MINUTES OF THE
SENATE COMMITTEE ON COMMERCE AND LABOR
Sixty-seventh Session
February 11, 1993
The Senate Committee on Commerce and Labor was called to order by Senator Sue Lowden, at 8:00 a.m., on February 11, 1993, in Cashman Field Center, Room 207, Las Vegas, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Sue Lowden, Vice Chairman
Senator Ann O'Connell
Senator Mike McGinness
Senator Raymond C. Shaffer
Senator Leonard V. Nevin
Senator Lori L. Brown
GUEST LEGISLATORS PRESENT:
Assemblyman Pete Ernaut
Assemblyman Lynn Hettrick
STAFF MEMBERS PRESENT:
Linda Krajewski, Committee Secretary
Sheri Asay, Committee Secretary
Brian Davie, Senior Research Analyst
Frank Krajewski Senior Research Analyst
OTHERS PRESENT:
Rabbi Mel Hecht, Chairman, Board of Directors, State Industrial
Insurance System (SIIS)
Dick Thomas, Labor Member, Board of Directors, State Industrial Insurance System
Don Jayne, General Manager, State Industrial Insurance System
James Leach, Labor 872
Arthur Busby, Private Citizen
Mark Habersack, Harrah's, Las Vegas
Carol Jackson, Director, Department of Industrial Relations
George McNalley, Nevada Trial Lawyers Association
James Waddhams, Lobbyist, American Insurance Association
Jerry McCormick, Injured Workers
Vicki Robinson, President, Employers for Workers' Compensation
Scott Craigie, Chief of Staff, Governor's Office, State of Nevada
Marc Hechtor, Assistant General Manager, Administrative Services, State Industrial Insurance System
John Kendrick, Concerned Citizen
The meeting was called to order by Senator Sue Lowden who announced that statements by Senator Townsend and Senator Nevin would open the meeting. Senator Townsend introduced Senator Nevin, who made a statement on the provision from the Governor's package that deals with compensability for heart/lung claims for public safety individuals.
Senator Nevin stated that he had checked with Scott Craigie, Chief of Staff, Governor's Office, who assured him that the heart/lung provisions did not affect police and fire benefits. Senator Nevin reiterated that neither the policeman or the firemen would not be hurt on the heart/lung bill.
The second issue regards lifetime reopening. Senator Townsend stated the language that would be put into a bill, was reviewed by the Nevada Trial Lawyers. This will allow those who have a long term disability to reopen a case, even after 3 years. It is not the intention of the committee to cut off reopening-long, term for all cases, and the committee hopes to accommodate these people.
Senator Townsend then turned the meeting back to Senator Lowden, who is chairing the meetings while they are being in held in Las Vegas.
Rabbi Mel Hecht, Chairman, Board of Directors, State Industrial Insurance System (SIIS) addressed the committee on worker's compensation issues for the State of Nevada. Rabbi Hecht's verbatim statement was introduced as Exhibit C.
Dick Thomas, Labor Member, Board of Directors, State Industrial Insurance System stated that the labor members on the board concurred with the statement just made by Rabbi Hecht. Mr. Thomas did say, however, the labor members were not willing to watch severe reductions in benefits to the injured worker. He specifically made mention of the fact they were not pleased with the proposal of changing the way of calculating the state wage from gross to net. He mentioned that any legislative means at their disposal would be used to keep this from happening.
Mark Smith, Vice Chairman, Board of Directors, State Industrial Insurance System noted he concurred with Rabi Hecht's statement, with one main exception. He felt that the board should be under the control of policy holders. He reiterated the board had not been consulted by the Governor before policies were made.
Senator Townsend, Mr. Smith Mr. Thomas and Rabbi Hecht reviewed some salient points of earlier testimony. Senator Townsend stated it was his concern that premium payer dollars would go to the General Fund "and work comp (workers' compensation) in general gets a benefit in return with some kind of accounting for that." Mr. Thomas expressed a concern regarding the Jean Hannah Clark Rehabilitation Center, that was built with policy holder dollars, stating he would like to know what happens to that facility. He went on to state it was an one of the best in the country, providing much needed service to the worker and he wanted to be sure it would still be available. Rabbi Hecht noted a principal concern would be control and effectiveness if outside contractors were utilized to cover an overflow of services. Senator Townsend stated where dollars were diffused was critical to policy deliberation. Mr. Smith noted that large amounts of funds went to a number of different areas, and these monies came from assessments. He was curious as to how the assessments were worked out. Don Jayne, General Manager, State Industrial Insurance System stated basically, assessments were built into the budget.
There was discussion between Senator Townsend and Mr. Thomas on problems that might result if the Department of Insurance, The Department of Industrial Relations, and SIIS, were to merge.
Senator Nevin inquired why there seemed to be a lack of communication between the Governor's office and the board. Mr. Smith stated an effort had been made by the board to contact the Governor's Office, but the effort had not been too successful. Senator Nevin expressed concern about reorganization and how it would affect the budget. Mr. Thomas noted that there was, in fact, money in a trust fund that should not be any part of state government.
At this point, Senator Lowden introduced Assemblyman Ernaut and Assemblyman Hettrick, who were sitting in on the meeting. She invited both to join the discussion.
Senator Brown asked about specific needs on vocational rehabilitation. She also expressed the hope that although many issues had been addressed, they might be brought up again. Senator Townsend assured her that this would, in fact, happen.
Senator O'Connell announced she would be chairman of the Reorganization Committee to meet in Las Vegas. She invited the board to take part in these meetings. Senator O'Connell also asked for a mission statement from the board telling what they perceive their duties and responsibilities to be. Senator O'Connell and Mr. Thomas were in agreement on the fact they felt that neither the committee or the board had been given accurate information on what was happening within the system. Mr. Thomas went on to say that the board had been given authorization for legal counsel to determine whether there might be a case against prior audit companies, because there might have been inaccurate information.
The meeting was recessed at 9:45 a.m. for a break.
The meeting was called back to order at 10:25 a.m.
Mr. James Leach, Labor 872, spoke regarding the fact that he felt more emphasis should be given to safety on the job site. Mr. Leach was assured by Senator Lowden that the committee was definitely interested in safety on the job.
Mark Habersack, Harrah's Las Vegas offered to answer questions on Exhibit D Risk Management Insights. There were three different articles mentioned; Ultimate Workers' Comp Claims Costs, Light Duty Programs Have Heavy Duty Impact, and Managed Care Consultants, Inc.
Arthur Busby, representing himself as a private citizen was next to speak. Mr. Busby stated that he has no problem with the board of SIIS. He did feel, however, there should be employee representation on the board, but did not feel the union should be the exclusive representation of employees on the board. As a non- union employee, he did not feel he was being represented properly by union representatives.
Carol Jackson, Director, Department of Industrial Relations, was asked by Senator O'Connell to provide information on why Nevada seems to pay so much more than other states as far as compensation for loss of body parts. Ms. Jackson said she would be happy to obtain that information and give a report.
George McNalley, Nevada Trial Lawyers Association and James Wadhams, Lobbyist, American Insurance Association, discussed various issues posed by Senator O'Connell, who mentioned the committee had been debating over cost sharing issues. Mr. Wadhams, Mr. McNalley, Senator Brown, Senator McGinness had a lengthy discussion regarding the exclusive remedy issue. Mr. Wadhams noted the discussion basically referred to a no-fault system and that to introduce a concept of contribution to an accident, through negligence of an employee, might create a loophole.
Mr. McNalley commented on Senator Lowden's query on a situation where an employee's disregard for imposed safety regulations might cause an accident. Mr. Wadhams felt there still might be a certain amount of responsibility on an employer's part to direct that a worker adhered to safety principles. Mr. McNalley, Senator Lowden and Senator O'Connell went on with the discussion, noting that essentially, whether the accident was due to negligence on anyone's part, or whether it was simply an accident and no particular person's fault, that SIIS usually ended up paying.
Don Jayne, General Manager, State Industrial Insurance System, offered that there were internal mechanisms that spread loss across all employers covered by SIIS. Mr. Jayne went on to state this was how claims would be paid, even though some companies whose safety records might not be good could be charged higher rates, as theorized by Senator Brown.
Senator O'Connell, addressing Mr. McNalley, Mr. Wadhams and Mr. Jayne, stated for the record:
From the system's standpoint you have not pursued the exclusive remedy situation any further, as far as a sharing of costs and anyway because in your thinking the information you have at hand tells us that it could be broken were it taken to a court of law, you think then that the umbrella would be closed and that there would be from a third party to a one party shift.
Mr. Jayne commented that whether a law would be passed that would allow for the deductibles and the sharing of risk is a policy level decision.
Senator O'Connell went on to state for the record:
Our major concern is that if we have some kind of a clear understanding, because employers have been led to believe a lot of different things on this issue. I simply want to give them as clear a cut picture as we can of the risk that we take, if we do this, indeed. And so that everybody knows that is out there and that if they're willing to support doing that, then they need to let us know, but it is still unknown territory. And that's what I'm trying to get as clear a picture as I can here. Before this, I've always thought that George (McNalley) thought it could clearly be taken to court and overturned and on the other side that there was no question that we could do it and there would be no break in the system whatever. Our responsibility is to let the employers of the state know, if you encourage this and if you go forward with it, that the risk is out there, without a doubt. And that is just what I'd like to get on the record here this morning.
Mr. Wadhams suggested the Legislative Counsel Bureau (LCB) staff might do some research in order to determine whether or not exclusive remedy would be eroded. Senator O'Connell still felt there were questions that needed to be answered. Senator Brown asked how cases involving indigent workers who might not be able to afford a deductible might be handled. Mr. McNalley responded that he thought there was provision for employers to handle the deductible and have the cost taken out of paychecks. Senator Lowden replied it had been discussed, but no action had been taken.
Mr. McNalley went on to summarize, stating he would lean toward Mr. Wadhams point of view and felt the risk was slim to none. Mr. Wadhams felt that perhaps a closer look should be taken at charging a larger rate to those companies who have poor safety records and higher losses.
Next to speak was Jerry McCormick, representing Injured Workers, who expressed concerns over the fact that it took too long for cases to be serviced. Senator Lowden also expressed these same concerns and stated the hope was that with managed care the injured workers would be taken care of in a more expeditious manner. Mr. McCormick then spoke about the fact there was a cutoff date for further treatment.
After expounding her views on claims and vocational rehabilitation, Vicki Robinson, President, Employers for Workers' Compensation,
went on to testify regarding the SIIS board, saying she felt the board should be made up of policy holders. Ms. Robinson stated in terms of the reorganization, the employers she is associated with would like to go on record:
That we oppose any reorganization which would transfer monies from our trust fund that we pay into, into the General Fund. That's not what it is intended for and we would really not like that to happen. We don't see that as an advantage to the injured workers of the state, nor do we see it as an advantage to the state in general, or to the employers.
Senator O'Connell asked Scott Craigie, Chief of Staff, Governor's Office to address Ms. Robinson's concerns regarding employers' money going into the General Fund. Mr. Craigie reinforced Senator O'Connell's comments as far as trying to avoid duplicate audits from different departments. Mr. Craigie went on to say that in the future, the audits would have target areas, but would be more intense.
Senator O'Connell shared the following information for the committee's sake:
SIIS did, I understand, approximately 11,000 audits last year. Don (Jayne) is......that's right and their recovery was somewhere around $225 per audit. The state auditors, as far as the tax commission is concerned, their recovery is approximately, I'm going to say 17 times greater than that in their audits, because their audits are more complete.....they're a different audit, they're a thorough audit, they are not the same types of audits and so they felt as far as recovery in the auditor's time, that perhaps they could bring their auditors up to speed on some of the other things they are looking at and that it would be a much more profitable audit for both the employer and the state.
Mr. Craigie stated he could not testify to the 17 to 1 ratio, but knew it was dramatic. He reiterated that the tax department had a target and the audits were more intense.
Senator O'Connell noted she wanted the information on audits to be on the record.
Senator Lowden called for anyone else who might wish to speak.
Mr. John Kendrick, Concerned Citizen had a question regarding how rates are set. Marc Hechtor, Assistant General Manager, Administrative Services, State Industrial Insurance System, noted rates are set according to risk factor and the higher the risk factor, the higher the rate will be.
There being no further business, the meeting was adjourned at
11:30 a.m.
RESPECTFULLY SUBMITTED:
Beverly Willis,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE:
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Senate Committee on Commerce and Labor
February 11, 1993
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