The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:50 a.m., on Thursday, March 4, 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

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

Crystal M. Lesbo, Committee Policy Analyst

Ardyss Johns, Committee Secretary

OTHERS PRESENT:

Amy Halley Hill, Lobbyist, Nevada Self-Insurers Association

Chairman Townsend opened the meeting with the introduction of Senate Bill (S.B.) 180.

SENATE BILL 180: Authorizes employer to conduct on-site test for alcohol or controlled substance without license as medical laboratory under certain circumstances. (BDR 53-1161)

Derek L. Naten, Lobbyist, Regional Manager, State Government Affairs, Hoffmann-LaRoche, told the committee his employer was a global health care company providing prescription medication and diagnostic services for over 100 years and one of the leaders in diagnostics. He said Hoffmann-LaRoche was in strong support of S.B. 180 which would permit the use of on-site testing technology by employers at the employment site to detect for substances of abuse. He mentioned the reason LaRoche had become involved in this legislation was because it had become apparent Nevada state law was not permissive in allowing employers to conduct any type of on-site drug abuse screening on their workforce. He stated Nevada is one of only four, five or six states that do not allow this type of activity. As a result, he added this deprives Nevada employers of the opportunity to utilize a very efficient, cost- effective, timely tool that not only assists them in implementing a drug-free workplace, but also protects the rights of the employees.

Mr. Naten declared this bill would allow for this type of activity provided certain criteria were met. He said the employers would have to be registered with the U. S. Department of Health and Human Services, trained by the test manufacturer and follow an appropriate chain-of-custody procedure with the screens. Most importantly, he maintained the measure provides that employers may not take any adverse action against employees based on the result of a positive screen until it is confirmed in a test by a medical laboratory licensed by the U. S. Department of Health and Human Services. He said as a result of extensive meetings with the U. S. Department of Health and Human Services, an agreement had been reached regarding some amendments to the bill (Exhibit C). The amendments would direct the State Board of Health, by January 1, 2000, to promulgate rules providing for the use of on-site tests including processes for registration with the Department of Human Resources. Mr. Naten said the State Board of Health would also implement guidelines for sample collection and appropriate quality-control procedures as well as training of personnel performing the on-site tests. He stated mandatory confirmation would be required of a positive test result by a different analytical process than that used in the initial drug screen.

Mr. Naten said during the rule-making process, the State Board of Health would rely on input by affected parties including clinical laboratories, labor, medical interest, employers, manufacturers and many others. Most importantly he added, the Department of Human Resources would provide necessary input to the State Board of Health as they move forward.

Senator Shaffer wanted to know how the health department felt about Senate Bill 180.

Richard J. Panelli, Chief, Bureau of Licensure and Certification, Department of Human Resources, said his department was very comfortable with the proposed amendments. He said having the rule-making process overseen by the State Board of Health addressed the Department of Human Resources’ issue which was the protection of the public health and safety of Nevada’s citizens. He pointed out a bill enacted in 1997, which later became Nevada Revised Statutes (NRS) 652.217, allowing nurses to perform testing at the bedside addressed the same primary concerns that are addressed in this proposed legislation.

Chairman Townsend drew attention to a fax from STC Technologies Inc. (Exhibit D) with regard to a possible additional amendment having to do with adding saliva testing to section 7 of the bill, along with blood and urine testing. Exhibit D also contained a request to change the requirement for alcohol testing to allow independent confirmation via blood or breath testing.

Stuart C. Bogema, Ph.D., President & Lab Director, Forensic Testing, Inc., stated he was a forensic toxicologist involved in the drug-testing industry for over 15 years and said he was very familiar with the proper procedures to be used for employment drug testing. He told the committee the procedure for drug testing is a two-phase process which consists of an initial screen by a technique called immunoassay to identify the negative specimens and told the committee approximately 40 percent of specimens tested are negative. The second step, for the specimens not testing negative in the initial screen he continued, is to have a confirmation performed by a method called gas chromatography-mass spectrometry (GC/MS). He said the United States government for testing by the Department of Transportation as well as other federal agencies requires this two-phase method.

Dr. Bogema said in the last 2 years rapid on-site immunoassay tests have been developed and approved for use in drug testing by the United States Food and Drug Administration (FDA). They are easy to perform he added, and allow identification of negative specimens in less than 10 minutes. As a technical consultant to the United States Postal Service (USPS) he testified, he has evaluated many of these rapid on-site immunoassays and found them to be reliable, accurate and to have a false-positive rate equal to or lower than those same tests used in the laboratories. He explained a false positive is a specimen initially identified as positive and then ends up not being positive by confirmation. He noted he had also found the on-site rapid immunoassays to be less susceptible to adulteration of the specimen than the laboratory immunoassays. Many drug users he explained, add adulterants to their urine to try to interfere with the drug-testing process. Dr. Bogema claimed the on-site test discussed here, has a built-in quality-control mechanism that shows whether or not a result is valid. He stressed these types of devices have been found to be simple, accurate and reliable enough that the U. S. Food and Drug Administration recently approved one of them for general distribution to the public. He said S.B. 180 requires safeguards similar to those required by laboratories.

Dr. Bogema told the committee, over the last 2 years the USPS has put in place on-site testing throughout the country and was now performing over 100,000 of those tests each year for pre-appointment purposes. He maintained their training program has worked excellently with no legal challenges to date and, in fact, is working so well the USPS is awarding a new 5-year contract for the continued use of on-site testing devices throughout the country. He claimed the USPS has a positive rate of less than 5 percent which means 95 percent are identified as negative, and it is done within 10 minutes. Not having to wait the 3 or 4 days for the results from a laboratory allows the employer increased productivity as well as allowing the employee to start work sooner. He added the same safeguards required in S.B. 180 are built into the USPS drug-testing program which are FDA-approved products, chain of custody, training and confirmation testing. He declared over 40 states allow on-site testing and concluded S.B. 180 provides a tool Nevada can give to its employers to help them combat drug abuse in the workplace.

Senator Carlton asked Dr. Bogema to explain more about false positive to which he replied a false positive is a result of the initial screen which shows positive and later is found not positive in the confirmation test. He said false positives can occur for a number of reasons and added the false positive rate in laboratory tests is very low, probably less than 1 or 2 percent, and the same holds true with on-site tests. Any false positives, he stressed, are eliminated by the confirmation process.

Senator Carlton inquired how long it would take for the employer and employee to know they had received a false positive. Dr. Bogema said typically, a confirmation test could be performed within 24 hours.

Wanda Boone, National Director, Occupational Testing Services Compliance and Training, Laboratory Corporation of America, stated she had been in the laboratory industry, drug testing for 14 years; and told the committee that Laboratory Corporation of America was certified by the U. S. Department of Health and Human Services (DHHS) and by the College of American Pathologists (CAP). She reiterated Dr. Bogema’s testimony stating over 40 states embrace on-site drug testing as a part of their testing protocol; but she added, those testing protocols also include chain-of-custody documents and confirmation at a certified laboratory. She mentioned Alaska as unique over and above what the other states do in that they allow the donor to view the result of the on-site screening test, giving the individual the opportunity to know they have tested presumptive positive. However, she said, embodied in their law, there is also some verbiage to indicate the result would be confirmed at a certified laboratory as well as an Employee Assistance Program (EAP).

Ms. Boone said currently the federal government allows on-site alcohol tests and are forming committees to discuss using the on-site drug test as well. She said the on-site saliva-alcohol screening test used by the federal government has a very similar protocol to that required by the various states; i.e., chain of custody and confirmation, so there are forensics built into the program. She stated employers used the on-site method in conjunction with LabCorp who has 800 laboratories throughout the United States. Ms. Boone said the LabCorp protocol contains all of the initial steps required by federal regulation in collecting a specimen, which includes proper donor identification and using a chain-of-custody form; a copy of which is given to the donor. This way, she explained, the donor can have a link between the specimen identification number on their form and the specimen that went to the laboratory. They also initial the seal on the specimen bottle, she declared, to show they acknowledge it is their specimen and know it has not been tampered with since they have watched the entire process. She noted, in addition the temperature of the specimen is checked prior to the testing process.

Ms. Boone pointed out training for use on the chain of custody and the testing device is something LabCorp has built into the process regardless of who is the end user, whether it is the employer, the laboratory or a third-party vendor. She stressed the chain of custody and the confirmation of presumptive positives at a certified laboratory will give the assurances necessary to make sure the tests are valid and carried out in a forensic fashion.

Chairman Townsend asked if there were national statistics showing the percentage of people who test positive initially and then negative in the confirmation test and questioned why this would happen. Of those who are confirmed positive, he wanted to know what the breakdown would be in terms of what type of substance; i.e., alcohol, drugs, etc.

Dr. Bogema stated the most recent statistics from 1997, kept by one of the major laboratories showed out of all specimens tested, just under 6 percent were confirmed positive. He said he does not know of anyone keeping statistics on the percent who test positive in the initial test but do not test positive in the confirmation test. He estimated though, as a laboratory director, it would be in the range of 1 or 2 percent. He added on-site tests are actually more specific and give fewer false positives than do the laboratory screening tests.

Dr. Bogema told the committee the largest percentage of positives was from marijuana, which he guessed was approximately 40 to 50 percent, and next was cocaine, which was approximately 20 to 30 percent of the positives. He said opiates and amphetamines were the least found.

Audrey Hennefer, Senior Account Manager, Roche Diagnostics Corporation, pointed out the simplicity of the test cup used for on-site testing and stated it basically brings the laboratory to the workplace. She gave instructions on the use of the Roche TESTCUP5 (Exhibit E) and told the committee the results would take 2 to 3 minutes. She said any sign of blue would indicate a negative reaction, and no color change at all would indicate a nonnegative reaction, which would require confirmation at a laboratory. She added if a nonnegative reaction is indicated, then the cup is also an FDA-approved sample collection and transport device whose cap is locked down and sent to the laboratory for confirmation.

Douglas Swalm, Chief Probation Officer, Department of Alternative Sentencing, Douglas County, stated he was in favor of on-site testing in the workplace because of his history with on-site drug testing. He said he has been working with the juvenile division for 13 years and declared the track record for on-site drug testing was superb. In 1992 he claimed, the Office of Juvenile Justice Delinquency Prevention (OJJDP) recognized on-site drug testing; so it is not brand new and, in fact, he said he does on-site drug testing every single day. He stressed he is so convinced it is accurate, he owns and operates a forensic laboratory that is within the Department of Alternative Sentencing. He said he uses an Enzyme Multiplied Immunoassay Test (EMIT) by way of an EMIT machine, and also has the availability of using GC/MS through different laboratories throughout the country. He declared the success rate so far, out of the thousands of tests he has conducted, has been 100 percent, both verified through the EMIT system as well as GC/MS. He then reiterated Dr. Bogema’s testimony wherein he mentioned the time saved by on-site drug testing for the employer as well as the employee, making it extremely beneficial for both of them.

Mr. Swalm presented two letters, both dated February 5, 1996 (Exhibit F); one from Forest Tennant, M.D., Dr. P.H, Research Center for Dependency Disorders and Chronic Pain, and the other from Gary Rapaport, M.D., Medical Review Officer, Bio-Test Review Services. Both letters called attention to the fact that there are no communicable disease or infectious hazards specific to urine and further stressed it is not possible to contract contagious diseases, which are carried by addicts, from the addicts urine.

Mr. Swalm addressed the issue of collection of samples using his own experience as an example; stating when he has to report for a drug test, he has to do so within an hour of being notified. He said he then has another hour to report to the hospital and surrender a sample giving him ample time to foul the drug test by way of two different methods. One way is to dilute the sample by drinking excessive amounts of fluids he said, but he pointed out that can be picked up at the laboratory by coming up as an invalid test or not enough creatinine level. The other way to foul a drug test would be to introduce another substance. He pointed out by using an on-site drug test, an individual would have no time to prepare because it is immediate, so there would be no way they could foul the test. He concluded by stating the track record for on-site drug testing is impeccable and a benefit for both the employer and employee.

Helen A. Foley, Lobbyist, Psychemedics, explained Psychemedics is a publicly traded company which provides laboratory drug testing to approximately 1600 corporations throughout the United States. She said their Nevada clients include Caesars Palace, MGM Grand Hotel/Casino, Harrah’s Las Vegas, the Mirage Resorts Inc., and all of their associated properties. Their clients outside the gaming industry, she added, include General Motors, Anheuser Busch, Michelin and the police departments in New York City, Chicago and Boston. She declared her main concern with S.B. 180 was section 13 because it exempts the use of on-site testing from all of the provisions of (NRS) 652. A lot of changes have been made over the years, she said, which have tightened the control measures allowing only licensed physicians, licensed practical and registered nurses, certified physicians assistance, certified intermediate emergency medical technicians, or dentists to collect specimens for drug testing. She pointed out this change would allow persons that utilize this on-site testing not only to collect specimens but to test them right on site, making NRS chapter 652 meaningless. If that is the intent she stressed, it should apply across the board to everyone who provides drug testing; not just the on-site tests.

Ms. Foley told the committee on-site testing has, at best, a checkered past and is prohibited in the states of California, Hawaii, Louisiana, Minnesota, Maryland, Oklahoma, and Vermont and is highly restricted in at least a dozen other states. She said recent side-by-side comparisons of on-site devices show they are not as accurate as laboratory tests, and have false positive rates as high as 75 percent and false negative rates as high as 90 percent. She claimed she was surprised at the difference in the information received by the committee today and the information she had received from her client.

Ms. Foley said another concern was with section 10, subsection 5 of this bill, which indicates if a positive result is obtained, the employer can take no adverse action against the perspective employee. This means, she maintained, an employer could put a person who tested positive out on a job operating a piece of heavy equipment; therefore creating an extreme liability. That person might actually be a heroin addict, she explained, but the employer could not deny him employment based on the on-site results. She told the committee it has been a long haul over the last decade for drug testing, especially hair drug testing, to become reliable, not only with the technology but with the comfort level of employers and the court systems. Ms. Foley concluded on-site drug testing is not in the best interest of health and public safety.

Danny L. Thompson, Lobbyist, American Federation of Labor-Congress of Industrial Organizations (AFL-CIO), stated there is the world we live in up here where we talk about these things, and then there is the real world wherein this does not work, neither for the employer or the employee. The AFL-CIO has a long history of not being against drug testing he said; however, this bill will set a lot of people back. He asked the committee in the case of a construction worker who goes out to a job for which he has waited 2 months, and receives a false positive, if they honestly believed the contractor would pay that individual to sit around and wait for a laboratory confirmation. He pointed out if the person goes to a laboratory in the first place, a more elaborate and absolutely accurate test is done and only the end result is reported. Having a false positive result which later turns out to be negative he stressed, puts a mark on the employee, and this bill makes it incumbent on the employee to take an action to remove that mark. In addition, he noted the unions would spend a lot of time fighting with their employers about these false positives and concluded the third-party approach with the laboratory makes better sense. He declared that is why the Legislature, in their wisdom, enacted that and that is why the AFL-CIO believes it should stay with the medical laboratories.

Robert A. Ostrovsky, Lobbyist, Nevada Resort Association, began by stating Nevada Resort Association was opposed to S.B. 180. He told the committee he had been a personnel executive for 25 years and negotiated almost every contract in Las Vegas with the culinary, teamsters, and the trade unions during that time. He said this is and was a very contentious issue in all of those negotiations; not on whether or not an employee should be drug tested, but rather how, when, and under what circumstances those tests should be conducted. He emphasized third-party laboratories had always been used because for one thing, both the employers and employees have confidence in those tests and because the employer does not want to face an employee who has tested false positive. He reiterated Mr. Thompson’s testimony in which he stated a laboratory test only reports the end result to the employer and concluded he supports maintaining the current system.

L. Tom Czehowski, Lobbyist, Associated General Contractors, Las Vegas Chapter, stated his clients also oppose S.B. 180 because they feel their current practice of using approved laboratories is a very good program that works. He added the employers and employees both agree to the current procedure and when unions are involved, they also are in agreement. He said it has been found to be very effective and has never been challenged; and of all tests that have been taken, none has been overturned. He agreed with Ms. Foley regarding section 10 of the bill because in the construction industry he explained, you might have someone on a bridge deck or on the tenth or thirtieth floor working in close cooperation with coworkers. If a test showed positive for that employee he continued, you would not want to take the chance of putting that individual back to work and possibly endangering himself or others.

Fred L. Hillerby, Lobbyist, Associated Pathologists Laboratories, introduced Dr. Raymond Kelly and told the committee Dr. Kelly would present some scientific evidence that should be considered before passing S.B. 180 which, he stated, is fraught with peril.

Raymond C. Kelly, Ph.D., Director of Toxicology, Associated Pathologists Laboratories (APL), told the committee he had 25 years of experience in forensic drug testing and that APL does approximately 250,000 tests per year. Reading from prepared testimony (Exhibit G), he voiced some concerns with on-site kits stating there were over two dozen of these products on the market and only one of those had been discussed today. He said they do not all perform the same with a great deal of variability from one product to the next and explained, without specifically addressing the Roche product, how the kits work. An interpretation is made based on whether a band is present after the test strip has been exposed to the urine, he explained. He continued, in some cases the band being present means the drug is present but in most cases the band being absent means the drug is present. Therefore, he claimed it is an interpretive thing and research has shown there is variability from operator to operator, from kit to kit, and from time to time in terms of whether it is positive or negative. He mentioned there are two kinds of errors one can have with any kind of an analytical method; false positive and false negative. False positive being more serious, he explained, because it is like accusing someone of being a drug user who is not a drug user. He noted false negatives create a situation where an employer hires someone who is a drug user who should have been screened out at the front end.

Dr. Kelly concurred with Ms. Foley’s remark regarding the accuracy of on-site devices having a exceedingly high incidence of both false positives and false negatives. He clarified not necessarily in the same kit but amongst some two dozen products on the market, there is inaccurate performance in both directions. He mentioned with third-party laboratory testing there is an unbiased setup whereas a company testing its own employees may apply those tests in some sort of biased fashion. Dr. Kelly claimed employment drug testing is a litigious area and said the validity of a result might have to be defended in an adversarial setting such as a court setting, an arbitration or workers’ compensation hearing. To that end he continued, you have to be able to bring to the table a package of evidence that explains the test result. In the case of on-site testing, he stated, it will involve two different entities and a more complicated chain-of-custody process. Despite the fact the person conducting the test will have some sort of training, it would be difficult to match that training with the kind of experience, background and education of someone working in a laboratory- based program. He told the committee a positive result using an on-site kit was not a true positive until it has been confirmed by a state-of-the-art method such as GC/MS. He suggested if this legislation is passed, a significant financial penalty should be included for failure to do the confirmation.

Dr. Kelly pointed out there was no provision in the bill for individuals conducting on-site testing to be regulated similar to the way forensic urine drug-testing laboratories are now regulated. He gave as an example his own laboratory which was inspected seven times last year by groups of expert toxicologists who looked at security, qualifications of personnel, methodology, standard operating procedures, equipment, etc. He noted adequate performance in all of those areas had to be maintained in order to retain certifications.

Mr. Hillerby expressed his concern regarding advertisements he had observed in sheltered bus stops in Las Vegas promoting the ability to help individuals beat their drug tests. He pointed out if an individual can beat the drug test in this kind of screening, that individual will be on the job site and not only be a threat to himself but to the people around him. He asked Dr. Kelly about the capability of the screening test to catch any adulterated specimens. Dr. Kelly stated on-site drug-testing kits would not detect adulterated samples.

Lawrence P. Matheis, Lobbyist, Nevada State Medical Association, expressed opposition to S.B. 180 and noted this was in concurrence with correspondence received by the committee from both the president of the College of American Pathology and the Nevada Society of Pathology (Exhibit H).

Samuel P. McMullen, Lobbyist, Retail Association of Nevada, and Nevada Self-Insurers Association, stated he wished to go on the record as being opposed to S.B. 180 and added the current laws are adequate.

Chairman Townsend closed the hearing on S.B. 180 and opened the work session. (Exhibit I) outlines the various proposed amendments to all of the bills to be discussed during the work session.

Kevin Higgins, Chief Deputy Attorney General, Fraud Control Unit for Industrial Insurance, Office of the Attorney General, stated the basic change S.B. 175 would bring about would be to make it a felony rather than a misdemeanor for an employer to be without insurance for a worker who is killed or incurs a serious injury on the job. There have been several circumstances, he explained, where employers were grossly negligent in not having insurance and employees were killed and the only thing the attorney general’s office could charge them with was a misdemeanor. This bill would also allow the attorney general, he continued, to extradite people from out of state and it also includes fines and penalties to recoup the money to the uninsured employer’s fund.

Chairman Townsend opened the work session on S.B. 38.

Lenard Ormsby, General Counsel, Employers Insurance Company of Nevada, stated the amendment on page 2, line 27 allows Employers Insurance Company of Nevada (the system) along with a private carrier, to provide industrial insurance for an organization or association of employers. He said line 33 on the same page, which was overlooked at the time Exhibit I was prepared, adds the same amendment simply adding the system along with the private carrier.

Chas R. Nort, Lobbyist, Union Plaza, and E G B N DBA Las Vegas Club, stated the proposed amendment, shown on Attachment A-2 of Exhibit I would alleviate a large volume of appeals being filed with the Hearings Division of the Department of Administration after a claim is closed. He explained when an individual brings a document to the Department of Administration, the administration is mandated to file it as a request for hearing. By adding "without appeal rights" to section 5 of S.B. 38, this issue would be alleviated.

Scott M. Craigie, Lobbyist, Alliance of American Insurers, and Liberty Mutual Insurance Group, referring to Attachment A-3 of Exhibit I and pointing out the second section of the first page, stated the entire piece of language did only one thing. He said it moves the responsibility of certifying and thereby regulating employee leasing companies out of the system and over to the administrator of the Department of Industrial Relations (DIR). He added all of the regulatory requirements remain. He then referred back to the first section of Attachment A-3 and stated it was unnecessary, and was only proposed, because some people might find comfort with the assurances it provided.

Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry, concurred with Mr. Craigie stating the issues proposed in the amendment to section 3 were already in the statutes and would be redundant.

Chairman Townsend opened the work session on S.B. 42.

Mr. McMullen stated Nevada Self-Insurers Association would like to ensure that first, the current legislation does away with the opportunity for any further claims to be filed with the subsequent fund. He suggested July 1, 1999, as an appropriate cut-off date. Second, he added the subsequent injury board and fund would continue to operate for all existing claims for at least through the next legislative session, when it would be looked at again for any opportunities that might present themselves. At that time, he said, more will be known about annuities and the status of those subsequent claims.

Thomas G. Stamos, C.I.C., Lobbyist, President, Workers Compensation Consultants Inc., Nevada, told the committee he had been in the insurance industry continuously since 1974 and said this same legislation happened in California 20 years ago. He stated there are rules already covered by the National Council on Compensation Insurance (NCCI) guidelines and questioned whether or not NCCI had been consulted regarding any of the changes in S.B. 42. He stressed Nevada accepts and has adopted those guidelines and urged the committee "if we are going to be an NCCI state, let’s [let us] be an NCCI state and not try to have two sets of rules." He maintained "if you start making these amendments and changes and ifs and whereas’ and pursuant to, I guarantee you, you will be dealing with workers’ comp issues again and again. We will be up here every 2 years taking up all 120 days."

Senator O’Connell told Mr. Stamos that NCCI was a part of the interim committee hearings consisting of ten meetings over an 18-month period. She said NCCI had a part in the language in the 15 bills under consideration and what was brought to the committee during that period was not controversial as far as NCCI was concerned.

Mr. Stamos replied he did not realize but was glad to hear that NCCI was a part of that process.

John F. Wiles, Division Counsel, Division of Industrial Relations, Department of Business and Industry, stated individual members of the Board for the Administration of the Subsequent Injury Fund for Self-Insured Employers had expressed to him a concern regarding S.B. 42. He said they wanted to make sure it was done correctly to bring the subsequent injury funds to a conclusion. He noted he would be willing to work with Mr. McMullen and the committee to make sure a suitable amendment could be proposed to make sure those funds would be brought to an appropriate closure.

Chairman Townsend closed the work session on S.B. 42 and opened the work session on S.B. 44.

Eloise Koenig, Self-Insurance Coordinator, Workers’ Compensation Section, Division of Insurance, Department of Business and Industry, referred to Attachment B-1 in Exhibit I and stated this was an amendment she had proposed and said it was satisfactory as written.

Daryl E. Capurro, Lobbyist, Nevada Motor Transport Association, stated his clients are in full support of Ms. Koenig’s proposed amendment to S.B. 44.

Mr. McMullen stated on behalf of Retail Association of Nevada he was also in support of the proposed amendment to S.B. 44.

Chairman Townsend told the committee he would hold Amendment No. 2, and then addressed the third amendment to S.B. 44, proposed by Mary Lau.

Mary F. Lau, Lobbyist, Retail Association of Nevada, referring to Attachment B-3 of Exhibit I stated she had reviewed the amendment and it was worded correctly.

Chairman Townsend opened the work session on S.B. 53.

Roger Bremner, Administrator, Secretary, Advisory Council to the Division of Industrial Relations (DIR), Department of Business and Industry, said the amendment shown in Attachment C-1 of Exhibit I had been proposed by DIR. Subsequently, he said, an amendment was offered by James Wadhams to which DIR was not in agreement; and, as a result, DIR was willing to withdraw their original amendment and go with S.B. 53 as drafted.

Mr. Wiles clarified there would be no objection to the committee proceeding on the basis of DIR’s original amendment which was agreed to by the self-insured employers and the State Industrial Insurance System. He pointed out there were, therefore, two options.

Jeanette K. Belz, Lobbyist, American Insurance Association, and Nevada Independent Insurance Agents, stated after reviewing Mr. Bremner’s amendments and proposing changes, she found that Mr. Bremner was withdrawing his amendments and going back to the original bill. She said because all of her comments were based on his amendments, she would need to go back and look again at the original bill.

Chairman Townsend asked if Mr. Bremner’s amendments were not withdrawn, what problem would Ms. Belz have with the original amendment. Ms. Belz replied there were some issues to which she and Mr. Bremner had agreed in subsection 2, paragraphs (c), (d) and (e). She said it would make it clearer if only one of those options were required by placing "or" between paragraphs (c), (d) and (e), because what is being asked for is an identification number being supplied by several different groups. Each individual group would have to supply the tax identification number in paragraph (c), paragraph (d), or paragraph (e).

Mr. McMullen said the intent of those provisions is to make sure the identifying numbers from not only the insurer, but also from the employer, is captured. He claimed as long as the amendment is passed with that understanding, there should be no problem with Ms. Belz’s proposal.

Ms. Belz suggested in paragraph (e), rather than the tax identification number of the insurer, the National Association of Insurance Commissioners’ (NAIC) number would be used for those groups that do not belong in paragraph (c) or (d).

Chairman Townsend asked why two different means of identification was necessary. He said it made no sense to him why you would have one for one group and a different one for another. Ms. Belz replied she was not understanding of all of the nature of all of the data submitted, but would go back to her clients for clarification of the issue.

Chairman Townsend asked Mr. Wiles if Ms. Belz’s suggestion regarding paragraphs (c), (d) or (e) was appropriate and Mr. Wiles acknowledged that, on the surface, it did not appear to be a problem.

Ms. Belz referred to subsection 2, paragraphs (l) and (o) of Attachment C1 to Exhibit I and suggested deleting those paragraphs because according to her client’s members, that information is not captured in order to be able to do the reporting.

Mr. Craigie concurred with the deletion of paragraph (l) because if it were required, every private carrier that comes to Nevada would have to redo their program for reporting.

Mr. Wiles stated this was information designed to be useful as a tool for the insurers in this state, but if the self-insurers, the self-insurer groups, and the state industrial system do not believe it is needed, DIR can remove it as a requirement. The private carriers raised this issue, he added, and it is a product for them so they need to tell us what is useful for them.

Mr. McMullen clarified for the record:

Ms. Belz stated paragraph (o) does more than just say whether or not the claim has been closed.

Mr. Stamos said any carrier coming into Nevada would already have data and procedures in place that would cover the areas that serve their needs. He suggested it be approved by the insurance commissioner prior to admitting a carrier into the state. The real issue here, he stressed, is self-insurers and the data they will be required and suggested that be covered in granting their certificate of authority. He explained the insurance commissioner’s office or the regulatory board they appoint would assure that any self-insurer has the adequate procedures in place to deal with these requirements. Any qualified third-party administrator (TPA) would have these procedures in place, he added, and said he did not want the committee to be involved in overkill.

Chairman Townsend told Mr. Stamos his point was well taken and said it was not the intent to make insurers obtain information they already have.

Mr. Craigie claimed his clients at Liberty Mutual Insurance Group felt strongly that paragraph (o) should be left in and noted a difference of opinion as to whether or not paragraph (o) is in the current International Association of Industrial Accident Boards and Commissions (IAIABC), Version One. He said Dave Dixon who is the expert for Liberty Mutual Insurance Group told him it is not only a part of the system but is essential.

Mr. Craigie suggested getting IAIABC and Mr. Dixon together to get an answer on which everyone could coordinate, and added that information coming before these two groups is usually very consistent.

Ms. Belz agreed there seemed to be an inconsistency since she had a document which had been e-mailed to her by one of the IAIBC members saying paragraph (o) is not captured in the IAIBC, Release One.

Mr. McMullen stated, "Just for the record, if there is any question about the detail under that, I think the important point, if there is an important point, is that the claim is closed. How it was closed may not be as critical."

Chairman Townsend excused the individuals who had testified on S.B. 53 from the hearing room to try to come to an agreement on the bill in the following hour. He said the committee would decide on it one way or another at that time. He opened the work session on S.B. 54.

Chairman Townsend opened the work session on S.B. 55.

Crystal M. Lesbo, Committee Policy Analyst, Research Division, Legislative Counsel Bureau, told the committee S.B. 55 had been completely replaced with the language shown in Exhibit I, Attachment D-1. She said essentially it removes all references to the appeals panel and deletes section 6, subsection 2 in the original book, which had to do with delegating the clerical duties of the appeals officer and the hearings officer.

Bryan A. Nix, Senior Appeals Officer, Hearings Division, Department of Administration, noted section 2 of the proposed amendment requires a hearing or appeals office to prepare their own decision. He stated he has no problem with that concept and acknowledged hearing and appeals officers in Carson City prepare virtually all of their own decisions. There is a significant workload difference between Carson City and Las Vegas, he pointed out, with Las Vegas hearing and deciding almost twice as many cases per appeals officer. In Las Vegas, he continued, without the necessity of preparing their own decision, the appeals officers are capable of keeping up with their caseloads and getting the decisions out in a timely manner. But that does mean, he stressed, they write to the attorney who prevailed in the case, set forth the reasoning behind their ruling and have the attorney prepare the decision. Mr. Nix stated it has only been controversial in a couple of situations and said most parties who contacted him could not understand why it was an issue. He told the committee if they did decide to leave this in the bill, subsection 2 presented some issues where it prohibits the hearing or appeals officer from soliciting or more importantly, from accepting, findings of fact. If an appeals officer prepares a decision, he explained, and inadvertently leaves out a finding of fact crucial to the case, this would prohibit a party from bringing it to the attention of the appeals officer. He said presently when a decision is prepared for an appeals officer, there is a period of time to object to the findings submitted in the decision and the appeals officer has an opportunity to take any appropriate action. He maintained any judge should have the opportunity of having a party submit a statement to the court explaining that something crucial has been left out of the decision.

Mr. Nix referred the committee to section 6 on page 4 noting the section dealt with issues concerning evaluating the appeals officers to determine if they are meeting certain preestablished standards of performance. Those standards are based on regulations to be adopted, he acknowledged, but said they essentially require the senior appeals officer to determine if the other appeals officers rendered their decisions consistent with legal authority. Mr. Nix voiced his opinion stating this provision is unnecessary because there is a process already in place; that being an appeal to the district court. Furthermore, he said a senior appeals officer’s opinion of whether or not another appeals officer rendered a proper decision is certainly subject to question, as is a district court judge’s opinion. Even judges among themselves do not always agree that a case was decided properly within the language of the law. Therefore, creating within our division, he stressed, a requirement to determine if these cases have been properly decided, is going to be expensive and probably will not serve a real purpose. He maintained evaluating an appeals officer based on his reversal rate at the district court does not necessarily make sense, because further court may review it and come up with a different conclusion.

Mr. Nix noted section 8 on page 7 removes the power of the Governor to appoint appeals officers, and places that power with the director of the Department of Administration. He suggested if that is what the committee decides to do, rather than making these a term appointment, allow the director of the Department of Administration to appoint the appeals officers and remove the term limit.

Referring to the second part of section 8 on page 8, Mr. Nix said by limiting the appointment of appeals officers to attorneys with at least 2 years of experience practicing workers’ comp law, the scope of the kind of people we can bring in is extremely limited. As a matter of fact, he continued, several of the sitting appeals officers would not have qualified for appointment and in addition the field would be narrowed to either State Industrial Insurance System (SIIS) attorneys or Nevada Attorneys for Injured Workers (NAIW). He stated not many attorneys in private practice are interested in this job since it does not pay nearly as well, and added there are very good attorneys out there who may not have 2 years of background in workers’ compensation.

Chairman Townsend suggested that perhaps the requirement should be changed to consider areas such as health care or insurance rather than strictly compensation. Mr. Nix agreed it would be a broader criteria which he said would be more appropriate than limiting it to just workers’ compensation.

After some discussion regarding section 9 where it requires the appeals officer to "give notice of his decision to each party by mail," it was agreed upon to add, "unless other arrangements have been made."

Mr. Nix pointed out section 11 requiring the director to adopt regulations governing the conduct of the appeals officers, and noted the appeals officers are already subject to the codes of professional responsibility and judicial conduct. To create a separate body of regulation, he declared, addresses a problem that does not exist and said, by creating a panel for complaints, you are inviting complaints. He said if there is a true issue with the conduct of an appeals officer, then the complaint should be filed with the ethics or judicial board and if they are not performing their job, they should not be reappointed or should be removed from office at an appropriate time. Concluding his remarks, Mr. Nix voiced his hope that the committee would not pass S.B. 55.

Senator O’Connell suggested Mr. Nix read the minutes of the session of the interim committee who came up with the proposal regarding the regulations governing the conduct of hearing officers. She said he was perhaps too close to his people and stated this was a very broad issue of discontentment among the business community. She told Mr. Nix he apparently was not aware of all of the concerns and maintained that reading the minutes might help put this bill in perspective.

Mr. Nix testified he was aware of a discontentment but said he does not believe there is much that can be done, as long as appeals officers have the power to rule, to stop discontentment. He pointed out because it is a controversial business wherein they decide cases that cost people money, those people will be discontent when they think they are right, but lose their case. He said in his opinion, while he realizes there are inconsistencies as far as decisions are concerned, they are not on any broad level deserving legislative attention.

Mr. Craigie suggested, based on the preceding conversation, going forward with a bill but honing it down to what is listed in section 3. He concurred that a regular evaluation cycle for the appeals officers was appropriate. With that, eliminate the term appointments, he explained, and some of what goes on inside that group of appeals judges, might be affected. First of all, he continued, they would get some legitimate feedback from others in the system, and secondly they would know the feedback could result in their being removed from the position. He said removing the term appointments, which would make those people more vulnerable, and feedback from others in the system, would be two key components that would be a reasonable middle ground.

Mr. Nix said while he appreciated Mr. Craigie’s remarks, to make a judge vulnerable would also make that judge subject to influences. He stressed no judge should be subject out of fear of their employment, to make rulings other than based on the facts and evidence as they see them. He stated he does not necessarily oppose Mr. Craigie’s idea, but his concern was if you make him too vulnerable, you may have a judge who feels he has to rule based on what is politically correct, or popular, rather than as he sees the particular case.

Mr. McMullen said the main thrust of S.B. 55 is to get some real supervision and evaluation by the people in the division and not anyone else. He declared it should not be politicized, nor should there be any vulnerability with respect to the quality of the opinions, and added this bill was a product of a great deal of conversation. He referred to tab D under section 2 of Exhibit I and said the key issue there was to stay away from a situation where someone could ask someone else to draft those things for them and not to prevent anyone from commenting on the decisions.

Chairman Townsend, requesting a response from Mr. Nix asked:

Mr. Nix replied:

Mr. McMullen stated:

Chairman Townsend asked if in a million dollar civil case, the district court would ask the prevailing party to write the opinion. Mr. McMullen replied, "Oftentimes."

Daniel L. Schwartz, General Counsel, Nevada Contractors’ Network, stated he was a private attorney who represented primarily employers, but said his firm also practiced in district court. He said in answer to the chairman’s question, if it were motion practice, 99 percent of the time all they get is a little pink slip from the district court in southern Nevada simply stating whether the motion was granted or denied. He told the committee the only problem he had with the bill was in section 2, with respect to a hearing or appeals officer having to write their own decision. He reiterated Mr. Nix’s concern regarding the excessive workload in southern Nevada. He said it was just not realistic to expect the appeals officers there to write long decisions that bring forth all of the facts and conclusions of law when they simply do not have the time.

Mr. McMullen stated this is not the major issue of the bill and suggested changing the language in section 2 to state the appeals officer shall offer the decision and fully explain the reasons for that decision. He said the basic idea was to make sure the officers focused on a decision and not just do a one liner. He pointed out the evaluation issue with which Mr. Nix had concerns and stated the purpose is not to get into each case and look at the decision but rather to get some statistical information. He stated to that effect, the language on page 4 was pretty clear. Further he noted, evaluation of job performance is clearly proposed in the bill but not necessarily anything interfering with decision making.

Referring to section 8, page 7, Mr. McMullen said there would be no problem with retaining the Governor as the appointing authority. He maintained the purpose there was to make sure, at a certain time, a possible need for a reappointment was considered and for someone to look at the quality of those individuals. On page 8, he continued, the requirement for an appeals officer to have experience in claims for compensation was actually meant to make sure that officer had more than just 2 years of practicing law. That language, he suggested, could be changed to say "or similar qualifying experience."

Vice Chairman O’Connell stated while Mr. Nix had presented some valid points that needed to be addressed, she did not want to see that much of a change in the bill. She suggested Mr. McMullen get together with Mr. Ostrovsky and Lynn Grandlund to see if they could come up with some acceptable language. The subcommittee, who consisted of Senator Townsend, Senator Carlson and herself, could then revisit S.B. 55. She then opened the work session on S.B. 76.

Mr. Ostrovsky told the committee he had participated in the subcommittee meeting along with Senator O’Connell, some people from the labor commissioners office and the Department of Business and Industry. He said the subcommittee did not see a need for the bill since as far as they could determine, there had never been a case or an incident involving such a need.

SENATOR SCHNEIDER MOVED TO INDEFINITELY POSTPONE S.B. 76.

SENATOR SHAFFER SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

* * * * *

Chairman Townsend explained that S.B. 92 simply adds "occupational diseases" to all of the provisions to make it consistent and was proposed by the Legislative Counsel Bureau.

Chairman Townsend went over the proposed amendments to S.B. 133 under tab G of Exhibit I and asked if anyone would like to comment.

Ms. Molasky-Arman explained the reason for her proposed amendment, Attachment G-1 of Exhibit I, was to make it expressed that the commissioner may adopt regulations. She said the commissioner does not have express regulatory authority under the Industrial Insurance Act and in many cases it had to be inferred.

Mr. Capurro told the committee he had met with the insurance commissioner’s office and discussed his amendments contained in Exhibit I, Attachment G-2, items 1, 2 and 3. He mentioned the commissioner’s office had expressed some concern with respect to how it would be applied and the possibility of running afoul of having someone who would not be a party to the association of self-insured employers involved. He explained Nevada Motor Transport Association would only come in a contractor-controlled program where it might have only members of the association involved in the project, so it would be a very narrow area for consideration. Also bear in mind, he added, the insurance commissioner’s office has control over whether that sort of thing can be done anyway. Mr. Capurro said if the committee decided that issue would be best left for another time, he would not be overly concerned, but claimed items 4 and 5 were very important. These, he noted, deal with deleting the provisions regarding rolling wraps. Even though those provisions of the bill would not become effective for 2 years, the commissioner’s office will have their hands full just implementing three-way insurance starting July 1, and dealing with Owner-Controlled Insurance Programs (OCIPs) and Contractor-Controlled Insurance Programs (CCIPs). He maintained that issue should be subject to legislative review again next time as a separate issue and not preapproved for 2 years from now. He asked the committee for its serious consideration to adopt at least that portion of his proposed amendments.

Jack Kim, Lobbyist, Sierra Insurance Group, stated he had a problem with items 1, 2 and 3 of Attachment G-2 of Exhibit I.

Mr. Czehowski told the committee over a year was spent putting S.B. 133 together and they had some difficult meetings in order to reach a consensus. He declared that what the committee had before them prior to these amendments was a consensus.

Chairman Townsend asked him if that meant any change would affect that agreement. Mr. Czehowski agreed that is what he meant except for what the insurance commissioner had recommended.

Chairman Townsend asked Mr. Czehowski if he had a problem with items 4 and 5 of Attachment G-2. Mr. Czehowski said if he understood items 4 and 5 correctly, it would be putting a total halt to rolling wraps. He pointed out there had been an agreement to start out with basically a 2-year moratorium on rolling wraps. Therefore, he voiced his preference to stay with the consensus of the committee that brought the bill forth.

Mr. Capurro stated so far as he knew, rolling wraps were taken completely out of the consideration by the interim committee and added, many had not seen the ‘agreed upon’ document until the day of the hearing on the bill. He insisted he was not aware that rolling wraps were back in and maintained he was not breaking faith with anyone with respect to that issue. He told the committee he thought they should take the next 2 years to look at how wraps, OCIPs and CCIPs work before moving on to the next level. He said, "I think we are trying to bite off more than we can chew to include them in this law."

Chairman Townsend asked Mr. Capurro where Nevada Motor Transport Association was dealing with OCIPs and CCIPs. Mr. Capurro said many of the members of Nevada Transportation Network’s self-insured groups were contractor transporters with a significant fleet of vehicles. He noted they were homogeneous with respect to the group but because they were contractors, they were impacted.

Chairman Townsend suggested this might give them more opportunity to do things to control their own destiny. Mr. Capurro replied this was not the case. He said in an OCIP or a CCIP, the assessments charged to members of the group would be backed out for these projects. In other words, he continued, the group itself would not receive assessments with respect to the group, which would have a negative impact because they have to back out their workers’ compensation assessments in order to participate in the bidding process. He continued:

Mr. Craigie stated that at some level he was also speaking for the consensus group who put this bill together. Referring to section 10 on page 3, lines 30 and 31 of the bill, he claimed this was not an add-on but had been in the bill originally even as prefiled and had never been taken out. He said the way the bill is written, rolling wraps would not be applicable for the first 2 years during which it would be learned how these are going to function and do it in the most controlled environment. This will be a transition period, he added, after that, if there are problems, it can be decided how to go forward.

Mr. Capurro said he fully understood and stressed it was exactly what his proposed amendment addressed, eliminating section 10 and associated subsection 2 and 3 of section 24. He reiterated Mr. Craigie’s testimony on the issue of having the next 2 years to see how OCIPs and CCIPs will work in this environment. He pointed out if everything works right, the next legislative session could present a bill to argue for the inclusion of rolling wraps. He concluded it would not be good legislative procedure to preapprove something without having some idea on how wraps are going to work in the interim period of time.

Senator O’Connell stated the argument Mr. Capurro was putting forth was an issue the interim committee went over in approximately four meetings and the consensus of the team was the result of "nose-to-nose, fist-to-fist" debate. The whole committee worked this out, she insisted, and because of the fact they were able to come to some agreement, she said she had to respect that agreement.

Mr. Wiles proposed an amendment which he said had a broad base of support and consensus (Exhibit J) and provided the appropriate regulatory oversight between the commissioner of insurance and the DIR. In clarifying a mistake on the proposed amendment he said, "Where it says ‘amend section l2(3)(a) as follows,’ that actually should be ‘amend section 12(3)(a) and (b)’." The next part, he continued, would insert the principal contractor who administers a CCIP and the owner of a construction project who administers the OCIP into an existing statutory framework. This would make it consistent, he said, so all of the entities that play a role in handling or processing a claim of workers’ compensation are mentioned.

Mr. Craigie concurred and stated the plan followed the direction given by the committee at the last hearing.

Mr. Capurro referred to Exhibit I, Attachment G-3, and stated the language in the proposed amendment was from general guidelines on wrap-up insurance in Nebraska. He explained in those states allowing OCIPs and CCIPs, it is not uncommon to have what is referred to as a noncoercive clause. The idea, he said, is to save money by being allowed to retain insurance with a lower rate.

Mr. Craigie told the committee the proposed amendments shown on Attachment G-4 of Exhibit I were pieces that were in controversy at the last hearing and had been worked out among all parties. The first one, he said, was to add the issue of "specified duration" to the definition to make it clear that it is time-specific.

Mr. Craigie explained the reason behind the proposed amendment to section 11. He said there was an issue about whether the insurance commissioner should rule on every amendment to a contract and how the regulatory lag would affect it. He declared the commissioner would review the original contract and all amendments to that contract would have to go through her. He maintained this way, there would be no delays unless an issue arose that needed to be dealt with by the commissioner.

Mr. Craigie said the proposed amendment to section 12, subsection 3 was to make it clear that the safety coordinator must be hired by the person in charge. He explained section 14 had been removed since it was language that was in the very earliest version and no longer consistent with the direction of the bill. Finally, he said the last proposed amendment just added the word "approved" to indicate the obligation to pay all "approved claims" rather than just "all claims."

Chairman Townsend told the committee S.B. 133 would be left for another day and reopened the work session on S.B. 53.

Amy Halley Hill, Lobbyist, Nevada Self-Insurers Association, told the committee the individuals who had testified earlier on S.B. 53 had come to an agreement and furnished members of the committee with copies of the agreed upon changes (Exhibit K).

There being no further business, the meeting adjourned at 10:50.

RESPECTFULLY SUBMITTED:

Ardyss Johns,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

DATE: