The Committee on Commerce and Labor was called to order at 3:45 p.m., on Wednesday, March 3, 1999. Chairman Barbara Buckley presided in Room 3142 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All Exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Ms. Barbara Buckley, Chairman

Mr. Richard Perkins, Vice Chairman

Mr. Morse Arberry, Jr.

Mr. Bob Beers

Ms. Merle Berman

Mr. Joe Dini, Jr.

Mrs. Jan Evans

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. David Humke

Mr. Dennis Nolan

Mr. David Parks

Mrs. Gene Segerblom

GUEST LEGISLATORS PRESENT:

Senator Mike Schnider, Senate District 8

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

L. Timothy Terry, Director, Office of the Attorney General, Medicaid Fraud Control Unit (MFCU), referenced Exhibit C, which was a letter from the Office of the Attorney General and information about the MFCU. The letter noted the MFCU was charged with investigating and prosecuting allegations of medical provider fraud in the Nevada Medicaid program and investigating and prosecuting allegations of patient abuse or neglect at facilities receiving Medicaid funds.

Current statutory provision allowing for inspection of patient medical records was in Nevada Revised Statutes (NRS) 629.061. As written, the statute authorized investigators from MFCU to gain physical inspection of medical records in the investigation of a provider fraud case. Although the unit was charged with investigation and prosecution, the statute provided authority for MFCU to physically inspect records in provider fraud investigations. A.B. 113 would include the ability to examine records in an investigation pertaining to patient abuse or neglect.

Vice Chairman Perkins noted A.B. 113 added three additional statutes to the jurisdiction, and he pointed out NRS 200.5091 was a policy statement in the statute. Vice Chairman Perkins questioned if the statement belonged in an authorization for investigation. He explained it was state policy for law enforcement, courts, and other listed entities to cooperate.

Mr. Terry pointed out the statutes in question were NRS 200.5091 through NRS 200.50995. The entire section dealt with abuse of elderly individuals, and the Legislative Council Bureau Legal Division drafted the language so the entire section was included in A.B.113. Mr. Terry noted NRS 200.495 was another primary statute dealing with criminal neglect of patients, and the above listed statutes were two statutory areas MFCU prosecuted with respect to abuse or neglect of patients or elderly individuals.

Mrs. Segerblom asked if care center records were included. Mr. Terry said medical records pertaining to patients in any sort of investigation were included.

There were no additional questions or testimony on A.B. 113, and

ASSEMBLYMAN PERKINS MOVED TO DO PASS A.B. 113.

ASSEMBLYMAN PARKS SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

Chairman Buckley opened the hearing on A.B. 310.

Assemblywoman Buckley, Assembly District 8, presented A.B. 310 as its prime sponsor. She introduced Ruth Mills, President, Nevada Health Care Reform Project and Patricia van Betten, R.N., Nevada Nurses Association. Ms. Buckley noted she sponsored A.B. 156 of the 69^th Session, which was known as the patient bill of rights with Ms. Mills and Ms. van Betten.

Ms. Buckley stated the purpose of A.B. 310 was not to add to the list of rights enacted in the legislation of the 69^th Session but to ask for enforcement of existing rights. She said there had been a transformation in the health care system during the past decade noting the shift from a fee for service system to a managed care system. There were benefits and detriments caused by the switch, and in her legislative experience, Ms. Buckley witnessed both. With a fee for service system, spiraling costs were experienced. Employers were forced to drop health care insurance because they could no longer afford premiums. As a cost cutting measure, focus turned to prevention.

Unfortunately, in a desire to control costs, decision making was vested with individuals who never saw patients or had no knowledge of an individual patient’s health care. Individuals with decision-making authority overruled decisions made by personal physicians and patients. At times, overruled decisions were appropriate but at other times, they were not. Most concerns came when overruled decisions were based on cost versus quality health care. A.B. 310 sought to provide assistance to patients who were caught in such situations by creating an office of ombudsman to be placed in the Office of the Attorney General.

Duties of the ombudsman were set forth on page 2 of A.B. 310 and required the ombudsman to educated consumers regarding health care plans and available options. Consumers did not always understand their policy, and education was the first component of A.B. 310.

The second, and most important component of A.B. 310, was assistance of patients in the identification, investigation, and resolution of grievances. Lawsuits were not the way to resolve problems. Patients did not want a lawsuit; they desired health care. Ms. Buckley offered an example of the types of telephone calls received since the enactment of A.B. 156 of the 69^th Session. She noted a gentleman whose son needed a kidney operation. The boy was approved for the operation in California but could not get approval for the operation in Nevada, even though there was an instate doctor willing to perform the operation. Ms. Buckley explained the health plan worked with her, and the boy was eventually able to obtain the operation in Nevada. An intermediary was necessary to help solve the problem. She then commented on a woman who was denied a mastectomy because the woman’s Health Maintenance Organization (HMO) did not think there were enough malignant cells in the woman’s breast. A decision to have a mastectomy was not one a woman made easily, and the woman and her doctor believed there were enough malignant cells to have the operation. Additional calls received by Ms. Buckley concerned the use of an intensivist or hospitalist. A patient was in the hospital and desired to be seen by their own doctor but was told by their HMO it was necessary to be seen by a hospitalist. A patient chose a doctor and a hospital on a provider list but was denied access to the doctor. Issues also involved providers, prompt payments, and a tying of products, which was questionable under anti-trust principals. The issues varied under one common theme; patients thought coverage was available to them but were being denied because someone who had not seen them said the coverage was not medically necessary. In some cases, patients were right, and in other cases, patients needed to be educated about what their health plan provided.

Ms. Buckley referenced Exhibit D, which was an article from the National Conference of State Legislatures (NCSL) describing national health care reform efforts. The article compared and contrasted different reforms and spoke to the issue of ombudsman offices. She noted a dozen states adopted ombudsman offices for Medicaid managed care, and California, Maine, and Vermont expanded the office to cover all managed care issues.

Ms. Buckley thought having an ombudsman could alleviate reform efforts in that an ombudsman could attend to the high volume of legislative bills dealing with policy issues in managed care. Problems solved before they came to a legislative level would provide a better health care system for those in Nevada. Ms. Buckley explained managed care organizations would pay $1 per patient per year to fund the office. She worked with the Office of the Attorney General to determine the amount of money the funding would provide and the staffing patterns the office would require. The information would be presented to the Assembly Committee on Ways and Means.

Ms. Buckley heard arguments against A.B. 310, which included HMOs believing an ombudsman office would be another unnecessary layer of bureaucracy. She pointed out the ombudsman office was not created for HMOs but for patients. Patients believed they needed assistance. In the insurance commissioner’s report received by legislators, it was noted the office received 13,000 complaint calls within a 7-month period of time.

Ms. Buckley suggested placing the ombudsman in the Office of the Attorney General because the office had a consumer protection unit and the utility advocate. She thought there was a problem with placing an advocate into a regulatory division. A regulatory division should be available to make a fair adjudication and pull a license if an individual or company was not following the law. Misunderstandings could be fixed without having to solve them in the legislature. Through the use of an ombudsman, the patient would receive help early in the process without having harm caused to themselves or their families.

Mr. Hettrick referenced section 8, subsection 1, which said, "Assist consumers with the selection of health care plans by providing information, referral services and assistance to consumers relating to obtaining coverage and services under health care plans." He said the language sounded as if specific health care plans would be promoted and thought an individual in the ombudsman position could develop a bias in assisting individuals by recommending one company over another. Mr. Hettrick noted the reference to "referral services" in section 8, subsection 1, and asked to which referral services the language alluded to. He inquired if the language referred to assisting a patient in going from a general practitioner to a specialist and stated he was unsure of what the language meant.

Ms. Buckley explained the term "selection" was meant broadly. The intent was to assist an individual in identifying key issues in health care plans not in the selection of a specific company. Ms. Buckley supported making a change in the bill to clarify the issue. She explained in systems such as Medicare, some companies participated and some did not. The language "referral services" came from the Legislative Counsel Bureau Legal Division, and if the language needed to be fixed, Ms. Buckley did not have a problem with doing so.

Mr. Hettrick referenced section 8, subsection 3, which said, "provide information to the general public, agencies, legislators and other persons concerning the problems and concerns of consumers relating to health insurance, and make recommendations as appropriate for solving those problems and concerns." He asked if the information was provided by request, or was the information provided by the volition of the office of the ombudsman.

Ms. Buckley envisioned the program operating in much the same manner as the Bureau of Consumer Protection.

Mr. Hettrick referenced section 8, subsection 4, which said, "To the extent possible, identify, investigate and resolve complaints on behalf of consumers and assist those consumers with the filing and pursuit of complaints and appeals." He did not think the office of the ombudsman should investigate and resolve complaints. The office should investigate a complaint and possibly steer a consumer to a resolution. He noted the language was open-ended and needed to be tightened.

Ms. Buckley explained the intent was not to dismantle the Division of Insurance. They were the entity that had the final ability to arbitrate, decide, and take administrative action. She wanted to obtain resolution on issues such as an individual receiving a wheelchair, before having to go to the level of a hearing, she did not desire to waste state resources on hearings with the Division of Insurance. Ms. Buckley wanted the ombudsman to focus on being part of the solution.

Mr. Hettrick noted section 8, subsection 7, which said, "Promote the development of organizations of consumers and other residents of this state relating to the provision of health care plans in this state." He thought the language was very broad and questioned development of consumer groups at state expense. Setting up state laws allowing for the establishment of consumer groups who would then argue private enterprise when there was an ombudsman paid to act in the same manner concerned him.

Ms. Buckley noted the intent of section 8, subsection 7, was to have the ombudsman work in the field of public education with such groups as the American Association of Retired Persons. The intent was not to start a new organization but to educate consumer groups on issues, assist members, and help members get to the right entities. She noted the language was general, and it could be conformed to other ombudsman statutes. Ms. Buckley did not want to lose sight of the fact the ombudsman was to assist patients and provide information thus allowing for fewer complaints and a public with greater knowledge.

Mr. Hettrick suggested changing the word develop to education in section 8, subsection 7. He then referenced section 9, subsection 2, which said, "pursue administrative, judicial and other remedies on behalf of the consumer or group of consumers." Mr. Hettrick asked if the state would provide legal services through the ombudsman’s office.

Ms. Buckley explained in the design and configuration of the office, it was her preliminary view that 97 percent of complaints could be resolved with an ombudsman who was not a lawyer. The unit would include an individual with medical experience, which was not currently contained within the insurance commissioner’s office. She suggested there be a registered nurse and a paralegal who would process calls and resolution of cases. In addition, Ms. Buckley envisioned the office to be much like the advocate’s office for utilities. An attorney would be assigned from the Office of the Attorney General, and if an issue was unable to be resolved and if it was felt there was a good case, the office would have the ability and funding to pursue the case from the Office of the Attorney General. Ms. Buckley noted the Office of the Attorney General currently had the ability to pursue a case, but if money was not allocated from a specific budget account, the action could not be performed, even if the office had the authority to act under law.

Chairman Perkins asked if the language was new language or if the language was borrowed from other statutes.

Ms. Buckley said the language was based on other statutes as well as the language in other state’s efforts. The concept was to have a strong ombudsman program and words could be changed to better reflect the intent.

Ms. Mills offered written testimony in favor of A.B. 310 (Exhibit E). She provided the history of the Nevada Health Care Reform Project and stated their mission was to improve the quality of health care and ensure all Nevadans comprehensive and affordable health care coverage.

Ms. Mills pointed out complications of navigating health care systems and talked about individuals who believed they had full coverage only to discover, when a crisis developed, that adequate coverage was unavailable. By the time an individual contacted the Health Reform Project, they had been shuffled from office to office and were very frustrated. It usually took an hour to obtain necessary medical information to help an individual, and the Nevada Division of Insurance, in their report dated January 31, 1999, stated they averaged less than 2 minutes time per call in the 13,139 calls they received during a 7 month reporting period.

According to Ms. Mills, when a patient was denied care they received a denial letter stating they had the right to appeal. A successful letter of appeal required a consumer to medically justify necessary care with supporting medical data. Most consumers, with a lay person’s knowledge of medicine, were unable to perform such action successfully. Those in the reform project believed an ombudsman with medical knowledge could help patients receive necessary care in a timely manner.

The Nevada Health Care Reform Project believed placing the ombudsman in the Division of Insurance would be a conflict of interest. It seemed unrealistic to think a health care advocate could be effective in the agency promoting health insurance.

Patricia van Betten read written testimony in favor of A.B. 310 (Exhibit F). She noted the Nevada Nurses Association was a member group of the Nevada Health Care Reform Project, and the nurses in the association served as volunteer ombudsmen for the coalition for the past 4 years. Ms. Van Betten reiterated Ms. Mills’s comments regarding a lay person’s lack of medical knowledge in dealing with the appeal process as it pertained to denials of coverage. Delays caused by the appeal process could take 30 days to 6 months, and when a consumer needed a wheelchair, a referral, physical therapy, or a prescription drug, such a delay was too long. She stated an outside independent advocate was the most consumer friendly mechanism to help people navigate the system of managed health care and urged passage of A.B. 310.

Ms. Giunchigliani noted the position of insurance consumer had not been restored and thought if the position had been left in place, issues surrounding A.B. 310 would not be necessary. There was a workers compensation ombudsman, and it was not unusual for many of the departments and divisions to have an individual available to advocate on behalf of consumers rather than businesses.

Ms. Buckley said the position was an automobile insurance advocate, and when the position was eliminated, it was not placed back in the statutes.

Patty Hutchinson, a private citizen, spoke in favor of A.B. 310. She explained she dealt with HMOs and doctors in an attempt to find care for patients. It was frustrating for patients and families when questions were asked and answers were not forthcoming. An ombudsman would cut red tape and provide answers in a timely fashion.

Louis De George, a private citizen, offered support for A.B. 310 (Exhibit G) and noted he was denied a wheelchair even though he had two broken legs and had to crawl 100 feet along the ground into the office of his HMO. Mr. De George announced he received an anonymous telephone call informing him he was not to testify in front of the committee. He was told if he did not testify, he would receive all the money he was conned out of by his HMO with regard to the 1995 problem he had with his teeth. He stated the company could pay the entire $26,000, and he would still testify because he did not like being conned or scammed by anyone. He did not know how the caller knew he would be testifying, but he was very angry. Mr. De George noted the people needed the ombudsman to speak for them, especially senior citizens.

Senator Mike Schneider, Senate District 8, offered support for the ombudsman position. He noted there was also a health care ombudsman bill in the senate, which was broader-based covering all health and automobile insurance. In addition, the senate ombudsman bill would be placed in the Division of Insurance. Mr. Schneider reported the ombudsman for the homeowner’s association placed in the Department of Real Estate during the 69^th Session of the Nevada Legislature had positive results. The Chairman of Commerce and Labor in the Senate was in favor of ombudsmen and the senate bill would be presented to the Assembly Committee on Commerce and Labor.

Joni Wines introduced her husband Blaine and offered written testimony in favor of A.B. 310 (Exhibit H). Ms. Wines relayed her husband’s experience regarding a back infection. Because of insurance company failure, doctors were unable to properly treat Mr. Wines. Mr. Wines was bound to a wheelchair because of neglect. Future patients should not have to face the hardships the Wines family endured.

Exhibit H offered the following suggestions and comments:

Vice Chairman Perkins noted some of the issues addressed by the Wine’s family were corrected in the 69^th Session of the Nevada Legislature and asked Ms. Wines if an ombudsman would have been helpful in her husband’s case.

Ms. Wines asked if the issues were corrected in the 69^th Session, how long it took for the corrections to take affect and inquired as to when doctors would be making decisions on health care versus business people.

Vice Chairman Perkins pointed out many issues were resolved, but health issues were a work-in-progress. Those in the legislature were looking for the best way to accomplish goals. He noted Ms. Buckley’s expertise in the area.

Marie Soldo, Sierra Health Services, spoke in opposition to A.B. 310. She worked very hard with Ms. Buckley during the 69^th Session to assist in making changes. Sierra Health Services was supportive of systems in which members were able to solve problems in an expeditious fashion and believed there was such a regulatory framework under the Division of Insurance.

She noted during the 69^th Session there was debate about whether there was opportunity for the insurance department to collect complaints. In the course of the policy debate, Ms. Soldo worked with Assemblywoman Freeman to pass a bill establishing an 800-telephone number. At such time, they believed there were not enough calls.

Ms. Soldo pointed out the 13,000 telephone calls referenced by Ms. Buckley were telephone calls and not necessarily complaints. She thought the 800 number was working. All of the health plans and insurers, who were not HMOs, provided information to their membership regarding the 800-telephone number.

Ms. Soldo said A.B. 310 was broad sweeping and noted Medicare benefits were not regulated by the State of Nevada. Those who offered Medicare policies through their risk contracts had to adhere to the Health Care Financing Administration (HCFA) policies, grievances, and appeals processes. HCFA dictated the benefits processes, which the company followed. There was a dispute resolution process to which Sierra Health Services adhered that had an external review. Based on testimony, Ms. Soldo was unsure if some were attempting to eliminate the appeals process the industry had worked so hard to establish. She was concerned about whether the ombudsman would be obligated to adhere to current policies.

Jon Bunker, President, Western Region Sierra Health Services, noted his duties included responsibility for Health Plan of Nevada and Sierra Health and Life Insurance Company. Mr. Bunker understood health care was very personal. His company was a for-profit company, but he understood the issues surrounding his business dealt with managing the health care of humans. It was also the job of those in his company to help people understand their insurance policy.

Mr. Bunker personally understood the emotional and financial burdens associated with losing a family member and dealing with insurers but said a policy of health care was a contract. It was important that all parties involved in the contract understand what the policy contained. He pointed out A.B. 310 dealt with education, helping individuals understand what their policy entitled them, and what their policy covered. Mr. Bunker explained a policy of coverage was not entitlement to all things that were available at any price. He was opposed to A.B. 310 but not opposed to education and consumer help.

Mr. Bunker stated his company fully insured over 200,000 individuals. A.B. 310 referenced a fee per patient, and he sought clarification as to whether the funding was based on per member or per patient. The language was unclear to him. He further noted his companies employed over 30 member services representatives who fielded over 460,000 telephone calls in 1998. Of the 460,000 telephone calls, approximately 3,000 appeals for services or decisions rendered on behalf of Health Plan of Nevada or Sierra Health and Life were filed. Of the 3,000 appeals, approximately 53 percent were overturned in favor of the member.

Mr. Bunker pointed out his company invested millions of dollars in a technological system that allowed a member access to a member services representative. The technology allowed members to hang up after they placed a call to the company, and the member would not lose their position. The telephone system would automatically call the member back when their position came forward. In addition, Mr. Bunker noted his company installed a medical director, who was a nurse working within the member services department helping members understand medical conditions. Mr. Bunker suggested additional staff be available to the consumer through the Division of Insurance, which enabled the consumer to better understand and receive answers to questions.

Mr. Bunker noted the creation of an office of ombudsman would only duplicate services. He stated if the committee were serious about helping individuals, as opposed to creating duplicative and costly laws, then they should not pass the bill with the intention of another regulatory office. There was a process already in place, which could be improved or expanded.

Mr. Bunker referenced an article in the March 3, 1999, Las Vegas Review Journal noting the University Medical Center (UMC) expended millions of dollars in health care to individuals who worked but were not insured because they could not afford an insurance policy. Additional costs would create additional expenses, which would be reflected in higher premiums thus causing a greater number of individuals to become uninsured.

Bob Ostrovsky, Nevadans for Affordable Health Care, offered testimony in opposition to A.B. 310. He stated A.B. 310 was a mandated administrative procedure and noted the bill would cause a situation where there would be an advocate on one side and an advisory on the other side. Mr. Ostrovsky explained the bill went to the heart of filing appeals, complaints, and judicial reviews.

An additional concern held by Mr. Ostrovsky was the placement of the ombudsman in the Office of the Consumer Advocate. The consumer advocate in the State of Nevada rarely represented individual consumer complaints; the advocate represented the state and its citizens in hearings. He thought a good place to start would be in improving the Office of the Insurance Commissioner.

Employment Retirement Income Security Act (ERISA) plans, Medicare, or union Taft-Hartley Trusts could not be used to raise the money for the office of ombudsman. The money would be raised on the backs of the smallest employers in the state who provided insurance for their employees or from individuals within the state who bought individual policies. The ombudsman services would be provided to all policyholders. The very smallest businesses in the state were being asked to fund a program to provide services for 100 percent of individuals.

Larry Hardy, Nevada Association Health Insurance, spoke in opposition to A.B. 310. He noted he was Nevada born and delivered by his Uncle Stan in a Las Vegas hospital. He had been in the life and health insurance business for 32 years in Nevada and understood the problems associated with the industry. He was pleased, as were the association members, because the problems were being discussed. Insurance agents were advocates for the consumer.

Section 8, subsections 1 through 6, looked like the mission statement of an insurance agent. Agents were advocates for the consumer. For years, agents complained about the Division of Insurance not having enough staff members to help companies with submitted complaints. Mr. Hardy pointed out Sierra Health Services had 30 customer service representatives while the Division of Insurance had only 3 consumer affairs representatives. The Division of Insurance fined one insurance company $95,000 for a violation, and Mr. Hardy noted a fine was power. He thought problems should be resolved within the Division of Insurance and without the "bed tax." He did not believe the people in the state needed additional taxes, as the premium tax was already very high. He noted money from the fines the Division of Insurance collected could be used for additional funding.

Fred Hillerby, Home Town Health Care, testified in opposition to A.B. 310 noting concern about the bill and its duplicative nature. Home Town Health Care was a small company insuring less than 50,000 individuals in the State of Nevada, but they had a member services organization. Mr. Hillerby pointed out the number of telephone calls the company received and answered between December of 1997 through 1998 averaged about 13,000 per month. The company board was interested in knowing how quickly representatives answered telephone calls. There was a commitment to the members of Home Town Health Plan to obtain answers and resolve issues. The company was aware the coverage of health care could be a very complicated issue.

Mr. Hillerby noted when medical decisions were made regarding health care coverage, a medical director, who was a licensed Nevada doctor, was involved in making the decisions that could result in a denial. The consideration was not an economic consideration. The company was looking at quality and facing fiduciary responsibility in keeping costs in balance. The process was not cost driven, but costs were part of the equation.

Mr. Hillerby referred to the 13,000 complaints and inquiries received by the Division of Insurance noting the calls were not all characterized by the division as complaints. He thought the 13,000 telephone calls should be examined closer and wondered if all the telephone calls dealt with managed care and if they were from coverage areas where the Nevada Legislature had no control. Mr. Hillerby pointed out Home Town Health Care paid $1,658,251.70 in premium taxes and fees to the Division of Insurance, and the vast majority of those dollars went to the general fund. Mr. Hillerby further noted the examination cost was not included in the above-mentioned number. Health Maintenance Organizations were being asked to fund the ombudsman program in addition to the $16 they paid to the state in taxes and fees. Mr. Hillerby thought equity in such a situation was missing.

Robert Barengo, Attorney and Counselor at Law, Health Insurance Association of America, expressed concern that subsections 5 and 6 of section 8 might allow the ombudsman to engage in lobbying, which would not help consumers resolve problems with insurance companies. He also indicated he had concerns that the provisions of sections 9 and 19 comply with requirements of the State Budget Act.

Keith Beagle, Chairman, Nevada Association of Health Plans and President of Nevada Care, stated there were over 800 carriers licensed by the Division of Insurance to do business in Nevada. Of those 800 carriers, 10 percent or approximately 80 carriers were active. The 80 carriers covered approximately 450,000 lives in Nevada or just under one third of all Nevadans. Self-insured individuals made up approximately 450,000 individuals, which neither A.B. 310 nor A.B. 156 of the 69^th Session addressed. The largest remaining component was the uninsured, which consisted of approximately 280,000 individuals. A.B. 310 would not address those individuals. The balance consisted of federal programs, which would not be affected by the bill. Mr. Beagle repeated numbers of previously mentioned calls received by health care organizations and noted the numbers represented only one third of the members. The calls were initiated, in part, because HMOs were required to list an 800-telephone number. The numbers did not reflect complaints but inquiries, and the telephone calls covered all aspects of insurance, including automobile. He stated his information indicated only 10 percent of the telephone calls were HMO related. Given the population, the number amounted to one half of 1 percent He explained HMOs insured less than one third of all Nevadans. He further noted A.B. 156 of the 69^th Session allowed for a majority peer panel to hear appeals.

Nevada Care was a small HMO with 10 member services who did nothing but educate, explain benefits, and schedule appointments. If A.B. 310 duplicated the education and outreach provided by HMOs, the audience would be much more supportive. HMOs desired to see the additional two thirds of all Nevadans not insured by HMOs have access to the quality of care of those served.

Mr. Beagle stated he sat on the board for the Health Insurance Portability and Accountability Act (HIPPA), which came about because of small group reform. Those on the board hoped to increase the level of participation throughout Nevada, but due to cost, such was not the case. Costs continued to be a barrier.

Nevada Care was the largest Medicaid HMO in the State of Nevada. The company dealt with members who did not have the luxury to look through lists of providers, have continuity of care, or member services. He noted a change in Medicaid was occurring.

Patricia Ogren, a private citizen, explained her husband, Carol Ogren, had bypass surgery in 1998. In an 8-month period, he was in and out of the hospital 20 times and saw 47 doctors. Every time he went into the hospital the HMO assigned him a new doctor, and he again started from "square one." He helped build Washoe Medical Center, started the Nevada Hospital Association, was a founding member of the School of Medicine in the State of Nevada, and he died an undignified death due to an HMO. She understood her husband would die anyway, but found it unbelievable that he died under the circumstances in which he did.

Ms. Ogren emphasized the citizens of the State of Nevada had rights too, not just corporations within the state. She noted she made seven telephone calls in Las Vegas to find out who regulated HMOs in the county. In addition, she made six telephone calls in the state to find out who regulated HMOs and contended the state needed someone for the citizens to call.

Charles Musser, a private citizen, asserted an ombudsman was needed to overcome the stonewalling executed by health care companies. He showed the committee papers from a failed HMO and a stack of registered letters asking for someone from the HMO to call him. No one ever did.

Mr. Musser noted ERISA was designed to protect the citizens in the United States, but it did not. There was a loophole in ERISA, which protected HMOs from any legal action by participants of the plan. He suggested the governor sign a joint resolution and send it to congressional representatives for the repeal of the ERISA loophole. Over 200 judges nationwide supported such action.

Mr. Musser asserted health plans could recoup money through subrogation by a third party. He suggested the State of Nevada adopt the Medicare subrogation formula rather than the haphazard actions that took place in relation to subrogation. Many of the problems the ombudsman would deal with were due to subrogation where an HMO wanted money back. He said legal expenses or costs were not taken into consideration, and in his case, the attorney’s fees were greater than his settlement.

Mr. Musser considered Medicare "carve out" to be abhorrent. He explained "carve out" was where the Medicare group paid $15,000 of a patient’s bills before supplemental Medicare insurance took over. Mr. Musser noted the ombudsman must be allowed to deal with public and private sector individuals. He thanked Ms. Buckley, Mr. Lee, and Senator Schneider who acted in the ombudsman capacity.

Chairman Perkins noted the State of Nevada sent resolutions to the Federal Government in the areas referenced by Mr. Musser and recognized the issues relating to the "carve out."

Fred Schmidt, Chief Deputy Attorney General in charge of the Bureau of Consumer Protection, stated his position was also known under the statutes to be that of the State Consumer Advocate. Mr. Schmidt explained the title, State Consumer Advocate, was confusing to people because his office did not have advocacy jurisdiction or responsibility in all areas of the law. He oversaw areas, which included utility advocacy, anti-trust law, and civil and criminal jurisdiction in enforcing the states deceptive trade practices act. Mr. Schmidt did have general jurisdiction over areas that at times encompassed health care, but there was not a specific resource within his division dealing with health care. Within the Office of the Attorney General there were a number of fraud units dealing with health care issues. There was also a workers compensation fraud unit.

Mr. Schmidt stated there were four ombudsman or consumer advocate positions created during the past 18 years. The utility consumer advocate was created in 1981 and was separate and independent from the Public Utilities Commission. In 1989, an ombudsman was created for the Division of Aging Services. There were eight ombudsman who operated effectively out of that office in helping senior citizens. In 1993, the consumer advocate for automobile insurance was created. The automobile consumer advocate was placed within the Division of Insurance, had one individual, no funding of any consequence, considered a failure, and repealed by the legislature in 1995. The final ombudsman was the ombudsman for owners in common interest communities, which was created in 1997.

The Office of the Attorney General thought the concept within A.B. 310 was excellent. A.B. 310 could work and be helpful if it were carefully run, expectations were not too high, and funding and resources were made available. There was concern regarding the funding of the office, and Mr. Schmidt would be willing to help work through the issues.

Mr. Schmidt noted his office tried to have consumers work with their companies rather than go to court. If the consumer had not fully exhausted all remedies, the consumer advocate could not help them. The concept behind the office of ombudsman could be effective in the State of Nevada.

Mr. Hettrick asked how the language in statute for Mr. Schmidt’s office compared with language in A.B. 310 with regard to issues such as judicial remedy.

Mr. Schmidt stated the language in A.B. 310 was similar to his office and noted section 10 of the bill did a good job of providing access to records on behalf of represented individuals. The language in A.B. 310 was slightly different from the language governing his office, but it was effectively written. He noted section 8 was much more detailed. Other states were also providing or looking to provide ombudsman services within the Office of the Attorney General.

Kenneth A. Fitzgerald testified as a private citizen who dealt with medical problems for 2 years fighting delays, abuses, and mismanagement of his rights by HMOs and health care systems. Mr. Fitzgerald thought there was an illness in Nevada, and the virus causing the illness was very complex. The virus was made up of businessmen, businesswomen, corporations, companies, and politicians who turned a blind eye to the devastating effects of the illness, which was health care in Nevada. It was killing people, destroying homes and families, and elected officials were the reason the virus was allowed to go on unchecked. It was not a great mystery to Mr. Fitzgerald that the greatest commodity in the country was its citizens, and the citizens who gave the largest return were the poor, the needy, and the average individual or family trying to make ends meet. They were the ones hurt the greatest by HMOs, and for too long, the people watched HMOs grow stronger from every cruel act perpetrated against the citizens of the state. The HMO’s were like a car manufacturer who calculated the effects of correcting a problem against the lawsuits they might face.

HMOs got away with improper care under the neglect of the legislature. Some elected officials ran for office under a conflict of interest and had an agenda that was self-serving, which was hidden from the people who elected them. Visions of power and attention from special interest groups stalled the help people needed to kill the virus. Bills with no teeth were used as stall tactics. Elected officials created the illusion of doing something to use later in a "vote for me speech." Mr. Fitzgerald asserted constituents were getting older and smarter and the actions of legislators said it all. It was time legislators started taking care of citizens instead of personal goals that lay outside the agenda of the citizens who elected them. He said if a legislator was outraged by his testimony, it was because it was an insult to who they were. If a legislator knew about the immoral, unethical, and illegal acts against the citizens they swore to protect, then the legislator was guilty.

The citizens of the State of Nevada needed A.B. 310 because they could not argue their cases with HMOs and win with any satisfaction. HMOs did not consider the advice of a doctor who was in charge of a patient. The people needed A.B. 310 and if the legislature did not provide it, Mr. Fitzgerald did not know what else could be done.

Kalynda Tilges, a private citizen, testified in favor of A.B. 310. She noted she had hepatitis C, was a nondrinker, and was 2 years away from being placed on a liver transplant list. Ms. Tilges found a doctor who was able to provide good treatment with a Food and Drug Administration (FDA) medication. She was prior authorized by her HMO for the medication prescribed by her doctor and had to fight with them on a weekly basis to obtain her medication. The HMO consistently told her pharmacist that they were not going to pay for her prescription. After hours on the telephone, the HMO told her the problems were settled, and she could obtain her prescription. When Ms. Tilges went to pick up her prescription, she was told the HMO would not pay for the medication. She noted her husband was recently diagnosed with the same illness but refused to obtain treatment because of the problems his wife had with the HMO. Ms. Tilges asked the legislature to pass A.B. 310; the citizens of the state needed help.

Dr. Adah F. Kennon, a private citizen, offered testimony in favor of A.B. 310 (Exhibit I) noting negative experiences encountered with her HMO and primary health care provider. She thought having the "ear of an Ombudsman would have been helpful." People needed access to willing lawyers who were brave enough to represent all ages without fear of being professionally "blackballed." In addition, people needed a variety of funding sources making services cost-effective. They also needed doctors who were willing and brave enough to act as expert witnesses in order to review patient records. It was necessary that ceilings be placed on how much money could be charged for services thus allowing for equal access. Ms. Kennon concluded by stating people needed representatives who made more than promises to win elections.

Walter B. Hammond, a private citizen, noted the HMO committed treason against his family when they withheld immediate medical care from Dr. Kennon’s mother. He reiterated comments read into the record by Dr. Kennon (Exhibit H). The people of the State of Nevada needed an ombudsman who had emergency powers to deal with issues such as those encountered by his family.

Florence B. Leppert, a private citizen, offered written testimony in support A.B. 310 (Exhibit J). She noted her desire to have the position of ombudsman advocate for members of Medicare HMOs.

Chairman Perkins noted Jan Gilbert, League of Women Voters and Bobbie Gang, Nevada Women’s Lobby supported A.B. 310 (Exhibit K). Ms. Gang stated the Nevada Women’s Lobby believed the office would be a tremendous benefit to consumers of health care, and the situation became more complex as more and more programs entered into the managed care arena. There were issues that related to consumer protection, consumer advocacy, and quality of care, which could be addressed by an ombudsman. The office of ombudsman would provide resources necessary to discover answers and it would be a place where grievances could be reported after other channels had been exhausted.

Ms. Buckley noted A.B. 310 would go to the Assembly Committee on Ways and Means if the committee agreed with its policy, and there were sections that needed language clarification.

ASSEMBLYWOMAN BUCKLEY MOVED TO DO PASS A.B. 310.

ASSEMBLYMAN GOLDWATER SECONDED THE MOTION.

Mr. Hettrick understood the legislative time constraints and that A.B. 310 had to be heard in another committee. With Ms. Buckley’s consent, the language in the bill would be addressed in the Assembly Committee on Ways and Means. He said he would not necessarily support A.B. 310 after the other committee heard it and might not ultimately support it later on the assembly floor.

Mr. Humke agreed with the remarks made by Mr. Hettrick and called the committee’s attention to the valid points raised by Mr. Barengo. If the problems remained when A.B. 310 went to the assembly floor, Mr. Humke reserved the right to vote differently.

THE MOTION CARRIED UNANIMOUSLY.

Assemblyman Dennis Nolan, Assembly District 13, presented A.B. 293 to the committee. He pointed out if A.B. 310 had been in place and there had been an ombudsman, A.B. 293 would not have been necessary. Mr. Nolan supported the concept of A.B. 310. A.B. 293, as written, would provide for immediate notification to the claimant if denial by an HMO or an insurance company was made.

Mr. Nolan mentioned he was involved in a sporting accident and went to a hospital he believed handled his health care concerns. He attempted to contact his HMO provider at 9:00 a.m. on a Sunday to no avail. While being transported to what he thought was his provider hospital, he passed three other hospitals. At the hospital, he provided insurance information, received x-rays, and 60 days later was notified his claim was denied, and he was held responsible for the payment of the bills. Mr. Nolan contacted his insurance company and was told to have the insurance carrier resubmit the bills. He was again denied.

Mr. Nolan referenced section 1, subsection 1, which said, "Except as otherwise provided in subsection 2, an insurer shall approve or deny a claim relating to a policy of health insurance within 30 days after the insurer receives the claim, which was existing language." He pointed out the language did not say who the insurer had to notify and how long after the claim was denied the insurer had to notify the claimant. Often the notification was made to the medical provider and not to the claimant. A claimant was close to receivership if notified 60 days after services were provided, and if an appeals process was necessary, the claimant could began receiving collection notices.

Mr. Nolan noted section 1, subsection 1, line 2, which said, "if the claim is approved, the insurer shall pay the claim within 30 days after it is approved." He then referenced section 1, subsection 2, which said, "if the insurer requires additional information to determine whether to approve or deny the claim, it shall notify the claimant of its request for the additional information within 20 days after it receives the claim." Mr. Nolan noted the section was the only notification reference to the claimant, and all the insurer was doing was notifying the claimant within 20 days after the insurer received the claim that additional information was needed. The language did not say whether the insurer needed additional information from the claimant to resolve a claim or if the insurer needed additional information from a health care provider. At such point where additional information was requested, there was no deadline as to when the information had to be provided back to the insurer.

Section 1, subsection 2 continued, "the insurer shall notify the provider of health care of the reason for the delay in approving or denying the claim. The insurer shall approve or deny the claim within 30 days after receiving the additional information." Existing language allowed for a long period of time to elapse while the insurer attempted to gather information, and the new language attempted to deal with the problem.

Mr. Nolan referenced section 1, subsection 1, which said, "if the claim is denied, the insurer shall immediately notify the claimant and inform the claimant of the reason for the denial." He pointed out the word immediately could take on several different definitions and thought the language should be kept within the 30-day notification time period. In addition, Mr. Nolan wanted to add additional language stating an insurer should immediately (noting the word immediately would need to be defined) notify the claimant and provide in such notification the claimant’s legal rights and appeal methods. There were many individuals who did not understand the appeals process and the notification was a good consumer protection plan. The language was repeated throughout the areas of the statute that applied to notification.

Section 6, subsection 1 said, "each managed care organization shall provide coverage for medically necessary emergency services provided at any hospital. If the managed care organization does not have a contract with the hospital at which an insured receives medically necessary emergency services, the managed care organization shall reimburse the hospital in the same amount and manner that it reimburses a hospital with which it has a contract for the provision of medically necessary emergency services." Mr. Nolan explained section 6, subsection 1, was for individuals who were covered by insurance, believed they had a medical emergency, and sought medical attention at the closest medical facility.

Mr. Nolan explained a constituent thought his wife, who was diabetic, was having a medical crises. He took her the closest hospital, which was not on the constituent’s medical plan. The woman was diagnosed as having a non-life-threatening problem, and the claim was denied. The insurance provided coverage for medically necessary emergency services but not at the facility which the woman was transported. If a person believed they had a medically necessary emergency problem, then they should be treated at any facility. The language in section 6, subsection 1, said, "each managed care organization shall provide coverage for medically necessary services." Mr. Nolan noted the insurance company referenced the above language when he contacted them regarding his constituent. The company said they did provide the coverage, but they did not provide coverage at which the facility the constituent was a patient. In addition, the constituent did not have a true medical emergency as the company saw it.

Mr. Nolan said there were unintended consequences due to the language in A.B. 293 section 6, subsection 1. The intention was to have a patient’s treatment paid at any hospital for medically necessary emergency services at the same reimbursement level a company would reimburse a contract provider. When a hospital was filled to capacity in a specialty area, such as an intensive care or burn unit, and a patient was being transported to the hospital, the hospital could say they were on divert, thus initiating a procedure where the patient would be taken to the next closest hospital who could take them.

Marie Soldo, Sierra Health Services spoke in favor of A.B. 293. Ms. Soldo noted she would like to work through the language so as to define what the term immediate meant. Under the existing process when a claim was denied, a notice was sent out to the member and the doctor with an explanation as to why the claim had been denied. Ms. Soldo stated the worst case scenario was an 11-day process from the time the claim was denied until the time the patient received notice of denial.

Chairman Buckley asked if Sierra Health Services provided coverage for medically necessary services at any hospital used by the insured. Ms. Soldo responded affirmatively. Chairman Buckley noted there was a policy shift and there was an impact on hospitals, especially rural hospitals.

Chairman Buckley asked if the company paid billed charges or an amount equal to the contracted amount. Ms. Soldo said Sierra Health Services paid billed charges if the services were provided in a noncontracted hospital. She further noted there was no question that emergency room costs were going up as a result of the changes in A.B. 156 of the 69^th Session.

Mr. Goldwater asked if a time-limit was also applicable for the coverage of insurance in general. He wondered if an individual were to apply for a policy of insurance or coverage with an HMO and was denied, were there provisions similar to what was proposed in A.B. 293 for the general coverage.

Ms. Soldo explained Sierra Health and Life Insurance Company adhered to the same standard as A.B. 293. Claims were paid the same for all of the companies, and 95 percent of claims were paid within 30 days.

Mr. Goldwater asked if an individual applied for an insurance policy with Sierra Health and was denied coverage, was the company required to inform the individual as to why they were denied coverage. He inquired as to whether there was a time-limit.

John Bunker said an individual applying for coverage would fill out a medical questionnaire, the company would conduct a medical review based on the questionnaire, and if there were conditions that warranted a rate-up or denial, the person would be told. There was no time-limit requirement because the company wanted to be thorough and precise. The process could take a few days or up to 2 or 3 weeks.

Janice C. Pine, Saint Mary’s Health Care Network, spoke for Larry Harvey, Nevada Health Care Coalition, which was a group of 18 employers representing 23,000 employees. Ms. Pine noted the same process to which Ms. Soldo adhered also applied to Saint Mary’s Health regarding timely payments and denials.

Ms. Pine addressed section 6 of A.B. 293 and explained the reason the amendment was brought forward (Exhibit L). Washoe County had a designated trauma center, which had protocols requiring a patient be taken to a certain hospital. In addition, Washoe County had exclusive contracts with one facility, as opposed to a contracting situation such as in Clark County. Ms. Pine noted the trauma system was put in place by the legislature in 1987, and the regulations were based on requirements in the NRS. The regulations required the patient be transported to the trauma center. The network fully supported the fact a patient was being well served by going to the trauma center. However, the result was a state mandated monopoly where the trauma center then could refuse to contract with organizations and could offer a discounted rate to those organizations which the center chose.

Chairman Buckley asked if there were contracts for the provision of medically necessary emergency services with hospitals.

Ms. Soldo said Sierra had contracts with hospitals and they contracted for the use of hospital emergency rooms. There were contracted rates with certain hospitals.

Chairman Buckley asked if Sierra would pay billed charges if an insured went to a closer hospital with which the company did not have a contract

Ms. Soldo said the insured would go directly to the closest hospital or where the ambulance took the insured.

Mrs. Segerblom noted the reference to populations of less than 400,000 in Exhibit L and stated the outlying areas of Clark County would be left out.

Ms. Pine said the intent of the amendment was to limit it to Washoe County. Clark County was in a population of over 400,000 and University Medical Center (UMC) was a level 1-trauma center. What would happen in Clark County would be different from what occurred in Washoe County because almost all of the managed care organizations in Clark County had contracts with UMC.

Mrs. Segerblom asked if Ms. Pine was talking about a trauma where someone could go to a hospital with which the HMO was not associated and the hospital would get reimbursed.

In a situation where an individual had a true emergency and went to the emergency room, it was Ms. Pines understanding that the HMO covered the expense.

Marie Soldo referenced the new language in section 1, subsection 1, line 5, which was repeated throughout A.B. 293, and stated, "notify the claimant and inform claimant." She noted the language should read, "notify the claimant and inform the insured" because the claimant was the provider. The provider was making the claim, but the insured was the patient.

Mr. Nolan clarified the protocol by which a person would be taken to a trauma center could be very benign, even if an ambulance were taking the patient. He noted some of the protocol included mechanism of injury. Mr. Nolan explained if an individual fell off the roof of his house, regardless of his true injuries, because he sustained a fall of greater than 15 feet, the individual still had to be taken to the trauma center. Within the trauma center mechanism, there were protocols mandating MRIs, complete body x-rays, and a full trauma work up. If the insured had to pay for such procedures, the cost would be extremely expensive.

Helen Foley represented Humana and noted they supported the legislation and believed it to be appropriate to provide an explanation of benefit. The physician and insured should be provided with information in a timely fashion. An appropriate timeframe should be 30 days or less.

Ms. Foley addressed section 6 and noted her concern at not having a patient billed for the balance of billed charges, which could happen under A.B. 293.

Chairman Buckley was concerned with out-of-state situations

Ms. Foley noted it would be very difficult for Humana to mandate an out-of-state facility charge the amount Humana billed.

Robert Barengo represented Sunrise Hospital and stated concern with section 6, which mandated that if the hospital did not have a contract with a provider, the provider had to accept another hospital’s negotiated rate. He noted Sunrise Hospital supported the current policy where the hospital would bill their usual and customary charges.

Mr. Barengo asked if the bill were to be amended, that language be added in section 6 on line 19 stating, ". . . shall reimburse the hospital’s usual and customary charges for the provision of medically necessary services."

Dana Bennett representing University Medical Center spoke to section 6. She noted concern about accepting emergency room charges that had been negotiated with other providers. The charges would be less if the patient had been transported to UMC for trauma care.

Chairman Buckley asked Mr. Nolan to review all comments, suggestions, and possible amendments. She stated he had a clear policy choice in the last section of the bill and desired to hear his recommendations at the work session.

There was no additional testimony or questions and Chairman Buckley adjourned the meeting at 6:45 p.m.

RESPECTFULLY SUBMITTED:

Jane Baughman,

Committee Secretary

APPROVED BY:

Assemblywoman Barbara Buckley, Chairman

DATE: