MINUTES OF THE
SENATE COMMITTEE ON COMMERCE AND LABOR
Sixty-seventh Session
March 8, 1993
The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:30 a.m., on Monday, March 8, 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:
Beverly Willis, Committee Secretary
Brian Davie, Senior Research Analyst
Frank Krajewski, Senior Research Analyst
OTHERS PRESENT:
Matthew Dorangricchia, Assistant General Manager, Northern Regional Operations, State Industrial Insurance System
Donald Jayne, General Manager, State Industrial Insurance System
Scott Craigie, Chief of Staff, Governor's Office, State of Nevada
Terri Rankin, Commissioner. Insurance Division, State of Nevada
Jim Jeppson, Division of Industrial Insurance Regulation
Marc Hechter, Assistant General Manager, Administrative Services,
State Industrial Insurance System
Ray Bacon, Lobbyist, Nevada Manufacturers Association
David Horton, Alternative Therapy Support Group
Scott Young, General Counsel, State Industrial Insurance System
The meeting opened with Senator McGinness introducing several memos prepared by Brian Davie, Senior Research Analyst. These memos, (Exhibit C) Eligibility Criteria for Vocational Rehabilitation, dated March 8, 1993; and(Exhibit D) Rehabilitation Expenses and Outcomes), dated March 7, 1993, were discussed in detail by Senator McGinness. Senator McGinness complimented Mr. Davie on an outstanding job of putting the issues into focus. Senator McGinness then referred questions to Mr. Davie. A discussion between Senator Townsend, Senator Nevin and Mr. Davie followed, with Mr. Davie offering clarification on several points of law.
At Senator Lowden's request, Matthew Dorangricchia, Assistant General Manager, Northern Regional Operations, State Industrial Insurance System (SIIS), came forward to speak on eligibility criteria and alternatives to rehabilitation, as it is done at this time. Mr. Dorangricchia stated he felt that the key to controlling costs in rehabilitation in Nevada, would be to control access. He felt that strict eligibility criteria would be necessary. Mr. Dorangricchia went on to discuss some of the methods by which this might be accomplished. He mentioned that the number of 35 percent disability was used, because it represents a significant level of disability.
Mr. Dorangricchia went on to state that strict criteria would limit the number of people getting rehabilitation. He reiterated that he felt the most important thing was to limit access and to restrict criteria.
At this point, Don Jayne, General Manager, State Industrial Insurance System, stated that savings in rehabilitation will depend on which set of figures might be used, with or without permanent partial disability payments. Senator Lowden asked Mr. Dorangricchia if those people with a disability of under 25 or 35 percent would still be able to be part of the working community. He responded that he felt there might be those with disabilities of under 25 percent that might need rehabilitation, and at this time, anyone who cannot do their pre-accident job is being rehabilitated. Senator Brown and Mr. Dorangricchia discussed using previous training and experience as a rehabilitation tool.
Senator Shaffer expressed concern for those who might be below the 25 percent level, stating these people might have to go on welfare, because of the fact they would not be trainable, or able to find other jobs. Mr. Dorangricchia agreed, stating that now, formal restrictions seem to be needed to avoid the system being abused.
At this time, Senator Townsend introduced the memo, Status Report on BDR 53-1764 (Exhibit E), suggesting that perhaps the committee might want to review this memo before the next meeting.
Next to testify was Scott Craigie, Chief of Staff, Governor's Office. Mr. Craigie stated he'd been asked by the Committee to explain the way the Governor sees the target for savings the bill has to have and how the position on long-term reserve is recaptured.
Mr. Craigie made a few remarks regarding future rate increases. He stated that he knew this was a topic of great interest to those on the committee and that many of the members had been told by the Governor directly, and he wanted to state for the record:
That it is his position that expenses and savings have to be......programs have to be put in place first before we look at rate increases. However, I want to avoid having the same problem that we had with the rateable pay issue that we had 2 years ago, saying that everything was going to be going along in neutral. There are four factors that can and will affect rates as they go through the normal course of processing over the next 2, and even beyond years. First of all there is the rateable pay issue which was originally moved to $36,000 in the bill that passed out of the last session. Now, there is a graduated program that has been in place by regulation by the Governor, bringing it back to $27,000 and applying the SIIS premium rate to all salaries below that and then every year there's an increase of $3,000 in that rateable pay level. That will automatically create a 3 percent across-the-board rate increase. It will hit some businesses harder than others. Some businesses won't be hit at all, but that process will continue, assuming that the bill, that prevents the $36,000 from remaining in place, passes both houses, which is yet to be introduced. Secondly, there's been discussion between the insurance commissioner and the system about a minimum premium. There are many people, according to Mark Hechter; we talked about this issue on Friday, who pay as little as $26.00 a year, I believe that's an annual number, and they're not even covering the cost of billing them and keeping them on the system. There is the belief, and that discussion we've not been a part of, that there should be a minimum premium. So that's another issue where, there will be rate increases. In addition there are reclassifications that take place every year where the higher risk companies and the higher risk occupation groups do come up for reevaluation, depending on what their experience is and their rate is adjusted and that would be a rate increase, as well. And finally, of course, everybody is familiar with the deductible which is something we're all dealing with here.
Mr. Craigie went on with a discussion of reserve levels needed for the reserve fund to protect against long-term unfunded liability. He stated that right now we would be at a level of about $566 million at the end of this fiscal year, and that as FY 1994 was entered the figure would be about $441 million The actuarial group for SIIS stated they felt the figure should be $725 million, while Terri Rankin, Commissioner of Insurance, felt the figures should be $900 million to $1.4 billion.
At Senator Nevin's and Senator Brown's request, Commissioner Rankin gave an explanation on her figures. Commissioner Rankin stated that the figures she was using were based on the presumption that if an insurance company were to close down today, there would be resources enough to pay all of the incurred obligations from when they were in business. A smaller number could be used if monies were being accrued in a sufficient manner; the larger number if investments were not going so well.
Mr. Craigie stated that the Governor proposed this target as a 6- year plan. It was felt that you cannot rebuild in a 2-year period; a 6-year cycle was felt to be needed. Mr. Craigie stated the Governor believes the first way to attack this is by dramatically reducing costs. If we take tough steps in cost cutting, we would dramatically reduce the debt level as we go along. The Governor's target for this reserve level would be $950 million. Mr. Craigie presented(Exhibit F) Projection of Accumulation of Invested Assets, and went on with an explanation.
Senator Brown posed the question of reduction for employers, stating that she did not notice any. Mr. Craigie replied that there probably would not be any reduction in payments until the end of 1997.
At this time, Mr. Craigie offered, with an explanation (Exhibit G) Projection of Cash Flows, and (Exhibit H) Six Year Plan To Solvency. Senator Townsend, Senator O'Connell and Mr. Craigie proceeded to discuss these exhibits.
Marc Hechter, Assistant General Manager, Administrative Services, State Industrial Insurance System, stated that SIIS agreed with the projection presented by Mr. Craigie. Senator O'Connell, Senator Nevin, Don Jayne, General Manager, State Industrial Insurance System,, and Mr. Hechter discussed the ramifications, if the projected numbers on the exhibits Mr. Craigie presented, were used. Mr. Hechter reiterated that SIIS agreed with the projection.
Chairman Townsend asked the members of the committee to review the exhibits to be sure of having up-to-date figures on potential areas of reduction.
David Horton, Alternative Therapy Support Group, presented (Exhibit I) Working Draft of Bill Draft Request 53-1764, an amendment based on the current draft, adding section 257, on page 232. Mr. Horton went on to summarize his document.
Jim Jeppson, Division of Industrial Insurance Regulation, was available to testify on the Manual of Audits, presented several days before. Senator O'Connell wanted to know how much it cost when SIIS hired an agent outside the system to have some delinquent bills paid. Mr. Jeppson was not able to answer that question. Don Jayne, SIIS, responding to Senator O'Connell's query said that he thought the amount was $3.98 per bill. Mr. Jayne went on to say he did not have the number of bills collected, but would get that information.
Referring to Exhibit E, Senator Townsend asked for Ray Bacon, Lobbyist, Nevada Manufacturers' Association to give information on Revisions To The Safety Program and Provisions. Mr. Bacon said the information would be ready before the day was over. Again referring to Exhibit E, the section on Stress As A Compensable Injury, Senator Townsend, Senator O'Connell, Senator Nevin, Senator Brown and Mr. Craigie held a discussion regarding possible verbiage for this section.
Scott Young, General Counsel, State Industrial Insurance System, responded to a question from Senator Brown regarding possibilities of claims being satisfied in the Stress As A Compensable Injury section, by stating certain criteria that was necessary. A discussion by Senator Nevin, Senator Brown and Mr. Young followed on various situations involved in this particular area.
Senator Townsend announced there would be time for the official BDR to be drafted and ready when work begins again. He then summarized further steps that would take place.
There being no further business, the meeting was adjourned at
10:15 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
March 8, 1993
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