The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 9:40 a.m., on Monday, February 8, 1999, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Randolph J. Townsend, Chairman

Senator Ann O’Connell, Vice Chairman

Senator Mark Amodei

Senator Dean A. Rhoads

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

GUEST LEGISLATORS PRESENT:

Senator Mike McGinness, Central Nevada Senatorial District

Senator Bernice Mathews, Washoe County Senatorial District No. 1

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

John Meder, Committee Policy Analyst

Kathryn Lawrence, Committee Secretary

OTHERS PRESENT:

David J. Guinan, Lobbyist, Attorney, Nevada Insurance Guaranty Association, testified Nevada Revised Statutes (NRS) 687A.033 is the statute that defines "covered claim." Referring to his prepared statement (Exhibit C) he stated in order for a claim against the guaranty association to be covered it must meet the criteria set forth in NRS 687A.033. Basically that means that it must be a claim arising out of and within the coverage of a policy of insurance issued by an insolvent insurance company, and there are several exclusions from a covered claim. Mr. Guinan pointed out that one of the exclusions to a covered claim is a claim by an insurance company. The original idea behind this statute was to take care of the consumers, the insureds; and as a publicly funded organization there was no reason to be covering claims as solvent insurance companies, so these claims have been shown as not included. When we are talking about the claims of an insurance company, it must be made very clear that the claims of an insurance company, whether they are direct claims, indirect claims, or a segregation claim, are not covered. Mr. Guinan insisted on the need to clarify that not only is a deductible insurance policy not covered, a self-insured retention is not covered. He directed attention to section 1, subsection 2, paragraph (c), subparagraph (1) which establishes an 18-month claims cutoff date independent from the claims cutoff date set by the liquidator. Mr. Guinan stated as the law reads right now, covered claims do not include a claim filed at the association after the claims cutoff date set by the liquidator. Unfortunately, not all states set up an independent or a specific claims cutoff date. Most of those claim cutoff dates are from a year to 18 months after the declaration of insolvency. He pointed out that the purpose of imposing a 18- month claim cutoff date is to fill the gap for those states that do not otherwise impose a claims cutoff date, so that there can be some finality to the processing of a huge volume of claims.

Mr. Guinan stated one of the major changes to this bill seeks to exclude from the definition of covered claims any claim that is asserted by or against an insured whose net worth exceeds $25 million. This change removes the large corporate claimants from the protection of the guaranty association; something that started about 10-15 years ago in Michigan. He stated a majority of the states in the country have now imposed some sort of net worth limitation. If Nevada does not impose some sort of limitation, it is going to end up receiving all the claims from other states that do have net worth limitations because they are going to all be funneled here. The insurance guaranty association needs to be assured they it is not left holding the bag. Mr. Guinan stressed the need to exclude coverage for incurred but not reported losses; specifically excluding any losses first reported after the claims cut-off date; a clarification of the existing law. He directed attention to section 2 of the bill pertaining to NRS 786A.060, and stated this modification is prompted by the three-way workers’ compensation act. Prior to this time, there has been a $300,000 claims cut-off for all claims or a claims cap of $300,000. This has never been an issue in Nevada with respect to workers’ compensation because it has always been a state system. He stated most states do not have a cap on workers’ compensation claims. The theory being that an injured worker who is on some sort of disability payment should not have his disability payments limited to $300,000. Mr. Guinan asserted that the guaranty association therefore seeks to remove the $300,000 cap from workers’ compensation claims.

Mr. Guinan pointed out that section 3 of S.B. 74 modifies NRS 687A.100, which requires claimants against the guaranty association to exhaust all other insurance they may have before going to the guaranty association. The idea behind this change in the bill is to make sure the guaranty association is a fund of last resort. If there is insurance coverage available through solvent insureds, then that coverage should be funded first. He stated there has been some confusion about the application of that language in respect to other insured motorists’ claims. There has also been a continuing problem in the situation if an insured has insurance with an insolvent carrier, the guaranty association will go after the insured directly and forget about Nevada Insurance Guaranty Association (NIGA).

Mr. Guinan stressed that to give the public the benefit of NIGA as it was intended, that is to have the insured of the insolvent carrier really protected, there is a need to make sure the claims against NIGA are eliminated. The language that has been added is based upon the Illinois Insurance Guaranty Association Act, which has worked well for the state of Illinois, and Nevada needs to benefit from their experience.

Mr. Guinan pointed out the last two sections of the bill (5 and 6) are housekeeping matters and they relate to what has been termed the federal "superpriority" act. Under federal law, there is a provision that gives the federal government priority over all other claims in an insolvency proceeding which created real havoc in insurance company insolvency when the federal government stepped in and assumed priority. The applicability of these sections was eventually tried to the United States Supreme Court under a decision titled U.S. Department of the Treasury, et al. v. Fabe, Superintendent of Insurance of Ohio (FABE). The United States Supreme Court decided that the federal "superpriority" act was not applicable to insurance company insolvency. He pointed out the court decision is a result of the McCarran-Ferguson Act named after U.S. Senator Patrick McCarran years ago; and the McCarran-Ferguson Act excludes or exceeds jurisdiction of insurance-related matters to the states resulting in the states regulating insurance.

Mr. Guinan expressed that the way FABE has been interpreted requires payment of claims of administration and policy holders; then the federal government must have priority over all other general creditors’ claims. The claims of local governments are one step below the federal government. He stated in the last legislative session the FABE cure was enacted and there was an amendment to what is termed the early access law, which gives insurance guaranty associations the right to receive interim distributions from an insurance company liquidator at a time prior to the final liquidating distribution. The insurance guaranty association will sign an agreement with the liquidator that they will return any monies that the liquidator needs to pay claims of higher priority. He pointed out the money is placed into the control of the guaranty association so that it reduces the impact on the general solvent insurers, the Nevada State Treasury and the premium tax credit. There was an incorrect cross-reference made in the last legislative session which did not properly tie in the FABE cure and the changes in this bill are simply housekeeping matters to make sure there is a tie back correctly into the priority section.

Chairman Townsend closed the hearing on S.B. 74 and opened the hearing on S.B. 76.

Charles L. Horsey III, Acting Director, Department of Business and Industry, testified on S.B. 76, pointing out section 1, subsection 1; the word "complaint," should read "claim for wages." This is the primary function of the labor commissioner’s office and we think that it would more closely parallel their current statutory authority. Mr. Horsey stated there were 3400-3600 claims filed with the labor commissioner. Senator O’Connell asked how many of the claims were valid.

Bill Maier, Administrative Services Officer, Department of Business and Industry, stated the total collections were $2,044,000. In regards to the valid claims, all the department has are the performance indicators, and the actual claims settled were the 3600 claims as indicated before. Senator O’Connell stated there were 3600 files and 3600 settled, but asked how many settled were valid. Bill Maier stated 3600 settled cases are the only indicators they have and they do not know how many cases were filed. Chairman Townsend asked for that number.

Senator Rhoads asked how the settled versus filed cases affect local government. Mr. Horsey stated that information was not available. Mr. Horsey noted the Office of the Labor Commissioner does not currently have a director and things are in disarray. Chairman Townsend asked if Mr. Horsey had spoken with the Governor and knew when they would be getting a new director. Mr. Horsey stated he had talked to the Governor’s Office and told them he thought the director’s position was very pertinent.

Senator O’Connell stated that if this bill needs to be amended and if there are 3600 claims or more, perhaps the effective date should be upon passage and approval as opposed to October 1999.

Chairman Townsend stated he wanted an amendment and a fiscal note to this bill.

Robert A. Ostrovsky, Lobbyist, Nevada Resort Association, stated he has some concerns about cleaning up some of the language in S.B. 76. He stressed if a complaint is filed with the labor commissioner, certainly that complaint is going to be recorded. Anyone could make a complaint, particularly after they were terminated from their employment. Mr. Ostrovsky insisted that employees should not be terminated because they seek out information or file a complaint with a public agency that is there to protect the rights of that employee. He stressed his support for the bill but stated he had some problems with the specifics.

Mr. Ostrovsky asserted that a review of chapter 613 of NRS "Employment Practices," includes many business activities such as false representation to obtain or change a job, prevention of political activity, involuntary servitude and wage issues that are defined. The violation of any of these activities can result in the perpetrator being found guilty of a misdemeanor and gross misdemeanor; and even include fines up to $5,000. This statute is full of references to penalties relative to issues that may come before the labor commissioner. This bill needs to coincide with coexisting rights that employees have relative to all loss of individual issues. The Office of the Labor Commissioner also has to review prevailing wage issues throughout the state. There is a lot of work that goes on in construction jobs relative to public works projects.

Senator O’Connell requested a breakdown of categories to allow the committee to determine how many cases are from prevailing wage. Mr. Ostrovsky stated he would get that information.

John Madole, Executive Director, Nevada Chapter of Associated General Contractors (AGC), expressed his concerns with S.B. 76 by stating AGC is an industry which does not always have permanent employment. He interprets this bill to be a shield for any employee who files a claim with the labor commissioners, whether legitimate or not. Mr. Madole pointed out that the possibility of civil action against an employer is unjust and could result in injurious result to an employer.

Danny L. Thompson, Lobbyist, Director, Nevada State AFL-CIO, stated that this was not a union bill, but the union representative would be interested in participating and listening to some of the concerns.

Chairman Townsend directed all parties concerned to talk with each other and then return to the subcommittee meeting to be chaired by Senator O’Connell.

Chairman Townsend closed the hearing on S.B. 76 and opened the hearing on S.B. 78.

Senator Mike McGinness, Central Nevada Senatorial District, stated he introduced S.B. 78, and pointed out that Rosemary Gamble of Fallon had been involved in a dispute with a regulatory board pertaining to a review of her personal records. He also stated that Ms. Gamble’s psychiatric doctor could not attend this meeting, but he anticipated written testimony from the doctor.

Ms. Gamble read her prepared statement (Exhibit D) in support of S.B. 78. She stated her case was in regard to her termination and the search of her body.

Senator McGinness stated that when this bill was introduced, Cynthia Bunch, R.N., State Legislative Coordinator, Nevada Nurses Association, contacted his office and asked to have her testimony submitted (Exhibit E).

Senator O’Connell reiterated Ms. Gamble’s statement regarding the attorney general’s investigation and finding of no wrongdoing. Ms. Gamble stated the attorney general investigated an anonymous letter in August 1996 because it had been mailed to the Governor’s Office. She asserted their conclusion was within her employment with the state for 19 years, there had never been a complaint from the staff, community, or a client.

Senator O’Connell asked if the letter did not require a signature. Ms. Gamble stated no and it was very painful and personal for her. Senator O’Connell asked if she had been reinstated in her position. Ms. Gamble stated she had not; she was terminated and on disability now because of it.

Chairman Townsend asked Ms. Gamble if she had retained her license with the board of nursing. Ms. Gamble stated her license was suspended December 10, 1998. Chairman Townsend asked if she was terminated as a result of losing her license or if she was terminated before the license was suspended. Ms. Gamble stated before the license was suspended. Ms. Gamble stated she had been given above-standard evaluations and had never had any problems in her job or the community. Chairman Townsend asked if the complaint came from the Mental Hygiene and Mental Retardation (MHMR) Division. Ms. Gamble stated yes, the rural clinics specifically.

Chairman Townsend queried if after the attorney general’s office received an anonymous complaint, and reviewed it and there was no wrongdoing found, the board of nursing continued their own investigation. Ms. Gamble stated after she was searched bodily and put on administrative leave in January, the MHMR notified the board of nursing which proceeded to request a voluntary return of her license or they were going to suspend it.

Chairman Townsend asked Ms. Gamble, regarding the complaint by MHMR, if it was a written complaint and if she received a copy of it at that time. Ms. Gamble stated she did receive a copy, but those allegations have not been proven as of today. Chairman Townsend asked if Ms. Gamble’s doctor was required by the board of nursing to surrender her licenses. Ms. Gamble stated that all of her records were to be surrendered. Her doctor was willing to turn over some of the psychiatric records in which there was some substance abuse, not on her part, but in her family’s records. Ms. Gamble insisted, "my mother has been dead 50 years; my father has been dead 56 years. That information should not be for the public. This case has nothing to do with them."

Senator O’Connell asked if the Nevada Nursing Association questioned some information that was on her license when she applied for her nursing license. Ms. Gamble stated the Nevada Nursing Association stated she had gotten her license by fraud in 1995 because she did not notify them she was seeing her psychiatrist. She pointed out that she was on an antidepressant, and was sure there are people who see psychiatrists who do not report it. She suggested he thought if she was incapable or could not work, her psychiatrist would have notified the nursing board.

Senator O’Connell stated if that was the grounds as to why they asked for your license back. Ms. Gamble stated no; the grounds that the nursing board asked for her license back were the allegations from rural clinics, and that is currently in litigation.

Ms. Gamble asked if her psychiatrist could come in and talk with the committee in the future. Chairman Townsend concurred with Ms. Gamble.

Kathy Apple, R.N., M.S., Executive Director, Administration, Nursing Practice, Discipline and Monitoring, State Board of Nursing, testified the board of nursing does not support this bill. The primary functions of any licensing board are mandated by the Legislature in licensing competent, qualified individuals and in disciplining licensees who violate the law by unprofessional conduct. This is how licensing boards protect the public. Ms. Apple justified that in the course of investigating complaints against licensees, the investigator is responsible for obtaining all information that is clearly relevant to the allegations. Medical records are very important to nursing investigations and they prove or disprove allegations against licensees. She urged without medical records, the board would not be able to enforce the legislative mandate. During the course of nursing investigations, all information is confidential by statute. It is simply not possible, as this proposed bill suggests, that a provider of health care would be able to determine the relevancy of a medical record, nor do we believe it is the role of the provider of health care to determine the relevancy. That is the job of the investigator according to state law.

Ms. Apple stated:

Senator O’Connell asked Ms. Apple how an anonymous letter is normally handled. Ms. Apple testified that the board has a requirement that they do not accept an anonymous complaint. Ms. Apple also testified she was unaware of an anonymous complaint. She testified that a complaint to the nursing board must be in writing, it must be signed by the person who is making the complaint, and it must contain enough information in the complaint that on the surface there appears a violation of our law. Only when that information is present in the complaint do we proceed with the investigation.

Senator O’Connell asked if they started the investigation or was it prompted by a request from the Governor’s Office. Ms. Apple stated no, the investigation was prompted by a written complaint from the MHMR. Senator O’Connell queried if it was that division that acted upon an anonymous letter. Ms. Apple stated she did not know the answer to that question.

Senator Rhoads questioned if the investigation caused by the written complaint from MHMR was different from lines 16 and 17 on page 1 of the bill, " . . . determines are not relevant to such an investigation," and if that was not the current practice of the nursing board.

Ms. Apple stated that is our practice, but if the decision for relevancy is made by a provider of health care and our complaint investigation process is confidential, they are not going to have a clue about how to determine whether it is relevant or not. That is our argument with the bill. Nor again do we really feel it is their role to make that determination because that is the whole point of an independent investigation.

Chairman Townsend questioned if an investigator would be nurses’ association nurses, other nurses, law enforcement types, or just people looking for work who are willing to do this kind of work.

Ms. Apple stated:

Chairman Townsend confirmed Ms. Apple’s answer but pointed out that there was doubt with other licensing boards which is a concern.

Paula Berkley, Lobbyist, Chiropractic Physicians Board of Nevada, submitted her statement (Exhibit F) and stated:

Robert R. Barengo, Lobbyist, Board of Medical Examiners, introduced Richard J. Legarza, General Counsel, Board of Medical Examiners; also, Larry D. Lessly, the Executive Director, Board of Medical Examiners, who was in the audience.

Mr. Legarza stated:

Chairman Townsend stated that he thought it odd that one licensing board would approach an individual who is licensed by another board to get medical records, with that person being perplexed with what to do. The Senator stated if the Board of Nursing approaches a person licensed under their board asking for records because the doctor/patient relationship is of high value to those practitioners and they may not know exactly what to do. The Senator said he presumed the psychiatrist surrendered those records, and queried if that was the understanding of this situation.

Mr. Legarza stated the Board of Medical Examiners (BME) does not have any knowledge of the situation. The only thing he can say is that the licensing board was in the process of investigating one of its own licensees. He pointed out that it is somewhat different than investigating a citizen complaint against a physician or against a nurse. The board investigates their own licensees as well. We may investigate our licensees that may not have to do with a quality-of-care situation with respect as a patient, such as substance abuse or an impaired physician. The Board of Medical Examiners spends a considerable amount of money on our impaired physician program to attempt to try and protect the citizens of Nevada from some physician who is high on drugs or alcohol treating patients. If the program is unsuccessful in convincing those physicians after certain studies and samples are taken from them and they need to go off to treatment, they may or may not be referred to the investigative committee of the board to conduct an investigation. Mr. Legarza pointed out the board would be investigating our own licensee for a violation of something not of a care issue and there may be a physician who has been treating that other physician. The board needs to look at those records to make a determination and we need to make sure that has occurred. In many instances, there are no medical records for justification.

Chairman Townsend stated this is a policy issue without specifics. The Senator queried if anyone who is a licensed medical doctor answers to your board or does your board have a subcommittee of the Board of Medical Examiners to deal with those specific issues. Mr. Legarza stated all medical doctors are licensed by the board, no matter what their specialty.

Chairman Townsend asked if all disciplinary issues are dealt with in a normal manner. Mr. Legarza answered yes and stated:

Senator Shaffer asked how much responsibility a person in the private sector has in the hearings; if they can sit and listen, provide input, or influence the decision in any way. He also queried if they can voice an opinion. Mr. Horsey stated the private sector can contribute greatly. Senator Schaffer asked if this was a relatively new process and how long has this private person been sharing the board. Mr. Horsey stated this is the first time in history that they have had a public member, but by law must have three public members. The board has six medical doctors and three public members, and currently the president is a public member from Las Vegas.

Chairman Townsend stated it is a lot of work for the public member who is granted that privilege or sought it. Mr. Horsey stated he is very capable.

Fred L. Hillberby, Lobbyist, State Board of Pharmacy, stated he wanted to give a specific example for Senator Townsend regarding one of the clients from the State Board of Pharmacy. He asserted that in the case of investigating potential drug diversion such as a pharmacist is prescribing unusually high controlled substances to one or two patients and is claiming a certain physician has prescribed them, the board goes to the physician’s office to look at the medical records of that patient to verify that such a person exists. The physician would not know why you were there to investigate and, in fact, if he was working with the pharmacist to divert drugs, he would clearly tell you those records were not relevant to your investigation. Mr. Hillerby stated that the same thing could happen if you were looking at a hospital pharmacist that appears to be diverting drugs from a hospital; the board would have to look at the hospital medical records to verify that those records were real, so there is a need to have access to those records. There may be times the board would have to go to another specialist to help in the investigation. He stressed if you are investigating a pharmacist and you go look at his medical records for those patients and he would say those medical records are not relevant to your investigation, you may have a problem.

Chairman Townsend put the bill on hold and adjourned the meeting at 10:47 a.m.

RESPECTFULLY SUBMITTED:

Kathryn Lawrence,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

DATE: