The Committee on Commerce and Labor was called to order at 4:05 p.m., on Wednesday, March 31, 1999. Chairman Barbara Buckley presided in Room 4100 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. 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

COMMITTEE MEMBERS ABSENT:

Mr. Richard Perkins, Vice Chairman

Assemblywoman Merle Berman, District 2

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Following roll call, Chairman Buckley opened the hearing on A.B. 434.

Assemblywoman Chris Guinchigliani, Assembly District 9, introduced A.B. 434. She explained the bill was a correction of a problem that occurred during an attempt to deal with the issue of interior design education. Page 2 of A.B. 434 intended to strike references to the Foundation for Interior Design Education and Research (FIDER). FIDER was no longer licensed or recognized by the Department of Education. The only school in Nevada that was FIDER certified was the University of Nevada at Las Vegas. It was felt that fact placed inappropriate restrictions on the process of obtaining interior design licenses. The change to A.B. 434 would allow the interior designers to obtain licenses through any accrediting body recognized by the United States Department of Education.

William Turbay, interior designer, testified in support of A.B. 434. Mr. Turbay said the National Council for Interior Design Qualifications governed testing, education, and experience standards for the industry. Nevada used the standards to test candidates who wished to become registered interior designers. The certification cost was $1,600, which allowed Nevada to administer its own test thus ensuring only qualified professionals practiced interior design. Certification tests administered nationally had a success rate of only 15 percent of the candidates passed the first time the test was taken. A.B. 434 allowed Nevada to administer its own test.

Currently there were four programs for the student who wished to become a professional interior designer. Mr. Turbay provided supporting documentation, marked, Exhibit C, relating to the testing process that followed the standard of the National Council for Interior Design Qualification (NCIDQ). It was a 16-hour test, with seven parts and included written as well as artistic (drawing) questions. In order to take the test, the candidate must have had at least 2 years of formal education and 4 years work experience, or 3 years formal education and 3 years work experience. Having met those requirements, one still had to take the Nevada test. The NCIDQ requirements were contained in Exhibit D.

Chairwoman Buckley noted section 1 of the bill amended Nevada Revised Statutes (NRS) 623.192, and section 2 also amended NRS 623.192.

Assemblywoman Guinchigliani explained it was because of the 6 years education requirement. In 1999 one portion of the first section would end.

Mr. Turbay said they were asking to continue conforming to the national standard put forward by the NCIDQ. There were four accredited educational institutions in the State of Nevada: University of Nevada, Reno (UNR), University of Nevada, Las Vegas (UNLV), the Interior Design Institute, and the Community College System. A student or a professional who was changing careers could not take the national test without meeting all of the other requirements of experience and must have recommendations from three professionals in the industry. It was a 6 year combination of education and experience in order to take the test. If the requirements were more stringent, it would be difficult for a professional to come to Nevada to work, and furthermore there would be the loss of reciprocity with other states.

Mr. Turbay added he taught evening classes and had one student, who was Assemblyman Nolan’s paramedic partner, who worked 10 hours a day and attended school 4 nights a week, 4 hours a night. She was a full-time mother and was changing careers. She would still have to have work experience in order to make any money. To require 4 years education instead of 2 was too much of a burden on most people.

Mr. Turbay said he had attended Loyola-Marymount University in Los Angeles. If he had come to Nevada and his school was not accredited by certain institutions as required under existing statute, he could not qualify to be a registered interior designer in the state despite his 25 years of work experience. He urged passage of the bill that would allow Nevada to conform to the NCIDQ requirements nationally, allowing students, professionals, and people who were changing professions to be NCIDQ-certified and able to be registered in the state. Further, the bill would allow conformance to the national standard of qualifications including the additional standard required by the State Board of Architecture by taking the Nevada test. Finally, the bill would provide that Nevada schools offering the interior design program were qualified or accredited by the U.S. Department of Education.

Assemblywoman Guinchigliani asked again about the cost of that test. Mr. Turbay said it was approximately $1,200 to $1,400; assuming one passed the first time. If not, then there was an additional charge for reexamination for each section of the test not passed. Also, the cost rose every year. The cost for the state examination $550, and again, if the student did not pass the first time they had to pay the same amount for reexamination.

Chairwoman Buckley asked if anyone wanted to testify in opposition to the bill.

Derrell Parker, a registered interior designer, said the cost for the NCIDQ examination was $475 not $1,600. It was true that if one failed a particular portion they had to pay to take it again. All professional licensing tests were structured that way. According to NCIDQ, the passage rate was 66 percent. The cost of the state exam was $500.

Chairwoman Buckley asked Mr. Parker to explain why he thought the bill was good. Mr. Parker said he had been present in 1995 when the bill passed. The purpose of the bill then was to protect the health, safety, and welfare of the public. He did not feel that could be achieved by lowering the standards or requirements for someone to enter the profession. The reason the 2 year education cut-off was put into the bill initially was to conform to NCIDQ.

Mr. Parker said he served on the NCIDQ board and currently NCIDQ was in the process of trying to introduce more education, an issue that had been discussed at the last two national meetings. The requirement for a 4 or 5 year degree would probably go into effect in 2000.

Chairwoman Buckley summed up the pros and cons for the committee. Page 2, lines 11 and 12, was the foundation for interior design, education, and research, and now it was being stated that did not make sense. That requirement was defunct.

Mr. Parker interjected that not only was it defunct, in 2000, one of the most expansive programs in 25 years would become the foundation. He provided information on the Foundation of Interior Design and Research (FIDER), marked Exhibit E and said a FIDER meeting would be taking place in Florida shortly. Ms. Buckley asked if FIDER was accredited by the U.S. Department of Education. Mr. Parker said as far as he knew it was.

Attila Lawrence, professor of interior architecture, UNLV Interior Design program, said it was the only professional program in the State of Nevada. FIDER was recognized by the U.S. Department of Education as a reliable authority on the quality of education in the field of interior design. It was the only agency that dealt with the professional accreditation of programs in the United States.

Mr. Lawrence continued saying there were three components to becoming a professional interior designer: education, practice, and examination. Regarding FIDER accreditation, he stated to have an interior design program that was not FIDER accredited was literally diluting the quality of education and compromising the individual who would be attempting to practice interior design. He echoed the comments of Mr. Turbay that for people coming out of programs not professionally accredited, it might take as long as 25 five years to be qualified as professionals. The professional accreditation of such programs served a very important purpose that was to "ease" people into the profession in a more expedient way. FIDER accreditation was professionally driven, it established the criteria modeled on the professional practice of providing interior design services. It was established to protect the public health, safety, and well-being.

Mr. Lawrence submitted a letter from UNLV, marked Exhibit F, regarding FIDER accreditation criteria that stated in part:

The FIDER accreditation body looked at several things. A program making application for accreditation had to be very clear about philosophy and goals in terms of educating the students. There were 70 standards and guidelines that carefully scrutinized the interior design program in terms of its content. There were four standards and guidelines for the admission of students. Students had to be qualified and had to show potential for growth and performance in terms of the professional practice of interior design. Everyone who applied would not be admitted. There were six specific standards that dealt with student counseling that involved career guidance; to ensure someone would not have to wait 25 years to become a professional. Further, there was the grading process that dealt with the evaluation of students with respect to professional performance. It determined if students were to be retained in a program; were they qualified to study in a professional program for interior design.

Mr. Lawrence explained there were 14 specific standards and guidelines that dealt with the recruitment, development, and retention of design faculty. That was important because whoever taught the students must be qualified and have the education and experience, as well as having had the examination to qualify them to teach a professional program.

Chairwoman Buckley said she wanted she keep focused on the bill at hand. The bill proposed to eliminate the program must be accredited by FIDER. It was Mr. Lawrence's testimony that FIDER was still around, doing well, and insuring quality. She asked Mr. Wadhams to speak next.

Jim Wadhams, an attorney representing the State Board of Architecture, explained the distinctions needed to be explained to the committee. There was an evolution in interior design that separated the profession into two groups. One group wanted to design the interiors of open spaces. That was basically commercial buildings, raw floors, and office suites. It involved space planning and such things as fire ingress and egress and a range of matters with serious architectural implications. Prior to the 1995 enactment, those matters could not legally be done by anyone except architects, engineers, or contractors. In the 1995 session, a coalition of professions came together and agreed it was time for persons with sufficient education to be allowed to design those interior spaces.

The problem created was that there were others who did not design spaces, but designed the interiors of spaces. They had traditionally called themselves interior designers and had done that for a number of years. The distinction between registered and nonregistered interior designers was not just between those who took the test and those who had not. It was between those who had demonstrated the qualifications of the fire and human safety issues in spaces inhabited by people, and those with demonstrated knowledge of the design of the decorative elements in the space itself.

He said the problem with the bill was that a suggestion was being made to dilute the educational requirement carefully crafted by a coalition of a wide range of people, including the schools. The coalition agreed it was the appropriate phasing of the educational requirement to make the distinction between those who could actually design the space itself, and those who would be designing the interior of the space. There was another bill discussed in the committee not too long ago that suggested lowering the requirements or even eliminating requirements for code compliance. It was an issue that required very careful consideration, particularly in the case of fire codes.

It was important to recognize how the history of the profession of space planning and registered interior designers was created. It was not created to eliminate those persons who did interior design. He said the committee should keep that in mind when it considered reducing or eliminating those educational requirements that were deemed important by all the people who participated in the passage of that bill.

Assemblywoman Segerbloom asked if one could obtain a degree in interior design in 2 years. Mr. Lawrence said a professional degree required 4 years. One could obtain an association degree in 2 years.

Assemblywoman Guinchigliani wanted to know if the board approved any programs other than FIDER. Mr. Lawrence said there were no programs other than FIDER from the standpoint of what they were looking for when the bill was originally written. However, there was a caveat in the bill that said "or approved by the board." They had not had any other brought before them to be approved.

Assemblywoman Guinchigliani said she felt the point the bill was trying to address was that only UNLV was FIDER-qualified. That eliminated UNR and the community colleges, as well as other schools that were properly accredited by the board to graduate individuals. The language was too narrow and that was what the bill was trying to change, rather than reducing the standards. She added she believed everyone in the business wanted the same types of standards. It appeared his issue was that anyone who wanted professional status or designation had to attend UNLV in order to accommodate or qualify for one section of the legislation.

It was Ms. Giunchigliani's understanding that in 1995 the bill got rid of the 6 years of consecutive experience and put into place actual classroom time as well as practical experience. She asked what was Mr. Parker's objection. Where did he see a reduction in qualifications or standards in the bill. His testimony had been he did not want to dilute the quality of the program, and where did the legislation do that.

Mr. Parker said primarily it required 2 years education was required by NCIDQ to take the exam. NCIDQ was constantly moving the bar up to get to a 4-year degree, much like what the National Architectural Board (NAB) now had for architecture. When the law was created it basically carved a niche out of architecture. He wanted to ensure statute at least qualified those people to the same level an architect would be qualified to do the same work. Architecture now required a 4 to 5-year degree plus passage of an examination. The same standards should be required. That was the reason there was a separate state test.

Assemblywoman Guinchigliani said his testimony could be taken two ways: When opposition prevented a separate board for interior design it was merged into the architectural board. The determination then was made to create the educational experience to have to tie into something the architects would no longer be doing to hold up the same standard.

Mr. Parker said he thought that part of it was because of the work they were doing as registered designers. As Mr. Wadhams said earlier, it basically carved it out between people doing space planning as opposed to just selecting finishes.

Assemblywoman Guinchigliani wanted to know if 2 years schooling with 4 years experience was still acceptable as long as they took the NCIDQ examination. Mr. Parker said it was.

Assemblywoman Guinchigliani said they still had to take the state examination and asked if his only objection was deleting the reference to FIDER.

Mr. Wadhams interjected the objection was eliminating the discretion. The board had the discretion, although no one had asked them to exercise it to date. The suggestion made by the bill was that the discretion be eliminated rather than exercised. He felt what Mr. Parker was suggesting was that it should remain FIDER that appeared to be a credible accrediting body, but the flexibility should be left with the Board to identify other 2-year programs if presented.

Assemblywoman Guinchigliani said she felt that answered it. In line 11 or 12, leave the current language and insert that the board had the flexibility to be able to do FIDER-approved programs or something else approved by the State Board of Education.

Chairwoman Buckley stated the 3 years of education and the 3 years of experience equaled 6 years, the same for page 2, lines 35 through 40. She assumed he had no problem with that, only with the proposed changes to FIDER.

Mr. Wadhams said he had no objection to that, but he did have an objection. The intent of the interior designers was to move to a 4-year degree over the course of time so that those persons in 2 year programs would have the opportunity to qualify, and as that changed they would take the 4 year program. That was staged so there would be a "grandfathering" or a phasing in of the process, as it was provided in the original bill, only 6 years of experience and passing the test was adequate.

Chairwoman Buckley felt the positions were clear; however, the two sides did not agree on what was appropriate. She then asked if anyone had not had an adequate opportunity to explain his position.

Mr. Turbay stated, regarding FIDER, he wanted the committee to consider the FIDER eligibility requirement became effective June 30, 1994. FIDER maintained recognition by the Department of Education until November 1996. At that time FIDER voluntarily withdrew. He then provided a letter (Exhibit G) written to Nancy Wolff, Interior Design Institute, regarding that original intent. He read the letter that stated, in part,

"pursuant to our telephone conversation of June 22, 1992,

and our previous meeting. I am hoping you will find the

enclosed information exciting as we at the Legislative

Coalition for Interior Designers in Nevada have found

it to be. After contacting the Executive Director of the

NCIDQ an determination was made that any student

completing your two-year program at the Institute

of Interior Design combined with the four years

experience in the field is eligible to sit for

the NCIDQ examination."

The letter was signed by Mr. Derrell Parker.

There was another issue regarding the request for additional approvals from the board. Nancy Wolff again wrote to the board on January 29, 1996, regarding application for the board approval of the Interior Design Institute. The answer she received was that the board had not yet come up with a methodology to approve a school of interior design. It was not the function of the accrediting body to approve schools. The State Department of Education and the National Department of Education would be the appropriate accrediting body. He added it would be "a very terrible thing" to elevate the profession of interior design so that only people who went to UNLV could become registered interior designers in the state.

Nancy Wolff, a registered interior designer in the State of Nevada, said she had been practicing for 25 years. She took the NCIDQ and passed it in 1996. It was a test one had to take more than once. She passed 5 out of 6 parts the first time, the second time she passed the sixth part. She took the Nevada State exam with the first group that took the exam and was one of 11 designers who received their Nevada registration. She had worked with Derrell Parker for many years on the issue, and it had always been the intention that the 2-year education would be retained. Anything said to the contrary was just not true. She said they were not lessening standards because, what had been done in Nevada to take care of the life and safety issues that concerned the board, was to develop a seventh test that addressed those issues. It meant a designer had to have 6 years combination, whatever combination, and had to take 7 very rigorous examinations to be able to register in the State of Nevada. Her question to the board would be why would they want to eliminate a pathway of education and experience that followed every other profession the board licensed to become a registered interior designer. They said no schools were brought forward, however, she brought her school forward. They said it was always intended for 4 years of education after the year 2000, however, they always said they were going to support the 2 years in a later bill.

She continued saying she and the board had agreed, "Let’s let this go through so that the space planners wouldn’t go out of business, that was my promise, okay if you help me I’ll help you. I’ll let this go through and in 1995 when we came before this Assembly we went along with the bill because we believed them."

Dallas Sisolak, who did not identify her affiliation, stated some people did not have the money or the time a 4-year education required. She spent 2 years in school, but had two children, a very busy husband, and many things going on. She simply wanted to work. She said she was going for the NCIDQ examination and taking the state architectural test. If she passed those tests she believed she deserved to be approved to work as an interior designer. She felt students should have the choice of how much schooling they obtained.

Next to speak was Max Hershenow, Amer Student Architects, Nevada, who said he was involved in the 1995 negotiations. He opposed the changes to the law. He was a sophomore at UNR in 1980, and there was no school of architecture. He had to transfer to the University of Arizona and pay his tuition for 5 years. What the legislature had done in 1995 was to raise the bar for interior designers who felt that made the state the custodian of that profession. He felt the architectural profession 8 years ago had not needed the schooling; it was possible to work for 8 years and become a licensed architect if you passed the examination. The State Board of Architecture and the legislature changed that a number of years ago and required a professional degree from an accredited school. In the spirit of what had been done for years, the interior design profession was going the same way. He reiterated it was not the intent to exclude anyone, only to create a professional level of interior design that required, in his opinion, more schooling, more experience, and testing. The three steps to being able to deal with the life and safety requirements.

He wanted to see the law remain as written and not diluted by lesser educational standards, as well as having different accrediting bodies determine how the residents of the State of Nevada were going to practice interior design.

Chairwoman Buckley believed there were some members on the committee who believed there was a place for people well-trained in the structural aspects of interior design, such as moving walls, fire safety, and so on, as well as people well trained to make selections of interior furnishings. She felt that might not be accommodated at present. She announced that bill as well as the bill on which the speaker was working with the board would be considered as a package and scheduled for a work session.

Chairman Buckley next turned to the work session document, Exhibit H, and opened the discussion on A.B. 106.

Vance Hughey, Research Analyst, stated that in a conversation with Jim Spinello he indicated there would be no need to process the bill.

MOTION BY ASSEMBLYMAN GOLDWATER TO INDEFINITELY POSTPONE A.B. 106.

SECONDED BY SPEAKER DINI.

THE MOTION CARRIED.

The next bill heard was A.B. 72.

Mr. Hughey noted the bill was in a work session on March 26. Two amendments were considered. There was also a discussion of processing the bill without amendments. Since that work session a memorandum from Secretary of State Dean Heller attempted to answer some questions raised by the committee.

Chairwoman Buckley noted she brought the bill up for a vote. It was one of two bills that had come out of the interim legislative commission study on mortgage investments. She asked Secretary of State Heller to provide information regarding requirements if those transactions were not exempted from securities laws. She then asked Mr. Heller to inform the committee regarding his findings, and how many other states had adopted a similar consumer protection measure.

Mr. Heller introduced Don Reis, Chief Deputy Secretary of State and resident expert, who had been the securities administrator of the Secretary of State’s Office for a number of years. Mr. Heller stated the purpose of A.B. 72 was basically a disclosure issue and also an issue of jurisdiction. Who should have jurisdiction as far as the Dilmar case and the Harman case. Should it be located within the Department of Financial Institutions, or should it be part of the Securities Act. The reason it was currently with the Department of Financial Institutions was because of the exemption mentioned in subsection 21 of Nevada Revised Statutes (NRS) 95.30. What they were asking the committee to do they believed would address many of the problems that had occurred during the Harman and Dilmar cases. That would enable it to fall under the Securities Act. What the Securities Act required was disclosure to the investors.

It would be erroneous to think it would not increase some of the costs of doing business. It would require a certified public accountant to go into every mortgage company annually and produce reports. Those reports would be distributed to the investors. They would investigate and provide background information of the principals of the company and past failures of the company in some of its transactions. It would tell an individual he had the opportunity to know as much as possible about a particular investment. That was the information one would receive in order to make that investment decision. In essence he believed as a consumer advocate with the division, it was exactly the kind of legislation needed in order to decrease the possibility of having Harmon cases in the future. He added, there was too little information out there for investors and because of that, they got into a policy scheme or pyramid scheme. Mr. Heller felt only the "tip of the iceberg" had been revealed.

Finally, Mr. Heller said, "most people knew in writing a piece of legislation you write it because 5 percent of the industry makes the other 95 percent look bad. I think in the case here we have about 50 percent of the industry making the other 50 percent look bad. We want to change that, get the opportunity for the investors to be informed, truly a consumer protection issue."

Chairwoman Buckley asked if he knew of any other state that had a similar exemption. Mr. Heller said he knew of no other state that had that particular exemption.

Assemblyman Goldwater stated A.B.72 attempted to address the transaction while A.B.64 attempted to address the institution. That was the differentiation, and he believed the Secretary of State would concur.

ASSEMBLYWOMAN GUINCHIGILIANI MOTIONED TO DO PASS A.B. 72.

SECONDED BY ASSEMBLYMAN GOLDWATER.

THE MOTION CARRIED. THERE WERE THREE ABSTENTIONS.

ASSEMBLYMEN ARBERRY AND HETTRICK, AND ASSEMBLYWOMAN BERMAN.

Assemblywoman Berman proposed adding provisions in the appropriate places in sections 1 through 5 of the bill to allow the use of peripheral dual energy x-ray absortiometry, known as PDXA, for baseline and annual bone-mass assessments.

Assemblywoman Berman provided supplemental information (Exhibit I). She stated the cost for a policy where osteoporosis x-ray was covered would be $5.40 a year. Mammography for women under 40 was $3.72 a year. A total of $9.12 for both coverages per year.

Chairwoman Buckley asked if the only proposed amendment contained in the work session document was Ms. Berman's proposal to add provisions to allow use of peripheral dual energy x-ray.

Speaker Dini noted quite a few bills had come in requesting increased coverage for health insurance. He felt it might be appropriate to do a study and determine the costs and how that would affect health insurance. The cost of health insurance was increasing to the point many businesses were dropping it. In fact, smaller business all had to drop it. He recommended a legislative study in the interim. He added they were all good projects, however, the overall cost might put people in jeopardy of losing their health insurance policies.

Assemblywoman Guinchigliani felt the problem was insurance traditionally had not defined health care as prevention. In session after session there were issues or items referred to as mandates. The solution to the problem was to have the industry begin to cover prevention. As men reached age 40 there should be automatic prostrate screening, similarly, when a woman reached a certain age she should have a mammogram.

Assemblywoman Berman cited a House of Representatives Report from Congress that stated the Kaiser Family Foundation found that "99 percent of small businesses would continue to offer coverage even if HMO reform legislation led to a premium increase of $5 per month." It stated further, "the Congressional Budget Office said the most protective bill last year would only increase insurance premiums by 4 percent over 10 years." She added that what was being requested in "the two small bills would hardly make a dent in the big picture." She urged the committee to pass A.B. 162.

Assemblywoman Evans said she had no quarrel with either bill. She was a proponent of screenings and of preventative medicine. She was, however, in accord with Speaker Dini's concerns about the impact on health insurance costs and the ability of businesses to absorb the costs. She said although she had sponsored various mandates in the past, she still felt the legislature would be in error not to revisit the issue of mandated coverage from the prevention aspect, as Ms. Guinchigliani suggested, and establishing criteria to better evaluate what should be considered.

Assemblyman Goldwater concurred and said also that while things were being accomplished the net effect tended to be small while the major issues were not addressed. He postulated if in an all-male company would the coverage be mandated.

Chairwoman Buckley said some of those men might be married and have dependents that would be covered. Mr. Goldwater interjected if it was a group of three single people, they would not have an option. Mrs. Buckley responded it would be the same for an all-female firm, if the benefit covered was a male disease.

Assemblyman Beers said the impact of the bill was less than one-half of 1 percent, not a very big impact, which was testimony to the fact it was already being offered by health maintenance organizations (HMOs) and managed care organizations (MCOs). The aspect of the market that could be regulated was already doing that one particular thing. He expressed concern that passing the law would simply increase the burden of reporting and compliance with governmental rules and regulations, rather than the actual cost of delivery of services. He said he supported Speaker Dini's idea of looking at the big picture and the cumulative affect of all the legislation, and he planned on voting in favor of A.B. 162.

Assemblywoman Giunchigliani said 18 studies had been requested thus far; several were greatly needed. Although she had not yet negotiated with the Senate, Senator Porter mentioned only four or five studies maximum from each house would be allowed. However, it could be accomplished with task forces by staff and so on.

Chairwoman Buckley stated she had held all the managed care bills to afford an opportunity to examine everything being introduced. There had been a number of bills that cumulatively affected the cost of health care. The bills covered a wide range of issues from mandated benefits to hospital practices. If an interim study on the cumulative affects was not done, she believed it would be wise to at least have the interim committee on health care spend two or three meetings on the subject. During the last interim the health care committee had so much to do there was not an emphasis on looking at the big picture.

Ms. Buckley felt it would be wise to have an ombudsman deal with some of the concerns, particularly to determine if osteoporosis testing and screening were medically necessary. Also, if everything medically necessary was supposed to be covered. She felt women's health issues were treated differently, whether it was contraceptives, osteoporosis, or mammograms. There were women's diseases that were not options. It was not like fertility treatment and although it was sad when someone could not conceive a child, that was not a disease in the same way that breast cancer was a disease that could be fatal.

Assemblyman Nolan said he would vote in favor of the measure. He, too, agreed with Speaker Dini's recommendation. Mr. Nolan was a proponent of preventative treatment and care. His wife, at age 24, had been diagnosed coincidentally through a routine pregnancy examination with a rare form of cancer. Although he had insurance, the treatment cost had been enormous. He felt looking at the savings derived as a result early detection in cases of cancer, osteoporosis, and so on, would provide helpful information in terms of mandating certain benefits. That was something the insurance companies did not report.

Assemblyman Hettrick opposed mandated benefits as not being the right way to address the issue. He felt mandated benefits might artificially inflate costs. However, he agreed a study on mandated benefits was important. He did not want to see the committee kill every bill that requested mandated benefits, particularly when the cost was a small as $9, but he believed if the study on mandated benefits determined a policy, the committee should apply it to all similar bills.

Ms. Buckley did not think the suggestion had been to have an interim study or kill every bill. Her intention would be to vote the bill on its own merit, consider the overall cost, and keep in mind the larger picture of prevention and cost in the long term.

Speaker Dini asked about consideration of taking out some mandates if others were added to equalize the costs. Were some mandated benefits going unused or were some inconsequential. He supported mammography screening. However, he said to consider if 10 bills were passed with mandated benefits, would there be some detrimental effect to insurance costs.

ASSEMBLYWOMAN GUINCHIGLIANI MOVED TO AMEND AND DO PASS A.B. 162.

ASSEMBLYMAN HETTRICK SECONDED THE MOTION.

A discussion ensued and it was determined the committee put together a list of mandated benefits and consider them as a package as suggested by Speaker Dini. The vote was then taken.

THE MOTION CARRIED.

Chairwoman Buckley turned next to A.B. 163.

Mr. Hughey noted Assemblywoman Berman proposed amending the bill to remove the current list of qualifiers. Presently the bill read, "The policy of health insurance must provide coverage for benefits payable for the expenses incurred for an annual mammogram for women under 40 years of age who have had certain conditions." Ms. Berman wanted to remove "certain conditions" and replace that as outlined on page 2 of the work session document (Exhibit H), namely, "(1) Who have a personal history of breast cancer; (2) Who have a personal history of lobular cancer in situ or multiple biopsies for benign breast disease; and (3) Who have a mother or sister who had breast cancer before the age of 40." The same change applied to various provisions in the bill dealing with health insurance policies, group health insurance policies, hospital or medical service corporations, and health maintenance plans.

Chairwoman Buckley noted the initial hearing of the measure when concerns had been raised about putting diagnostic treatment indicators in statute. She recalled the testimony then seemed to be "we don't like this bill at all, but if you had to have it you'd want to indicate the exact trigger points." She asked Ms. Berman's opinion about allowing that to be established by appropriate medical protocols that would require coverage for annual mammograms for certain women under 40 when medically necessary. Ms. Berman responded the three protocols in the amendment had come from the American Cancer Society's suggestion for paired down wording. She believed it would not affect too many people. She thought the nonspecific language might open it to a larger group, but she had no objection to that language.

Ms. Guinchigliani felt the term "medically necessary" would be more appropriate and allowed some flexibility to the medical profession.

ASSEMBLYWOMAN GUINCHIGLIANI MOVED TO AMEND AND DO PASS A.B. 163 WITH THE LANGUAGE AS DETERMINED TO BE MEDICALLY NECESSARY.

ASSEMBLYMAN HETTRICK SECONDED THE MOTION.

THE MOTION CARRIED.

The next item on the work session was A.B. 194.

Mr. Hughey noted Marv Texiera had proposed amending the bill by deleting everything from line 3, page 1, to the end and inserting the provisions included in the work session document (Exhibit H) under tab C. The proposed amendment essentially required a managed care organization (MCO) that contracted with certain rural hospitals to consult with its insured and explain in writing its justification for not authorizing admission, denying service, or transferring from the implant provider at its local hospital to another facility. The MCO must notify the insured prior to taking action if possible and must consider in its decision certain medical and economic needs of the insured in addition to other factors. If prior notification was not possible, the MCO must still provide written justification of its actions.

Chairwoman Buckley said she did not know where Assemblywoman Segerblom was with the proposed amendment. She did not think it made sense, because if a hospital was already on the list why then would the MCO be allowed not to justify why they were not admitting.

Assemblywoman Segerblom said she was not enthusiastic about it either, in fact, thought it had been dropped and was surprised to see it come up. What she wanted, and what was happening in some of the rural hospitals was, they belonged to a care provider and maybe had not had a doctor with their group in that community. When an emergency occurred and the patient went to the local hospital for treatment, they were charged and not reimbursed and the hospital was not reimbursed. She added she did not intend to make it difficult for an MCO or HMO; however, she believed that if one had an insurance policy, the insurance company had to take care of the insured. That was the idea behind the bill.

Chairwoman Buckley noted some of the testimony indicated if there was another hospital that offered better facilities, it was felt the case manager should still be able to explain that to the patient. If the patient chose, he could go to that other hospital, because rural hospitals sometimes did not have the ability to handle serious medical situations. She felt that made sense, and added the patient should be able to choose any hospital on the list and have it covered. Her concern was that testimony revealed that although Boulder City Hospital was on the list, people were told they could not use it.

Assemblyman Hettrick said he had worked with others in trying to develop the amendment to include what the Chair had expressed. There were situations where the provider would like to be able to tell the insured that although he preferred a particular hospital, in their opinion the insured would be better served to go elsewhere. It was an attempt to reach some middle ground even if they then had to provide written justification. It would take into account the reasons why the insured might not want to go to another hospital. The insured might say he was happy with the treatment he received, or he was worried his family might not be able to visit him, the distance was too great, or cost prohibitive, or that he would rather have his own doctor, and so on. The attempt had been to not mandate a specific coverage at a specific hospital and have the provider explain why they felt it necessary or appropriate to go to another hospital.

Ms. Segerblom remarked if she had an emergency, she would not have time to wait for an explanation that she had to go somewhere else.

Mr. Hettrick noted emergency care was always covered without explanation. The last paragraph of the amendment addressed that, stating the MCO would provide written justification of any denial of services or transfer of the insured in emergency situations where prior notification was not possible.

Ms. Buckley cited page 2 that stated "prohibit or discourage an insured from receiving services that are covered." If the words "or discourage" were deleted, it would read "prohibit an insured from receiving services that are covered." Then a sentence added stating "nothing in this statute would prohibit an insurer from informing the insured of the availability of services at a different hospital," it might accomplish what was desired.

Ms. Segerblom said that would be fine.

Chairwoman Buckley acknowledged some of the concerns were from Mr. Hettrick's district.

Assemblyman Beers' concern was the measure would have an impact on rates that far exceeded that of the three mandates passed thus far, simply because a provider was precluded from being able to centralize their expensive resources in a few facilities.

Ms. Buckley said all the bill was saying was that "you can't prohibit someone from going to a hospital on your list." That was much different that saying one could not go to any doctor or hospital he chose. She added she did not understand why an insured could not go to a hospital on the list. If a hospital was not covered and one could not go there, it should not be on the list.

Ms. Buckley reiterated her earlier suggestion about deleting "or discourage" and adding the appropriate sentence at the end, as noted above.

ASSEMBLYWOMAN SEGERBLOM MOVED TO AMEND AND DO PASS

A. B. 194, WITH THE REMOVAL OF "DISCOURAGE" AND THE

ADDITION OF A SENTENCE AT THE END WHERE THE PROVIDER INFORMED THE INSURED OF A SITE MORE APPROPRIATE OR SUITABLE FOR TREATMENT.

ASSEMBLYMAN GOLDWATER SECONDED THE MOTION.

The vote was taken; Assemblymen Beers, Hettrick, Evans, Dini, and Humke opposed. Eight members voted in favor of motion.

THE MOTION CARRIED.

Next on the work session was A.B. 418.

Mr. Hughey noted Assemblywoman Ohrenschall and Renee Diamond had proposed several amendments during the hearing on the bill. The first amendment by Ms. Ohrenschall would remove several provisions that required the administrator to conduct annual inspections of the records of the mobile home parks. There was concern that would be a burden to the division and might also have an adverse fiscal impact. The next amendment was to clarify section 18, that the bill applied only to mobile homes built on or before January 1, 1975; the date of certain standards imposed by the U S Department of Housing and Urban Development (HUD).

Renee Diamond's proposed amendments on section 2, page 1, contained a provision that required a person responsible for maintaining records of a mobile home park to keep confidential certain records regarding tenants. Ms. Diamond proposed an exemption for representatives of her division, the Manufactured Housing Division, who were already bound by a confidentiality statute. Then Ms. Diamond had testified that section 13, page 6, line 42, made the rent provisions of NRS 118B.150 applicable to persons who rented their homes from the owner of the park. She explained the tenants who rented were already covered by statutes for ordinary rentals, and the provisions of that NRS chapter applied only to homes owned by an individual who was renting land from the mobile home park owner.

Chairwoman Buckley noted that rent justification for mobile home parks was a perennial legislative issue, and it would probably pass the Assembly and not pass in the Senate, just as had happened before. However, she said there was no more important issue in her district than mobile home rent justification. "Thanks to Senator Porter who drew my district with so many mobile home parks and I thank him for that since they have elected me so many times."

Assemblywoman Guinchigliani asked if the language in section 13, page 6, line 42, should be kept in the bill, or would it cause problems. Ms. Buckley felt in light of the bill's fate in the Senate that the committee should process it. However, if there was concern in the committee an amendment could be developed.

ASSEMBLYWOMAN GUINCHIGLIANI MOVED TO DO PASS A.B. 418.

ASSEMBLYMAN PARKS SECONDED THE MOTION.

THE MOTION FAILED.

The next measure under discussion was A.B. 451.

Crystal Lesbo, Senior Research Analyst, explained the measure had come out of the Clark Commission, appointed as a result of the Sierra Chemical explosion that occurred in January 1998. The bill required inspections of certain facilities and places of employment where explosives were produced, used, stored, or handled to be conducted jointly by various state and local agencies. There were several amendments.

In attachment D of the work session document (Exhibit H) Ray Bacon, Nevada Manufacturer's Association, had proposed the same exemptions that were included in A.B. 110, A.B. 111, and A.B. 112 should be included in subsection 4 of section 1, and subsection 5 of section 3. Those were essentially the Alcohol, Tobacco and Firearms (ATF) exemptions that would limit the definitions of explosives.

The second amendment addressed the mining industry. Major General Clark, chairman of the Clark Commission, stated in his testimony that A.B. 451 should not apply to the mining industry. That provision was adopted for A.B. 110, A.B. 111, and A.B. 112.

Assemblywoman Guinchigliani proposed the third amendment. It added a new section amending NRS 618.685 by increasing the penalty for a first offense from $20,000 to $140,000, and increasing the penalty for a second offense from $40,000 to $280,000, for any employer who willfully violated any chapter or any requirement of chapter 618 of NRS that resulted in a death of an employee.

The fourth amendment was to subsection 1 of section 1 that required inspections of regulated facilities where explosives were manufactured for sale, removing the reference to facilities where explosives were produced, used, stored, or handled. In addition, it would remove the requirement that those inspections be scheduled to provide an opportunity for participation by the affected agencies.

The fifth amendment was proposed by Ray Bacon and was included as attachment G of Exhibit H. It would amend subsection 1 of section 1 and subsection 1 of section 3, by deleting the phrase "produced, used, stored, or handled" and replacing it with "produced and stored." Amendment 5B to subsection 1C of section 1 provided it was not mandatory for law enforcement agencies to inspect certain facilities. The amendment provided that law enforcement agencies should be notified of the inspections and had the option of being present at such inspections.

The sixth amendment deleted section 3 and amended subsection 1 of section 1, so the Division of Environmental Protection must enter into cooperative agreements that provided for the inspection of certain facilities. The amendment was proposed by Mr. Wilds of the Division of Industrial Relations and was included as attachment H of Exhibit H.

Chairwoman Buckley thought most of the amendments could be dismissed because definitions would be made consistent. Two things needed to be decided in regard to section 3, whether to increase the fines where violations resulted in death, and if so, were the suggested amounts agreeable. Second, a decision on the wording "shall enter into cooperative agreements" or "shall adopt a regulation."

Speaker Dini recommended an amend and do pass but to delete the increase in the fines in section 3. He felt those were stiff penalties that could result in lost jobs. That had recently happened in Fernley due to an $800,000 fine.

Ms. Buckley asked if the amendment would be to include attachment H (Exhibit H) about cooperative agreements as opposed to doing the regulations. Mr. Dini thought the regulations were better.

SPEAKER DINI MOVED TO AMEND AND DO PASS A.B. 451.

ASSEMBLYMAN BEERS SECONDED THE MOTION.

A discussion ensued and Assemblyman Hettrick said he did not like to disagree with Speaker Dini, however, the testimony as he remembered it was that the regulations already existed in the other entities, and it would be a simple matter and save cost and time to adopt the cooperative agreement. He added Speaker Dini had not been in the room at the time that testimony was given. Speaker Dini was agreeable to going with the cooperative agreement.

Assemblywoman Guinchigliani felt the increased penalties should not be dropped and suggested the division bring something back in the 2001 session for consideration, because that was an area that had not been increased over the years.

Assemblywoman Segerblom said she liked the proposed amendment that the division shall enter into a cooperative agreement because that was what had been agreed upon by the Division of Industrial Relations.

Chairwoman Buckley felt in view of the consensus that was building, it would be best to leave the fines alone for the present and use the cooperative approach. The restated amend and do pass by Speaker Dini would be to include the amendments making the bill consistent with the others, rejecting the fine amendment and accepting the amendment shown in attachment H of the work session document (Exhibit H). The vote was then taken.

THE MOTION CARRIED.

Next on the work session was A.B. 489.

Chairwoman Buckley noted the bill had been sponsored by Assemblywoman Gibbons with the Division of Industrial Relations and created a section for safety and health. No amendments had been proposed.

ASSEMBLYWOMAN BERMAN MOVED TO DO PASS A.B. 489.

ASSEMBLYWOMAN SEGERBLOM SECONDED THE MOTION.

Chairwoman Buckley opened the discussion asking was the bill needed. Or, could the division already established apply to the secretary of labor for the ability to reduce penalties for small employers. The testimony revealed that was possible, however, would probably be better if it was in statute. Ms. Segerblom

recalled Mr. Wilds had spoken in favor of the bill and said he would furnish a toll-free telephone number. The vote was then taken.

THE MOTION CARRIED.

Ms. Lesbo discussed the next bill, A.B. 536.

The bill had also come out of the Clark Commission in response to the Sierra Chemical Explosion. It required certain permits to be obtained by a facility or place of employment where highly hazardous vessels or explosives were located. The first amendment, to keep all the explosive bills consistent, was proposed by Ray Bacon. That would amend subsection 7 of section 6 and included the ATF exemptions 4, 5, and 6 limiting the definition of explosives.

The second amendment addressed the fact the bill was not intended to apply to the mining industry, as General Clark had informed the committee. The same provision had also been adopted for A.B. 110, A.B. 111, and A.B. 112.

Regarding the third amendment, several recommendations were made by Mr. Rosse of the Division of Environmental Protection. Amendment 3A had been withdrawn and replaced by the handwritten notations (Exhibit K) for section 1, which stated, "No owner or operator may commence construction or operation of a new process that is regulated pursuant to NRS 459.3813 unless he first obtains permits from the division for that construction or to commence operation. Before issuing the permit the division shall consult with the Division of Industrial Relations of the Department of Business and Industry." Essentially the amendment provided that there would be a separate permit issued for the construction and operation of a facility. The permit would be issued by the Division of Environmental Protection in consultation with the Division of Industrial Relations and was agreed upon by both entities.

Amendment 3B to subsection 3, section 1, provided the Division of Environmental Protection might require the facility to meet certain requirements before issuing permits for construction or the operation of a facility.

Amendment 3C to subsection 5, section 1, provided that the Division of Environmental Protection must adopt regulations through the State Environmental Commission to carry out the provisions of section 1.

Amendment 3D added a new section to the bill to amend NRS 459.380 to NRS 459.3874 to include a definition for "process" and "vessel." The definition was included in attachment I of Exhibit H.

Amendment 3E added a new section to the bill to amend section 5 of NRS 459.3824. It provided in addition to the fees, any penalties and interest collected pursuant to NRS 459.3833, NRS 459.3834, and NRS 459.3874 must be deposited with the state treasurer for credit to the fund for precaution against chemical accidents.

Amendment 4A, also proposed by Ray Bacon, Nevada Manufacturers Association, was included as attachment G to the work session document (Exhibit H), and amended subsection 1 of section 1 to provide the owner was prohibited from commencing construction until a permit was obtained.

Amendment 4B provided the fine referenced in section 4, page 3, applied to the owner and not the contractor, unless the contractor was responsible for obtaining all permits in his contract and knew or had reason to know the planned use of the facility.

Amendment 4C amended subsection 1 of section 6, deleting the phrase, "produced, used, stored, or handled" and replace it with "produced or stored."

The fifth amendment had been withdrawn and replaced by the handwritten notations shown on the excerpted material marked Exhibit L. It provided, under NRS 618, that "No owner or operator may commence construction or substantially alter the construction of or modify any major process used to protect the lives, safety and health of employees at a place of employment where explosives are produced, used, stored or handled unless the person obtains a permit from the division. Before issuing the permit the division shall consult with the Division of Environmental Protection of the Department of Conservation and Natural Resources." Mr. Rose and Mr. Wilds concurred with the amendment.

Chairwoman Buckley said due to the extensive amendments the committee could take action and then bring it to the floor. She felt the amendments took care of the plant that was already built, but wanted to make sure it covered new facilities. The committee might want to see the completed version of the bill.

Speaker Dini felt a reprint was in order, and would afford the opportunity to get comments from the industry about the amendments. Ms. Buckley said they could pass the bill and when the reprint came back it could be put on the desk to be brought back.

SPEAKER DINI MOVED TO AMEND AND DO PASS A.B. 536.

ASSEMBLYMAN HUMKE SECONDED THE MOTION.

In discussion, Chairwoman Buckley noted the bill allowed the division to charge a fee for insuring the safety of explosive plants. The division should check with the governor to make sure he was not going to veto because it had a fee attached. She noted further in section 6 the division "may charge a collective fee for the issuance of a permit." If that did not go to the general fund it should be allright. A vote was then taken.

THE MOTION CARRIED.

Ms. Lesbo began the discussion of A.B. 603.

She stated amendments 1 and 2 would make the bill consistent with the prior explosive bills; that included exemptions 4, 5, and 6 limiting the definition of explosives and that the bill did not apply to the mining industry.

The third amendment was opposed by Mr. Rosse, Division of Environmental Protection. 3A amended subsection 1 of section 1 by deleting the term "hazardous substance" and inserting a reference to NRS 459.3816, which already included a list of designated highly hazardous substances. Also inserting a reference to NRS 459.3833, which required the State Environmental Commission adopt regulations that established a list of highly hazardous substances.

Chairwoman Buckley asked Ms. Lesbo for confirmation that those amendments were consistent with each other and agreed upon by the parties. Ms. Lesbo so confirmed. Ms. Buckley recommended similar action be taken as with the previous bills.

ASSEMBLYMAN HUMKE MOVED TO AMEND AND DO PASS A.B.603.

ASSEMBLYMAN ARBERRY SECONDED THE MOTION.

THE MOTION CARRIED.

Ms. Buckley said in keeping with the legislative rule that no bill was ever dead, she asked for reconsideration of the mobile home park bill, A.B. 418.

ASSEMBLYWOMAN GUINCHIGLIANI MOVED TO DO PASS A.B. 418.

ASSEMBLYMAN GOLDWATER SECONDED THE MOTION.

THE MOTION CARRIED.

Chairwoman Buckley closed the work session and re-opened the hearing with A.B. 516.

Assemblywoman Vivian Freeman, Assembly District 24, introduced her bill and explained the first part would require managed care organizations (MCOs) to authorize a woman to select an obstetrician or gynecologist as their primary care physician. She noted it was a bill that had been addressed in the 1997 session in the Committee on Health and Human Services. She was unsure why it had not passed. Her experience had shown that women who went to gynecologists used them as their primary care physician until after their child- bearing years when they went to an internal medicine physician. Some of the MCOs were already doing that; however, there was still a need for the bill.

Ms. Freeman said Assemblywoman Gibbons had provided her with the federal Managed Care Reform Act of 1999, marked Exhibit M. Many of the provisions she would discuss were in the congressional bill. The second part of the bill allowed a patient to sue an MCO. She noted that A.B. 491 scheduled to be heard later in the week, created an external review and was addressed in federal legislation as well. Most MCOs already had internal review boards. She added the bills would become clearer when both had been heard.

Assemblywoman Evans asked about section 4 that allowed for the OBGYN to be the primary care physician. She said her gynecologist would not do anything but his specialty, therefore she had to have two doctors. If that was the case with others, how would the bill address that. Mrs. Freeman said she believed some MCOs allowed a woman to see a gynecologist once a year, but they needed to go to another physician for other matters. The bill would allow them to do that without preauthorization.

Assemblywoman Guinchigliani also asked about the intent of section 4. Mrs. Freeman said she was not sure if preauthorization was necessary but included that section in case it was.

Next to speak was Matthew Sharp, representing the Nevada Trial Lawyers, who supported A.B. 516. He cited section 5 relating to the liability being imposed by the MCO. The rationale was simple with the advent of managed care. MCOs had taken the position of making medical-type decisions. They had done that to reap a financial benefit both to the organization and to their medical provider and with that came certain responsibilities including damages. With respect to Assemblywoman Evans' question, he said there had been some confusion in the state of the law as to whether a managed care organization would be liable for negligent acts in limiting the care of its members. He cited as examples, not allowing emergency care, not allowing cancer screening, or not allowing for hospitalization. The bill clarified the state had imposed liability upon an MCO for those acts. It might not be necessary, but it clarified the law and avoided argument in court that a managed care organization would not be responsible. He added that with responsibility came accountability, and for that reason his group supported the bill.

Jon Sasser, Washoe Legal Services, referred to the letter from the Nevada Health Care Reform Project (Exhibit N), made up of 52 member organizations representing 540,000 Nevadans, whose purpose was to ensure all Nevadans had competent and affordable health care. For patient protection to be meaningful, an individual must have the right to sue when he was not protected. There were three proven methods of enforcement of patient rights in managed care: an ombudsman, external review, and the right to sue. He added that the right to sue was an important aspect of health care regulation; anyone who would jeopardize another person's health through a faulty decision must be held liable

Next, Jan Gilbert, representing Progressive Leadership Alliance in Nevada (PLAN) stated her coalition of 39 organizations had chosen to focus on health care for the 1999 session. They had supported many health care bills thus far and supported A.B. 516 because the ability to sue was necessary of there was no ombudsman, otherwise there was no one to whom to address concerns.

Bobbie Gang, representing the Nevada Women's Lobby, Planned Parenthood of Northern Nevada, and the National Association of Social Works-Nevada Chapter, stated all supported A.B. 516. She provided an excerpt from the "Nevada Women's Lobby Magazine", marked Exhibit O, which stated, among other things, that "Managed care is revolutionizing health care delivery in Nevada and the United States. The fundamental promise of managed care is to hold down health care costs without sacrificing quality…" She added that her groups believed women were entitled to select their primary care provider to be an OBGYN. It was usually a doctor they had seen for many years and in whom they had complete trust. They should be able to elect to continue in that doctor's care. Nevada could do better by guaranteeing that all health insurance and managed care programs provided women with the option to choose a reproductive care provider in addition to or as their primary care provider. Ms. Gang urged passage of A.B. 516.

Allison Gaulden, associate vice president of public affairs for Planned Parenthood, was next to speak. She said Planned Parenthood was an advocate for reproductive issues, and it supported the bill. She provided her written testimony, marked Exhibit P, which stated in part: Research had shown an overwhelming majority of women aged 18 to 60 thought of their gynecologist as "their doctor." Women should have the opportunity to designate that person who had often managed their care for years as their primary care physician. Twenty other states had legislation similar to A.B. 516. Moreover, OBGYNs were trained first as primary care physicians and performed family care rotations. Just as a primary care physician would refer a patient to a specialist when treatment was beyond their range of expertise, so too was an OBGYN just as competent as a family physician in making those referrals.

She added her belief the bill did not mandate that all OBGYNs become primary care providers; however, it offered the OBGYN and the patient a choice. Planned Parenthood supported choice and on their behalf and their patients, she urged passage of A.B. 516.

The opponents of the measure spoke next.

Marie Saldo, representing Sierra Health Services, and Nevada Association for Health Plans; Dr. Dennis Schuman, medical director, St. Mary's Health First, and Dr. Allan Ebbin, vice president for Health Care Quality and Education for Health Plan of Nevada, all testified. Dr. Ebbin said they had a number of concerns, primarily not having a clear understanding of all of the implications. In the 1997 session they made a number of changes in grievances and appeals that expedited processes and enhanced dispute resolution for the members of HMOs. They had also changed the review panel so that a majority was made up of members. Alternatives were sought in response to the criticism HMOs needed more independent objective evaluations and thus were leaning toward external review.

Dr. Schuman, a board-certified internist, board certified in utilization quality assurance, and a member of the American College of Physician Executives, said he had been in managed care approximately 10 years, prior to that was an internist for 16 years in California. His concern was quality of care and said OBGYNs were not trained to be primary care physicians. To become a primary care physician they had to meet the standards of family practice, internal medicine, or osteopathy. He provided an excerpt from NRS 689B.0374, marked Exhibit Q, section 2 of which provided that a policy of health insurance must not require an insured to obtain prior authorization for any service provided pursuant to subsection 1.

Ms. Salda pointed out that legislation had been passed in the 1997 session.

Dr. Schuman said he polled the physicians at a recent meeting and to his knowledge no HMO restricted free access to OBGYN care. He reiterated they were not trying to restrict care but to provide the appropriate care. In closing, he said he opposed the measure and urged the committee to consider his comments.

Dr. Ebbin, advised he was board-certified in preventive medicine, pediatrics, medical genetics, and board certified by the American Board of Quality Assurance and Utilization Review Physicians. He expressed concern with A.B. 516 for several reasons. Legislation that exposed health plans to enterprise liability for the actions of providers did not recognize the important distinction between the role of health plans and the role providers played in the overall delivery of health care. Health plans were responsible for developing and maintaining panels of qualified providers, maintaining the financial resources necessary to pay for members health care, for operating quality assurance programs, and for making decisions about coverage. In contrast, providers were responsible for rendering clinical health care to patients consistent with their state-licensed category and using their independent professional judgment.

He said health plans made decisions based on benefit design and nationally recognized practice guidelines and protocols created by practicing physicians to promote the use of safe, effective, and proven therapies. The provisions of the bill rendered the process useless and also supported nonscientific based medical practice.

He continued, saying A.B. 516 held health plans accountable for all medical decisions made by the treating physician, whether or not the health plan intervened in any way. That tied the health plan to the clinical decision-making function which was not their role. The result would be reduction in the size of networks, reevaluation of plans and micro-management of clinical practice.

He believed the bill would foster lawsuits for the sole purpose of influencing the range and scope of coverage provided by health plans. There was concern about the possible use of aggressive litigation tactics that affected and circumvented coverage limitations in plan documents. That would result in undermining the ability of health plans and employers to contractually define the range of scope of coverage to be provided and thus to control costs. Moreover, he felt the bill would add nothing to patient care quality, it would delay rather than foster efficient dispute or problem resolution. Ultimately the cost would be born by consumers and employers.

Finally, he said malpractice proposals did not create meaningful reform, rather they shifted the burden of malpractice costs from individual providers to health plans already held accountable. The measure did nothing to improve the efficacy or efficiency of the system of health care to patients nor did it result in providing greater access to affordable high quality care.

Ms. Salda said considerable dialogue currently in Congress included liability, external review, and other patient protections. A.B. 516 affected only a very small insured population and had no equity across the board. It was the kind of issue best left to the Congress to find suitable approaches to address those concerns for the entire population.

The last witness was Bob Ostrovsky, representing Nevadans for Affordable Health Care, who expressed concerns about what the cost impacts would be. The liability would clearly create a new area for the trial bar to aggressively pursue. He believed every malpractice case would drag in the insurer with the "deep pockets." He felt that would limit the ability of Nevada to attract new providers of service, in fact Nevada might become a very unattractive place to offer insurance. He urged the committee to look at what other states were doing. It was a very big step and should be taken very carefully.

In rebuttal, Assemblywoman Freeman asked to respond to the comments of a prior speaker that angered her. She pointed out that when she had heard a constituent speak about a woman who was dying of breast cancer who had been denied care, she was reminded that health insurance was all most people had left to which to look for help.

Matthew Sharp, on behalf of Nevada Trial Lawyers, said he spent his time representing people against their insurance companies and had seen the impact improper claims handling had upon a family. He found it offensive to hear Dr. Ebbins say that if we held MCOs accountable for the decisions they made, businesses were going to flee the state. He had heard the argument about increased costs in holding managed care responsible, and his rebuttal to that was what was the cost saving when preventive remedies were initiated so that a family never had to be denied access to medical care. The answer was that by putting preventive measures in place, by holding companies accountable, costs would be limited because there would not be a situation where people fell through the cracks. A.B. 516 addressed the situation of who would protect the family when the system broke down, when an MCO denied access. He cited a decision rendered by the Ninth Circuit Court of Appeals, Arderry vs. A. Aetna Health, which illustrated the problem. In that case a couple sought emergency care when the husband had a heart attack. The A. Aetna physician requested the claims adjuster authorize the person be flown to a metropolitan hospital. The claims adjuster refused and the person died. It was not the physician at fault, the MCO prevented the physician from doing his job. Who was there to protect the victim in that kind of negligence. A.B. 516 protected the consumer, it was cost-effective, and it was good for Nevada.

Chairwoman Buckley closed the hearing on A.B. 516 and opened the hearing on

A.B. 470.

Assemblyman David Goldwater, representing Assembly District 10, provided background on a bill from the 1997 session, A.B. 156, which he said was the "greatest bill ever drafted. Its author was truly inspirational to me and to many, its concepts were far-reaching, and its passage was necessary and very effective." The bill, authored by Assemblywoman Barbara Buckley, had been referred to as the "Patient's Bill of Rights." It offered protection to patients involved in health plans. Nevada had an employer-based system of delivery of health insurance. Worker's compensation also delivered medical care. He hypothesized a worker injured at 4:59 p.m. probably fell under the worker's compensation insurance, and none of the provisions in A.B. 156 that the legislature regarded as important would apply.

Regarding A.B. 470, Mr. Goldwater explained the "meat of the bill" began in section 3: HMOs and MCOs must have a medical director.

• Section 4 developed policies and procedures concerning utilization review and made sure subcontractors used it as well.

• Section 5 required a report to be completed with the Department of Health for the method of reviewing quality of care and contents of that report.

• Section 6 made a fiduciary relationship exist within the managed care program.

• Section 7 required authorization of treatment, if appropriate, and identified reasons and method of transmission for not authorizing coverage.

• Section 8 required written criteria for authorizing coverage and reviewed reasons for denial. That was particularly important, especially for worker's compensation. The section dealt only with the medical treatment, and an examination of most of the appeals indicated section 8 would be very helpful.

• Section 9 involved emergency treatments. Mr. Goldwater said there had been many horror stories concerning A.B. 156 about the problems in the emergency room regarding health insurance; however, for one hurt on the job the protections afforded to normal insurers, or health plans, were not afforded in worker's compensation. He added that hopefully they now would be.

• Section 10 dealt with quality assurance program.

• Section 11 dealt with the quality improvement committee.

• Sections 12 and 13 involved dispute resolution and an improvement in the current dispute resolution and supplanted it. There was a deletion of some very loose language regarding how disputes regarding medical care were handled. Those sections would help codify and bridge any gap between health and compensation and made it very clear.

• Section 14 was a managed care organization report for dispute resolution.

• Section 15, was a requirement to disclose methodology for dispute resolution.

• Section 16 attempted to not prohibit any communication between the doctor and the patient.

• Section 17, the most important section in the bill, prohibited the discrimination of doctors for advocating or assisting patients to receive coverage. In health plans, doctors were chosen at random. In worker's compensation, the self-insurer's were very focused. They controlled a great number of lives, and it was a very focused area of medical practice. The margins when doctors were practicing in worker's compensation were very thin. They depended upon volume. On the management side and on the labor side, doctors in worker's compensation were abused. Mr. Goldwater felt the volume that employers held out influenced diagnosis. Many doctors were labor friendly and many were management friendly. It was very important for doctors to have something in the statutes.

• Section 18 prohibited any kind of material inducement, bonus, or other financial incentive to deny, reduce, withhold, or limit care.

• Section 19 added more physician discrimination language.

• Section 20 required preapproval before medical care treatment and required compliance.

• Section 21 clarified provisions resolving complaints.

• Section 22 clarified the appeals process.

Mr. Goldwater stated if the bill was passed it would greatly reduce the litigation associated with worker's compensation. The majority of disputes involved the medical care not the compensation.

In summation, Mr. Goldwater stated the bill applied some consistency in the health system. On the medical side, it should not matter who one's insurer was or whether hurt on the job or elsewhere. The protections afforded in A.B. 156 should be afforded just as equally to the people in worker's compensation and A.B. 470 would in fact improve the current worker's compensation system.

Barbara Gruenwald, representing the Nevada Trial Lawyers Association, offered examples that applied to various sections of the bill. In section 7 it stated "the MCOs shall authorize coverage unless the determination made by a physician who possesses the education and training to evaluate, and so on." Presently in the managed care organizations nursing consultants were making those determinations. Ms. Gruenwald stated she recently had a claim denied by a nursing consultant that had never been reviewed by a doctor. Another example fell under section 9, necessary emergency services. She had a claimant currently appealing who was denied necessary medical emergency surgery. A third example fell under section 17, where Mr. Goldwater had made a point of commenting about doctors being influenced. Ms. Gruenwald recalled a deposition where the treating physician said it was covered, the physician was then advised by the insurance company-employer and in the deposition the treating physician totally changed his testimony.

On behalf of Nevada Trial Lawyers, Ms. Gruenwald advocated the passage of A.B. 470.

Danny Thompson, representing the Nevada State AFL-CIO, said that prior to 1993 workers injured on the job had the right to select their own doctor. When the changes were made in worker's compensation to correct the deficit that had been in place, that change from the right to choose one's own physician to managed care represented, in his opinion, the lion's share of the savings the system had realized to date. All of the plans used for worker's health benefits were done with managed care. His feeling was that if those protections put into place in 1997 for the health side of people who were injured and sought care from an MCO were good enough for the general public they should be good enough for injured workers as well.

Mr. Goldwater said the bill was well drafted, heavily negotiated, and bridged the gap. Most MCOs handled both health and worker's compensation and were probably already doing those things for their health patients. The only industry people the bill would affect were those who just did worker's compensation.

Paula Berkley, representing the State Board of Chiropractic Examiners, asked for a one-word change in section 7, on page 3, line 5. Presently it read "physician," and Ms. Berkley wanted to add "chiropractor" to that as they provided injured worker service, and just as a nurse probably did not know how to adequately judge the physician's side, neither did the physicians know the chiropractic and vice versa. The addition of the word "chiropractor" would also be required in section 1A to read, "is licensed to practice medicine or chiropractic in the State of Nevada pursuant to Chapter 360 and 364." Currently State Insurance System had a chiropractic advisor and for the same reason it worked there it worked in the bill as well. Ms. Berkley provided a letter from the Chiropractic Physicians' Board of Nevada, marked Exhibit R.

The next to speak was Bob Ostrovsky, representing the Nevada Resort Association, who had concerns about how the internal review process would mold itself with the hearings and appeals process that already existed. He felt if caution was not exercised in any internal review the process might be slowed down. Quick resolution of claims issues was an ongoing problem and layering with what was already in place could hinder rather than help the process. Over the past 20 years there had been discussions about how to fix the situation with hearing officers particularly, to make that a better place for a claimant or an employer paying to achieve resolution of a problem.

Chairwoman Buckley asked if there were any issues beyond the one Mr. Ostrovsky raised that caused concern. He responded he was surprised the emergency care provision was included, since most injuries happened on the job and the employer transported the injured worker. He wondered if the issue was that of someone who had a problem later at home, who perhaps had an open claim and needed further treatment, and the question was whether that was paid. He did not feel that was a frequent occurrence. He said he would have to speak with the MCOs to know how that was handled.

Mr. Goldwater said one of the more frequent situations at the appeal level involved therapy for the two parties. He asked if Mr. Ostrovsky agreed that pushed the therapy portion back into a reserve process, and then it could finally go to appeal a real issue rather than to appeal the small things. Mr. Goldwater felt that was the intent of the provision. Mr. Ostrovsky hoped that would be the case. He recalled that prior to the litigiousness of recent years, a hearing officer would hear both sides separately, then tell the parties what the law said and finally advise the parties to try to work out their differences. It was very informal. Now, everything came with a lawyer and the hearing officer had to become a judge. The Senate had a number of proposals from the Self-Insured Employers Association to attempt to fix the hearing process and the appeals process.

Jack Kim, representing Sierra Insurance Group, introduced Barbara Merritt, director of managed care for worker's compensation, Sierra Insurance Group. Mr. Kim said they had some concerns about the bill and Ms. Merritt would address those concerns.

Ms. Merritt, a registered nurse in the State of Nevada, had been doing worker's compensation managed care since 1993 and medical case management and vocational rehabilitation in worker's compensation for 21 years in Nevada and other states. Within the Sierra Group, the worker's compensation department was a solely owned subsidiary company and was not involved with the health side operation. They understood the intent of the bill was to offer protection to the injured worker, which they supported. However, A.B. 470 did not take into consideration the vast differences between a health maintenance organization and a worker's compensation managed care organization. In 1997, A.B. 156 put a system of provisions in place they believed were already addressed by statute and regulation in the worker's compensation industry. Those statutes and regulations took into consideration the many ways health and worker's compensation insurance differed. An example of some of the differences was that in health insurance there was a policy involved that defined coverage. Under worker's compensation, statute and regulation defined coverage. Health insurance covered all aspects of health care defined in its policy, and in worker's compensation in an MCO, the MCO was not the insurer, it did not incent its providers, and it did not pay for the medical services provided to injured workers. An MCO provided selective services to an insurer; for example, preferred provider networks, bill repricing to the Nevada fee schedule, utilization review services, dispute resolution, and medical case management.

Ms. Merritt said one of the problems they had with the bill was the insurer who hired their service might only buy a part of the service; bill repricing, or the provider network. It was not necessarily all encompassing. That limited their ability to do the reporting required by A.B. 470. She agreed the intent of the bill was laudable; however, they felt the worker's compensation law offered protection and legal recourse for the injured employees, employers, and providers.

Chairwoman Buckley felt it might be helpful if Ms. Merritt's group detailed the provisions of A.B. 470 and where they felt those were addressed in existing statute.

Jack Kim agreed to do that and submit it to the committee.

There were no further questions therefore Ms. Buckley closed the public hearing on A.B. 470 and opened the hearing on A.B. 676.

First to speak was Scott Walshaw, representing the Division of Financial Institutions. Prior to the 1997 session, his office met with representatives from the mortgage banking industry to try to restructure NRS 645B to create a new chapter to transfer companies that were primarily exempt under current law into a chapter whereby they would become subject to licensing by the division. Sections 1 through 36 of A.B. 676 encompassed that goal.

Chairwoman Buckley said she understood from Mr. Goldwater, who had chaired the interim committee, that much of what was contained in the bill including the separation into two chapters was contained in his bills. She asked what was left in A.B. 676 that was not addressed in those two bills already being processed by the committee. Mr. Walshaw responded that after reviewing the amendments to A.B. 64, there had been an intent to excerpt the provisions in sections 1 through 36 and place them into A.B. 64. In discussing that with the legislative analyst at the end of the work session, he noted there was still a provision for exempting the very companies they had sought to make subject to the licensing requirement. The explanation had been that apparently because that was not within the scope of the testimony during the work session, it was not in the bill draft and would have to be considered through a separate amendment. He said nothing at the time, he explained, because he felt it would further hold up the processing of any of the bills. Their goal was to try to get a bill draft out and something done to remedy what they perceived to be problems.

Ms. Buckley said her intent would be to process the other bill and then have Mr. Walshaw tell the committee what he would like the committee to consider that was not already addressed there. From a policy point of view, if the committee chose to do anything, they would amend Mr. Walshaw's bill to only include those provisions. She asked him to then highlight the provisions not contained in the other bill.

Mr. Walshaw said the obvious areas to him were sections 1 through 36 that needed to be addressed. Without having the other bill available, however, he was unprepared to make comparisons but would be glad to do that in the future. He then moved on to A.B. 676 and said the major differences between what his division was proposing and what was in A.B. 64 was the manner in which some of those areas were addressed. There were distinct similarities between some of the amendments that were processed already to A.B. 64 and would defer to Doug Walter to make those comparisons. They intended to create a separate act, and the remaining act that was now titled 645B would be for licensed mortgage brokers. There was a major difference, and that was to remove the ability of people licensed pursuant to that mortgage act to handle other people's money. A requirement amended existing language in NRS 645B.175, which was the part dealing with trust accounts that said anyone receiving money from the public must place it with an independent third party such as an escrow company licensed pursuant to NRS 645A, or a title insurer that handled escrows under NRS 692A.

Ms. Buckley asked for a further explanation. Mr. Walshaw referred to the actual language of the chapter. The language presently in the statute provided for the ability of a licensed mortgage company to receive money from the public for two purposes: (1) to fund loans arranged by the mortgage company, and (2) to service subsequent payments made by the borrower through the mortgage company to the lenders. Mr. Walshaw proposed that was no longer permissible and those licensed pursuant to the chapter, if they were engaged in that type of activity, must deposit the money with one of the two entities mentioned in the revised language of the section.

Ms. Buckley asked how it would benefit the public. Mr. Walshaw responded they had had a similar desire about 12 years ago when the chapter went through a major overhaul. There was a situation similar to that which now existed, in that his office proposed its own version of an overhaul to the mortgage company act and a similar subcommittee to Mr. Goldwater's met in the interim and adopted its version pertaining to the issue. Mr. Walshaw felt then as now, it was an inherent conflict of interest for a mortgage company to be in the position of handling the money. It applied only to the mortgage brokers and mortgage agents as licensed under 645B.

Mr. Walshaw went on to explain at the time a compromise had been struck where there was a series of checks and balances put into the act which more or less worked until the problem arose with the Harle Harmon Mortgage Company.

Mr. Goldwater said Mr. Walshaw represented himself very well. The other side of the issue was if one wanted to invest, for example, $10,000 in deal XYZ, it became cumbersome for a mortgage company to do the deal if they had to go through the escrow process, particularly when doing a syndicated loan with 25 or 50 people involved. He added the title companies, who would be thought to be in favor of it because it would generate increased business, felt it was very cumbersome. The mischievous part of those dealings occurred with trust money. If their ability to handle the trust money was eliminated much of the potential for fraud and abuse of the consumer would be eliminated as well. Much of A.B. 64 governed trust accounts. The bill would eliminate them, and Mr. Goldwater predicted there would be vehement industry opposition to elimination of the trust accounts.

Mr. Walshaw said in 1985, the last time the issue was considered, there was a much higher portion of the licensed population engaged in handling other people's money. Currently there were 371 mortgage companies and no more than 25 actually handling trust accounts of one type or another. Some of the 371 companies were not handling trust accounts but were engaged in similar activity to those that were and had chosen not to handle other people's money even though they were doing the same type of lending. They put together investors to make a loan but did not actually handle the money, they put it into an escrow. So business could be transacted that way for those who desired to do it. Mr. Walshaw strongly emphasized that based on observations over the years every time there was a problem in the area it was always the result of manipulation of the trust accounts. It was an area where conflicts of interest could exist and where the parties could be kept uninformed or misinformed by the person actually handling the money.

Chairwoman Buckley said that gave the committee two clear policy choices and it was simply a matter of deciding which was best. But she first wanted to know what other states had done in that regard, or had they arrived at another option. Mr. Walshaw was not aware of other options, but said he had not purposefully made an effort to find out. He was aware other states did not license mortgage companies in the same manner as Nevada. Arizona had a similar structure. California had a vastly different way of issuing licenses and creating the opportunity for people to engage in mortgage activity.

Mr. Goldwater concurred there was a clear policy choice. The choice on A.B. 64 did not neglect the fact there needed to be increased regulation and increased examination of trust accounts. Those sections were enlarged and the policy choice was to keep the trust accounts but not without some severe scrutiny, licensing, regulation, and net worth requirements.

Ms. Buckley asked Mr. Walshaw to come back to the committee with his request for consideration of particular sections after making the comparison mentioned earlier.

Mr. Walshaw pointed out if the committee made the policy choice of eliminating the trust accounts that would indirectly impact many things Mr. Goldwater's committee chose to implement as part of A.B. 64. There were certain aspects designed as "firewalls" that had been based on the idea that companies would continue to be in a position to handle other people's money. If that was removed, then the need to do some of the things in A.B. 64 theoretically was removed also. He felt that needed to be examined in the context of making policy choices along that line. Additionally, A.B. 64 proposed to implement in two parts net worth requirements for mortgage companies. Currently the statute called for a solvency requirement on an ongoing basis. Also, the provisions touched on two different areas: one would apply to those who handled trust accounts and was a more onerous requirement, and those that did not were held to a lower standard. The question of whether there still needed to be net worth requirements if the ability to handle other people's money was removed, was a policy decision that needed to be addressed.

Assemblyman Nolan said he had received countless telephone calls from people concerned that if the net worth requirement was put into place, it would put out of business a great many people who had been in business many years. He hoped Mr. Walshaw would be able to provide information in that regard as well.

Doug Walter, Attorney General's Office, offered some background based on his experience with the statute proposed to be amended in section 85 of the trust account restrictions. He had been asked to do an opinion in 1989 which dealt with the issue of what mortgage brokers could do with money in the process of making a loan, given those restrictions. One focus of the opinion had been the disposition of loan proceeds, for example, in a construction loan. The statute in subsection 2 stated if the loan was consummated the money had to be given to the borrower or his designee. The issue was, could the broker act as the designee. Mr. Walter's opinion had been no; the intent of those restrictions had been to separate those functions, prohibit the broker from wearing dual hats, acting as a construction control agent in the disposition of loan proceeds.

Since that time, Mr. Walter had seen where a mortgage broker tried to conform to the letter of his opinion but achieved the same result by creating a construction control company, a legally different entity than the mortgage broker, but falling within the spirit of the opinion. When the division criticized that practice, situations were created where a spouse or an attorney would open a construction control company or hold the funds. While those existing provisions were intended to address what they felt was the inherent conflict in controlling the funds after the loan was consummated, the temptation to control the funds was very strong. He believed his 1989 opinion spelled out clear guidelines; however, there had been an effort to try to find ways around the restrictions that went beyond the statute enacted in 1985.

There were no further questions and Ms. Buckley asked Mr. Walshaw to have the requested information to the committee within a few days.

The next witness was Russell Best, representing Home Financial Mortgage, and others in the industry. They had been opposed to provisions in A.B 45 and to the proposed legislation of A.B. 676, because it was not uniform for everyone. The banks were exempted, Mr. Best said he was told, "because they had more money." Nevertheless, countless banks had gone broke since 1982. Further, the industry was controlled not the only by the statutes but by the Federal Government statutes and Housing and Urban Development (HUD). He provided documentation of his position, marked Exhibit S, including a report on how all 50 states handled the licensing issue. He reiterated the guidelines should be the same for everyone in the industry. Mr. Best was also upset because he had been present when the bills had been scheduled for hearing and all had been rescheduled.

Ms. Buckley acknowledged his position about uniformity and explained the other companion bills had been set for hearing several weeks prior. She invited Mr. Best to submit anything else he wished regarding the bills and the staff would see every legislator received a copy prior to voting on the floor. She also explained the only issue in the bill under consideration would be the ability to use funds held in trust, and invited his comments on that issue.

Mr. Best did comment on the trust issue that it had to be uniform for bankers, mortgage brokers, and so on. If one group had to be licensed but the other group did not, individuals would join the firm that did not require a license.

Ms. Buckley concurred it was a difficult situation. For years each industry created their own chapter, and if they were licensed under that chapter then they were exempt from the other chapters. Trying to change what had been created over so many sessions was not a simple matter. However, she invited Mr. Best to petition the committee for any changes he felt in order.

Assemblyman Hettrick proposed an option. Smaller companies or individuals who may not meet the net worth requirements, and so on, might choose to use a trust account and put the funds into escrow.

Mr. Best said he had no problem with that. He added he did not handle the money at all; instead he had clients write their checks directly to the payee, such as credit report company, appraiser, and so on. When he put together a syndication of investors he always used an escrow account for the funds. Ms. Buckley then asked if he ever "self-handled" the money. He said he did not; however, he was speaking up for those who did because he felt they were being stepped on.

Mr. Goldwater said those were all issues heard in A.B. 64 and it was a policy decision. If one was going to handle other people's money, one should have a vested interest in the business. It was bifurcated; those who handled other people's money and those who did not. The net worth requirement was far less onerous for those who did not.

Ms. Buckley asked if he had considered the possibility of a dual approach. Either the individual had the net worth and all of the protections built into the bill, or alternatively, they used an escrow or title company. Mr. Goldwater responded if an individual did not handle a trust account that was the way to do it, through an escrow or title company. That was the current practice. Ms. Buckley asked if that was in his bill. Mr. Goldwater said it was.

Mr. Best interjected that the net worth requirement was $100,000 if they did not handle trust funds and $250,000 if they did. He added the amounts should be considerably less.

Mr. Hettrick directed his comments to Mr. Walshaw and said he had no problem with the way A.B. 64 handled the issue, or the way A.B. 676 did, but wanted to see if people could be accommodated who were already licensed but were unable to meet the net worth requirement. That was the "either/or" scenario he was proposing; either have the net worth requirement or use an escrow account.

Scott Walshaw said A.B. 64 attempted to address that in a way that segregated

people who handled trust accounts and put them in a classification with a higher net worth requirement of $250,000. Those that did not faced a phase in of a net worth requirement over time of $100,000.

Chairwoman Buckley suggested that when the reprints on Mr. Goldwater's bill were received, Mr. Hughey could outline exactly how that issue was handled.

At that time, additional options could be considered.

Assemblyman Nolan asked to have that information combined with the information to be provided by Mr. Walshaw about what the net worth requirements would do to existing businesses.

Mr. Goldwater added a final note to clarify his position regarding trust accounts. The genesis of the trust accounts came from the group in the legal community that faced problems with mortgage companies. Often it was investors who felt they were wronged, defrauded, and so on, and sometimes those reports never went as far as Mr. Walshaw's office. What had been discovered was that often companies that operated "out of the back of their car" dealt with huge amounts of money. The checks were never made out to them, but somehow the mortgage company made a false representation, the mortgage company was negligent, or did not perform due diligence and was guilty of fiduciary impropriety. No one else was at fault except the mortgage company, but they did not necessarily handle the money. The investor was wronged and the consumer was hurt. But when recovery was attempted, nothing was there; it was a shell of a corporation. There was no incentive for the mortgage company not to be good. That was from where the net worth issue came.

With no further business before the committee, Chairwoman Buckley adjourned the meeting at 8:15 p.m.

RESPECTFULLY SUBMITTED:

Darlene Rubin,

Transcribing Secretary

APPROVED BY:

Assemblywoman Barbara Buckley, Chairman