MINUTES OF THE

      SENATE COMMITTEE ON COMMERCE AND LABOR

 

      Sixty-seventh Session

      March 5, 1993

 

 

The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Friday, March 5, 1993, in Room 227 of the Legislative Building, Carson City, 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

 

STAFF MEMBERS PRESENT:

 

Denise Pinnock, Committee Secretary

Brian Davie, Senior Research Analyst

Frank Krajewski, Senior Research Analyst

 

OTHERS PRESENT:

 

Scott Craigie, Chief of Staff, Governor's Office, State of Nevada

George McNally, Lobbyist, Nevada Trial Lawyers Association

Brian Harris, Legal Counsel, Governor's Office, State of Nevada

Larry Zimmerman, Consensus Group

Ron Krump, Lobbyist, Nevada Unified Business Coalition

Terry Rankin, Commissioner, Department of Insurance, State of          Nevada

Marc Hechter, Assistant General Manager, Nevada State Industrial       Insurance System

John McGlamery, Attorney, Department of Industrial Relations

Bob Ostrovsky, Lobbyist, Nevada Resort Association

Don E. Jayne, General Manager, Nevada State Industrial Insurance       System

Marty Bibb, Lobbyist, National Federation of Independent Business

Paul Aakervik, Aakervik & Associates

Tim Terry, Deputy Attorney General, Medicaid Fraud Control Unit,        Attorney General's Office, State of Nevada

Carol Jackson, Director, Department of Industrial Relations, State      of Nevada

 

 

Senator Townsend opened the meeting by explaining the committee would not be voting because there was additional information to be brought forth. 

 

Scott Craigie, Chief of Staff, Governor's Office, State of Nevada, stated the Governor's intention was to draw expertise from the private sector to improve the Nevada State Industrial Insurance System (SIIS) if he were given control of the system as an emergency measure.  He spoke of using people with direct experience in bidding for, signing contracts with, and implementing managed care systems.  Mr. Craigie introduced Exhibit C, which was proposed language dealing with utilization review.  He then discussed Exhibit D, a flow chart of a proposed appeals process.  Mr. Craigie suggested printing up a brochure to explain the appeals process. 

 

Senator Shaffer expressed his concern that a claimant might not have competent representation at the lower levels of appeal.  He also stated the claimant might not be getting compensation during the appeals process, and wondered if the committee should set a time limit for each step of the process. 

 

George McNally, Lobbyist, Nevada Trial Lawyers Association, testified those issues should be internal procedures set forth by the managed care organization (MCO). 

 

Mr. Craigie stated it would be likely the internal review process would be overseen by a medically trained person.  

 

Senator Lowden questioned at which level mediation would be placed.  Mr. Craigie said it would be at the hearing officer level. 

 

Mr. McNally stated the function of the current hearing officers was closer to arbitrators than mediators. 

 

In response to a question from Senator O'Connell, Mr. McNally said the first recorded proceedings would be at the appeals officer level. 

 

Senator Brown clarified that at the appeals officer level the employee had the right to counsel.  Mr. McNally agreed.

 

Senator McGinness asked what would happen in the rural areas in regard to utilization review and managed care.  Mr. Craigie said the rural areas would probably operate on a fee-for-service basis.  He said the system would be more efficient, but would otherwise stay the same. 

 

Ron Krump, Lobbyist, Nevada Unified Business Coalition, read  proposed changes regarding managed care (Exhibit E). 

 

Senator Brown asked if Mr. Krump's organization favored requiring the $200 deductible.  He stated they thought it should be a required minimum, because if there were not going to be an adjustment of premium it would be unfair if some employers had it and some did not.

 

Senator Townsend said it had been pointed out that some employers had premiums under $200, and should therefore be exempt.  Senator O'Connell stated the Governor was recommending a $500 minimum deductible.  Senator O'Connell was concerned about what that would do to a very small employer. 

 

Terry Rankin, Commissioner, Department of Insurance, State of Nevada, submitted Exhibit F, language regarding deductibles.  Senator Townsend questioned the rationale behind section 2 of Exhibit F.  Ms. Rankin said they had left the language as broad as possible to allow the SIIS to develop a mechanism to reduce the paperwork for themselves and the employer, and still deal with the Occupational Health and Safety Act (OSHA) requirements. 

 

Marc Hechter, Assistant General Manager, Nevada State Industrial Insurance System, said from the insurer's perspective they wanted to maintain frequency statistics even if they were not paying out anything on behalf of the insured.  Mr. Hechter stated the issue was not to create another paperwork shuffle, but to acquire and maintain data.  Senator Townsend stated the threshold would be the deductible and lost time.  If the claim amount was over the deductible or there was any lost time, the employer would file a report. 

 

Senator Townsend compared the injury reporting to automobile accident reporting; he did not have to report an accident to his insurance company as long as he paid for the damage himself.  Ms. Rankin said frequency reporting was something the insurer would want to have regardless of whether it was auto, health, or industrial injury insurance. 

 

Mr. Hechter said 52 percent of the SIIS policyholders pay annual premiums of $500 or less.  They are policyholders who had very few claims.  He stated the SIIS had an obligation as a public insurer to look at continuing frequency of small claims as an indication something was wrong.  He said the deductible program implied about a 4 percent rate increase.  It was designed to be a cost-sharing program.  Mr. Hechter said the incentive was to force safety programs on those businesses with many small claims. 

 

Senator Shaffer suggested using an annual report of the activity in each employer's deductible account.  Mr. Hechter agreed that would work.

 

John McGlamery, Attorney, Department of Industrial Relations, State of Nevada, cautioned the committee that the OSHA guidelines were

set by the federal government. 

 

Bob Ostrovsky, Lobbyist, Nevada Resort Association, testified the employer could keep an annual log with the employee's name, date of injury, and amount paid, to be turned in once a year.  He said the amount paid could even be added to the OSHA report form. 

 

Ms. Rankin explained each section of Exhibit F.

 

Senator Brown asked about section 5.  Mr. Ostrovsky clarified that an injured worker who had medical treatment would have 90 days from that treatment before the claim closed.  As the section was written an injured employee who did not seek treatment had 120 days to pursue the claim.  Senator Brown suggested using medical evidence language to allow reopening of those claims.  Mr. Hechter agreed they might refer to convincing medical evidence.

 

Mr. Ostrovsky stated:

 

      Senator [Brown], we're going to have to differ on this issue.  If we get into all that on these little claims, you can put this thing to bed; you've wasted your time.  I feel strongly that if 90 days isn't enough we need to do something else to protect employees.  They need some legitimate protections, but we get into reopening rights and all this stuff and if you don't follow every letter of the law you're going to find yourself right up in the district court and the supreme court, and you're going to eat these cases ... I'd be happy to look at the language to loosen this up, but to let them fall in under the reopening is defeating the purpose. 

 

Senator Brown said if the injury were handled through the deductible there would have been no opening of a claim, so there could be no reopening.  If the employer were required to keep on file a report of the injury, and a claim started later on, there would not be an abundance of paperwork.  Mr. Ostrovsky said he saw a substantial risk for the employer, and would not recommend they take that risk for any amount. 

 

Senator Townsend said there were many injuries which did not immediately manifest themselves with great amounts of pain.  He stated there was a need to educate employees of the need to report all injuries, no matter how small.

 

Mr. Ostrovsky said he would be more than happy to extend the time limit, but felt there should be a definite cutoff. 

 

Mr. Hechter gave some figures on rate points and likely annual savings. 

 

Senator Townsend asked Senators Lowden and Brown to work with the consensus group, SIIS representatives, and Ms. Rankin to resolve differences and draft language for section 5 of Exhibit F.

 

Marty Bibb, Lobbyist, National Federation of Independent Business, testified against a mandatory deductible.  Senator Townsend stated the committee needed to figure out the relationship of the deductible with those who had premiums in that range.

 

Paul Aakervik, Aakervik & Associates, a third party administrator, stated he saw several problems with the deductible.  He said:

 

      An employer, not sophisticated in handling claims, accepts a claim under the $500 figure.  He has a deductible so he sends the employee out to the doctor.  The doctor starts to treat, and nobody realizes that this claim is not a compensable claim.  What happens when he now gets to $600, it goes to SIIS, and they say, 'Oops!  Wait a minute.  This is not an acceptable claim.  We're going to deny the claim.'  What happens at this point?  Has the employer committed SIIS to acceptance of the claim?  Nobody has thought about this.  Once the claim has been accepted, the only way you can deny that claim is to prove fraud on the part of the employee.  That's very difficult to do.  SIIS may be stuck with tens of thousands of dollars of claim that the unsophisticated employer accepted, but should never have been covered in the first place. 

 

      Another little problem is your fee schedules.  You have a fee schedule that is set up in the state of Nevada, and it's a good one.  Now you have the employee go out, and he goes to several medical vendors.  He goes out and treats with the emergency room for $135, and another $125 to a chiropractor, and then he builds up the bill to $495, and he has to go out for some x-rays.  The x-ray now comes in for $400.  Let's say the whole deal is maybe $600.  The employer writes his checks for $500 and the claim goes into SIIS for the other $100.  SIIS says, 'Hey!  We have a fee schedule.  If we apply the fee schedule the entire claim would only be $350, therefore, we're not liable for anything.'  The radiologist is out there, out of pocket for $250.  Who's going to pay the bill?  The employer is going to say he's met his responsibility by paying the $500 out, and SIIS says it's over the fee schedule. 

 

      You're going to cause an awful lot of problems in another area ... Chiropractors typically charge $25 to $35 to his private patient.  This deductible situation is going to confuse the chiropractor because he's going to say, 'Now, is this a private patient, or is this a SIIS patient, because for the SIIS patient I get $72 for the same visit.' ... As a third party administrator I see claims coming in to me from a chiropractor that had been billed to the employee because for some reason he didn't know that it might be compensable, and that bill comes in for $25 or $30, and then the next bill that I get from the chiropractor is billed under the fee schedule for 1 hour of chiropractic treatment at $72, you're going to have a little bit of a problem there. 

 

      Senator Townsend, you were touching on this problem a few minutes ago.  How about the mail?  What do we do with the mail on these situations?  [The] employee goes out for treatment to a chiropractor or to an emergency room, and the provider may not know whether he's met that deductible or not.  Does he send the bill to the employer?  Does he send it to the employee?  Does he send it to SIIS?  Or does he send it to a number of third party administrators.  Right now I get SIIS mail all the time.  SIIS mail room gets a lot of my mail....

 

      You're going to have another problem occur.  You're going to have some switching from industrial to group carrier claims.  Now everybody wants to take what should be a group claim and make it an industrial claim so they can avoid the deductible.  Whoever has a $500 deductible is going to say, 'Hey let's make this a group claim, because we only have a $250 deductible on our group policy.'  You're going to have a number of claims, then, that should be industrial, shunted off to the group carrier.  This is a concern of mine.

 

      One other thing is, does the $500 deductible apply as far as the time limits that we were talking about earlier, does that apply also to self-insureds?  If I get a bill in and I pay it for my self-insurer, my self-insurer is not going to want to do the paperwork.  He's already hiring me to do the work, so we're going to have basically no deductibles for that self-insured employer.  Does the 90 day, or 6 month, or 1 year rule apply if my billings are only $450?

 

Senator Townsend commended Mr. Aakervik for his substantive remarks, and asked him to meet with Mr. Ostrovsky to work out solutions. 

 

Tim Terry, Deputy Attorney General, Medicaid Fraud Control Unit, Attorney General's Office, State of Nevada, introduced Exhibits G & H.  He explained Exhibit G was proposed amendments to Nevada Revised Statutes (NRS) Chapter 228.  Exhibit H was a fiscal note regarding the new SIIS fraud unit. 

 

Senator O'Connell expressed concern regarding what notification the employer was given before members of the fraud unit went in to audit their books.  Mr. Terry stated the procedures were in existing statutes; his proposals merely applied those procedures to SIIS cases.  He offered to meet with Senator O'Connell to further clarify the procedures.

 

Carol Jackson, Director, Department of Industrial Relations (DIR), State of Nevada, submitted Exhibit I (see original in Research Library), State of Nevada of Nevada, Compliance Audits, Worker Compensation Insurers, and Exhibit J, a summary of that audit.  She stated:

 

      In 1991 the Legislature mandated that the Department of Industrial Insurance schedule audits for insurers at least once every 3 years.  They also mandated that these audits be presented before the Legislature on or before March 1st.  We're a few days late, but I think we're forgiven for that.  During this period we conducted 30 audits of insurers, and Senator Townsend indicated the only audit he's interested in is the SIIS.  Is that correct?

 

Senator Townsend said, "For today.  We will get to the others very shortly." 

 

Ms. Jackson stated, "There are many, many good employees who work at the SIIS, and I've known many of them for many years.  They are hard workers and very dedicated employees."  She explained the differences between the problems found in southern and northern Nevada.  She concluded:

 

      Looking at it, and this is my opinion, I felt that there was a claims management problem, or a case management problem.  There were two areas that our samplings were just not sufficient, and that's why we expanded into the rehabilitation area, and also into the medical bill payment.  Of course we found many violations in that particular area.  There are lack of statutes, lack of regulations, particularly governing rehabilitation.  We were looking at ranges of where there may be areas where we could say, 'Okay, this may be a standard.'  We could not find that.  Of the 40 claims that we looked at we did a random, non-statistical sample of those 40 claims.  For the record I'd like to state that the State Industrial Insurance System has responded.  They have some questions on that, but because we were required to submit our findings, we are here today with those findings.  On rehab [rehabilitation], we felt that there were significant problems when you looked at those particular files in northern and southern Nevada.  Even with the use of the private vendors; approximately 30 claims out of the 40 did have private vendors involved in those claims.  We felt that the multiple rehab [rehabilitation] programs ... that was definitely a problem.

 

Don E. Jayne, General Manager, Nevada State Industrial Insurance System, requested the committee pay particular attention to the timeframes of the audit.  He said the SIIS was experiencing serious problems during those timeframes.  He exclaimed:

 

      I need to go on record to say the information, as presented, we certainly agree there have been problems, and in fact, many of the things in the audit that I have not had the chance to have our final response back yet.  The methods we use for the average monthly calculations were acceptable methods as approved by prior DIR directors.  So, we've got a situation here where we had a method we were using, so ....

 

Senator Townsend stated the committee was just looking for areas where they could make substantial changes.

 

Mr. Ostrovsky urged the committee to look at the rehabilitation audit, and said he was prepared to take them through the information. 

 

As there was no further business, the meeting was adjourned at 10:35 a.m.

 

 

 

 

 

            RESPECTFULLY SUBMITTED:

 

 

 

                                    

            Denise Pinnock,

            Committee Secretary

 

 

 

APPROVED BY:

 

 

 

 

                                     

Senator Randolph J. Townsend, Chairman

 

 

DATE:                                 

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Senate Committee on Commerce and Labor

March 5, 1993

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