MINUTES OF MEETING

      ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT

 

      Sixty-seventh Session

      May 8, 1993

 

 

 

The Assembly Committee on Labor and Management was called to order by Chairman Chris Giunchigliani at 9:00 a.m., Saturday, May 8, 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. Chris Giunchigliani, Chairman

      Mr. Bernie Anderson, Vice Chairman

      Mr. Douglas A. Bache

      Mr. John C. Bonaventura, attending from Las Vegas

      Mr. John Carpenter

      Mr. Tom Collins, Jr.

      Mr. Peter G. Ernaut

      Mr. Lynn Hettrick

      Mrs. Erin Kenny, attending from Las Vegas

      Mr. John B. Regan

      Mr. Michael A. Schneider, attending from Las Vegas

 

 

COMMITTEE MEMBERS ABSENT:

 

      None

 

 

GUEST LEGISLATORS PRESENT:

 

      Senator Randolph Townsend

     

 

STAFF MEMBERS PRESENT:

 

      Mr. Frank Krajewski, Senior Research Analyst, LCB

      Ms. Vivian McClay, Senior Research Technician

      Ms. Kimberly Morgan, Assembly Bill Draft Adviser, LCB

      Ms. Leigh O'Neill, Deputy Legislative Counsel, LCB

      Mr. Donald Williams, Principal Research Analyst, LCB

     

OTHERS PRESENT:

 

      Mr. Scott Young, General Counsel, State Industrial

            Insurance System

      Mr. Larry Zimmerman, CDS of Nevada

      Mr. Sam McMullen, Nevada Self-Insurers Association

      Mr. John McGlamery, Counsel, Department of Industrial            Relations  

      Mr. George McNally, Nevada Trial Lawyers Association

      Ms. Carol Jackson, Department of Industrial Relations

      Mr. Jim Jeppson, Industrial Insurance Regulation

            Division (DIIR)

 

 

Chairman Giunchigliani announced the committee would hear suggested amendments on the "Fraud" sections of SB 316.

 

Senate Bill 316 -Makes various changes to provisions governing industrial insurance.

 

Ms. Giunchigliani opened testimony on Section 237.  She stated there had been some question whether the statutes noted in the bill covered all potential areas of "fraud."  The Nevada Revised Statutes (NRS) which identified fraud were 616.630, 635, 640, 675, 690 and 700.

 

Ms. Kimberly Morgan, Assembly Bill Draft Adviser, LCB, stated an amendment in reference to Section 60 had been requested by the State Industrial Insurance System.

 

Mr. Scott Young, State Industrial Insurance System (SIIS), explained the proposed amendment would revise Section 63 to allow a lesser included offense (Exhibit C).  This amendment was necessary as penalties had been increased to felonies and SIIS wanted something by which the attorney general (AG) could reduce the charge to facilitate a plea.

 

Mr. Hettrick suggested as Section 63 only needed a reference to Section 60, perhaps it ought to be done at the same time.

 

Mr. Anderson maintained the sections dealt with conspiracy and conviction; thus, the two issues should remain separate.

 

In response to a question by Ms. Morgan, Mr. Young agreed Section 60 was a separate crime and should fall under Section 237.  Therefore, as the attorney general should have authority, he noted the amendment should read "...616.700, or sections 54 to 57, inclusive, and section 60,..."

 

The Chair concluded Sections 63 and 237 were to be amended, adding a reference to NRS, Section 60.  She read the definitions of "fraud" from the NRS.

 

Ms. Kenny asked if another fraud bill recently passed out of Government Affairs, was separate from the fraud portion of SB 316.

 

Ms. Giunchigliani explained the bill, introduced by Mr. Scherer, would be unnecessary with the passage of SB 316.

 

Ms. Morgan suggested adding Section 616.630 to the NRS statutes needing to be amended.

 

With the creation of the Fraud Unit, the Chair clarified the attorney general would investigate and prosecute fraudulent cases, therefore, reference to the district attorney in NRS 616.630 needed to be deleted.

 

Mr. Bache asked if the NRS statutes dealing with health care provider fraud were also referenced.

 

Ms. Leigh O'Neill, Deputy Legislative Counsel, LCB, said the statutes were referenced in Sections 54-57.

 

An issue was raised relative to bankruptcy being used as a means to alleviate past due premiums.

 

Mr. Williams referenced SIIS' proposed amendment to Section 66 (Exhibit D).

 

The Senate, Mr. Young said, discussed making the bankruptcy issue a criminal offense, however, determined it not to be a feasible option.  The amended language treated the premium due as a tax, which would not be discharged by bankruptcy.  The administrative fine included paying all premiums due plus up to a $10,000 penalty.  Mr. Young was unsure whether the penalty was imposed by SIIS or the Administrative Court.  He would verify which and report back to the committee.

 

Upon questioning, Mr. Young maintained uninsured employers fell under NRS 630 as a criminal offense.  Local court systems would prosecute those cases with the attorney general travelling to outlying areas for hearings.

 

Mr. Young determined independent contractors who had not covered what were actually employees, could be subjected to a fine.   The current wording was the employers "shall" be fined "up to $10,000."

 

The Chair, speaking on the first subsection of fraud, questioned whether the language of AB 303, passed by the Assembly, would cover the provisions of Section 1 in SB 316.  Senator Townsend asked the language of SB 316 be left as it was. 

 

In subsection 8, Mr. Hettrick suggested changing "may" to "shall."

 

For consistency, Ms. Giunchigliani agreed.

 

To provide more accurate reporting, Mr. Carpenter suggested SIIS adopt the Employment Security Department's (ESD) reporting system which incorporated individual employee information.  He observed the information could simply be duplicated or shared between the two agencies.

 

Ms. Giunchigliani referred to a BDR which would require the issuance of insurance cards showing proof of coverage.  The cards, carried by employees, would be similar to health insurance cards.  She noted the cards should be considered for both SIIS and self-insured employers.  Ms. Giunchigliani suggested the committee discuss the two concepts when the BDR became available.

 

Mr. Anderson questioned if language was necessary to alleviate any walls between the two agencies in the event either Mr. Carpenter's idea or the BDR were eventually accepted.

 

A short discussion on allowing shared information between the two agencies occurred.  Ms. Morgan assured the committee she would insert language which allowed for the concept.

 

Mr. Bonaventura asked why the items listed in Section 1, subsection 11, were considered privileged information.

 

Certain records under SIIS, self-insureds and ESD were considered confidential, noted Ms. Giunchigliani.  Last session legislation passed which provided for a cross-match of lists, but protected privy information.

 

Mr. Larry Zimmerman, CDS of Nevada, explained there were currently no provisions for self-insured employers to interact with ESD.

 

Ms. Morgan was asked to check on Mr. Zimmerman's concern, as the Chair's intent was for both SIIS and self-insureds to cross-match with ESD.

 

Ms. Giunchigliani questioned if Sections 52 through 65, which were similar to the Medicaid fraud statutes, applied to self-insureds.

 

The language stated "insurer," which Ms. O'Neill believed gave self-insureds the same access as SIIS.

 

In Sections 52 through 59, Mr. Williams reviewed a technical amendment in which "goods or services" should be changed to "accident benefits" (Exhibit E).

 

After discussion of changing the wording to "accident benefits or medical benefits" as suggested by Ms. O'Neill, Mr. Young determined "accident benefits" as defined by NRS 616.025 included the term "medical benefits" as defined by 617.130.  It was, therefore, decided to leave the wording as "accident benefits."

 

Responding to a question on Section 52 by Mr. Carpenter, Mr. Young reported the language was intended to make medical providers responsible for practices within their office.  Also, he referenced Section 58, subsection 3, which provided protection for inadvertent errors on the part of office personnel.  The language of Sections 52 through 59 was aimed at providers who had a consistent pattern of fraudulent billing. 

 

Mr. Carpenter asked if the word "specific" on page 21 should be removed.

 

Mr. Young stated he would have to speak with the attorney general's office, to see if there was a particular reason for the limiting language.  He, himself, had no problem with the deletion of "specific."

 

In reference to a question on page 21, line 44, Ms. O'Neill believed "goods, services, materials or supplies" was taken from the Medicaid fraud provisions and could be replaced by "accident benefits."

 

It was decided in Section 57, page 22, to add "the attorney general."

 

Ms. Giunchigliani requested language which restricted access to records by persons not properly cleared to received such information.

 

Mr. Sam McMullen, Nevada Self-Insurers Association, asked for further review of Section 56 pertaining to anti-kickbacks.

 

The Chair determined much of the language of this section was taken directly from the Medicaid provisions and might not be pertinent to SB 316.  She asked the bill draft advisors verify the language and report back to the committee.

 

Mr. Young, responding to Ms. Kenny, explained the process of reporting fraudulent activities.   He surmised investigators currently at SIIS would remain within the agency to investigate information for PPD awards and whether physical restrictions as determined by physicians should be modified.

 

A suggestion was made by Mr. Bonaventura relative to tiering the charges referenced in Section 55.  He believed the first offense should be a misdemeanor, the second offense a gross misdemeanor and the third offence a felony as the attorney general was primarily looking for repeat offenders. 

 

Ms. Giunchigliani believed the language of Section 58, subsection 3, referenced earlier by Mr. Young, would resolve Mr. Bonaventura's concerns.

 

Upon further discussion, Mr. Giunchigliani noted Section 58 affected persons who received money, not the persons who actually performed the transaction.

 

Mr. Young referenced Page 21, lines 1 and 30 which stated the act had to be done "knowing" the charge to be false.

 

Mr. Carpenter questioned Section 58, subsection 5, which stated penalties collected must be used to pay salaries and other expenses of the fraud unit.  He asked for an explanation of how this would work.

 

Mr. Young determined monies recovered by the attorney general would first be used to reimburse either SIIS or the self-insured for money illegally obtained through fraudulent activities.  However, in addition, the AG was allowed to impose penalties.  The notion was penalties would be used to fund the office, which in turn reduced the assessments paid by SIIS and self-insureds.

 

An additional question of how the budget process would be affected by the collection of penalties was voiced by Mr. Carpenter.

 

Mr. Young assumed the AG would still have to go through the budget process and identify monies collected by fines to offset office expenses.  Any shortfall would be made up by the assessment process.  He believed an excess would be carried as a balance against a year short of fines.

 

Mr. Hettrick questioned whether Section 60 should be referenced in both Sections 63 and 65. 

 

Ms. Giunchigliani requested Kim Morgan review the language and report back to the committee.

 

Mr. Hettrick pointed out the wording of Section 55, subsection 2, appeared to be reversed.  He suggested "shall be punished by imprisonment..." be changed to "may be punished by imprisonment..." and "may be further punished by a fine" be changed to "shall be punished by a fine."

 

Mr. Anderson disagreed.  He wanted the full scheme of enforcement for all persons found involved in fraudulent activities.

 

Ms. Giunchigliani explained she agreed the same standards should apply to everyone.  However, she stressed progressive discipline was her preference.

 

Mr. Young observed the $5,000 fine recommended in Section 58 could be imposed for each act or incorrect billing.  The Senate used the term "shall be" because it wanted a felony conviction.  As a practical matter, Mr. Young determined most felony convictions would merely be assessed a penalty and not require inprisonment.

 

Mr. Regan suggested changing the language in Section 58 pertaining to both the area of fines and imprisonment to "shall." 

 

Mr. Hettrick agreed to the suggested change.

 

In response to Mr. Regan, Mr. Young maintained NRS 616.680, relative to Section 61, would be replaced by Sections 54 through 57.

 

Ms. Giunchigliani reviewed SIIS' proposed amendment to Section 66 (Exhibit D).

 

There being no amended language offered for the next subsection of fraud, Section 111, Ms. Giunchigliani moved on to Section 145. 

 

Ms. Carol Jackson, Department of Industrial Relations (DIR), concurred with the Chairman's suggestion to add language in subsection 2 which directed DIR to notify the attorney general.

 

Mr. John McGlamery, Counsel, Department of Industrial Relations (DIR), determined the language presented to the Senate which was to help fund the fraud unit in prosecution of uninsured employers might not be necessary.  With the present language of Section 145 he related SIIS would take over most of the administration of the uninsured fund. 

 

Mr. Young called attention to his letter of April 19 in which SIIS requested responsibility for the administration of the uninsured fund be returned to DIR (Exhibit F).  He noted the matter had been discussed with Mr. Jim Jeppson, Industrial Insurance Regulation Division (DIIR), who concurred with the amended language (Exhibit G).

 

The intent, as explained by Mr. George McNally, Nevada Trial Lawyers Association, was to allow injured workers the right to prosecute uninsured employers while receiving benefits from the uninsured employer's fund.

 

Section 11 provided for administrative fines of $10,000, however, Mr. Hettrick was concerned the fine might actually be less than the premium owed. 

 

Mr. Young stated he would provide language which clarified the fine was in addition to the premiums due, plus interest.

 

Mr. Regan suggested changing the administrative fine in subsection 11 from "not more" to "not less than $10,000."

 

Mr. McGlamery explained fines issued by his agency were considered unsecured debts by the bankruptcy courts and thus dischargeable.  However, premiums due were considered taxes and, therefore, not dismissable.  His concern was the cost of the lien plus the imposed fines would push employers into bankruptcy and ultimately become uncollectible.  Further, Mr. McGlamery ascertained the original language of the bill would have to be adopted if DIR was again to accept this responsibility.

 

Mr. Young disagreed, stating his amended language left DIR entirely in charge of the uninsured fund, provided DIR the right to collect any liens and removed SIIS from the loop entirely.

 

In reference to the fines in Section 145, Ms. Giunchigliani noted the committee had agreed to change the wording to "shall."  In response to Mr. McGlamery's concern about pushing businesses into bankruptcy, she noted the committee's general feeling was "strength" in fines.   In addition, the brackets in lines 15-22 were to be deleted from page 27.

 

Mr. McGlamery requested the reference in Section 145 covering uninsured out-of-state injuries be amended out.   He would provide language for consideration.

 

In response to a question by Ms. Giunchigliani, Ms. Jackson stated language for the business survey concept which had been discussed at a prior meeting would be provided for consideration.

 

Referencing Section 189, subsection 2, Mr. Young suggested insurer fines be imposed only if determined the insurer had no reasonable basis for invoking the provision.

 

There were no changes recommended for Section 195.

 

Mr. Regan questioned whether the verbiage of Section 186, line 18, should be changed to "shall."

 

In response, Mr. Young maintained those costs had traditionally been left to the discretion of the court and, he opined, should remain that way.

 

There were no changes to the current language of Sections 202 or 203.

 

Mr. Regan pointed out Section 60 also needed to be added to Section 204, page 95, line 27 and Section 205, page 96, line 17 for consistency.

 

Mr. Bonaventura inquired if the definition of "knowingly" in Section 206 fell under NRS 193.017.

 

Mr. Young replied it did.  The Senate determined "knowingly" was a lesser standard, where "willfully" required the prosecutor's determination of intent.

 

Mr. Hettrick questioned if Section 206 should be amended similarly to the amended verbiage of Section 55.

 

Ms. Morgan determined the language of Sections 206 and 207 was "typical" because it allowed for imprisonment, fines or both.  The determination was left to the courts to apply either one or both options.  Section 55, as amended, left no options.  If the committee's intent was to preclude judicial discretion or plea bargaining, she suggested language similar to the DUI provisions.

 

Mr. Hettrick expressed confusion with the committee's inconsistency.  Sections 96 and 97 stated "shall" be punished by imprisonment and "shall" be fined, which was what the committee opted for in Section 55.  However, the language of the next section was changed to  "not less than $10,000." 

 

Mr. Young believed charges based on fraud would not be dismissed by bankruptcy.  He believed the committee ought to allow for judicial discretion by leaving the language of "not more than" but increasing the $10,000 fine.

 

Upon questioning the committee, Ms. Giunchigliani determined the general consensus was to allow for judicial discretion as outlined in Sections 206 and 207.  She next considered the committee's preference for fines.

 

Mr. Bache suggested two separate levels of fines, one for the criminal offense and another for the civil issue.

 

Mr. Young reiterated the punishment language of Section 206 was necessary to establish a felony conviction.  There were provisions for a further $10,000 administrative fine, in addition to a $5,000 fine for each offense.

 

For clarification, Ms. Giunchigliani recommended the language of Sections 206 and 207 be utilized throughout the bill in areas dealing with punishment and fines.

 

The majority of the committee concurred, however, Mr. Regan preferred the fine be changed to "not less than $10,000."

 

No questions were raised on Sections 242 or 247.

 

Staff determined NRS Section 60 needed to be added in Sections 249 through 282, where appropriate.

 

Mr. Young believed under NRS 629, either the attorney general or a grand jury could investigate referenced misconduct.  In response to questioning by Mr. Anderson, Mr. Young opined no change was necessary in reference to the district attorney as  the attorney general would be required to prosecute under the language of SB 316.

 

The Chair asked staff to determine if the reference to NRS 629 was actually necessary.

 

In regard to Section 289, Mr. Young asked about cases already charged and pending with the district attorney.  He indicated he would speak with Mr. L. T. Terry, Attorney General's Office, and report back with transition language.

 

Mr. McMullen asked to work with Mr. Young on the language.

 

Mr. Anderson queried if the fraud unit was actually to be up and running within 30 days of passage and approval.

 

The Senate, Ms. Giunchigliani stated, believed it would be functional within 30 days.

 

Moving to the areas of SB 316 dealing with fines, Ms. Giunchigliani pointed out several sections had already been discussed.  There were no further comments on Section 145.

 

Ms. O'Neill, in response to Ms. Giunchigliani, said "violation" was not a defined term, however, she noted many sections throughout NRS 616 and 617 prescribed when administrative fines may be imposed pursuant to Section 80.

 

Ms. Jackson explained the language of Section 80, requested by Senator Nevin, changed the processing of administrative fines.  It was her understanding the administrator would issue the notice of violation, but an appeals officer would ultimately set the fine in a hearing which would result in approximately 1,200 additional hearings annually.

 

Mr. Jeppson noted presently the notice of violation issued by DIIR identified the fine amount.  In many cases the party just paid the fine which concluded the process.  Mr. Jeppson stated the fines were imposed for any violation of NRS 616.

 

DIIR was asked to identify the areas for which it currently fined under NRS 616, excluding those to be handled by the proposed fraud unit.   This, Ms. Giunchigliani noted, would provide a basis of comparison for fines verses violations.

 

Mr. Larry Zimmerman, representing CDS of Nevada, provided for committee consideration a proposed amendment to Section 204, subsection (d) (Exhibit H).

 

For consistency, Ms. Giunchigliani asked the committee consider DIR's language change from "may" to "shall" impose fines.

 

Responding to Mr. Collins, Ms. Giunchigliani clarified the fines referred to in Section 80 were administrative fines.  She explained the $250 to $1,000 fines of this section were for infractions, usually time delays, of claims administration.  The $10,000 fines previously referred to in other sections were for fraudulent actions.

 

There being no further business to come before committee, the meeting was adjourned at 12:10 p.m.

 

      RESPECTFULLY SUBMITTED:

 

 

                             

      BARBARA DOKE

      Committee Secretary

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Assembly Committee on Labor and Management

May 8, 1993

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