MINUTES OF THE
SENATE COMMITTEE ON COMMERCE AND LABOR
Sixty-seventh Session
March 16, 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 16, 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 Advisor
Brian Davie, Senior Research Analyst
Sheri Asay, Committee Secretary
Beverly Willis, Committee Secretary
Frank Krajewski, Senior Research Analyst
OTHERS PRESENT:
Scott Craigie, Chief of Staff, Governor's Office
Claude Evans, Secretary and Treasurer, State of Nevada American Federation of Labor and Congress of Industrial Organizations (AFL/CIO)
Jack Jeffrey, Lobbyist, Southern Nevada Building & Trades Council
Mark Habersack, Compensation and Benefits Specialist, Harrah's Las Vegas (Testified from Las Vegas)
Harvey Whittemore, Lobbyist, Health Insurance Association of America
Dave Owen, Clark County School District (Testified from Las Vegas)
Bob Ostrovsky, Lobbyist, Nevada Resort Association
Larry Zimmerman, President, CDS of Nevada
Don Jayne, General Manager, State Industrial Insurance System
Matt Dorangricchia, Assistant General Manager, State Industrial Insurance System
Lynn Grandlund, Grandlund, Watson, Clark & Associates
Stan Smith, President, Nevada Self-Insurers Association
Sam McMullen, Lobbyist, Nevada Self-Insurers Association
Mark Balen, President, Professional Fire Fighters of Nevada
O.C. Lee, President, Nevada Conference of Police and Sheriffs
Scott Young, General Counsel, State Industrial Insurance System
Mrs. Roy Burson, Private Citizen
Marsha Berkbigler, Lobbyist, Nevada Association of Rehab Professionals in the Private Sector
Senator Townsend opened the meeting and informed the committee that the Governor's staff had submitted changes to the bill draft. Scott Craigie, Chief of Staff, Governor's Office, addressed the committee to show the proposed changes outlined in Fiscal Impact Assessment (Exhibit C).
Mr. Craigie explained how the Governor's Office had arrived at their changes. He said the Governor's staff discovered that the numbers used in the savings programs were 1992-1993 numbers, so they brought them up to 1994 to better reflect the savings. Mr. Craigie said they focused on the area of claims management, which they thought was the key to solving the problem.
Mr. Craigie referred to Exhibit C, and reiterated his focus on claims management. He commented that the system needs to institute a good back-to-work program, such as the self-insureds have, in order to realize the $74,594,000 savings. Mr. Craigie explained the benefit changes and spoke about the lump sum buyout. He stated that the Governor's office did not think the lump sum buyout was a good investment. Mr. Craigie stated that the 6-month rehabilitation time, outlined in Exhibit C, would not start until the injured worker was actually on the program. Mr. Craigie referred to the 80 percent issue in Exhibit C. He praised the Oregon return-to work-program, and said that in Oregon the caseload dropped from 9500 to 1500 when they adopted the 80 percent rule.
Mr. Craigie asserted that by following the steps outlined in Exhibit C, they would return $100 million in benefits to the injured workers. He informed the committee that the majority of the savings would not show until 6 months into the fiscal year.
Mr. Craigie referred to the Projection of Cash Flows after Reform (Exhibit D), to show the costs for these changes. He explained that they would not be able to make the $30 million payment toward the reserve pool in 1994, as they had hoped to do. Mr. Craigie explained how the system would reach solvency by the year 2000, according to this proposal. He pointed out that by taking this slower route, the system would still be $40 million short in the first year. Mr. Craigie expressed optimism about the plan.
Senator Brown observed that 50 percent of the savings come from worker benefits. Mr. Craigie explained that some of these provisions are not reduction in benefits, such as the 80-percent rule. There was further discussion on the issue.
Senator O'Connell asked what area would be the least likely to realize the savings. Mr. Craigie said that the area of lost time would be a difficult goal to meet. He reiterated his belief in strong claims management as the key to savings.
Outside utilization review was discussed. Senator O'Connell described it as "outside the managed care component, the state, or agency of the state, or outside firm." Mr. Craigie defined it as "evaluating and auditing the utilization review of all operations." Senator O'Connell was concerned that the bill did not mandate the utilization review, but only made it permissive. Mr. Craigie assured her that the Governor's Office intended to follow through with the utilization review program.
Mr. Craigie discussed the length of time that the Governor would have control of the State Industrial Insurance System (SIIS). He stressed that if the Governor had a 2-year time limit, he would be walking away from the management at the key moment in the reform package. Mr. Craigie stated Senator Nevin's suggestion, that the Governor report to the legislature in 1995 on the full status of the reform package. Mr. Craigie was in total agreement with that idea. He praised the Governor for his willingness to work with everyone involved. Mr. Craigie added that the Governor thought a 6-year time period was necessary, but that he would accept a compromise of 4 years.
Mr. Craigie referred to the open panel versus closed panel issue. He stated the Governor's intent was to allow all willing bidders the full opportunity to be a part of the bidding process, and stressed that there would be no discrimination. Mr. Craigie corrected a prior statement, and said "...one last statement, for the record, as we do our math, this package we put before you puts $110 million back in the benefits packages."
Senator Townsend thanked Mr. Craigie and applauded the Governor's Office for their efforts.
Senator Nevin asked if the Governor's proposed changes would be retroactive. Mr. Craigie assured him that the changes would not impact those currently receiving benefits, but could possibly affect those who have not yet received an award.
Claude Evans, Secretary and Treasurer, State of Nevada American Federation of Labor and Congress of Industrial Organizations (AFL/CIO), testified before the committee regarding the proposed changes. Mr. Evans stated the AFL/CIO opposition to the changes and specified the 5-day payment elimination (Exhibit C). Senator Townsend reminded Mr. Evans that over $100 million in benefits was replaced in the package. Senator Townsend asked for options that would be acceptable to the AFL/CIO. Mr. Evans reiterated his opposition.
Jack Jeffrey, Lobbyist, Southern Nevada Building & Trades Council, addressed the committee. He pointed out that $200 million of the $302 million in savings, outlined in Exhibit C, appears to come from the injured worker. He suggested increased premiums to the employer, or an assessment to the self-insureds who have left the system. Mr. Jeffrey blamed those self-insureds for the SIIS insolvency problem.
Mark Habersack, Compensation and Benefits Specialist, Harrah's Las Vegas, testified from Las Vegas. Mr. Habersack said he disagreed with Mr. Jeffrey's assessment of the blame for SIIS insolvency. In response to a question by Senator Brown, he explained that the self-insureds were required to post a bond when they left they system. He was unaware of any money the self-insureds got back.
Harvey Whittemore, Lobbyist, Health Insurance Association of America, addressed the committee. He responded to Senator Brown's question regarding the self-insureds who had left the system. Mr. Whittemore explained that a lawsuit had been filed in the early eighties, on behalf of all employers who had safety records. He said that the lawsuit was decided in favor of the employers, who received overpayment dividends as a result.
Dave Owen, Clark County School District, testified from Las Vegas.
He explained that public entities, as well as many private entities, had augmentation plans beyond the Total Temporary Disability (TTD) benefits, i.e., sick leave. He thought the 5-day waiting period, outlined in Exhibit C, would not necessarily have a negative impact on the injured worker. There was further discussion on this issue.
Bob Ostrovsky, Lobbyist, Nevada Resort Association, testified before the committee regarding the proposed elimination of the lump sum buyout. Mr. Ostrovsky favored the lump sum buyout. He pointed out that the insurer is not required to offer the buyout, nor is the employee required to accept it. Mr. Ostrovsky thought the buyout would eliminate the problem of an "endless number of rehabs (rehabilitation cases)." He added, "We think it saves us money, that's why I'm a little concerned...it's really a tradeoff between spending the money in rehabilitation or spending the money directly to the employee."
Senator Townsend reminded the committee of the original intent of the lump sum buyout. He said it was designed to help an individual in the trades, who reaches an age where he cannot be retrained.
Larry Zimmerman, President, CDS of Nevada, added to the discussion of lump sum buyouts. He said it is a cost savings factor rather than a cost. Mr. Zimmerman explained that good management is needed to make the decision whether or not to offer the buyout.
Don Jayne, General Manager, State Industrial Insurance System (SIIS), spoke in favor of retaining the lump sum buyout. He also regarded the buyout as a cost savings method.
Mr. Craigie explained how the Governor's Office arrived at the figures in Exhibit C. He said they "designed the program and built the cost from the floor up." He stated that limiting the rehabilitation time to 6 months, and using the 80-percent rule, should eliminate the need for the lump sum buyout, which he thought had been overused. Mr. Craigie pointed out that offering an injured worker a lump sum buyout would not be helping the worker, if rehabilitation was needed.
There was further discussion on the lump sum buyout.
Matt Dorangricchia, Assistant General Manager, State Industrial Insurance System testified at the request of Senator Brown. He explained what currently happens to workers who can earn 80 percent of their former income. Mr. Dorangricchia discussed the 6-month rehabilitation maximum. He thought it would not necessarily be a savings, but "it's not inherently a bad thing."
Senator Shaffer asked if it would be very costly and time consuming to move the rehabilitation claims from SIIS to the Bureau of Vocational Rehabilitation (BVR). Mr. Dorangricchia replied, "In my opinion, yes..." He elaborated on this issue.
Lynn Grandlund, Grandlund, Watson, Clark & Associates, testified from Las Vegas in support of the lump sum buyout. As an employer,
she thought that moving rehabilitation from SIIS to the BVR would make it harder to track cases, which is necessary to control the costs.
Stan Smith, President, Nevada Self-Insurers Association, testified from Las Vegas. He stated that the American Disabilities Act (ADA) will have a substantial impact on vocational rehabilitation. Mr. Smith said that rehabilitation would be limited because employers will be required to take their employees back. He thought the lump sum buyout was a key for employees who no longer wanted to work for their former employer.
Sam McMullen, Lobbyist, Nevada Self-Insurers Association, cautioned against eliminating the availability of the lump sum buyout for existing claims.
In response to a question by Senator Townsend, Mr. Craigie said he would not object to leaving the discretion of the lump sum buyout to the insurer, but he was concerned about possible litigation if the insurer decided to prohibit the buyouts for a period of time. Ms. Needham thought there would not be a problem with litigation, and said it would just be an offer on the part of the insurer.
Mr. Zimmerman explained that the law presently states the lump sum buyout is at the discretion of the insurer, and is not an appealable decision.
Mr. Dorangricchia explained how the lump sum buyouts went from zero to $11 million, and now to a possible $25 million. He concluded that "lump sum buyouts are less expensive than continuing...rehab (rehabilitation) on difficult cases."
Senator Townsend asked about the impact of the Governor's proposal on the lump sum buyout. Mr. Dorangricchia thought it would reduce the average amount of the buyout. He explained how buyouts are initiated. Mr. Dorangricchia spoke about the impact the ADA would have on the lump sum buyout, in response to a question by Senator Lowden.
Ms. Grandlund spoke on behalf of employers regarding fraudulent claims by employees. She thought injured workers should take on some of the responsibility for their claims. Ms. Grandlund spoke in favor of the 6-month rehabilitation limit, "if, in fact, the programs would be instituted, and end, at that time."
Mark Balen, President, Professional Fire Fighters of Nevada, testified before the committee about a problem he perceived, regarding the heart and lung rating method (Exhibit C).
O.C. Lee, President, Nevada Conference of Police and Sheriffs, expressed his concern over changes to the heart and lung provision.
Scott Young, General Counsel, State Industrial Insurance System, explained how the heart and lung cases are rated. He assured the committee that a specialist would be used for rating purposes, and that the proposal should not affect the benefits. Mr. Balen thought the treating physician should be the one to do the rating, because he would have firsthand knowledge of the problem.
Senator Brown was concerned that section 190, subsection 1(c), Bill Draft Request (BDR) 53-1764 (Exhibit E. Original is in research library), provided no exception for someone using a prescription drug according to the directions. Mr. Young thought a provision should be added, that if someone was using a prescription in accordance with instructions from the doctor, they ought not be penalized.
Mrs. Roy Burson, Private Citizen, testified regarding her husband's injury. She read from prepared testimony (Exhibit F). Mrs. Burson expressed concern about the way SIIS handles different cases. Senator Townsend referred Mrs. Burson to the Nevada Attorney for Injured Workers.
There was discussion on the length of time that the Governor would have control of SIIS, under the new proposal.
SENATOR NEVIN MOVED TO EXTEND THE TIME THE GOVERNOR WOULD HAVE CONTROL OF SIIS TO JULY 1, 1997, AND REQUIRE THAT THE GOVERNOR REPORT TO THE LEGISLATURE IN THE FIRST WEEK OF THE LEGISLATIVE SESSION OF 1995.
SENATOR LOWDEN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR BROWN AND SENATOR O'CONNELL VOTED NO.)
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There was discussion regarding the lump sum buyout. Senator Townsend reiterated that the law currently gives the discretion of the buyout to the insurer.
Senator Brown expressed concern about the language "can return to work" (Exhibit C). Mr. Craigie explained that the rehabilitation program will require a placement component to define this. He explained how Oregon deals with this issue.
Senator Brown wondered whether limiting rehabilitation payments to 6 months would eliminate training possibilities, such as schools that extend beyond 6 months.
Marsha Berkbigler, Lobbyist, Nevada Association of Rehab Profes- sionals in the Private Sector, responded that the average training program was 1 year. She thought the 6-month limit would not have a major impact, because many injured workers enter training programs of 6 months or less.
SENATOR LOWDEN MOVED TO ADOPT THE GOVERNOR'S COMPENSATION PACKAGE (EXHIBIT C), WITH THE EXCEPTIONS OF THE TRANSFER TO THE REHABILITATION DIVISION AND ELIMINATING LUMP SUM PAYMENTS.
SENATOR MCGINNESS SECONDED THE MOTION.
There was discussion on the proposal, specifically the lump sum buyout. Senator Townsend said, "I believe that in the motion, it allows the discretion to remain with those self-insured employers, in other words, the current law says there is discretion with the insurer, whether it's SIIS or whether it's with the self-insured, so they can determine and offer as they do now." Senator O'Connell asked that the minutes clearly reflect that.
Senator Nevin expressed support for the measure because it restored some of the benefits. He thought it was not the best proposal, however, and asked for other solutions from anyone who had ideas.
Senator McGinness expressed concern regarding the $400 deductible. He thought it would be a hardship on small businesses, particularly in rural Nevada, where there are only small businesses. He referred to a March 15 document, which outlined average premium increases. Senator McGinness pointed out that the increases, with the proposed deductible, added up to $22 million.
Senator Shaffer said he could not support the proposal, because of the changes in benefits to the injured worker.
Senator Brown expressed support for most of the proposal, but was concerned about affecting individual lives with some of the benefit changes. She explained her specific concerns.
Senator O'Connell stated she could not support the $400 deductible.
Senator Townsend explained that these are not easy decisions. He said the $400 deductible would be hard on small employers.
Senator Brown proposed two alternatives: (1) increase premiums in equal amounts to the benefits cut from employees; (2) extend the length of time given to SIIS to attain solvency. She suggested a 30 percent premium increase for employers.
Senator Townsend stated he could not support the proposal, because of the $400 deductible, which he explained was a 4.5 percent premium increase across the board. He pointed out the the system would be able to file with the Insurance Commissioner for rate relief at a later date. Senator Brown said she did not foresee a 30 or 60 percent rate increase, which was the amount she thought was being taken from the workers.
Senator O'Connell suggested a copayment on the deductible if the accident was not related to safety. There was discussion on how this would impact a no-fault system.
Senator Townsend reminded the committee, "There has been a substantial restoration of the cuts from a week ago, which are going in the right directions..."
Senator Towsnend explained the upcoming legislative procedure regarding BDR 53-1764. He called for a vote on Senator Lowden's motion.
THE MOTION CARRIED. (SENATORS SHAFFER, BROWN AND O'CONNELL VOTED NO.)
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Senator Townsend discussed the hearing schedule for the next 3 days. There being no further business, he adjourned the meeting at 10:35 a.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 16, 1993
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