MINUTES OF THE
SENATE COMMITTEE ON COMMERCE AND LABOR
Sixty-seventh Session
March 9, 1993
The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Tuesday, March 9, 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:
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:
Jan Needham, Senate Bill Drafting Adviser
Brian Davie, Senior Research Analyst
Sheri Asay, Committee Secretary
Denise Pinnock, Committee Secretary
Frank Krajewski, Senior Research Analyst
OTHERS PRESENT:
Scott Craigie, Chief of Staff, Governor's Office
Marc Hechter, Assistant General Manager, State Industrial Insurance System
Marsha Berkbigler, Lobbyist, Nevada Association of Rehab
Professionals in the Private Sector
Terri Potts, Lobbyist, Nevada Physicians Caucus
Ray Bacon, Lobbyist, Nevada Manufacturers Association
David Going, Senior Industrial Hygienist, Division for Enforcement of Industrial Safety and Health, Department of Industrial
Relations
Don Jayne, General Manager, State Industrial Insurance System
Matt Dorangricchia, Assistant General Manager, Northern Regional Operations, State Industrial Insurance System
Scott Young, General Counsel, State Industrial Insurance System
Bob Ostrovsky, Lobbyist, Nevada Resort Association
Sam McMullen, Lobbyist, Nevada Self-Insurers Association
Vance Hughey, Assistant General Manager, Policy Planning and
Review, State Industrial Insurance System
George McNally, Lobbyist, Nevada Trial Lawyers Association
Carol Jackson, Director, Department of Industrial Relations
Senator Townsend opened the meeting and announced that the focus for the hearing would be the Status Report on Bill Draft Request (BDR) 53-1764 (Exhibit C). He invited Scott Craigie, Chief of Staff, Governor's Office, to address the committee.
Senator O'Connell asked for clarification on the handouts Mr. Craigie presented to the committee on March 8 (Exhibit D), regarding the State Industrial Insurance System (SIIS) cash flow, and particularly the area of rateable pay.
Mr. Craigie explained how they arrived at the figures on the handout. He also explained the 6 percent inflation factor, stating "that 6 percent is not an increase to the individual company, that's an increase in overall premium collections, and accounts not only for new hires at individual businesses, and increases, but it accounts for new businesses that come in and all the employees that they bring with them." He stressed this was not a premium rate increase.
Marc Hechter, Assistant General Manager, State Industrial Insurance System (SIIS), explained the projections further. He stated that the system needs $300 million dollars of savings, in some fashion, to begin the next fiscal year.
Mr. Craigie responded that once the reforms are in place, the system will be saving $300 million dollars during each 12 months of the 6-year cycle. Mr. Hechter confirmed this, and explained that it would take 18 months to realize the savings. Mr. Craigie elaborated on that statement.
Senator Townsend referred to SIIS Board of Directors, section 92. He presented the options and the issue was discussed. Senator O'Connell expressed concern that the leadership of SIIS would be handed over to someone unknown to the committee, should the Governor not be reelected.
Senator Brown asked for clarification on the authority and responsibilities of the board. Mr. Craigie said the Governor will have the same role the board has had in the past, with a manager and management team. He stressed that one person should be accountable.
There was further discussion on the length of time the Governor would be given control of SIIS. Senator Lowden recommended a maximum of 2 years, and suggested the issue be reconsidered at the next session.
SENATOR LOWDEN MOVED TO GIVE THE GOVERNOR CONTROL OF SIIS
UNTIL THE THIRD MONDAY IN JANUARY, 1995.
SENATOR O'CONNELL SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR BROWN VOTED NO.)
* * * * *
There was discussion on how the board would be set up. Senator Nevin suggested the board consist of a variety of people, but not too many, who have actuary experience and a background in investment. There was also discussion on whether or not the board should be made up of policyholders. Senator Nevin thought that would not be a true representation of the public. Senator O'Connell favored it, and said we need people who understand insurance and the system. "The structure of that board is going to be critical to the success of what we're trying to do here," she said.
Senator Brown pointed out the difference in this type of insurance contract, that the policyholder is not the beneficiary. She thought that being a policyholder would not necessarily give a person insurance expertise.
Senator Shaffer asked who would select the board members. Senator Townsend thought the Governor would.
SENATOR NEVIN MOVED THAT THE BOARD BE COMPRISED OF FIVE MEMBERS; TWO LABOR, TWO BUSINESS AND ONE PRIVATE CITIZEN WITH ACTUARIAL AND INVESTMENT EXPERIENCE.
SENATOR BROWN SECONDED THE MOTION.
Senator Townsend expressed his opinion that the legislature should set the parameters that affect injured workers, and that the board should "run the company to meet those standards."
THE MOTION FAILED. (SENATORS TOWNSEND, LOWDEN, O'CONNELL AND MCGINNESS VOTED NO.)
* * * * *
Responding to Physician Self-Referral, page 4 (Exhibit C), Marsha Berkbigler, Lobbyist, Nevada Asssociation for Rehab Professionals in the Private Sector (NARPPS), expressed concern that a complete ban would be put in the bill, which would cause problems for rural Nevada or outpatient surgical centers. Terri Potts, Nevada Physicians Caucus, responded that they understood "...this would be handled as an overall issue, and not directly within the SIIS language." Mr. Craigie confirmed that.
Senator Townsend referred to Attachment 11, Exhibit C, which deals with the State Contractors Board.
SENATOR SHAFFER MOVED TO APPROVE THE STATE CONTRACTORS BOARD PROPOSAL.
SENATOR NEVIN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
Senator Townsend referred to the Plain Meaning Provision on page 3, and read Attachment 10 of Exhibit C.
SENATOR O'CONNELL MOVED TO APPROVE THE PLAIN MEANING PROPOSAL.
SENATOR MCGINNESS SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
Jan Needham, Senate Bill Drafting Adviser, commented on Stress Provision, page 3. There was discussion of the proposal, and it was decided that compensable stress would be limited to stress caused by a sudden traumatic event, in the course of employment, rather than a gradual stimulus. Mr. Craigie agreed to work with the staff to define the policy. Senator Nevin asked that it be added, "except as is otherwise provided in Nevada Revised Statutes and put the police and firemen exemption in there to make it clear."
SENATOR SHAFFER MOVED TO APPROVE THE STRESS PROVISION POLICY.
SENATOR NEVIN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
There was further discussion on the intent of the Stress Provision proposal. Senator Brown asked for clarification regarding a specific example. Mr. Craigie said that particular situation would not be compensable.
Ray Bacon, Lobbyist, Nevada Manufacturers Association, addressed the committee regarding Loss Control/Safety Program (Section 208), page 3 (Exhibit C). He referred to the Revision to the Safety Program Provisions of section 208 (Exhibit E). Mr. Bacon said he thought there needed to be a cooperative effort between Loss Control and the Department of Preventative Safety (DPS). He mentioned the differing needs of employers with regard to safety programs.
David Going, Senior Industrial Hygienist, Division for Enforcement of Industrial Safety and Health (DEISH), Department of Industrial Relations (DIR), agreed with Mr. Bacon regarding the cooperative effort. He disagreed with Mr. Bacon over whether this should be voluntary, section 2, subsection 3 (Exhibit E), rather than an enforced program. Mr. Going thought there needed to be guidelines if this were to be enforced, and asked for the committee's input.
Senator Townsend expressed concern over the ambiguous language of Exhibit E. Don Jayne, General Manager, SIIS, responded that he and Scott Young, Legal Counsel, SIIS, would help revise the language.
It was decided to postpone a vote on this proposal, and make this issue a separate bill. If they decided to treat it as separate legislation, Senator Brown suggested the committee consider allowing for an increase in premiums based on Occupational Safety and Health Administration (OSHA) violations.
Senator O'Connell addressed Return to Work/Pooling for Light-Duty Employment (section 175), page 3 (Exhibit C). She explained that it was a complex issue, and "I think it's going to require another bill."
Hearings and Appeals Process (sections 79, 160, 162-166, 202, 252), page 2 (Exhibit C), was explained by Senator Brown. Mr. Young answered questions of the committee regarding this proposal. Abolishment of the position of the Nevada Attorney for Injured Workers was discussed. Senator Nevin thought the position should be put back in. Senator Townsend explained what the position entails, and stated what the Nevada Attorney for Injured Workers would be allowed to do if the position remained intact.
SENATOR BROWN MOVED TO ACCEPT THE PROCESS SET FORTH IN ATTACHMENT 1.
SENATOR NEVIN SECONDED THE MOTION.
There was further discussion on the issue. It was decided the motion did not include the proposal to reinstate the Nevada Attorney for Injured Workers.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
SENATOR BROWN MOVED TO REINSTATE THE NEVADA ATTORNEY FOR INJURED WORKERS.
SENATOR NEVIN SECONDED THE MOTION.
Senator Lowden asked how the fraud unit would be funded if the position was reinstated. Ms. Needham explained how it would be funded according to the current bill draft. There was further discussion on this issue.
THE MOTION CARRIED. (SENATORS LOWDEN, O'CONNELL AND TOWNSEND VOTED NO.)
Referring to Vocational Rehabilitation (sections 76, 106), Senator Townsend discussed the amount spent by SIIS on rehabilitation last year. Senator McGinness explained how other states have dealt with the issue of eligibility for rehabilitation. There was discussion on the options presented.
The question arose on the cost savings that would result if the Permanent Partial Disability (PPD) payments were limited to impairments of 25 percent or more. Matt Dorangricchia, Assistant General Manager, Northern Regional Operations, SIIS, and Mr. Jayne addressed the committee on this issue. Mr. Dorangricchia referred to the March 8 memo (Exhibit F), explaining the savings outlined.
He stated the system would save $73,600,00 by going to the 25 percent figure.
SENATOR SHAFFER MOVED TO LIMIT VOCATIONAL REHABILITATION TO PERSONS WITH A 25 PERCENT PPD, AND USE PRIVATE COUNSELORS, AS CONTRACTED SIIS.
SENATOR NEVIN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR BROWN VOTED NO.)
* * * * *
Senator Townsend recessed for a break at 9:50 a.m.
The hearing reconvened at 10:04 a.m., with a discussion of the savings that would result with a $400 or a $200 deductible, in reference to Employer Deductible (section 78), page 3. It was agreed there would not be a corresponding premium reduction. Bob Ostrovsky, Nevada Resort Association, testified before the committee regarding the language proposed in Exhibit G. Sam McMullen, Lobbyist, Nevada Self-Insurers Association, concurred with Mr. Ostrovsky's remarks. There was further discussion of this issue by the committee. Senator Brown thought there was a lack of incentive for the employer to improve safety programs if the deductible was set at $500. Senator O'Connell expressed concern about differentiating between safety related accidents and other types of accidents.
There was discussion regarding the modification factor of the employer. Mr. Craigie clarified the Governor's position that, "...only the cost that the person does put on the system should define that modification factor."
Senator Brown discussed number 5, section 78, of Exhibit G, which deals with claim reopening. She expressed concern that a worker would be unable to reopen a claim if medical evidence arose at a later date. She thought a person would make sure they got over $500 worth of treatment, because the claim could not be opened later. Senator O'Connell suggested a copayment as a solution. Mr. Ostrovsky stressed that it was his intention in this language to prohibit reopenings.
There was discussion on reporting an injury, and whether or not witness statements would be taken.
SENATOR LOWDEN MOVED TO APPROVE SECTION 78.
SENATOR O'CONNELL SECONDED THE MOTION.
It was determined that the $500 deductible figure was not being voted on. Senator Brown suggested an amendment to this motion. Senator Lowden asked Senator Brown to make her motion, and then vote on the motion Senator Lowden initiated.
SENATOR BROWN MOVED TO AMEND SECTION 78, TO MAKE NUMBER 5 CONSISTENT WITH THE POLICY THE COMMITTEE VOTED ON.
SENATOR NEVIN SECONDED THE MOTION.
THE MOTION FAILED. (SENATORS TOWNSEND, LOWDEN, O'CONNELL AND MCGINNESS VOTED NO.)
* * * * *
Senator Lowden reworded her motion:
SENATOR LOWDEN MOVED TO APPROVE SECTION 78, WITH THE EXCEPTION OF THE LAST SENTENCE IN SECTION 1, EXHIBIT G, AND THE AMOUNT OF THE DEDUCTIBLE.
SENATOR O'CONNELL SECONDED THE MOTION.
Senator Brown stated, "On the record, I just want to let everyone know that I agree with everything except 5 (number 5, section 78), and that's the reason I can't vote for it."
THE MOTION CARRIED. (SENATOR BROWN VOTED NO.)
* * * * *
There was discussion on whether to change the deductible level in section 78 to $200.
SENATOR NEVIN MOVED TO SET THE DEDUCTIBLE AT $200.
SENATOR O'CONNELL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
Mr. Jayne addressed the committee regarding the deductibles. He said if enabling legislation were developed that would allow SIIS to create deductibles in $500 increments, SIIS could develop deductible levels.
SENATOR O'CONNELL MOVED TO APPROVE SECTION 78A, NUMBER 1, REMOVING THE LANGUAGE AFTER THE WORD "BENEFITS."
SENATOR BROWN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
The discussion moved to Managed Care, page 2. There was a question of whether or not the language would preclude an open panel. Senator O'Connell thought that no matter who provides the service, the system should have the right to have independent utilization review for that provider. Ms. Needham said that language was in Attachment 3 (Exhibit C), which deals with utilization review.
Mr. Craigie discussed the Governor's views on this proposal. Senator O'Connell thought there needed to be audits of the Health Maintenance Organizations (HMOs) by the system. Mr. Craigie stated, "As you have described it, our language does work." Mr. Jayne said that SIIS wanted the ability to conduct the independent utilization review of the managed care entities.
There was further discussion on Attachment 3. The issue of the impact on rural Nevada was discussed.
SENATOR O'CONNELL MOVED TO ADOPT ATTACHMENT 3.
SENATOR NEVIN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
Mr. Young addressed the committee regarding the Fiscal Impact Assessment (Exhibit H.) He stated that the $44 million savings on page 5 was from the SIIS business plan. Mr. Young explained that the original plan contemplated a "very broadly based, but closed, panel." In response to a question from Senator Shaffer, he explained how a worker could select a physician from such a panel.
Senator O'Connell expressed concern regarding the bidding process. She thought that a provider who could meet the criteria should be allowed to participate. Mr. Young replied that SIIS would prefer to see the provisions established without willing providers. He explained that their goal is to provide quality care, while
decreasing their medical costs.
There was discussion on rural doctors' participation in managed care and the bidding process. Senator McGinness elaborated on the problems rural doctors encounter.
Senator Townsend explained the options available regarding Managed Care, page 2. Ms. Needham stated that section 5 of Bill Draft Request (BDR) 53-1764 contains a definition for managed care.
SENATOR O'CONNELL MOVED TO ACCEPT THE LANGUAGE IN SECTION 5 OF BDR 53-1764.
There was discussion regarding this proposal. Mr. Craigie stated that this language clearly provides for an open panel. Ms. Needham said it allows for an open panel, but that she was not sure it automatically includes an open panel. There was further discussion on whether it does or does not, should or should not, include an open panel. Mr. Craigie mentioned that the proposal was radically different from what the Governor had originally submitted. The Governor's original proposal simply stated "The manager will have the ability to contract with managed care organizations to provide service."
Mr. Craigie stated, "The possibly exists, if you give the Governor the authority I've described...that they (open panels) may not be able to bid. I want to make sure that is fairly stated, that's why I went the extra step to put it on the record. It may be that the Governor, and the manager the Governor appoints, would limit it to a closed panel." He added that it has been proven that closed panels deliver the greatest savings.
SENATOR NEVIN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
SENATOR NEVIN MOVED TO ALLOW ANY MANAGED CARE ORGANIZATION, WHICH MEETS THE CRITERIA SET UP BY THE SYSTEM, TO BID.
SENATOR SHAFFER SECONDED THE MOTION.
Senator Lowden asked if this was in line with what the Governor wanted. Mr. Craigie replied, "The key language here, as I see it, would be any criteria that is set up by the system, which may or may not allow for some groups to bid. With that language in it, it's fine." Senator Brown asked if the legislature would be involved with setting the criteria. It was agreed that they would not.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
The meeting was recessed at 11:13 a.m. The meeting reconvened at 12:24 p.m. There was discussion regarding the criteria to be set up by SIIS. Senator O'Connell asked if part of the criteria set forth by the Governor's Office would allow for willing providers. Mr. Craigie stated the issue had already been resolved, and that the criteria was to be established by the system. Senators O'Connell and Brown expressed concern about possible discrimination of willing providers.
SENATOR O'CONNELL MOVED TO ALLOW FOR WILLING PROVIDERS IN THE CRITERIA.
SENATOR BROWN SECONDED THE MOTION.
There was further discussion on the issue. Senator O'Connell said that Mr. Craigie clearly indicated that if the criteria were left to the Governor, it would be a closed panel. She said the focus of her motion was to disallow any discrimination in the criteria, so there could be an open or closed panel.
Ms. Needham explained, "Essentially, as I understand the previous motion, the Governor or the manager of the system was going to determine the criteria, and they would have complete authorization to do that. Included in that criteria could be a requirement that you have a closed panel, unless you specifically state that cannot be part of the standards, or that cannot be part of that criteria."
Senator Townsend stated, "We need to set the goals and the parameters, and certainly the benefits, that injured workers deserve. But then, after that, I think we've got to get our hands off of it, and let professionals do this."
THE MOTION CARRIED. (SENATORS TOWNSEND, SHAFFER AND LOWDEN VOTED NO.)
Senator Shaffer stated, "I want to qualify my opposal. I'm satisfied that there is no statement whatsoever exempting willing providers in our previous motion that we passed before we took the break."
There was confusion regarding the motion, and Ms. Needham was asked to explain. She said, "...the manager is going to establish criteria for the bids, or who... will be qualified for an acceptable bid. One of those criteria is he is not going to be able to require a bidder to have an closed panel or an open panel...he's going to judge the standards of the bidders on another basis, other than whether they have a closed or open panel." Ms. Needham stated this language does not preclude the manager from choosing a closed panel.
Senator Townsend stressed that this language does not preclude open panels from bidding on the process. In light of that information, Senator Shaffer expressed a desire to change his vote to yes. In response to a question by Senator Townsend, Senator O'Connell stated that what Ms. Needham explained was indeed the intent of her motion.
There was further discussion regarding the motion. Ms. Needham reiterated what she was putting in the bill, "...essentially that the manager is going to establish the qualifications for people to submit bids for an MCO (Managed Care Organization) contract. Those qualifications cannot include a requirement that they have a closed panel or an open panel. So everyone will be allowed to bid. They will make their selection though, based on other critiera, and not based on a closed or open panel, so they can choose a closed panel or an open panel, depending on the other criteria that has been established by the manager."
Mr. Craigie responded to a question by Senator Townsend, "The answer to your question is, that is not an acceptable position for the Governor..." There was further discussion on the issue. Mr. Craigie explained, "I am not stating here that the Governor is absolutely not going to allow willing providers to bid." In response to a question by Senator O'Connell, he added that he did not believe it was possible for an open panel, with no guarantee of volume, to actually develop a cost lower than that of a closed panel bid. There was further discussion on the issue.
Senator Townsend referred the committee to Compensation/Benefit Changes (section 86), page 3. He cited an estimated reduction of 25 percent PPD using good utilization review, peer review and claims management. He referred to Exhibit F, presented by Senator Nevin.
Vance Hughey, Assistant General Manager, Policy Planning and Review, SIIS, addressed the committee with a correction to the March 8 memo (Exhibit F). He explained that the last two dollar figures are probably going to be much higher. The second figure should be approximately $94 million dollars, not $11,418,858, he said. Senator Nevin expressed concern about injured workers having a minor injury, and cashing out for a huge sum of money. There was discussion on that issue.
Mr. Young addressed the committee at Senator Townsend's request. He said, "Although we call them Permanent Partial Disability awards, the Nevada system actually rates impairment." He explained the difference between a physical impairment, which involves some damage to the body, and disability, an injury that would prevent a person from performing his job. Mr. Young stated that an injury which leaves no damage to the body was not supposed to qualify for an award.
SENATOR O'CONNELL MOVED TO LIMIT PPD AWARDS TO PERSONS WITH A DISABILITY OF 15 PERCENT OR MORE.
Senator Brown explained her concern with this proposal. She thought the rating for the injury should relate to the occupation.
SENATOR LOWDEN SECONDED THE MOTION.
There was discussion on the proposal. Mr. Young explained 15 percent injuries. He suggested limiting PPDS by loss of range of motion, rather than an across-the-board 15 percent.
George McNally, Lobbyist, Nevada Trial Lawyers Association, addressed the committee and said, "The language I think Senator O'Connell is talking about, is the language doctors follow in the AMA guides..." He added that he has handled workers' compensation claims for 10 years, and has had approximately three claims with a 35 percent or greater PPD.
The motion was not voted on.
Carol Jackson, Director, Department of Industrial Relations (DIR), addressed the committee regarding the fee schedule.
SENATOR O'CONNELL MOVED THAT THE DIR FEE SCHEDULE BE
FROZEN.
There was discussion on the issue. Ms. Jackson asked that the DIR be given the ability, after their outcome studies, to lower unit values, if need be. Ms. Needham asked how long they would be frozen. Mr. Craigie suggested a moratorium on any increase in rates, until contracts were signed by the manager with MCOs in the state.
SENATOR NEVIN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
There being no further business, the meeting was adjourned at 1:16 p.m.
RESPECTFULLY SUBMITTED:
Sheri Asay,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE:
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Senate Committee on Commerce and Labor
March 9, 1993
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