MINUTES OF MEETING
ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT
Sixty-seventh Session
May 4, 1993
The Assembly Committee on Labor and Management was called to order by Chairman Chris Giunchigliani at 4:30 p.m., Tuesday, May 4, 1993, in Room 207 at Cashman Field, Las Vegas, 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. John Carpenter
Mr. Tom Collins, Jr.
Mr. Peter G. Ernaut
Mr. Lynn Hettrick
Mrs. Erin Kenny was present via teleconference in Room 119
of the Legislative Building, Carson City, Nevada.
Mr. John B. Regan
Mr. Michael A. Schneider
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
None
STAFF MEMBERS PRESENT:
Mr. Frank Krajewski, Senior Research Analyst was present
via teleconference in Room 119 of the Legislative
Building, Carson City, Nevada.
Mr. Donald O. Williams, Principal Research Analyst
OTHERS PRESENT:
Mr. Claude Evans, Executive Secretary-Treasurer of the
Nevada State AFL-CIO
Mr. Danny Thompson, Nevada State AFL-CIO
Mr. Frank Caine, President of the Southern Nevada Building
Trades Council
Mr. Bob Maxie, Greater Las Vegas Chamber of Commerce
Mr. Dean Hardy, Nevada Trial Lawyers Association
Mr. Martin Bibb, State Director, National Federation of
Independent Business
Mr. Kevin Spilsbury, Quality Mechanical
Ms. Susan Harrilson, James Truss Co.
Ms. Lynn Grandlund, Grandlund, Watson, Clark & Associates, EON, NAIB, AFA
Mr. Daniel Richoalsky, Workers' Compensation Representative
Mr. Robert Hinders
Mr. Danny Williams
Ms. Barbara Costello
Mr. Bill Shranko, Personnel Manager, Whittlesea Taxi
Ms. Trudy Stubbs
Mr. Michael Garland
SENATE BILL 316 -Makes various changes to provisions governing industrial insurance.
Mr. Claude Evans, Executive Secretary-Treasurer of the Nevada State AFL-CIO, testified regarding SB-316, Sections 194 and 195 which contain reductions in benefits for injured workers. Mr. Evans testified from prepared statement (Exhibit C). He emphasized Nevada workers who did not receive benefits for the first five days off from work would not be able to feed their family. He recommended this section be removed from SB-316.
Mr. Evans pointed out the current version of SB-316 would not permit an incarcerated, injured worker to receive disability and stated an injured worker should not receive compensation if he was convicted, not just incarcerated.
He stated everyone should share the pain in reforming the State Industrial Insurance System (SIIS), but the current legislation did not indicate how the self-insured employers would share in the monetary costs. He pointed out the self-insured employers would actually receive a $109.6 million windfall with the current form of SB-316. He suggested an amendment of: "Self-insured employers shall pay $500 to the State Industrial Insurance System (SIIS) for each lost time accident."
He emphasized the reduction in all permanent partial disability awards would result in a windfall of $12,419,680 to self-insured employers. He reiterated it was not fair to place the shortfall of the State Industrial Insurance System (SIIS) on the backs of injured workers as it appeared in SB-316. He stated strong opposition to the proposed reduction in benefits and suggested
the compensation of benefits to injured workers remain at the current level.
Mr. Ernaut requested clarification on the windfall amount cited on page three of Mr. Evans' testimony (Exhibit C). Mr. Evans replied a memo dated April 7, 1993 from Frank Krajewski, Senior Research Analyst of LCB, to the Assembly Committee on Labor and Management (Exhibit D) explained how the amount was reached in item 15, page 3.
Ms. Giunchigliani stated Mr. Krajewski's report indicated a $109.6 million total projected savings to the self-insureds because they would be able to pocket savings based on the benefits reductions.
Discussion regarding Mr. Krajewski's report occurred between Mr. Ernaut and Mr. Evans.
Mr. Danny Thompson, Nevada State AFL-CIO, concurred with Mr. Evans regarding the AFL-CIO's position. He pointed out many self-insured employers were local government agencies, along with the large casinos. He emphasized when the self-insureds left the system, the liability burden was placed on the other system employers who were forced to pay. He stressed if SB-316 passed in the current form with the self-insureds paying their fair share, the result would be local governments taking money from the injured workers and putting it in their pocket. He concluded the AFL-CIO supported the amendment to assure self-insureds pay their share.
Mr. Frank Caine, President of the Southern Nevada Building Trades Council, testified. He noted the funds received by injured workers was inadequate to cover the medical and living expenses accrued while disabled. He stressed it was ludicrous to suggest taking 20 percent away from what was already to little.
Ms. Giunchigliani noted the committee would work to improve SB-316. She emphasized the issue was to find what was driving the costs up and this would remain the focus of the committee. She stated the system needed to be handled properly and management was a large part of the problem.
Mr. Bob Maxie, Greater Las Vegas Chamber of Commerce, testified. Mr. Maxie submitted to the committee letters from 167 employers who employed 41,500 workers in southern Nevada. He emphasized these employers encouraged the committee to support SB-316.
Chairman Giunchigliani clarified the individuals represented in the Chamber of Commerce were from all types of business, and what the committee was trying to resolve was something which would work for all size businesses. She noted, while the Committee was moving as rapidly as they could, they must also take the time to do the job properly. She further explained because SB-316 passed in the Senate, it did not mean all issues were resolved. She accentuated there would be SIIS reform this session. She also noted that she had been told by some members, they did not support everything, such as the mandatory deductibles and the safety committee of Governor's Control.
Mr. Maxie stated the Greater Las Vegas Chamber of Commerce had approximately 3,000 members who supported SB-316 as it was presented to the Assembly.
Mr. Collins asked how many employers who submitted letters actually had read SB-316 thoroughly and knew the effects of it. Mr. Maxie noted every business which signed their letter had read the summary (Exhibit E) and understood the central issues.
Mr. Mark Smith, President, Greater Las Vegas Chamber of Commerce, testified. He noted the members of the Chamber of Commerce were notified of any changes made to SB-316 as they occurred.
Chairman Giunchigliani summarized the key issues to be restructured were vocational rehabilitation, managed care, reviewing benefits to discern if there was a more effective way to streamline them, the governor's control, board of directors and fraud.
Mr. Dean Hardy, representing Nevada Trial Lawyers Association, testified. Mr. Hardy submitted a letter from Robert I. Vines, Esq. (Exhibit F). Mr. Hardy thanked the committee for taking the time to diligently understand the issues in SB-316. He commented there were many reasons for the impoverished state of affairs of the State Industrial Insurance System (SIIS). A few of the reasons were the overburdened work load, inefficient claims management and fraud. Mr. Hardy pointed out the dismal state of affairs was not carried over to the self-insured. The benefit structure had not caused the self-insured employer the economic problems the employers insured through the system were faced with. Self-insured claims were adjudicated efficiently, and claim costs were kept down by moving the claims along quickly. Mr. Hardy noted a question the committee was faced with was "is inefficiency a viable reason to reduce benefits?" He noted efficiency could not be legislated.
Unfortunately there was a financial crisis at the State Industrial Insurance System (SIIS). The crisis had been utilized to try to identify the phrase "everyone to give a little or everyone has to give up something in order to resolve this particular crisis." He noted the people who had lost body parts, suffered through multiple surgeries or sustained injuries reducing their quality of life had already given up something. In addition to those very real and tangible losses, they had given up something even before they were injured. They had given up the right to sue. As a result of the injury they sustained they were thrown into a system plagued by bureaucratic inefficiency. What these people wanted was to get out of the system and what they received was decreased wages, lost careers, doctors who did not care and SIIS claims personnel writing them letters to go to these doctors who did not care, and vocational rehabilitation counselors, or their benefits would be cut off. He noted there was little choice for medical care with the present system, and managed care would all but eliminate those few choices. He further noted other benefits which might be eliminated with SB-316, such as the elimination of the first five days off, Temporary Total Disability (TTD) and Permanent Partial Disability (PPD).
Mr. Hardy stated, "Unquestionably a reduction in residual disability awards will affect me economically." He pleaded with the committee not to reduce benefits because of the inefficiency of the State Industrial Insurance System (SIIS).
"Do you understand the basis of workers' compensation, the total program," questioned Mr. Regan. Mr. Hardy noted he understood the basic concept of workers' compensation.
Mr. Bonaventura questioned what Mr. Hardy would suggest the total percentage of the average monthly wage should be. Mr. Hardy responded the present percentage of was fair.
Mr. Carpenter questioned what he thought the greatest inefficiencies of the system were. Mr. Hardy answered because of the economic boom in the 1970's not much attention was paid to safety and workers' compensation claims, employees of the State Industrial Insurance System (SIIS) became lax and the problems which existed now had been created over a number of years. After a lengthy proclamation by Mr. Hardy, Mr. Carpenter requested he send in a written statement pertaining to the inefficiencies of the system. Mr. Hardy responded he would be glad to.
Mr. Collins questioned what his part was in helping the injured worker. Mr. Hardy responded he had five full-time employees who only handled getting claims moved through the system. He noted he was trying to get resolutions, not litigation. He noted how average lost time claims had gone from 9 to 22 weeks in the last 4 or 5 years. The injured worker was getting paid every two weeks and not seeing a physician for months at a time.
Mr. Collins questioned what the average time span for a claim should be. Mr. Hardy noted it would depend on the injury.
Mr. Schneider commented, "You said your industry was satisfied with the 66 2/3 percent payment of pay." Mr. Hardy noted he was only speaking as a trial lawyer, not as an injured worker. Mr. Schneider also questioned how many claims he reopened. Approximately 25-30 percent, responded Mr. Hardy. Mr. Schneider remarked, "If the system was fixed, there would be no need for trial attorneys in the system." Mr. Hardy responded the injured worker came to him when they had a problem, but also claimed if the system worked properly his work load would be lessened.
Mr. Martin Bibb, State Director, National Federation of Independent Business, testified from prepared testimony (Exhibit G). Mr. Bibb stated workers' compensation was undoubtedly a problem for small businesses.
Mr. Anderson questioned if the National Federation of Independent Business had made a comparison between the cost of medical treatment in Nevada and other states. Mr. Bibb noted he was unaware of this comparison. The numbers received from the National Federation for unemployment and workers' compensation addressed those particular issues which were covered in Exhibit G.
Mr. Hettrick questioned, "I believe you said these were percentage increases and so it would be relative to each state. Is that correct?" Mr. Bibb responded a percentage of increase was relative to each state's base, then several states, plus the District of Columbia were compared for the particular year to discern whether they had gone up or down.
Chairman Giunchigliani commented any documentation available would be welcomed by the committee.
Mr. Kevin Spilsbury, Quality Mechanical, testified. Mr. Spilsbury noted as a small business owner he was not in favor of the employer deductibles, Sections 73, 142 and 191 of SB-316. He stated Permanent Partial Disability (PPD), Sections 195, 196 and 287, and Temporary Total Disability (TTD), Section 194 were the largest cost drivers in the system. What the employers wanted was to make the system fair for both the employer and the employee.
Chairman Giunchigliani noted she concurred on the employer deductibles. She stated an idea was to make a flexible deductible schedule which would be an option for the employer. She noted the committee was examining the structure of PPD. TTD was not a cost driver, but a standard way of compensating someone for being off work. The Senate felt they had to save dollars and deducting five days pay from an injured employee was a way to do this. No one seemed to believe this was fair to the injured employee. For 10 years beginning 1981 the State Industrial Insurance System (SIIS) had no rate increases. This was one of the major causes of their existing financial burden.
Ms. Susan Harrelson, James Truss Co., testified. Ms. Harrelson noted she supported the employer deductible being optional. She also noted support of Section 194 (TTD). She noted her support of the small reduction to bring Nevada in line with other states, regarding (PPD) Sections 195, 196 and 287, but felt the decision should be left to people with more statistical information regarding the ratio of the PPD to other states.
Mr. Frank Krajewski, Senior Research Analyst testified. Mr. Krajewski called attention to the memo Mr. Ernaut referenced pertaining to self-insureds (Exhibit D). The savings presented in the memo would be modified as a result of the revisions to the official fiscal note the State Industrial Insurance System (SIIS) provided. Mr. Krajewski noted self-insureds operated unlike the system. He noted his data was limited to the figures which appeared in the original fiscal note prepared in cooperation with the Department of Insurance, the Governor's office and the State Industrial Insurance System (SIIS).
Mr. Hettrick pointed out item 12 of Exhibit D, "Managed Care: Medical payment savings only, $26 million," and questioned if the figure was inflated. Frank Krajewski mentioned some controversy had been generated as a result of this item. He noted the self-insureds might already be practicing managed care and closed panels, and if they were, then they were in violation of the statutes because neither of those items were permitted. Self-insureds had adopted some of the techniques which were unique to managed care and in the area of rehabilitation they did an excellent job in getting their injured workers' back to work. Mr. Krajewski concurred with Mr. Hettrick that the figure might be inflated and noted he would be glad to recalculate the figures if the self-insureds would provide the information needed.
Mr. Krajewski presented a memo dated April 1, 1993, regarding Permanent Partial Disability (PPD) benefits (Exhibit H). He mentioned there were essentially three benefit categories, two of which were closely related. The first one was utilized in Nevada for the rating of PPD benefits. SB-316 changed the reduction from .6 to .5 percent of the average monthly wage based on percentage of impairment. The second major benefit category would be the wage loss benefit which was when an injured worker was compensated based on the amount of money they lost as a consequence of their injury. Some states utilize both impairment and wage loss (see Exhibit H). The third was loss of wage earning capacity which would compensate the injured worker for his loss of ability to compete for a job. A comparison was made with some of the western states, Nevada, Arizona, Oregon and Utah. Mr. Krajewski referenced a schedule of injuries (Exhibit I) which all the states listed above use, except for Nevada. Most states award a PPD benefit for a scheduled injury based on the body part which had suffered the injury. Nevada did not use a schedule, but referred to the AMA guide and determined what percentage of the body had been injured.
Mr. Bonaventura questioned how it was decided a disability exceeded 25 percent. Chairman Giunchigliani responded there was a range of motion the AMA Guide took into consideration to do a rating. Mr. Krajewski noted the AMA Guide developed by the American Medical Association had calculated what percentage of the entire body each part was worth.
Mr. Bonaventura inquired if Nevada used the AMA Guide officially or unofficially, and were any other guides used in conjunction with this. Mr. Krajewski responded officially. Currently Nevada was using the 2nd Edition and the 3rd Edition had been published and now became the guide Nevada was required to use. However, the concern was some of the benefits in the 3rd Edition of the AMA Guide would result in greater cost to the system, so there was some concern as to whether SIIS should adopt the AMA Guides. Mr. Krajewski noted when researching back to NIC regulations there was a schedule of injuries which compensated people based on the loss of limb which was not from the AMA Guide.
Chairman Giunchigliani noted the Department of Industrial Relations (DIR) had permission under the statute to also do a supplemental check if there was an area in the guide they did not agree with.
Ms. Lynn Grandlund, Grandlund, Watson, Clark & Associates, EON, NAIB, AFA, submitted prepared testimony (Exhibit J) and noted opposition to the mandatory deductible.
Ms. Kenny questioned when there was non-compensable injury, was it possible to garnish the employees wages. Ms. Grandlund responded the only recourse the employer had was to recover the money civilly. She noted she was not sure the employer had the legal right to garnish the employees wages. Mr. Ernaut noted an employer could not garnish his own employees wages.
Mr. Bonaventura stated if an employee had an injury and the medical expenses were less than the $200, the employer only would pay the lesser amount. An employer might elect to have a higher deductible to generate a lower premium. Ms. Grandlund responded the employer was responsible by law to report the incident to the insurer.
"Chairman Giunchigliani, was it not your suggestion at either or during the session or the standing committee to design the C-3 in such a way that the incident, if you will, would be reported to the employer. The employer and the injured worker would sign it . . . the paperwork doesn't go anywhere until medical care is necessary," questioned Ms. Grandlund. She noted this was an excellent suggestion and would cut down on the amount of paperwork which clogged the system, and protected the injured worker. Chairman Giunchigliani said yes this was her suggestion.
Mr. Collins questioned, "You choose an option of a deductible, not total opposition to a deductible." Ms. Grandlund responded she was not in total opposition of a deductible. She opposed it being mandatory, especially for the small business.
Mr. Daniel Richoalsky, an injured worker and a licensed workers' compensation representative, testified. Mr. Richoalsky noted his opposition to the maximum allowable wage and felt adjustments should be made to this area. He noted he represented a few injured workers and it had taken him several months to get them a PPD rating. He recently represented an injured worker, a carpenter, who lost part of his finger and the State Industrial Insurance System (SIIS) was not going to give him a PPD at all.
Mr. Collins questioned if an injured worker was able to go back to the same position he had, why should he receive a PPD. Mr. Richoalsky noted, the man he spoke of who lost part of his finger was a carpenter and was able to go back to carpentry, but the nerve damage in his finger would last for the rest of his life.
After discussion between Mr. Ernaut and Mr. Richoalsky regarding PPD awards, Chairman Giunchigliani stated currently PPD paid solely on the issue of medical impairment. Therefore, if there was a loss of something, the State Industrial Insurance System (SIIS) would compensate the loss separately from the salary issue. She queried if it was fair and reasonable to reward an injured worker whose injury did not have an impact on their job the exact same amount as someone whose injury had an actual impact on their wage loss.
Mr. Robert Hinders, injured worker from Mercy Ambulance, testified. Mr. Hinders noted his concern regarding the 25 percent minimum on rehabilitation. He explained he was told by his physician he might not be able to return to his previous position which he held for 14 years. Mr. Hinders stated, "If you try and find a job at the age of 38, and you've already been employed for 14 years doing something else, how many people are going to employ you at $40,000 a year." Chairman Giunchigliani responded the committee was open to rework the rehabilitation issue. She noted the testimony presented to the committee had shown the rating percentage had absolutely nothing to do with rehabilitation, and the committee was examining the eligibility, age, and other factors involved to determine who would qualify for rehabilitation.
Mr. Hettrick clarified there was a six month limit on less than 25 percent for rehabilitation.
Mr. Hinders questioned who would make the determination as to what he would be retrained as. Chairman Giunchigliani stated currently the rehabilitation counselor was supposed to do a full diagnostic workup. The system at present was a strict medical model. The physician determined the injured workers limitations, and there was no communication with the employer. The committee would like to go beyond the medical model by bringing the injured worker, the employer and the rehabilitation counselor together to work out what the limitations were and what recommendations should be made.
Mr. Danny Williams, an injured worker, testified. He noted he was in the system for over 3 years. He noted the system could work as it was, without revision, if the employees of the system did their jobs correctly. He noted his opposition to the Governor's control of the system and supported the present board. He declared he had lost a 24 year career. After his injury he spoke to his doctor about going into rehabilitation during the medical procedure so he could get back to work quicker. At present he had been in vocational rehabilitation for over 2 years.
Mr. Williams said, "If you're going to propose what I've seen go through the Senate as is, the Governor's proposal, then have no cap on bad faith, because bad faith runs rampant in the system. You think you got suicides now, it's going to go beyond suicides. You'll have people losing their homes and families. You'll have people coming down blowing some people away and that's exactly where it's going to be heading."
Mr. Regan questioned what benefits he had received from the two years of rehabilitation and what program he was involved in. Mr. Williams noted he had originally put together a program he could do himself. He presented the program to the State Industrial Insurance System (SIIS) as a lump sum buyout. He was presented with an offer of about 1/5 percent of what it took to do the program, so he denied it. In turn SIIS then put him with a counselor. He was sent out with his residual skills to look for work within his limitations. Then SIIS had him look for on- the-job training. While he was looking for on-the-job training SIIS also had him redo the program he initially gave to them, and when he was sent to outside counselors the program went up almost three times what he had originally asked for. When he was terminated three months ago, SIIS told him he had not presented an alternative program, which in fact he did, about two months before they terminated him. Mr. Williams noted he was now going through the court system. Mr. Regan commented he had never been rehabilitated, but just pushed around the system. He noted the committee wanted to correct these types of problems.
Mr. Williams further explained while he was doing the on the job training search he ran into a problem with potential employers stating he needed formal training for the type of positions he was applying for. The system said get letters from these employers, and when he obtained the letters the system never addressed them.
Mr. Williams noted he graduated from the North American School of Conservation, was also a certified deep sea diver and wanted to get into an environmental photography position. The system has told him he could not be rehabilitated. Mr. Williams stressed he had lost plenty. He worked for an uninsured employer from out of the state, who came to Nevada, and was here for almost a year without any insurance. Mr. Williams questioned, "What am I now, am I on the bread line, I'm going to be in front of the Governor's house, be in front of SIIS, anybody I can find. You're going to see my face around."
Mr. Regan requested the name of the uninsured employer be sent to Chairman Giunchigliani. Mr. Williams responded affirmatively.
Mr. Ernaut asked Mr. Williams if he could send in what type of program he had sent to SIIS, and what the cost was in his lump sum.
Ms. Barbara Costello, wife of Danny Williams, testified. Ms. Costello stated the large businesses were not paying their fair share. She noted the self-insured were as much at fault as the State Industrial Insurance System (SIIS). Ms. Costello called attention to letter from Stella Marchard (Exhibit K) and news article (Exhibit M).
Mr. Bill Shranko, Personnel Manager, Whittlesea Taxi, testified. Mr. Shranko noted his company paid $1 million per year to the State Industrial Insurance System (SIIS), 80 percent of which were soft tissue injuries. He noted his company had no objection to PPD awards and noted concurrence with Mr. Dean Hardy, Nevada Trial Lawyers Association. He noted it was acceptable when a PPD was awarded for a major impairment, but when there was a situation where the injured worker did not lose a days pay and received a $25,000 award, this was outrageous. Mr. Shranko called attention to a letter from Dr. Vincent Cedarblade (Exhibit L). He noted this was one of the cost drivers and noted he did not think a PPD award should be made so quickly, unless it was a major injury. Mr. Shranko thanked the committee for spending so much time and researching SB-316 so thoroughly and noted his appreciation.
Ms. Trudy Stubbs, testified. She noted she was a workers' compensation specialist for a company which had 3,500 employees and were currently under the State Industrial Insurance System (SIIS). Ms. Stubbs noted her company's SIIS yearly expense was $9 million and they were in the process of going self-insured. She further stated her husband was out on a workers' compensation claim for nearly 6 weeks, and he worked for a self-insured company.
She noted she saw the bad decisions made by SIIS everyday. She outlined her company had one claimant who had 169 chiropractic visits for a soft tissue strain. When this claim was at 80 visits they started requesting SIIS to do something about closing the case. The response from SIIS was not to worry, they were taking care of it. There was no doubt this particular claimant merely enjoyed going to the chiropractor. When the claimant was finally sent for a second opinion, the doctor who examined her said the situation was appalling, and there was absolutely nothing wrong with the claimant. SIIS stated they had to conform with the treating physician, in the meantime the claimant continued with her chiropractic visits. This was just one of the adverse situations her company had been through and this was why they would be going self-insured. Ms. Stubbs noted her concurrence with Mr. Dean Hardy, Nevada Trial Lawyers Association. She also stated SIIS should examine how the self-insureds handled their claims and consult with them regarding their experience in handling claims.
Chairman Giunchigliani mentioned the biggest issue was there was no contact with the employer or the injured worker from the beginning. The State Industrial Insurance System (SIIS) was not contacting the injured worker for months.
Mr. Bache asked if she requested the system do a Comprehensive Intensive Workout (CIW) after the claimant received 80 visits to the chiropractor. Ms. Stubbs responded affirmatively, and noted at this time the claimant was sent to Dr. Haller for a second opinion.
Mr. Michael Garland, injured iron worker, testified. Mr. Garland stated the system was extremely mismanaged and overworked. He noted SIIS employees would not work with the injured worker. There should not be any reason why an injured worker had to hire an attorney to expedite his claim. He claimed he did not want to be out of work after being an iron worker for 24 years, but his hand was permanently damaged.
Chairman Giunchigliani concluded the financial crisis with the system had to be worked out, but cutting the benefits would not fix the system.
There being no further business to come before committee, the meeting was adjourned at 7:40 p.m..
RESPECTFULLY SUBMITTED:
JEANNE PEYTON
Committee Secretary
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Assembly Committee on Labor and Management
May 4, 1993
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