The Committee on Commerce and Labor was called to order at 3:45 p.m., on Monday, April 26, 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. Richard Perkins, Vice Chairman

Mr. Morse Arberry, Jr.

Mr. Bob Beers

Ms. Merle Berman

Mr. Joe Dini, Jr.

Mrs. Jan Evans

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. David Humke

Mr. Dennis Nolan

Mr. David Parks

Mrs. Gene Segerblom

GUEST LEGISLATORS PRESENT:

Senator Mark James, Senate District 8

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Following roll call, Chairman Buckley opened the hearing on S.B. 16.

Senator Mark James, Senate District 8, presented S.B. 16 and explained the issue was brought to his attention by an article written in the ABA Journal about the use and misuse of genetic information. He was aware of legislation passed during the 69^th Session of the Nevada Legislature preventing healthcare companies and others from such use, but the legislation did not apply to employers. Exhibit C entitled "Body Science" discussed the need for legislation to ensure people had control over what genetic information was generated about them and how the information might be used in the employment process. The bill came out of the senate unanimously without any amendments.

Mr. James noted a situation where a social worker with an exemplary work record was fired because she tested positive for Huntington’s disease. As more knowledge of genetics was obtained and the greater the ability to determine the sort of traits carried with specific genes, the greater the danger the information could be to an individuals rights. There were tests being developed for common disorders such as heart disease and cancer. Genetic testing was also being proposed for numerous behavioral disorders, such as alcoholism, manic depression, and even risk taking behavior.

The question posed was did individuals have a privacy right in their genetic information, and did other parties have the right to demand the information be revealed. Mr. James thought people clearly had a privacy right to their genetic information, and the information should not be misused in the employment process. Exhibit C had numerous examples demonstrating misuse and what the legislation would prevent.

Chairman Buckley reiterated language in section 2 of the bill as it related to the description of an employer.

Janine Hansen, State President, Nevada Eagle Forum, thanked Senator James for alerting the forum to the issues. Ms. Hansen referenced Exhibit C, which said, "The potential exists for genetics research to produce findings that could undermine our conceptions of equality of opportunity, and individual and social responsibility. . . Throughout the United States, people seem to have drifted into a mindset that assumes that if genetic information exists, it should be acted on and taken into consideration in a variety of social realms. . . But less attention is focused on how we will use knowledge gained through genetic testing. . . The vexing question of how the fruits of genetic research should be used by society is on the table. Scientists are charting the map of the human genome, but the legal system will play a crucial role in determining where that map leads."

Ms. Hansen thought the bill was critical because of the potential for abuse. The privacy of genetic information should be protected, and individuals should not be forced to disclose such information without good cause. She recommended the legislation for passage.

Guy A. Perkins, Jr., Supervisor, Department of Business and Industry, Division of Insurance, commented on section 1, subsection 2, of S.B. 16, which considered genetic testing for workers’ compensation claims. He noted in the 1997 Session of the Nevada Legislature, a bill was passed prohibiting a health insurer from asking a potential applicant if they had undergone genetic testing. He pointed out such was a prohibition in all of the health insurance chapters of the Nevada Revised Statutes (NRS), and one of the provisions was
NRS 689B.069.

Requiring an employee take a genetic test after a worker’s compensation claim was incurred was like the practice of post-claims underwriting, and post-claims underwriting was a deceptive practice under Title 57. A health insurer, or any other insurer, was required to ask questions on applications deemed necessary to underwrite an application for coverage. To wait until an insured incurred a claim and then underwrite the person based on information not collected at the time of the application or prior to the claim was an unfair practice. If the claim existed and was legitimate, under Title 57, the claim should be processed with the information requested prior to the event and upon which the coverage was issued. He thought there was an analogy between such a situation and one where a claimant applied for work, questions were asked, and suddenly after a worker’s compensation claim was filed, questions were asked requiring a genetic test.

Mr. Perkins pointed out genetic tests were all encompassing with the reports being on every possible physical condition, not just what might be related to a particular workers’ compensation claim. The claimant might not want to know the information and certainly may not want others to know the information, in particular his current employer. In such a case, the tests might be an invasion of privacy. He supposed there were circumstances where the invasion might qualify as a violation of civil rights.

Confidentiality was very important in issues of genetic testing. Some of the potential unanticipated affects might be blockage of a claimants continued employment or reemployment. Having such unwanted information, in a hiring situation where there were other people who were applying for the same job but may not have the same sort of information about themselves, might put the individual who went through the genetic test at a disadvantage. The person might have to divulge information about which they might not have ordinarily known.

The information about potential medical conditions or a predisposition to diseases that a person might not in actuality incur in their lifetime might also affect the underwriting of insurance coverage if disclosed and could affect the claimant for the rest of their life. Although health insurers in Nevada were prohibited from using the results of genetic tests, the same might not be true in other states or foreign countries where a person may choose to work. In addition, it could be possible for the results of genetic testing to come to the attention of a health insurer through other sources other than a direct review of the results of the tests.

Chairman Buckley summarized Mr. Perkins’ concerns did not deal with paragraph 1 but paragraph 2. She further noted his concern with employers who might use the legislation to make it appear as though they could use genetic testing when such would be a deceptive trade practice to do so after a workers’ compensation claim was filed. His concern also considered privacy following the workers’ compensation issue.

Senator James noted bill-drafting issues where the bill drafter said certain language was necessary in order to resolve a conflict with existing law. If what Mr. Perkins said was true, he would be in favor or removing the language. The bill was designed to prevent what Mr. Perkins said, and he thought that was what had occurred. The bill was supposed to prevent an employer from misusing the information.

Chairman Buckley suggested the Legal Division and the committee research analyst look at the issue before the next work session and provide options as to whether the committee could delete the section, or if there was a conflict with another area of law, of which they were unaware.

Senator James said the language submitted to the bill drafter was section 1, subsection 1 and additional language was added to make it fit into the law.

There being no further testimony or additional questions, Chairman Buckley closed the hearing on S.B. 16, and she opened the hearing on S.B. 54.

Bob Ostrovsky, representing the Nevada Resort Association, explained he participated in numerous meetings of the interim committee, and the issue pertaining to the bill was raised at one of the three-way task force meetings as well as one of the interim committee meetings. A number of years ago, the Department of Taxation was going to undertake a lengthy audit of the tax records relative to the collection of the business tax. In order to act in such a manner, the Department of Taxation needed information from various sources to check returns. One source was the Employment Security Department, and another was the Department of Industrial Relations (DIR), which collected information about employers.

Mr. Ostrovsky referenced section 1, subsection 6, of S.B. 54 and noted the current law said, the administrator, which was the administrator of industrial relations, shall provide to the Department of Taxation upon their request names and addresses of employers. He said such language was not a problem. He then noted language that was to be deleted, which said, "the number of employees employed by each employer and the total wages paid by each employer" and explained such information was not collected by DIR nor was the information collected by what was the old State Industrial Insurance System. If such information was requested, it would have required the division to collect the information, and the division was going to go forward with a regulation to collect the information. Such collection would require considerable upgrading of their computer system and a lot of duplicative reporting that the employer now reported to the Employment Security Department.

What was requested in the bill was to clarify that the Department of Taxation would have access to lists of names and addresses of employers that was kept at DIR, and they would also have access in section 1, subsection 6(b), to "other information concerning employers collected and maintained by the administrator or the division." Any records that were kept on employers and employees were available to the Department of Taxation to check tax returns to ensure employers were properly reporting. The language would clarify to what the division was entitled and would not require the DIR to collect any other information than it collected in its normal course of business.

Dino Dicianno, Deputy Director, Department of Taxation, explained the department did not have a position concerning S.B. 54. What Mr. Ostrovsky testified was the combined audit tax program that no longer existed. The Department of Taxation no longer needed wages; however, they did have sources for information concerning audits on business tax returns when it came to the number of employers or number of employees. The department did not have a problem with such or the amendments made to the bill.

Chairman Buckley asked if they needed the bill.

Mr. Dicianno explained S.B. 54 was not the department’s bill.

Chairman Buckley asked for Mr. Hettrick’s input as to whether the bill was necessary.

Mr. Hettrick thought the bill was necessary as it allowed for a means of cross verification indicating an employer was in fact paying premiums on all of their employees. By law, an employer must provide insurance, and it was necessary to ensure they did.

Chairman Buckley commented it would be more so in cases of audits or in-depth investigations as opposed to the information being collected with the computer program.

There being no additional questions or further testimony, Chairman Buckley closed the hearing on S.B. 54 and opened the hearing on S.B. 64.

Don Jayne, representing CDS of Nevada, Inc., addressed section 7 of NRS 616.214 and noted the bill attempted to provide consistency between sections 7 and 8 and asked that the attorneys involved in a subrogation suit notify the insurer at the time the suit was initiated not just at the point in time in section 8 when the proceeds in a judgment were obtained. CDS viewed the bill as cleanup improving communication in affording earlier notification to the insurer of a lawsuit.

Lenard Ormsby, General Counsel, Employers Insurance Company of Nevada (EICN), explained there were two subrogation bills that came out of the interim committee. One considered the proceeds, which was a cleanup bill. As an insurer, one of the problems EICN and private carriers had was a plaintiff’s attorney might be retained and then file or initiate litigation against the tort fees. They may have no knowledge and the only thing they could do was rely upon the statutory lien. If the case was settled, then the company had to try to get their money after settlement, which put the burden on the attorney not only to disperse the money after settlement, but upon the initiation of a lawsuit. The change in subsection 7 was very clean and a relatively minor change but important from the standpoint of insurance companies.

Mr. Goldwater said the bulk of the change was in subsection 7 of section 1.

Mr. Ormsby affirmed Mr. Goldwater’s statement and noted the language was mirrored from subsection 8, which said, "the injured employee or his dependents, or the attorney or representative" into the beginning sentence of subsection 7.

Mr. Goldwater asked what were the consequences if individuals failed to act.

Mr. Ormsby said there was discussion in the Senate to place penalties into the bill, but the penalties did not survive. It was a statutory obligation. Potentially, the action could be malpractice if someone wanted to file an action. He noted subsection 8 said an attorney had an obligation, subsection 7 did not say the same, and it was very difficult to convince someone the obligation continued in subsection 7. The language said both before the settlement, when the lawsuit was initiated, and then after the settlement, the attorney and his or her client both had an obligation to notify the insurer of the litigation.

Mr. Hettrick noted Exhibit D, which were two volumes entitled "Legislative Committee on Workers’ Compensation, January 1999." The volumes covered the hearings that took place during the interim and might be helpful to committee members since the bills were complicated. He urged the committee to look at the volumes.

There being no further testimony or additional questions, Chairman Buckley closed the hearing on S.B. 64 and opened the hearing on S.B. 417.

Alice A. Molasky-Arman, Commissioner, Division of Insurance, explained S.B. 417 established an appeals board for industrial insurance to hear certain grievances of employers. On July 1, 1999, the workers’ compensation system would covert to a competitive environment. Employers would be able to purchase their industrial insurance from private carriers as well as from EICN. In addition, on July 1, 1999, the regulatory authority of the state system ceased. Rather than appealing classifications of rates or any rating rules or decision to the system, employers would seek assistance from the insurance commissioner. Forty four to fifty thousand employers would receive notices of changes in their classifications in the month of May. Those changes resulted from the classification system filed with the insurance commissioner by the National Council on Compensation Insurance (NCCI) and adopted in December of 1997. Other appeals were going to be generated on experience modifications, which also were going to be noticed to employers during May.

The division had been told appeals could number into the thousands, according to Mr. Ormsby of EICN. They anticipated hundreds, not thousands. The division’s current staffing would not enable them provide timely due process to employers who would seek resolution of applied rates, classification, or experience modification.

When Ms. Molasky-Arman looked at the NCCI’s plan for appeals, she realized, under existing law, the commissioner did not have authority to delegate the responsibility for hearing appeals to another person or entity. S.B. 417 would enable the commissioner to do so and provide the division a "life raft" while they attempted to convert to three-way workers’ compensation. She did not know how the agency would handle the number of appeals anticipated without the bill.

Ms. Molasky-Arman also believed the bill preserved due process rights for employers to appeal to the commissioner decisions made by the appeals board. She thought the number of appeals to the commissioner would drastically be decreased, and the appeals board would resolve most of the concerns.

Tim Hughes, Appeals Manager, National Council on Compensation Insurance, explained S.B. 417. He noted sections 5 through 17 contained the "heart" of the bill.

Section 5 created a seven-member appeals board appointed by the governor in consultation with the insurance commissioner. The seven members selected for the board represented a wide range of interests in the state. The members consisted of an individual from the Department of Insurance, an insurance agent, two representatives from the general public or private employers, one representative from EICN, one representative from a private insurance company, and one representative from the advisory organization.

Section 6 provided instruction on the appointment of the board chair and when board meetings should be conducted.

Section 7 described the duties of the board chair as far as scheduling the time and place of meetings, establishing agendas, and conducting the meeting.

Section 8 established what constituted a quorum, which were four members in attendance.

Section 9 granted board members entitlement to receive compensation of not more than $80 per day while engaged in the business of the board. It also provided a per diem for travel expenses.

Section 10 identified who could present an appeal before the appeals board and what type of appeals the board could hear. The board was going to hear appeals related to the application of the experience rating plan, classification assignments, or other rating plans affecting the employer’s premium.

Subsection 2 of section 10 identified who may appeal a decision made by the board. As the commissioner stated, the department of insurance, through the commissioner, retained authority or jurisdiction over appeals board decision.

Section 11 identified issues the board would not hear such as classification rules applied to all insurers to all similarly classified businesses. In the bill, all issues the board would hear and those issues the board would not hear were identified.

Section 12 provided timeframes concerning notice of board meetings to employers who requested a hearing and when board decisions would be communicated after the hearing.

Section 13 provided hearings would be open to the public.

Section 14 addressed what constituted a conflict of interest for board members and how such conflicts would be handled.

Section 15 identified how and when board decisions were communicated and provided the board advise any affected party of their right to appeal board decisions.

Section 16 provided how appeals of board decisions would be handled pursuant to NRS 679. Such appeals would fall under the jurisdiction of the insurance commissioner.

Section 17 authorized the commissioner to adopt regulations to carryout the operations of the appeals board.

Ms. Giunchigliani referenced section 5, subsection 1(c)(1)(I), and asked what the rationale was for having a board member be a member of the chamber of commerce.

Mr. Hughes said the language was common. There were currently 25 appeals boards in other states operating similarly to such a filing.

Ms. Giunchigliani asked what restrictions were in place to ensure a board member did not wear "two hats" at the same time.

Mr. Hughes noted it was identified there would be one member from a private insurance carrier and one from EICN. The board member had to meet the qualifications. A member could not be a member of the chamber of commerce and a carrier representative. The governor, in consultation with the commissioner, would ensure the board represented the broad categories.

Ms. Giunchigliani referenced page 3, line 26, which said "a representative of a private carrier." She noted there should be a qualifier noting the individual would not be the one participating in insurance at such a point in time.

Ms. Molasky-Arman said section 14 addressed conflicts of interest insofar as members of the board were concerned. The section referred to a personal interest or a conflict of interest, and she believed the section would preserve the independence and neutrality required of the board.

Ms. Giunchigliani hoped such would be the case, but when nominations were requested, it would help if individuals were prescreened so the governor or commissioner had a clean list.

Scott Craigie, representing Liberty Mutual and the Alliance of American Insurers, referenced page 3, lines 18 through 22, which considered limitations on the representatives from the general public. He thought language could be added to fully address the concern of Ms. Giunchigliani.

Ms. Giunchigliani said she would reread the section and thought the language might be tight enough. She asked if the bill was solely for those in the business sector and would not allow employers a second opportunity at an appeal that had to do with a claim.

Ms. Molasky-Arman explained claims were excluded, and the language particularly referred to rates applied to employers, their classification, or experience modifications. Ms. Molasky-Arman referenced section 11, which referred to not hearing claims and referred to classification rules applied by all insurers to similarly classified businesses. Such still remained under the jurisdiction of the commissioner, not the appeals board.

Mr. Goldwater was concerned with S.B. 417. He thought items, such as experience modification factors and risk class, placed up for appeal were empirically based, and it concerned him that they were not. He wondered why the state would give employers a forum on something that was empirically determined.

Ms. Molasky-Arman agreed it was to be determined empirically. She noted the NCCI was the advisory organization, and classification was established according to data, analysis of data, and experience modifications. Employers currently could appeal, but appeals were addressed to the system. There could be errors made, and she thought a process would be established where an employer should be heard because their classification was incorrect.

Mr. Goldwater asked if employers needed the process. He thought, considering the makeup of the board, it would be sympathetic to whatever appeal they had and asked if the process was necessary since it was empirically determined. He wondered if the process would be a waste of state resources.

Mr. Hughes thought the process was necessary, especially during the transitional period where the state was converting from one system to another. As the appeals board functioned in 25 other states, the board might only hear 10 or 15 appeals in the course of a given year. The appeals were usually classification appeals and were judgment issues. There were approximately 450 classification codes and countless thousands of businesses needed to be grouped into one of the codes. There were going to be employers who clearly did not fit into one code or another. The carrier would take one position and the employer would take another position. There needed to be an informal process without litigation and related expenses where an employer could present their case, the carrier could present their case, and the board could make a ruling based on their best judgment.

Mr. Goldwater asked if the decision of the board was final and binding.

Mr. Hughes noted the decision of the board could be appealed back to the commissioner.

Mr. Goldwater noted another step was being created.

Mr. Hughes said there was a process providing a first level of review for the Department of Insurance and if Mr. Ormsby’s numbers were correct, there would be a great burden placed on the department if there were hundreds or thousands of employers who thought their assignments were incorrect.

Chairman Buckley asked how many appeals of the type under discussion were occurring under the current system.

Ms. Molasky-Arman explained she had a letter from Mr. Ormsby with an estimate based on changes from the State Industrial Insurance System classification, going from an experience modification system to that which was approved for three-way. Ms. Molasky-Arman introduced Clifford N. King, Supervisor, Property and Casualty Section, Division of Insurance, and noted he could provide an example of where errors might occur in assigning a certain classification to an employer.

Mr. King said the state was moving from a system with roughly
900 classifications to a new system that had about half that number. Whenever such occurred, there would be employers who would have some payroll divided into two or three classifications and other employers who previously had two or three classifications could go into a single classification. Where an employer ran into problems was when they had one employee who worked at multiple jobs. He asked how would such an individual would be classified.

The bill would provide a forum for the employer to present their case as to why they should be classified in a particular manner. Such affected not only the employer’s regular premium but also the experience modification. The experience modification was calculated based upon the classification assignments for the employer.

Mr. Goldwater understood what might occur, but wondered if it was necessary to have an entire board with members and premium dollars coming from the pockets of small businesses to determine the classification assignments, or could the determination be made by a clerk at the Department of Insurance. He asked if it was necessary to go through the entire process.

Mr. King thought the board was necessary.

Ms. Molasky-Arman thought the process presented in the bill would be less costly than having the Department of Insurance review the appeals, concerns, and grievances of the employers. She thought the process would take an enormous amount of staff, and the bill would eliminate much of the need.

Mr. Goldwater said the bill did not affect self-insurance or group self-insurance, and he noted three-way was realized in order to remove the government, and the bill seemed to again include the government.

Mr. King said the division was going through a transition. Ultimately the number of appeals would go down, but there was going to be an initial shock. The board would provide a forum for employers. An employer would not want to hear from clerical staff if they suddenly had a change in their premium base affecting their experience modification.

Mr. Goldwater asked if the carriers had an internal appeals process.

Mr. King assured Mr. Goldwater the carriers did have an internal appeals process, but the division was attempting to enter into it in a manner in which there was some administered pricing disciplines. The bill would probably not be necessary if they were going straight into an open rating and allowing carriers to do as they wished.

Chairman Buckley asked if the concern was during the transition period, if a sunset clause was considered.

Ms. Molasky-Arman said the division did not consider a sunset clause because some of the elements that went into rating would constantly be changing. One such change would be experience modifications of employers, and she believed setting up the mechanism was important for an employer who was mandated to purchase workers’ compensation. She said the employer was the policyholder who was afforded all of the safeguards of all consumers of insurance. She thought it was important there be a structure securing for employers what she believed was their right to be heard when they purchased insurance.

Mr. Ormsby explained he responded to a request by the commissioner trying to estimate the number of appeals the proposed board could expect as the three-way environment came about. His estimation was in the thousands. Mr. Ormsby noted about 3 years ago EICN changed their experience modification formula, which resulted in hundreds of appeals. Currently there were between 8,000 to 9,000 employers who were experienced rated, which meant they received a report card for their particular shop. Under the NCCI program going into affect on July 1, 1999, there was an estimation that there would be between 18,000 and 20,000 employers who would be experience rated. There were going to be a number of Nevada employers who never received an experience rating before. The rating could be 1.11, which meant the employer paid .11 more than the standard rate, and he thought many of the employers would appeal. EICN was taking their classification manual and merging it into the NCCI manual. Such would also cause questions and appeals. In addition, NCCI proposed, and the commissioner adopted a transition plan, which put a band around the new rates so employers would not have too much of a shock either upward or too much of a benefit downward when the change occurred from the EICN premium program to the way NCCI set rates. Historically, since EICN was a monopoly, they were a "one stop complaint shop." If an employer did not like their rate, classification, or employer modification, an appeal was filed with them. They had hundreds of employers and half a dozen representatives of employers. When a change was made, the company would get a blanket appeal based upon every employer they represented.

As far as the number of hearings, Mr. Ormsby did not think they would see thousands of hearings because many of the issues would be consolidated. There should be some vehicle available to employers, and much of the concern was a lack of understanding as to the new system. They were going from payment in arrears to payment in advance, which would raise ire. The board also provided a neutral party for employers. One of the advantages of the competitive world was an employer could appeal to the board or change carriers.

Mr. Goldwater noted Mr. Ormsby’s comment of the free market and reiterated if an employer did not like their employer modification, they could go to another carrier. The bill ran contrary to everything for which three-way insurance stood. Under the old system, an employer needed a board because they did not have a choice. He asked why it was necessary to have an appeals board when an employer, who was unhappy with one company, could go someplace else.

Mr. Ormsby explained one of the things he liked about the concept of the NCCI model board was the employer modification an employer received was not developed by the company. The formula was developed by NCCI. One vehicle a business had was if they did not like the way they were treated by a carrier; they could go someplace else. He explained some of the information should be the same no matter to what carrier an employer went, such as the transition rate.

Ray Bacon, representing the Nevada Manufacturers Association, saw no problem with a sunset clause noting there was bound to be some confusion when the transition occurred. Mr. Bacon explained there was a potential for a 50 percent change in the manufacturing sector as the transition occurred from the SIIS codes to NCCI codes.

Mr. Craigie said S.B. 417 was on the governor’s list of bills that might be vetoed. He noted section 3 and said there were four areas of expenses listed. One was for a full-time employee at the Legislative Counsel Bureau who would work on the issues. He noted such was already in current law and was added for consistency. Subsections (d) and (f) were already expense items that were in NRS 232.680. There was no additional cost in those areas, but there was an additional cost for subsection (g), which were salary and per diem expenses for board members. Most of the boards were much smaller; there were usually three members on a board. He explained the appeals board for industrial insurance was to have a group of individuals from the north and a group from the south of the state with one person traveling. There would be a majority of four individuals present for the hearings so as to not create two boards that could develop two different philosophies.

Mr. Craigie referenced section 17 and explained money was raised for the extra piece and was in the existing DIR assessment. He noted discussing the issue with individuals in the Governor’s Office and asked if the situation met with the standards of receiving the governor’s signature. He said, "obviously I’m sure the committee doesn’t want to move forward with a bill that they know will be vetoed." He thought the burden was on "us" to have the discussion and find out what Governor Guinn would do.

Chairman Buckley asked if Mr. Craigie had a copy of the governor’s list.

Mr. Craigie did not have a copy of the list, but he called and asked and noted the bill was definitely on the list.

Chairman Buckley asked about the positions being unpaid. She thought it might be an honor to be on the board and individuals would not mind serving without the small monitory return.

Mr. Craigie said in Arizona and other states, the members were not paid. The situation would be different for some of the members serving on the panel. The makeup of the board, as presented in the bill, would constitute many individuals who were not in the industry and had no interest in having the system administered the way the panel helped administer it. He thought it would be difficult to get people to serve without per diem and some recognition.

Ms. Molasky-Arman explained she was not aware the bill was included on the governor’s list. Mr. Hughes told her that none of the states that utilized the advisory organization appeals board compensated members of the board. In all other states, the method of financially supporting the board and its mechanisms was by assessment to insurers by the NCCI and not through the state. She did not know why the particular provision was added to the bill or why the mechanism was selected. The division provided the Interim Committee on Workers’ Compensation with the NCCI plan, and it was her belief the bill was to follow the plan.

Mr. Hughes confirmed that none of the appeals boards received an allowance or salary. There were perhaps some that received expenses. He too did not know how the provision got into the bill.

Mr. Ormsby recollected when it was initially presented to the interim committee, the NCCI proposal had a $250 charge against the insurance company from whom the appeal came. He noted EICN did a quick check on 10,000 new policy holders who were going to receive an experience modification factor for the first time and took it times $250 for each appeal and noted they did not want to pay the amount. EICN was going into a three-way market with new rates, classifications, and experience modifications, and the company did not want to bear the brunt of the education of the appeal at $250 per appeal. EICN objected and met with members DIR and staff to come up with a funding mechanism, which was simply to add it to the DIR assessment that was currently in law.

Mary C. Keating, Chief Administrative Officer, Division of Industrial Relations, thought it should be on the record that in the DIR budget there was no funding

for the program. If the bill was approved, there would need to be some sort of funding mechanism included.

Mr. Goldwater noted Mr. Ormsby referenced the interim committee, yet Senator O’Connell seemed to be the sponsor of the bill. He asked if the bill was an official recommendation of the interim committee.

Mr. Ormsby did not know how the bill came out of the interim committee.

Vance Hughey, Principal Research Analyst, Legislative Counsel Bureau, noted his recollection of the events surrounding the recommendation contained in the bill was it was brought up at one of the meetings, but at the final work session, the issue was overlooked. By the time the meeting ended, the issue of the board was not part of the recommendation, and the chairman agreed to make it a personal bill.

Chairman Buckley asked Ms. Keating if she prepared a fiscal note for the bill.

Ms. Keating said she did not, but would be willing to do so.

Chairman Buckley explained normally if an agency had a fiscal note, it should be prepared as early as possible. She asked why the note had not already been done.

Ms. Keating said it was her understanding the request for a fiscal note came through Legislative Counsel Bureau staff. She had responded to several fiscal notes, but never received a request for a fiscal note for the bill.

Chairman Buckley asked if Ms. Keating testified in the Senate that there might be a fiscal impact and whether she brought the issue to the committee’s attention.

Ms. Keating said there was a lot of conversation about cost, and she wanted it made clear that in the DIR budget there was no funding. However, DIR would have to analyze and see what the costs were, if there were any.

There were no further questions or testimony on S.B. 417, and Chairman Buckley closed the hearing and began the work session on S.B. 74.

Mr. Hughey said there were a couple of amendments to the bill, one of which was on Exhibit E. The amendment on Exhibit E was proposed by Robert Barengo representing the Nevada Insurance Guarantee Association, and the intent was to insure a workers’ compensation claim was not barred from payment from the guaranty fund if the claim was reopened more than
18 months after the date of an order of liquidation of the insurer or was reopened after the final date set by the court for filing a claim against the liquidator or receiver of an insolvent insurer.

The second provision considered a proposal made by Commissioner Molasky-Arman. The proposal dealt with section 2, line 41. Ms. Molasky-Arman suggested that because the definition of industrial insurance included workers’ compensation and employer’s liability, there might be a need for clarification; the provision applied only to workers’ compensation. Her recommended solution was to insert, before the word benefits, the word statutory.

Chairman Buckley explained the amendment presented by Mr. Barengo was a committee concern. The committee was concerned with how putting dates by which one had to apply to the guarantee fund would affect reopening. She thought the language provided by Mr. Barengo met the need.

Ms. Giunchigliani asked how the amendment met the need. She noted the committee concern was lifetime reopening rights not be restricted by having the potential changeover. She asked how the amendment did that.

Chairman Buckley thought the language "Except as provided in NRS 616C.390 for the reopening of claims for workers’ compensation" answered Ms. Giunchigliani’s concern. Reopening of cases was excluded.

Ms. Giunchigliani noted language in Exhibit E, which said, "any claim filed with the association after the earlier of: (1) Eighteen months after the date of the order of liquidation."

Chairman Buckley said the reference went back to the standard language in the first reprint on page 2, lines 8 through 12. The phrase was incorporated regarding reopening.

Chairman Buckley asked if there were any benefits that were not statutory.

Mr. Hughey believed the workers’ compensation benefits were statutory, but the employer’s liability benefits might be established by the insurance policy.

Ms. Molasky-Arman said the reason she suggested inserting the word "statutory" before the word "benefits" was under the Industrial Insurance Act as well as in chapter 686B, which referred to the rates for industrial insurance, industrial insurance was defined as including both the benefits for workers’ compensation as well as employer’s liability. She wanted to make certain the exception did not apply to employer’s liability insurance. The benefits for employer’s liability were not in the Industrial Insurance Act; they were established by contract and were different in kind from the no fault nature of the contracts for workers’ compensation.

THE MOTION CARRIED.

Chairman Buckley entertained a motion on S.B. 54.

ASSEMBLYWOMAN SEGERBLOM MOVED TO DO PASS S.B. 54.

ASSEMBLYMAN PARKS SECONDED THE MOTION.

THE MOTION CARRIED.

Chairman Buckley entertained a motion on S.B. 64.

ASSEMBLYMAN HETTRICK MOVED TO DO PASS S.B. 64.

ASSEMBLYMAN GOLDWATER SECONDED THE MOTION.

THE MOTION CARRIED.

Chairman Buckley opened the hearing on S.B. 463.

Bob Bayer, Director, Department of Prisons, spoke on behalf of S.B. 463. He referenced page 2, line 2, which repaired the problem with uniformed employees and added language in section 1, subsection 7(c), which said, "nonuniformed officer or employee, designated by the director of the department of prisons pursuant to subsection 1 of NRS 289.220 to have the powers of a peace officer, employed by." Mr. Bayer said NRS 289 was the statute that specifically discussed peace officers and identified those who were peace officers in the State of Nevada.

The purpose of the bill was to fix a problem for individuals who were not specifically uniformed or a forensic specialist employed by the department and would not be covered by the statute, but they were covered as peace officers and by the police, fire, and retirement program. If the individual was an investigator for the Department of Prisons who came up through the ranks and was a peace officer by statute, they were not covered under the particular statute, which he thought was an oversight. A counselor working in the prison population was required to perform peace officer duties. The individual, according to definition, was a peace officer who received police/fire, received physicals every 5 years at the beginning of their service, and every year thereafter after the age of 40, but was not covered under the statute in question.

Mr. Bayer referenced section 1, subsection 8, which said "the director of the department of prisons." He explained he had more than 20 years in the system and would not be affected by the bill. He thought the language was in the bill because it eliminated the problem of the director designating him or herself.

Mr. Goldwater asked if it was Mr. Bayer’s concern that an individual went from a status where they were covered by the benefit and then changed employment where they were not covered by the benefit.

Mr. Bayer’s offered an example of a policeman who worked for Las Vegas Metro who transferred into a position as an investigator in the department. The individual would not be covered, even though the individual was still a peace officer by statute.

Mr. Goldwater disagreed with Mr. Bayer stating the individual could not make a claim on their current position, but could make a claim on the old position.

Mr. Bayer said he went over the bill with Sue Dunt, with Risk Management Division, and she said the individual would not be covered.

Mr. Goldwater thought the bill expanded the definition of a police officer and expanded the benefit of a certain class of people.

Mr. Bayer said no one covered under the language was not a police officer as defined under NRS 289. So the language did not expand the definition of police officer at all.

Mr. Goldwater noted it was not police powers, but those entitled to the benefits under NRS 616. He was speaking of those who had a right to the special benefit that he thought the legislature created to "get at" the special stressful situations under which police and firemen worked. The question was whether others would be included that were not originally intended to be included.

Mr. Perkins noted section 1, subsection 1, discussed deputy sheriffs and city policemen. Whether they were uniformed or not, the individuals still carried the title. Where the statute became problematic was under subsection 7, where it discussed employees of the prison system and differentiated between uniformed employees and forensic specialists. They were the only two that arrived at the benefit. The concern he had was an individual had to serve in one of the defined sections for 5 years, thus accruing the benefit regardless of where the individual went in the system. They took the benefit with them. If any heart or lung ailment arose, it was presumed to have come from the employment, which was where the benefit was derived. The difficulty the committee was going to have was law enforcement and fire service occupations caused great additional stress and exposure to things that caused lung ailments. The stress was considered for the heart problems and exposures to chemicals was the lung elements of the provision.

Mr. Perkins noted the legislature created a separate definition of police officer and kept it closely delineated to the number because it was determined that those on the list were the most stressful jobs in law enforcement. They did not consider all of peace officers in statute because it was not believed that all such individuals fell within the list that had the extremely stressful jobs or those that caused them to be exposed to chemicals causing lung ailments. The question before the committee was, did the nonuniformed officers and employees designated by the director and the director of prisons fall into the category. There were numerous others in state and municipal service who were designated peace officers in other statutes and were being brought before the legislature. He asked if the requests could be afforded and did the individuals fall under the original determination of most stressful and exposed jobs.

Bob Bayer offered another example noting for a sheriff, deputy sheriff, or officer of a police department, there was no distinction between uniformed or nonuniformed. When the law was originally enacted, such positions as criminal investigators were not in existence. The positions were similar to investigators in a police department such as detectives. They were not uniformed positions, and there were good reasons for such. The positions were clearly those that should be included and very similar to a detective, but the distinction of nonuniform eliminated them from the particular benefit. The same list was used to hire for the Nevada Division of Investigation (NDI) as was used to hire investigators for the Department of Prisons. The same criteria was used, but if the individual was with NDI they were covered, but with the Department of Prisons, the individuals were not covered. He was attempting to fix what was an inequity in statute.

Mr. Perkins said the burden was on Mr. Bayer to convince the committee that within the job description and duties of the personnel in question, they were exposed to those sorts of situations that caused lung ailments, or their job was stressful enough for them to fall into heart ailment.

Mr. Arberry asked Mr. Bayer how much it would cost the state. He noticed there was not fiscal note but thought the cost would be great.

Mr. Bayer explained he did not see where there would be a tremendous fiscal impact on the bill because a heart attack could occur. He could not think of anyone who experienced such. There were catastrophic cases in their medical, but when they built their base budget the catastrophic cases were not considered. Only day to day experiences were considered. He did not recall ever knowing anyone who would fall under the act, but it was nice to know the insurance was available in case someone did. He noted the director of the

Oregon prison system was stabbed and killed coming out of his office and there was a contract out on the director of the Arizona prison system.

Ms. Giunchigliani noted Mr. Perkins addressed some of her concerns. There were a couple of bills that were trying to expand the definition of a peace officer. She thought that because of the expansion of the definition, they were losing sight of the issue of what heart and lung was all about. The legislative body spent many terms trying to protect heart and lung, and as more individuals were added, there was a risk of the issue opening up again.

Ms. Giunchigliani noted the change in the bill where it was originally to take effect in 1999 and was changed to take effect in the year 2000 and asked what was the rationale for the change.

Mr. Bayer explained someone said there was a mechanical problem, and the soonest the bill would be able to take effect was in October. He did not remember the reason why.

Ms. Lesbo explained the rationale in the Senate for changing the effective date was to accommodate the rate setting process.

Ms. Giunchigliani noted there would be a fiscal bill.

Ms. Evans referenced section 1, subsection 7(c), which said, "nonuniformed officer or employee, designated by the director of the department of prisons." She asked what the criteria for selection was, and how did the director decide.

Mr. Bayer said the wording specifically mirrored NRS 289, which addressed how a peace officer was designated in the Department of Prisons. In the statute, it indicated who was or was not a peace officer in the Department of Prisons. When there were escapes, there were different duties assigned to different individuals, and the Department of Prisons did not have 24-hour peace officer duties, "unless designated by the director." There were times when some peace officers in the Department of Prisons needed peace officer power that extended beyond an 8-hour shift.

Ms. Evans said she would look at NRS 289, and what appeared from the wording in the bill was there was room for subjectivity in terms of making the designations. Her concern was what degree of subjectivity was involved in making the selection.

There were no additional questions or testimony on S.B. 463, and Chairman Buckley closed the hearing and opened the hearing on S.B. 495.

Mr. Ormsby explained during the past year, the Department of Insurance, DIR, and the State Industrial Insurance System got together to look at the statutes to find what needed to be changed in anticipation of three-way coming into affect on July 1, 1999. The bill came out of the meetings.

One of the biggest changes was the responsibility for the employee leasing certification, which historically was accomplished by the State Industrial Insurance System and was transferred to DIR. It was not appropriate for an insurance company to certify leasing companies.

The second major issue within the bill was the uninsured fund. Statutorily, the State Industrial Insurance System was required to provide the administrative duties for uninsured claims. A claim would be filed, recorded with DIR, and DIR would assign the claim to the State Industrial Insurance System to process. Going into three-way, the bill removed the statutory requirement for the State Industrial Insurance System to be the administrator on uninsured claims. In replace of that, DIR was provided the authority to bid, to obtain a third party administrator through a request for proposals (RFP), and serve as the administrator for the uninsured fund. There was no prohibition to the State Industrial Insurance System or EICN from bidding to provide those services, but it was now elective, and DIR could put it out to bid and select the successful bidder.

There were seven statutes referring to manager’s hearings, which would change. Currently, if an insurance company did not agree with a decision, the employer had a right to file an appeal or protest with the manager and go through an administrative hearing. In the three-way marketplace, if an employer did not like EICN or another insurance company, the employer changed insurance carriers and went with someone else.

The deemed wage for real estate agents was changed in 1997 in NRS 616; it was not changed in NRS 617. Whether the agent had an occupational disease or an injury, there were two different deemed wages. They were using S.B. 495 as a cleanup bill to change what needed to be changed going into a three-way environment and also to consider any administrative mistakes that still existed in the law.

Mr. Ormsby noted section 1 considered an employee leasing company. The responsibility, which the manager of the State Industrial Insurance System previously held, was transferred to DIR.

Chairman Buckley asked Mr. Ormsby to explain what an employee leasing company was.

Mr. Ormsby explained an employee leasing company was also referred to as a professional employee organization, which was a growing market throughout the United States. Rather than having an employee work for an employer in the traditional employee/employer relationship, there were circumstances where it made good business sense for employer to lease employees from an employer leasing company or a professional employer organization. Rather than the employer being responsible for workers’ compensation and withholding unemployment benefits, the employer leasing company or professional employer organization would be responsible, as the employee worked for them. The marketing information said the employer could save money and headaches by having the employee work under another’s payroll.

Chairman Buckley asked why such was not previously under the jurisdiction of DIR.

Mr. Ormsby said the responsibilities that had rested with the Nevada Industrial Commission (NIC) went to other agencies and some were retained by the system. Employee leasing company certification was one of the items the system retained, but it was not appropriate to remain as the system went into the three-way marketplace.

Section 2 was a blanket statement, which said, "An insurer shall not issue a policy of industrial insurance to an employer that does not cover each employee of that employer who satisfies the definition of employee set forth in
NRS 616A.105 to 616A.225, inclusive."

Section 3 considered the $36,000 payroll cap and the period of time the $36,000 would be calculated.

Ms. Molasky-Arman explained section 3 clarified the payroll cap was applicable during the policy period beginning with the date the policy was effective. She thought in 1997, the legislature amended the section to delete the reference to calendar year. The purpose was to clarify that commencing July 1, 1999, the period of time would be the policy year.

Mr. Ormsby said the prior law was calendar year and in 1995, the projected change for 1999 was the year without any descriptor. The language was the commissioner’s to make it starting at the anniversary date for the policy.

Section 4 added a section out of NRS 616B.463 on page 3, line 12. The particular section considered an insurer must be authorized in the State of Nevada before issuing a workers’ compensation policy. Such was oversight to the commissioner.

Section 5 considered if the laws were repealed, NRS 626B.224 referenced the requirement that all employers have workers’ compensation coverage within the state.

Section 6 deleted and changed some of the rules that were going to expire in NRS 616. There were a number of sections in the law putting limits or restrictions on investments that were available to the State Industrial Insurance System. The deletions on page 3, line 39, considered sections that would expire. The current exceptions would expire on July 1, 1999.

Section 7 on page 4, line 42, deleted references in the law to sections that were expiring in the current law.

Section 8 aligned the system with private carriers. NRS 616B.185 required the system to provide a program for the work industry and the prison industry program. The language was changed on page 5, line 10, to refer to requirements adopted by DIR and coverage provided by either the system or a private carrier.

Section 9 aligned the system with the private carriers. Whether the prison industries was a benefit or a burden, it simply removed the mandate that the system perform the function and opened it up to everybody.

Section 10 deleted the language "In addition to the authority given the manager to determine and fix premium rates pursuant to NRS 616B.218 to 616B230, inclusive, the." It aligned EICN and their responsibilities. NCCI filed the rates, and the commissioner adopted them.

Section 11 did the same thing, aligned EICN with private carriers.

Section 12 considered the payment of premiums and reporting of payroll reports. It aligned EICN with private carriers. One of the changes affecting every business starting July 1, 1999, was EICN was going from payment in arrears to payment in advance. There were some changes in the law, and it was necessary to delete some information requiring the payment of premiums in the reporting of payroll at the same time. Such was accomplished in section 12 where EICN were aligned with private carriers.

Ms. Molasky-Arman, explained sections 13 and 14 were provisions that were sought by the Division of Insurance. In section 13, the premium base for members of an Association of Self-Insured Employers was redefined. Under existing language, the references were to regulations of the system. Those regulations would expire as of July 1, 1999. Such had been replaced and referred to the manuals that were adopted by the Commissioner of Insurance. The section also deleted a reference to NRS 616B.389, which was also repealed under the bill. NRS 616B.389 was the provision that required a member of an Association of Self-Insured Employers, who was terminated by the association to return to the system for the insurance for a period of not less than 2 years.

In section 14, the language was changed to be consistent with Title 57. Currently the language read "rate organization." The language should read "rate service organization" to make it clear it was a rate service organization licensed by the Division of Insurance.

Section 15 emphasized existing law and stated a private carrier that was authorized by the commissioner constituted an authorized insurer, as the term was defined in NRS 679A.030, and it subjected the insurance carriers, who were qualified for workers’ compensation, to be subject to the provisions of Title 57.

Section 16 was also requested by the Division of Insurance to make the hearing process for private carriers consistent with the hearing process that currently existed and was applied by the Division of Insurance for insurers where violations occurred. As the language had been written, it was mirroring the process that was conducted for self-insured employers and the Associations of Self-Insured Employers, who were not actually in the business of insurance. There were higher standards applied to recognize that they were not insurers. The acts could be corrected. Ordinarily, when a private carrier or insurer violated the law, the Division of Insurance was not required to hold an informal conference and allow the insurer, in all instances, to correct its conduct. The division had broad authority to bring disciplinary actions against insurers, and section 16 would make the enforcement under Title 57 applicable exactly to violations of the Industrial Insurance Act.

Mr. Ormsby explained section 17 and noted it was simply "cleanup" considering an employer within the provisions of 616A through 616D. NRS 617 was added.

Section 18 considered the $36,000 payroll cap, applied the new language for corporate officers, and limited it throughout the year for the policy of industrial insurance.

Sections 19, 20, 21, 22, 23, and 24 started a series considering employee-leasing language. There were six or seven statutes transferring responsibility for certifying or registering an employee leasing company and maintaining the records on the employee leasing company from the system to DIR.

Section 25 considered the uninsured fund. Current law mandated the system be the administrator of the uninsured fund. EICN met with DIR and agreed it was more appropriate for them to put it out for bid. Section 25 authorized DIR to put it out to an RFP, receive bids, and appoint a third party administrator.

Section 26 started a series of laws where a manager’s right to hold a hearing was removed.

Chairman Buckley asked Mr. Ormsby to clarify his statement in section 25, considering the system would no longer retain those claims but instead it would be put out to bid.

Mr. Ormsby said the way the uninsured fund currently worked was if an uninsured claim was filed, it was registered with DIR. If DIR agreed the claim was uninsured, they assigned it to the system for administration. The way it would work effective July 1, 1999, was DIR would find an administrator, submit a request for proposal, and take bids from third party administrators. EICN had the option to make a bid like any other third party administrator to serve as the administrator for the set contractual period of time. The mandate that they must do it with DIR was eliminated, and DIR could find an administrator of their choice.

Chairman Buckley asked if the decision was made about 18 months prior.

Mr. Ormsby explained Chairman Buckley was referring to the residual market, or the involuntary market. If an employer could not obtain coverage in the voluntary market, the commissioner adopted the NCCI plan and two servicing carriers who would provide the workers’ compensation coverage.

Chairman Buckley asked if the language was to administer the uninsured claim fund. Mr. Ormsby affirmed Chairman Buckley’s statement.

Mr. Ormsby explained section 26 started a series of sections deleting language applying to manager’s hearings. As a monopoly, EICN established their rates and experience modification formula, applied the formula to employers, and had their own classification manual. The law provided that if an employer did not like any of the previously mentioned schemes, the employer could appeal to the company in what were referred to as a manager’s hearings.

Section 26 through 32 dealt with what used to be the manager’s hearings. Under the bill, if an employer did not like the way they were treated, they had the option to go someplace else.

Section 32 considered the actual cost incurred in reopening a claim.

Section 33 added interest and penalties. The provision was one where if an employer currently owed the system money and the owner simply changed the name of his or her business, it was unlawful for the insurer to provide coverage to the employer. Section 33 applied such across the board not only to EICN as the system but also to private carriers. Page 19, line 25, added to the language what an employer might owe an insurer, currently or at a future time.

Mr. Ormsby explained in 1997, the three times penalty was reduced to a one-time penalty for those employers who did not have coverage or did not pay the proper premium for coverage. Section 34 reflected the change that did not occur in NRS 616D220. The language was "cleanup" so there was a one-time penalty.

Section 35 referred to real estate agents. Chapter 616 had a deemed wage of $1500 per month, chapter 617 had $900 per month. There was an oversight and the language in the section corrected the oversight.

Section 36 considered corporations, and capped the $36,000 cap for the period of the policy for industrial insurance.

Section 37 dealt with the uninsured fund for occupational diseases in chapter 617. The prior language was in chapter 616, and the language mirrored the two.

Section 38 aligned the system with private carriers. It was the fund for prison industries. Mr. Ormsby referenced subsection 3 of section 38, which said, "The director shall expend money deposited in this fund to pay to the state industrial insurance system the premiums required for coverage of offenders." The language "to the state industrial insurance system" was removed causing the language to read "The director shall expend money deposited in this fund to pay the premiums required for coverage…"

Section 39 deleted the reference to NRS 616B.230. The law dealt with the requirement for payment of premiums by public employers, which Mr. Ormsby believed was being repealed.

Ms. Molasky-Arman explained section 40 was necessary in order to address the hearing process that was mentioned to in section 16 of the bill.

Mr. Ormsby noted the bill was put together by DIR, the Division of Insurance, and the system to try to reflect the realities that would occur on July 1, 1999, trying not to give any additional burdens or benefits than appropriate and putting the administrative and regulatory responsibilities with the proper authority.

There was no further testimony or questions, and Chairman Buckley closed the hearing on S.B. 495 and adjourned the meeting at 6:00 p.m.

RESPECTFULLY SUBMITTED:

Jane Baughman,

Committee Secretary

APPROVED BY:

Assemblywoman Barbara Buckley, Chairman

DATE: