to bring reform to this system. However, we will not be rushed into anything and I do hope people will understand that."
The Honorable Bob Miller, Governor of the State of Nevada, testified. Governor Miller introduced Scott Craigie, Chief of Staff and Brian Harris, Legal Counsel. He explained Mr. Craigie and Mr. Harris both had an active participation on SB-316. Governor Miller stated he believed the State Industrial Insurance System (SIIS) reform was the biggest financial problem the State of Nevada had experienced in its 128 year history. He stated the present system threatened the economic stability and economic diversification of the state. He explained Alaska Airlines rejected flights to either Reno or Las Vegas because they did not want to do business in a state that had a workers' compensation system as much in disarray as Nevada. This was a reflection of the crisis facing the state. Governor Miller stated he would sign SB-316 because it was a system that protected injured workers and provided stability. He further stressed everyone must participate to solve the problem with the system. Businesses in Nevada which participated in the system paid an additional $39 million during the last year, they would pay an additional $60 million this year and at least $15 million in each of the next three years. Governor Miller further stated he proposed a $400 deductible which would add $22 million a year more to the burden faced by Nevada's businesses. As SB-316 related to injured workers, no one who was presently receiving benefits would have those benefits reduced or eliminated based upon this legislation, and those who might need benefits would be ensured quality care, fair compensation and a potential for future employment as part of a stable system, financially able to meet its obligations. The $2 billion plus unfunded liability the system faced was the equivalent of the state's general revenue fund for the entire biennium. He explained no other state had faced the problem Nevada was facing and introduced some charts of data collected by the State Industrial Insurance System (SIIS) (Exhibit C).
Governor Miller said SB-316 provided each employer initiate a written safety program. It also required the State Industrial Insurance System (SIIS) to act like a private insurance company by removing it from the state budget. Also SB-316 established an aggressive fraud unit in the Attorney General's Office and created an advisory board to the Governor for direct control during the term of this emergency or until 7/1/97 .
Chairman Giunchigliani questioned the claims management section of the system and asked if the personnel needed to get the claims handled would be hired. Governor Miller responded the entire system was to be reorganized with the direct control and accountability to the executive branch of government. Chairman Giunchigliani inquired if there would be a manager or would the executive branch of government be handling the daily management of the State Industrial Insurance System (SIIS). Governor Miller noted a manager would be selected by the Governor. Chairman Giunchigliani asked if companies were creating the majority of the driving cost through lack of a proper safety program and should these companies be charged accordingly. Governor Miller responded companies individually should be held accountable in the safety process and there should be definitive policies regarding the safety guidelines. Chairman Giunchigliani stated there was no statute mandating government be held to the same standards as the private sector and all government agencies did not have any type of safety program. Governor Miller said certainly he would not object to this type of program.
Chairman Giunchigliani questioned if there was a public policy issue to establish a solvent system. Governor Miller responded the system had to become solvent in order to be able to fund the liabilities of the system. If the State Industrial Insurance System (SIIS) was a private insurance company it would have been declared insolvent and put into receivership already. Governor Miller further noted self-insureds had a better standard than the State Industrial Insurance System (SIIS).
Mr. Bonaventura questioned the makeup of the board as it currently stands in the bill at present. Governor Miller defined the board had done an admirable job under extremely difficult circumstances. Governor Miller expressed he would work with the committee toward any type of board everyone agrees on at the conclusion of the emergency in July, 1997. In the interim there should be an inclusive advisory concept.
Mr. Schneider questioned the $200 deductible in SB-316 and asked why he wanted the amount increased to $400. Mr. Schneider also stated this created a hardship for small businesses and asked if the injured worker would participate in the increase. Governor Miller said the proposal would be paid by businesses. The Governor further noted he would accept the $200 amount, but proposed the higher amount.
Mr. Anderson questioned if the Governor would be making additional changes to SB-316. Governor Miller responded he outlined some of the core elements essential to solvency of the system.
Ms. Kenny queried if he believed the patients who were taken care of under self-insured programs were content with the care they currently received. Governor Miller replied he felt self-insureds largely received good care, and it was at least comparable to the care received under the existing State Industrial Insurance System (SIIS). Governor Miller pointed out health care was the largest single problem facing the United States and the same problem existed in the State Industrial Insurance System (SIIS). Quality care in a bargained and negotiated setting was needed. He also stressed to develop a system able to fund itself would require some sacrifice by all components of it, including the medical profession, the legal profession, injured workers, organized labor and businesses.
Mr. Hettrick questioned the dollar figure that must be saved annually to provide solvency to the system and was there a bottom-line number in regard to the amount of money SB-316 had to save. Governor Miller responded he approved of the figures presently proposed in SB-316 and felt these figures would make the system solvent by the year 2000.
Chairman Giunchigliani questioned how solvency, market share and closed versus open panels would be defined. Governor Miller explained the present system was already declared insolvent by the Alliance of American Insurers since payments were not being made on time. He defined market share as a collaboration of medical professionals who bid for a market share or business in which there was a certain reduction in cost in relationship to the volume of business they were able to obtain. Further he defined closed panel as a bidding group having the ability to limit what number of medical professionals participated, and the individual businesses would then select a PPO or managed care unit and the injured worker would choose someone within the group. Mr. Bonaventura queried if the criteria for the selection of a managed care unit should only include a closed panel organization. Governor Miller answered a closed panel would save a great deal more money than what was characterized as an open panel.
Mr. Ernaut asked if SB-316 included an open panel, which meant any willing provider, would he sign the bill. Governor Miller responded, "Not likely."
Ms. Kenny questioned, "Can you explain to me, because as the wife of a doctor for eight years I really want to understand how volume in a doctor's practice is going to cut costs without cutting quality of care." Governor Miller responded, "You would perhaps be more able than I to discuss what goes on with inside a medical office, but I believe that by pooling of physicians and inclusion of some physicians that haven't developed a practice as yet that there is an ability to control costs and still provide quality medical care." Ms. Kenny stated this system would restrict what a doctor could earn and restricted free enterprise of the medical profession in the state of Nevada. Governor Miller responded, "Not only in Nevada, I think that's what your going to see in the whole country." Mr. Regan suggested cutting the paperwork demanded by managed care.
Chairman Giunchigliani thanked Governor Miller for his time.
She announced over 100 people attended tonight's meeting in Las Vegas and apologized for the problem with telecommunications. She noted copies of SB-316 would be sent to Las Vegas for Thursdays meeting.
Mr. Ed Goodrich testified against SB-316. Mr. Goodrich questioned what was driving the costs of the system and was it due to poor claims management. He also questioned the fraud in the system and safety in the workplace. Mr. Goodrich agreed with Ms. Kenny regarding a physician only had so many hours in a day to treat patients and quality care meant to spend time with a patient, not cut it down. He pointed out if it was in a corporations best interest to adhere to safety regulations, the cost drivers of the system would go down considerably. Mr. Hettrick questioned what would happen if an employee was on drugs or alcohol, or just was not obeying the safety rules of the company and caused the accident himself. Mr. Goodrich responded the injured employee had to be repaired or he would become a welfare case. He stated the original concept of workers' compensation insurance in 1913 was to shield employers from liability whether the accident was their fault or the employee's fault.
Chairman Giunchigliani called the next testifier from Las Vegas, but the audio was not working.
Mr. Richard Cusynski, Iron Workers #118, testified against SB-316. Mr. Cusynski stated there was never a problem with Iron Workers being on drugs or alcohol. He stated a person could not work in the category of an iron worker while drunk or on drugs. Mr. Cusynski introduced his group of iron workers and submitted their names for the record as follows: Michael Prather, Howard Hilderbran, Allan Harding, Martin L. Culverwell, Scott Clifford, James Lopez, Steven E. Patrick and Lynn Biglieri. Mr. Cusynski commented the construction worker has been painted as a fraud, a drug abuser and an alcoholic. Chairman Giunchigliani explained the concern of the committee was not to balance this issue on the back of the injured worker or small business. Mr. Cusynski stated the iron workers were willing to do their fair share to improve the deficit in the system.
Chairman Giunchigliani stated the audio was still not working from Las Vegas. She stated the people in Las Vegas who wished to testify should come back on Thursday, April 8th when their testimonies would be taken first.
Mr. Charlie Cox, President, United Auto Workers Local Union #2162, testified against SB-316. Mr. Cox emphasized safety in the workplace. He noted the average fine in the United States for an employer who violates an Occupational Safety & Health Administration (OSHA) regulation was about $456. He further stated it took eleven years for an OSHA inspector to make it to the work site. Mr. Cox asserted if the necessary personnel had been hired at the State Industrial Insurance System (SIIS) a year ago and the claims had been managed efficiently this deficit would presently not exist. Mr. Cox stated he represented about 300 workers and the premium for the State Industrial Insurance System (SIIS) was going to be an estimated $590,000 per year. He stressed the United Auto Workers Union had one of the best safety programs implemented in the state and a union negotiated full-time safety representation to monitor safety in the plant along with the security and a substance abuse program. He further stressed his negative feelings toward the closed panel issue.
Mr. Ernaut questioned what would be lost to the injured worker and what amendments he proposed to SB-316. Mr. Cox stated Local #2162 did not want the loss of five days pay, and wanted lifetime reopenings of a claim in serious injuries, freedom of choice of a physician and a board for business and labor.
Mr. Claude Evans, Executive Treasurer, AFL-CIO, testified against SB-316. Mr. Evans stated, "I want to make sure that we understand exactly what one of the main problems that I have with SB-316. We're saying now that round figures, we're pulling together the figures now that $300 million. I am told that one-third of all the workers in our state are covered by self-insurance, so you figure your saving $300 million, you must be saving a $100 million to self-insured. Do self-insurers pay benefits and let's use the first five days and let's use a round figure of $400 that you don't get compensation for the first five days. Do self-insurers pay directly out of cash flow so they won't pay that $400 a month. Goes directly from the injured workers pocket back into the employers pocket. If you reduce permanent partial impairment by 20 percent and under that current bill a reduce of .6 to .5 which is in my arithmetic is a 20 percent decrease. The self-insurer rather than pay $1,000 for partial impairment will only pay $800. The other $200 goes back in their pocket. It does not do one single thing to help the deficit with the system. It does not go through the system at all. It's taken directly from the pockets of the injured worker back into the self-insurers of this state, and that's wrong, that's wrong." Mr. Evans questioned where the self-insurer paid his part of the burden. He also mentioned the issue of pre-existing condition and stated everybody over forty had a pre-existing condition. Chairman Giunchigliani stated all these problems needed to be looked at more extensively after more information was available.
Mr. Jack Jeffrey, representing the Southern Nevada Building & Construction Trades Council, testified. Mr. Jeffrey commented his organization agreed an employee should not be compensated if he was injured while drunk or on drugs while working. He pointed out SB-316 stated the injured worker could not sue the employer, whether the employer was negligent or not. He stated the penalties for employers' negligence in safety needed to be looked at more closely.
Mr. Danny Thompson, AFL-CIO, testified. Mr. Thompson also questioned what solvency was in a state-run program. He stated if the cash flow problem was dealt with and the reserve spending was stopped, the system could be recovered without doing away with all the benefits. Mr. Hettrick questioned where the money would come from without reducing benefits. Mr. Thompson responded managed care and case management with the implementation of a fraud unit would vastly reduce the cash flow problem. Mr. Collins stated he agreed the system could work without reducing benefits if it was properly run.
Larry Larson, Carpenter, Local 971, testified. Mr. Larson stated he was injured and for three months he had not heard from the State Industrial Insurance System (SIIS). He received his check and forms to fill out through the mail, but no personal contact. He stated he was a diabetic for the last 18 years and now the SIIS was telling him his diabetes was part of the problem in finding him work. He also stated he would like freedom of choice of a physician. Mr. Carpenter asked Mr. Larson if he felt he could do carpentry work since his accident. Mr. Larson responded he could not do carpentry since he broke his pelvis and wrist in the accident. Mr. Larson stated he felt the SIIS should at least contact him regarding what road he should take to become employed again.
Chairman Giunchigliani closed the hearing on SB-316. She mentioned the meeting on Thursday, April 8th, in room 119, 3:30-5:30 p.m. and 7:00-8:30 p.m. would be teleconferenced to Las Vegas.
There being no further business to come before committee, the meeting was adjourned at 6:15 p.m..
RESPECTFULLY SUBMITTED:
JEANNE PEYTON
Committee Secretary
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Assembly Committee on Labor and Management
April 6, 1993
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