The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:45 a.m., on Tuesday, March 9, 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 Alice Constandina (Dina) Titus, Clark County Senatorial District No. 7

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

John L. Meder, Committee Policy Analyst

Ardyss Johns, Committee Secretary

OTHERS PRESENT:

Chairman Townsend opened the meeting with the introduction of Bill Draft Request (BDR) 57-1418.

Paula Berkley, Lobbyist, Truckee Meadows Human Services Association, reading from prepared testimony (Exhibit C), told the committee her client was comprised of 45 nonprofits from Washoe County and rural communities. She said they joined together in a larger coalition named Citizens for Blue Cross/Blue Shield of Nevada Conversion Equity which included a number of other coalitions such as the Nevada Health Care Reform Project, the Southern Mental Health Coalition, the Community Unity Coalition, the Association for Retired Citizens, the Coalition of Human Services, and so on. She surmised this was the largest coalition of nonprofits ever put together over a single topic. The main reason for this, she explained, is because nonprofit organizations fight so hard and usually compete against each other in order to provide services for the needy. So, she continued, when they see dollars slipping through their fingers or when they see an opportunity to gain some dollars for which they do not have to compete against each other, they become very motivated. She stated S.B. 12 was an attempt to do two things. The first, she maintained, was to prevent Colorado citizens from being unjustly enriched with the assets of Nevada citizens and the second was to provide a model in Nevada law governing the conversion of nonprofit organizations to for-profit. This law, she noted, would involve the interest of parties, subscribers, nonprofit organizations and health care professionals.

Ms. Berkley claimed the bill was narrow in focus because the coalition realized a 120-day session would limit time and/or opportunity to hear, amend and negotiate with all the potential interested parties. She said the coalition wanted to focus on the dollars that were immediately "at risk" of being lost forever, those due to a potential Blue Cross/Blue Shield (BCBS) conversion from a nonprofit to a for-profit corporation. This focus, she maintained, makes S.B. 12 both practical and effective.

Ms. Berkley called attention to a chronology of events attached to Exhibit C and highlighted the details from the nonprofit point of view. She said that on December 9, 1996 the Nevada insurance commissioner held a hearing on a proposed merger between BCBS of Nevada and BCBS of Colorado. No subscribers or nonprofit communities were made aware of this hearing, she explained, because there was no statute like S.B. 12 in which it would be required. Not one subscriber or nonprofit attended the meeting, she declared, and the Nevada Legislature was also not notified.

Ms. Berkley pointed out that Colorado passed, with BCBS’s support and the active participation of the nonprofit community, "model" conversion law to ensure that Colorado BCBS assets were preserved. She said Nevada’s insurance commission would only allow discussion of the actual merger details and did not allow any testimony on the upcoming conversion, despite repeated requests by the deputy attorney general. The BCBS attorney, she maintained, objected repeatedly when the deputy attorney general insisted that the conversion was germane to the merger and the commissioner repeatedly upheld BCBS’s objection. She declared in her view, this paved the way for the assets of Nevada citizens to be turned over to Colorado.

Ms. Berkley asked the committee to note the hearing was December 9, the effective date was December 31, the deadline for judicial review was January 12, the conversion plan was announced on January 13 and the Nevada legislative session began January 15. If this whole process had been delayed by 1 month she stressed, the Legislature, the nonprofit communities, the subscribers and all interested parties might have been able to address this issue before Colorado statute took hold. In July 1997, she continued, Nevada nonprofits learned of the impending conversion and searched for ways to retain Nevada’s rightful assets. She said Consumers Union of United States Inc. representatives agreed to hold a training session for nonprofits to give them an idea of what other nonprofits had done in other states and on other BCBS conversion attempts across the nation. Among other things, she explained, they watched an episode of the television show "60 Minutes" which described how in multiple states, BCBS was attempting to avoid setting aside nonprofit assets in foundations. She claimed the show also described how conversions often provided incredible "golden parachutes" to BCBS board members who should have been exercising their responsibility to their subscribers and communities.

Ms. Berkley testified that after a series of petitions and correspondence, the Colorado insurance commissioners ordered BCBS of Nevada to hold a hearing allowing subscribers and the public to comment on the impending conversion. BCBS heard testimony from 27 different witnesses, she declared, and never responded to any of the concerns in any way. She said BCBS maintained they were not a charitable trust and therefore were not required to create a foundation. They also maintained, she added, that the Nevada BCBS had no assets to put into a foundation and that once the merger was done, they were no longer accountable to the concerns of the nonprofits. Basically, she continued, the Colorado insurance commissioner stated that Nevada had lost its chance, once the merger was approved.

Ms. Berkley said that last year the nonprofits became aware that, for "market reasons," BCBS of Colorado stopped the conversion process, which gave the nonprofits a new opportunity; and, therefore, S.B. 12 was created. She pointed out since the conversion process was suspended, a new Governor was elected in Colorado and it is expected that a new insurance commissioner will be appointed. She stressed if this bill is in place when a conversion process starts again, Nevada should be in an excellent position to protect its assets. Basically what S.B. 12 says, she explained, is if BCBS of Colorado or any other like insurance company wishes to do business in Nevada, any assets accrued in Nevada must be separately valued by the attorney general’s office. And, she continued, all of those assets must be retained in a Nevada trust foundation dedicated to serving Nevada health care needs.

Ms. Berkley stressed the main intent of this bill was to preserve Nevada assets. She said it would recapture assets that might have been lost when BCBS of Nevada ignored their fiduciary responsibility. She told the committee if insurance companies chose to register as nonprofits it is because they saw some business advantage to doing so. She asserted if those companies now choose to become for-profit in order to take advantage of some business advantage, they should be allowed to do so only after protecting the nonprofit assets.

Mary Ann Cryan, Lobbyist, Staff Attorney, Consumers Union of United States Inc. (Consumers Union), told the committee Consumers Union was the nonprofit publisher of Consumer Reports magazine whose mission is to advance the interests of consumers by providing information and advice about products and about issues affecting their welfare, and by advocating a consumer point of view. She said the West Coast Regional Office of Consumers Union has monitored the conversion of nonprofit health care institutions to for-profit status for nearly 15 years. She pointed out at stake in health care conversions are both the community’s nonprofit, charitable assets, and the delivery of health care services.

Ms. Cryan stated that in 1996, Consumers Union and Community Catalyst, a nonprofit advocacy organization focused on health care issues and established the Community Health Assets Project (Project). The goals of the Project, she continued, are to protect nonprofit charitable assets and to ensure that community-defined health needs are addressed in health care conversions. She said Project staff assist and provide technical advice on conversions to consumer groups, legislators and regulators across the country. She noted they are currently providing assistance in more than 25 states on nonprofit conversions in the health care sector. Project staff, she stressed, are familiar with the history of BCBS entities, the changes in the health care marketplace that have altered the operation of nonprofit health insurers, and the relationship between these nonprofit charitable entities and the national Blue Cross/Blue Shield Association.

Ms. Cryan testified that upon learning of the merger of BCBS of Nevada with BCBS of Colorado, local Nevada organizations sought Consumers Union’s assistance in their efforts to monitor the merger and the proposed conversion of BCBS of Colorado to for-profit status. At the Nevada group’s request, she stated, Consumers Union provided them with legal analyses, technical assistance, and training on the issues involved in nonprofit to for-profit conversions.

Ms. Cryan told the committee the merger of BCBS of Nevada and BCBS of Colorado, and the proposed conversion of BCBS of Colorado to for-profit status, are part of a national trend of consolidation and restructuring in the health care sector. She noted the number of conversions has increased dramatically during the last two decades; pointing out that in 1981, 82 percent of the nation’s health maintenance organizations (HMOs) were nonprofit, dropping to 29 percent by 1995. She said the number of BCBS plans involved in conversion activity has expanded rapidly. She explained only a few years ago, 3 plans had completed conversions and at present, over 20 plans have either converted, are in the process of converting, or have made affirmative steps toward conversion. Because of this, she declared, about half of the states have passed conversion legislation, explicitly regulating hospital conversions, insurance company conversions, or both.

Ms. Cryan told the committee that the remainder of her comments would provide background for S.B. 12, summarize the history of BCBS plans nationally and describe how they are grounded in public service. She drew attention to the HISTORY OF BCBS PLANS – NATIONAL PERSPECTIVE (Exhibit D. Original is on file in the Research Library.). Attachment 1 of Exhibit D, she pointed out, gives some history of the special-tax status of BCBS plans and how they differ from that of commercial insurers.

Ms. Cryan said virtually all BCBS plans were originally organized under federal law as "social welfare" organizations. She claimed as the BCBS plans have tried to make the switch from nonprofit corporations to for-profit status, the public interest and the charitable assets at stake have not always been protected, despite certain well-established legal principles. Charitable trust law and the cy pres doctrine, she noted, generally require that the assets of a converting nonprofit health care institution continue to be used for charitable purposes. Referring to Exhibit D, Attachment 2, she said the manner in which these legal principles have been applied to other BCBS conversions has varied dramatically. Some plans fully converted, she explained, setting aside the full, fair market value of the nonprofit plan in charitable health foundations in compliance with the cy pres doctrine. Others, she continued, instead of creating foundations, have transferred charitable assets to the government, which results in few safeguards or assurances that the assets will be used for health-related activities. Still others, she added have converted and avoided their charitable obligations, forcing regulators to conduct "look-back" investigations, which have often resulted in litigation.

Ms. Cryan told the committee that in response to local groups’ request for technical assistance, she had conducted legal research on constitutional challenges that could be made against legislation that regulated conversions of nonprofit hospital, medical-surgical and health-service corporations to for-profit corporations. She said in particular, she considered legislation that would cover both conversions of domestic nonprofit corporations and conversions of foreign (out-of-state) nonprofit corporations doing business in Nevada. She pointed out a copy of her research memorandum labeled "Attachment 3" to Exhibit D.

Concluding her testimony, Ms. Cryan stated Consumer Union’s position was that in Nevada, as in other states, the public has an interest in the nonprofit assets that were held by BCBS of Nevada. However, she explained the Colorado statute governing the conversion of BCBS of Colorado, mandates that the assets of BCBS of Colorado, which now include the assets of BCBS of Nevada, must be distributed to a foundation created for the benefit of the citizens of Colorado. Therefore, she stressed, Nevada citizens will receive none of the assets that result from the conversion of BCBS of Colorado to a for-profit company. She told the committee S.B. 12 seeks to redress this inequity by requiring the value of any nonprofit assets accrued in Nevada be preserved for the people of Nevada. The full fair-market value of any such assets, she maintained, should be transferred to a charitable entity with a broad mission and proper safeguards to benefit the people of Nevada.

Jon L. Sasser, Lobbyist, Washoe Legal Services, testifying in support of S.B. 12, offered prepared testimony as well as an outline of the provisions of the bill (Exhibit E. Original is on file in the Research Library.). He stated after Nevada’s insurance commissioner approved the merger between BCBS of Nevada and BCBS of Colorado effective December 31, 1996, the merged corporation filed a petition with the Colorado commissioner to convert to a for-profit.

Mr. Sasser told the committee that under the model Colorado statute, adopted in Spring 1996 with BCBS’s active support, the commissioner must conduct a rather lengthy public hearing process prior to approving the proposed conversion. At its conclusion, he continued, the nonprofit must transfer an amount equal to its entire value to a new-formed public foundation prior to converting. He said the statute contemplates that the converting corporation will hold an "Initial Public Offering" (IPO) of its stock and turn the proceeds over to the new foundation. Prior to approving the conversion, he added, the commissioner must determine that the conversion is in the best interest of the nonprofit insurer’s subscribers and of the general public.

Mr. Sasser said arguments were made to Colorado Insurance Commissioner Jack Ehnes that Nevadans were entitled to a portion of the proceeds of the IPO. These arguments, he noted, were presented in a brief he had prepared, in a letter from Nevada Attorney General Del Papa and in an amicus curiae brief prepared by the Legislative Counsel Bureau on behalf of the Nevada Legislative Commission. Commissioner Ehnes, he told the committee, rejected those arguments and then last June BCBS requested that the Colorado proceedings be postponed. He said BCBS has been ordered to provide the commissioner a status report by May 15. He added Colorado has elected a new Governor who may replace Commissioner Ehnes.

Mr. Sasser stressed if the Colorado commissioner approves the proposed conversion in the future, all of the value of the merged corporations will be transferred to a newly formed Colorado foundation from the proceeds from the IPO. He said unless the Nevada Legislature, or perhaps a court, intervenes, the full value of that merged corporation, including the portion accumulated over 30 years in our state, will unjustly enrich Colorado citizens at the expense of Nevadans.

Mr. Sasser pointed out that sections 3 through 8 of the bill govern foreign corporations (not incorporated in Nevada) doing business in Nevada, like BCBS of Colorado, who may choose to convert to for-profit corporations after the bill is enacted. As a condition of doing business in Nevada, he continued, such foreign corporations would be required to transfer funds to a charitable trust in an amount equal to the full fair-market value of the nonprofit business at the time of conversion.

Mr. Sasser told the committee BCBS continues to do business in Nevada using the name Blue Cross/Blue Shield of Nevada as a nonprofit corporation. He said BCBS of Nevada is the third largest commercial insurer in Nevada with about 5 percent of the market share, and earned approximately $58 million in premiums in 1997. They also have Nevada’s contract, he added, to do the state Medicaid fiscal agent business which nets them about $6.5 million per year. In addition, he noted, they have the federal employees program in Nevada and a for-profit HMO in Nevada, which has about 1.2 percent of Nevada’s market share.

After going over the provisions of the bill outlined in Exhibit E, Mr. Sasser referred to the last two pages of Exhibit E and noted the proposed amendments to S.B. 12. He mentioned some additional language in sections 7 and 25, lifted from the national model legislation by the National Attorneys General Organization covering the attorney general’s cost, made sure the attorney general received full recovery from the efforts made by that office. He stated section 15 goes over what types of entities are actually covered by the bill and the proposed amendment to section 16 just makes that section more succinct. The proposed amendment to section 23, he explained, was one which Senator Townsend had suggested in order to make sure any money obtained as a result of this legislation was not squandered.

Chairman Townsend wanted to know if S.B. 12 was taking the Colorado law and adapting to it, or if this was Nevada-specific and asked:

Mr. Sasser replied that was the intent of the bill but it does not purport to govern the rules for the conversion of foreign corporations. He said it merely conditions their ability to do business in Nevada. He stressed each state has the right to condition the ability of foreign corporations to do business within its borders. He asserted the bill does improve Nevada’s position in terms of looking at potential conflict between the state laws as to where the money goes, and if this ultimately ended up in court, it would improve our position there, also.

Chairman asked Ms. Cryan if Nevada was alone throughout the country in facing this problem.

Ms. Cryan stated this was the first case she knew of where after an interstate merger, the merged company proposed to convert. There were a couple of other cases, she maintained where plans merged but remained nonprofit. She said this is a unique situation and concurred with Mr. Sasser with respect to not trying to regulate the conversion system in Colorado. Instead, she explained what S.B. 12 is trying to do is give Nevada the ability to impose conditions on a company that converts and then seeks a certificate of authority to do business in Nevada as a for-profit.

Chairman Townsend asked, if approved, how a possible windfall would be distributed. Ms. Berkley claimed section 24 addressed that issue by requiring that the board distributing charitable assets must be from the health care industry as well as a nonprofit community. This, she said, assures that the people on the board have an interest and an expertise in being able to figure out how those funds are distributed. She pointed out that the bill specifically says the for-profit corporation, in this case BCBS, will not decide how the funds are distributed.

Chairman Townsend wanted to know how the members of the board would be chosen. Ms. Berkley said in absence of that being addressed in the bill, she assumed it would be initially set up through the attorney general’s office.

Chairman Townsend stated the attorney general, if the committee decides that is who should be the appointing authority, would have an overwhelming number of applications from individuals wanting to be on this charitable trust. Therefore, he said the mission should be considered and then general categories that ought to be represented should be decided upon.

Lawrence P. Matheis, Lobbyist, Nevada State Medical Association, told the committee the intent of S.B. 12 was really one they should be supporting. He said this is a unique issue where fundamental fairness is brought to the table and on behalf of Nevada and the longstanding goodwill of BCBS, the community through the Legislature needs to make sure Nevadans are appropriately compensated.

Anne Cory, Lobbyist, Great Basin Primary Care Association, reading from prepared testimony (Exhibit F), stated Nevada has tremendous needs for health care and social services. She said Nevada’s population has shocking health-status indicators, and the state government does not have the resources to subsidize health care to assure that treatment and prevention services are available to everyone. Given increased resources, she continued, Nevada could significantly improve the quality of life for countless citizens and for its next generation. She claimed the charitable assets of BCBS were accumulated in Nevada from the benefits the organization received as a nonprofit and those assets belong to Nevadans. If Nevada’s needs were not so great, she stressed we could be generous and watch those resources go to Colorado with no qualms. However, she insisted, the health care needs of Nevada’s population are so pressing and the resources so scarce, it is wrong to allow those funds to leave the state with no accountability. She concluded by telling the committee that the providers of health care for Nevada’s most needy support S.B. 12.

Ruth Mills, Coordinator, Nevada Health Care Reform Project, mentioned the only reason she made the trip from Las Vegas to attend this hearing was because she felt S.B. 12 was an extremely important bill. She read from prepared testimony (Exhibit G) and claimed the Nevada Health Care Reform Project has monitored the merger of BCBS of Nevada with BCBS of Colorado since 1997. Appropriate regulation, she stated, will ensure that the assets of the nonprofit corporation remain in Nevada and are dedicated to the tremendous health care needs of Nevada citizens. She added, with this law, accurate and public valuation of assets will be monitored by the attorney general and appropriate funds set aside in a foundation dedicated to health care needs.

Ms. Mills told the committee that because the trustees of BCBS had always done such a good job of providing quality health care over her lifetime, she thought they were responsible trustees in protecting subscribers. But when they were not willing to benefit subscribers in Nevada from a for-profit conversion, she questioned how they were protecting her interest as a Nevada subscriber. She declared that even though there are fewer subscribers in Nevada than Colorado, Nevada’s growth continues to increase which should mean the value of BCBS is escalating. She concluded by urging the committee not to miss the opportunity to obtain resources for Nevada’s health care needs.

Senator O’Connell asked Ms. Berkley if, since S.B. 12 was going to be amended anyway, she thought it would be appropriate to have a mission statement as a preamble for the bill. Ms. Berkley agreed it would preserve the intent and the spirit, adding at some point in the future the Legislature might want to expand this conversion law to others, so the reason it was enacted will be important.

Jan Gilbert, Lobbyist, Progressive Leadership Alliance of Nevada, told the committee the possible funds derived as a result of S.B. 12 were essential to all of the needs of Nevada, and said it was crucial to make sure the money remains in Nevada. She urged the committee to pass S.B. 12.

Roberta Gang, Lobbyist, Nevada Women’s Lobby, presented a letter dated March 9, 1999 from Sarah Chvilicek and Arley Ann Goris, Co-chairs of Nevada Women’s Lobby (Exhibit H) and stated she hoped the Legislature would do whatever it could to preserve Nevada’s share of BCBS assets when it converts to a for-profit corporation.

James L. Wadhams, Lobbyist, Nevada Association of Health Underwriters, Nevada Association of Life Underwriters, and Blue Cross and Blue Shield of Nevada, told the committee he had been reviewing insurance legislation since 1972 and had never before seen a bill like S.B. 12. He said he found the bill very troublesome in that it sends a terrible signal to the business community. He claimed the intent of S.B. 12 was to take private money and make it public. He explained if an entity happened to organize as a nonprofit, not as a charity, he emphasized, that entity’s private property could be confiscated by the state.

Mr. Wadhams pointed out that the Amended and Restated Bylaws of BCBS of Nevada in Exhibit E presented earlier by Mr. Sasser, stated "On dissolution of the Corporation, after payment of creditors, all of the assets of the Corporation shall be held, used, employed and applied solely for the benefit of those persons who are then subscribers …." He emphasized "subscribers" and stated this is not a charity. He maintained the articles and bylaws are set up so that if this corporation were to have been dissolved, any remaining assets after payment of liabilities go to the people who paid for them.

Mr. Wadhams drew to the attention of the committee a letter dated February 21, 1997 from the Division of Insurance (DIR) (Exhibit I) and pointed out that BCBS of Nevada was formed under the provisions of chapter 81 of the Nevada Revised Statutes (NRS). He noted that nothing in the bylaws suggests that it is a charitable organization or organized for a public or charitable purpose. He then referred to another letter dated March 5, 1997, from Nevada Attorney General, Frankie Sue Del Papa (Exhibit J) regarding the merger of BCBS of Nevada and BCBS of Colorado, in which she states "we conclude that the approval of the merger was appropriate." Also stated in the letter, "After careful scrutiny of the original articles of incorporation, bylaws and amendments, we have determined that BCBS is not a corporation for public benefit, it did not operate as a charitable trust and was not organized for a charitable purpose. At no time in history has BCBS of Nevada held assets in trust."

Mr. Wadhams quoted from a third letter dated September 10, 1997, also from Nevada’s attorney general (Exhibit K), addressed to the Las Vegas Sun, "Nevada BCBS has never operated as a charitable trust and has never held assets in trust." He presented yet another letter from the Nevada attorney general, dated November 10, 1997 (Exhibit L), to the Colorado insurance commissioner in which she said "Although we determined that Blue Cross Blue Shield of Nevada was not a corporation for public benefit subject to the cy pres doctrine,…" Mr. Wadhams reiterated BCBS is not a charity, a fact the attorney general had stated repeatedly, but private property, he added.

Mr. Wadhams told the committee the amendments delete all other reference to any other possible entity. He said there is only one entity to which this could apply and that is BCBS of Colorado, which does business in Nevada as a foreign corporation under a license. He maintained when the Legislature passes a bill that could possibly only apply to one entity, it is called a bill of attainder, which is unconstitutional. Mr. Wadhams stressed BCBS is a commercial enterprise, organized for commercial purposes. "It underwrites insurance and does not take all comers", he said, "and in that regard, it is identical to companies like State Farm Insurance Companies and Liberty Mutual Insurance Group who are also organized as nonprofits under NRS chapter 82 or similar statutes in the states under which they are organized."

Mr. Wadhams claimed the intent of S.B. 12 was to reach back in time and change the legally adopted articles and bylaws and to vest the beneficiaries, as identified in Mr. Sasser’s handout (Exhibit E), of any assets in excess of the liabilities. This, he said, is an ex post facto law, which is also unconstitutional. In addition, he testified, taking private property creates a takings, and when you take private property, due compensation must be paid.

A letter from the Office of the Attorney General dated March 8, 1999 (Exhibit M) was presented to the committee stating their office, in preparation for today’s hearing had consulted with the National Association of Attorneys General (NAAG). Attached to the letter was a copy of proposed model legislation promulgated by NAAG. The letter said although S.B. 12 was not structured identically to the model statute, the bill did provide for the basics. Testimony was not given in conjunction with Exhibit M.

Chairman Townsend said a work session would be scheduled to further consider S.B. 12 and closed the hearing. He opened the hearing on S.B. 253.

Senator Schneider told the committee S.B. 253 was requested by one of his constituents who is president of the Westward Ho Hotel and Casino in Las Vegas and who helped write the bill. He said after meeting with Danny Thompson, Lobbyist for the Nevada State American Federation of Labor-Congress of Industrial Organizations (AFL-CIO), some problems had surfaced and asked that Mr. Thompson address the committee with those issues.

Danny Thompson, stated Roberta West who represents all of the grocery clerks in Las Vegas was going to meet with the gentleman of whom Senator Schneider spoke, to see if they could work out a policy that would address the issue. He said he believed it could be addressed with just a policy rather than a change in the statutes.

Senator Schneider concurred stating his constituent would be happy to meet with Ms. West in an effort to work something out.

Chairman Townsend closed the work session on S.B. 253 and opened the work session on S.B. 271.

Senator Alice Constandina (Dina) Titus, Clark County Senatorial District No. 7, told the committee S.B. 271 would require cable television companies to have public access channels. She said the bill was primarily aimed at Clark County who did not provide access to public television through a cable company, unlike Reno and Carson City. She explained since she proposed the bill, that problem had been remedied. She stated she would be satisfied and withdraw the bill if, for the record, James Spinello from Clark County and Steve Schorr from Cox Communications would tell the committee that the intended needs of the bill would be met.

James J. Spinello, Lobbyist, Clark County, told the committee that he was also speaking on behalf of the Regional Telecommunication Jurisdiction (RTJ) which is an inter-local between the five entities in southern Nevada. He outlined the public television channels that would be provided in southern Nevada. In addition to the single government channel that has been shared with the University of Nevada, Las Vegas (UNLV), he explained, there would be two other channels. The City of Las Vegas, he continued, would control one and the other would be shared by the City of Henderson, Boulder City and North Las Vegas. Mr. Spinello stated a channel designated for community access would become active on January 1, 2000.

Steve G. Schorr, Lobbyist, Vice President, Cox Communications, claimed his company had already set aside a community access channel. He said as a company, he believed access was very important for the community and testified that the company had committed to a total of 11 access channels.

Chairman Townsend opened the work session on S.B. 45.

A work session packet, dated March 9, 1999, giving a brief history of the bills to be addressed and proposed amendments to those bills was distributed to the committee (Exhibit N).

Robert R. Barengo, Lobbyist, Nevada Collateral Loan Association, stated he had spoken with Wallace Beinfeld, who had originally requested S.B. 45 and presented to the committee a letter and proposed amendments from Mr. Beinfeld dated February 26, 1999 (Exhibit O). Mr. Barengo told the committee that Mr. Beinfeld’s proposed amendments basically take away section 1 of the bill, and then go on to define "secondhand dealer" and "trade show." He suggested the bill should also define "location" as "a place customarily used for convention facilities," in order to eliminate the problem of using a hotel room as a location site. He pointed out the amendment does not exempt a person from keeping a logbook of items they have bought or sold so law enforcement officials can see what has been bought and sold, and to where it might have gone.

Senator Schneider submitted proposed amendments to S.B. 45 (Exhibit P) which, he said, were sent to him by the small antique dealers and used bookstore owners. Those amendments, he noted, also required the dealer to keep a book in which must be written in ink at the time of purchase, a description of any antiques, collectibles and/or used books along with the name, address, drivers’ license number and description of the person selling those items. In addition, he explained, the amendment would exempt the dealer from the privilege license procedure required by Clark County so long as they apply for other business licenses.

Alfredo Alonso, Lobbyist, Superpawn, told the committee the intent of the bill was to have everyone licensed under one auspice so if you dealt with secondhand goods, you were licensed under a secondhand license. He said he opposed the amendment submitted by Senator Schneider and suggested instead of being exempt from the privilege license procedure, just making it easier for those individuals to become licensed.

Senator Schneider pointed out that the dealer would still be required to have a work card and would still have to keep a list of everything they buy and sell as well as being required to have a business license.

Chairman Townsend remarked the existing requirements had been in place for quite some time and asked if an ordinance had been changed in southern Nevada that had prompted the need for this bill. He said there are trade shows in and out of Las Vegas regularly, and suddenly there is a problem and inquired how that occurred. He requested that someone from southern Nevada enlighten the committee as to any recent changes.

L. Keith Carter, Lobbyist, Las Vegas Metropolitan Police Department, replied he was not aware of any county ordinance that had recently changed.

Chairman Townsend suggested Mr. Barengo, Mr. Alonso and Senator Schneider meet with Lieutenant Stan Olsen of the Las Vegas Metropolitan Police Department to talk about S.B. 45 and the proposed amendments. He said that perhaps Lieutenant Olsen could be of assistance in arriving at a resolution, by pinpointing changes that occurred to prompt Mr. Beinfeld’s perceived need for this bill. He closed the work session on S.B. 45 and opened the work session on S.B. 85.

Senator O’Connell told the committee Senator O’Donnell had informed her that after having spoken with the nurses who had prompted the bill, he found that the bill was no longer necessary and could be indefinitely postponed at the committee’s discretion. Senator Townsend concurred.

* * * * *

Chairman Townsend opened the work session on S.B. 140.

Richard E. Shrader, Jr., Lobbyist, AAA Nevada Insurance Agency, stated AAA did not object to the spirit in which this bill had been offered and what it was attempting to do to inform the public. He said the nature of his suggested amendments (Exhibit Q) was to attempt to phase in the requirements of S.B. 140 while addressing first of all, the issue of Year 2000 (Y2K) in respect to the computer system. The second issue, he continued, was to implement the changes at a time when it would be most cost-effective. For example, he explained, as maintenance and computer programs changes are done, it would be most cost-efficient to do the changes required by the bill at that time rather than to make those changes to some old systems now at a significant cost. To add the notice required by S.B. 140 now, he estimated, would cost several million dollars. He said the amendment would allow for the first implementation to take effect July 2000 in order to get over the Y2K hump and then to allow, at that point, an option. Either for the insurer to show the calculation on the renewal notice, Mr. Shrader explained, or to use an insert which simply states the percentage of the premium tax that is part of the premium itself. He noted if there was a will on the part of the committee, the best way to resolve this would simply be to allow the insert of the flyer which would still give the information to the public and at the same time be cost-effective for insurers.

Chairman Townsend concurred stating a separate insert might even be more effective because of the fact it would be a separate piece of paper requiring attention.

Senator Amodei asked if it could be assumed that by allowing the most cost-effective method to be put in place, the policyholder’s premiums would not be increased. He said he asked that question because he did not want to see a bill stuffer that says ‘and by the way, your premium went up a buck a year to comply with this unfunded mandate to private industry from the Legislature.’

Mr. Schrader said that was not the intention, but rather the intention was to use the policyholder’s money wisely.

Fred L. Hillerby, Lobbyist, American Council of Life Insurance, and Washoe Health System, presented a proposed amendment to S.B. 140 (Exhibit R), and stated it was very similar to the amendment proposed by Mr. Schrader. He said the main difference was that his would not require an actual calculation but rather a flyer insert that would not only explain general premium tax, but also provide information regarding annual fees and assessments required to be paid to the State of Nevada that may also contribute to the cost for insurance.

Helen A. Foley, Lobbyist, Humana Healthcare Inc., said it would be much simpler to just state the percentage of the premium attributed to tax rather than itemizing each individual tax. Especially considering the potential tax on any one of the ombudsmen bills currently before the Senate that may pass.

Clark (Danny) Lee, Lobbyist, Nevada General Insurance Company, told the committee a domestic insurance company would be unable to give its policyholders an amount or even the percentage of tax on the premiums. He claimed because the domestic company receives tax credits simply for being a domestic, they do not know what their taxes are until March of the following year.

Jim Werbeckes, Lobbyist, Farmers Insurance Group, stated his client was comfortable with the original bill except for the potential Y2K problem. The proposed amendment, he added, removed that problem by delaying the effective date to July 2000.

Chairman Townsend opened the work session on S.B. 145.

Chairman Townsend referred the committee to page 2 of Exhibit N and pointed out the suggestions made by various individuals. He said Mr. Hillerby had suggested amending section 2, subsection 4 on page 2, lines 16-17 to read: "An insurer shall not make partial settlement of a fully payable claim." Insurance commissioner Alice Molasky-Arman, he continued, suggested amending the bill to make it applicable to third-party administrators (TPAs). Regarding Dr. David Edwards’ previous suggestion, Senator Townsend stated he did not understand why a provider would want to keep his name from being used on an insurance providers list.

Mr. Matheis told the committee Mr. Hillerby’s and the insurance commissioner’s suggestions were good ones. Dr. Edwards point, he said, while being an interesting one, did not warrant an amendment. He explained a provider can be put on a panel list without his knowledge and without even knowing the company exists. There are some doctors who choose not to be on a particular list because they do not want to deal with a particular company but, he said, the problem is already handled because it is fraud, and that is the proper way with which it should be dealt.

Mr. Matheis said Dr. Allen Schnaser’s idea was to not allow the insurers to charge a fee for including the name of a provider on a list of providers. While he could understand the frustration on the part of Dr. Schnaser, he claimed, it would be inappropriate to expect no charge at all. After all, Mr. Matheis remarked, there can be a reasonable cost that is actually incurred and this bill empowers the insurance commissioner to set the reasonableness. Further, he continued, it allows for complaints to the insurance commissioner if the charge for being on a panel is unreasonable, and action to be taken. Therefore, he said, the suggestion from Dr. Schnaser was unnecessary.

Mr. Matheis, addressing the amendments proposed by Mr. Wadhams, stated it was his understanding that the first one would change "claimant" to "provider" in terms of having a contract that would supercede the usual interest-rate issue. For the record, Mr. Matheis said:

Mr. Wadhams second proposed amendment, Mr. Matheis continued, has to do with when a third-party payer is aware that the purchaser/employer is not paying the insurance premium. When payment is due to a provider of dental, hospital, or medical services, and the premium payment is in arrears, this amendment would prevent the third-party payer from disclosing this as the reason for a delay in payment of a claim.

Jeannette K. Belz, Lobbyist, Blue Cross and Blue Shield of Nevada, said it frequently happens that an employer who is experiencing a cash-flow problem might be delayed in the payment of their premium. In such a case, BCBS allows this and extends the time for them. If the bill were passed as written, she added, and payment of the claim was delayed for this reason, the "specific reason" called for in the bill, would be "nonpayment of the premium by your employer." Such a disclosure, she declared, would violate the privacy of the employer and therefore be inappropriate.

Chairman Townsend said there should be no excuses for not paying a vendor who provided services. He claimed if you have a contract that states "upon receipt of the accepted claim, within 30 days you get your money," there is no excuse for not honoring that contract.

Ms. Belz, revisiting Mr. Wadhams first proposed amendment, pointed out there were probably several references within the bill where "claimant" should be changed to "provider" to make it clearer. Senator Townsend concurred.

Chairman Townsend referred to Exhibit S and identified it as a bulletin that was a result of the interim efforts. He pointed out four reasons listed in the bulletin that would be considered illegal evasions of the requirement for timely payment. He asked if the bulletin had proven effective with regard to the committee’s efforts on that issue.

Mr. Matheis stated the bulletin had been effective at least to the extent it has made it very clear that the insurance division does not accept those practices. Unfortunately, he added, those practices are still going on and have to be identified on a case-by-case and claim-by-claim basis.

Chairman Townsend asked insurance commissioner Alice Molasky-Arman what her rights were to penalize someone who failed to meet the standards addressed in the bulletin.

Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry, said her office has the ability to impose disciplinary action on any licensee for failing to abide by the law. She said the measures differ but insofar as an indemnity insurer, a fine of up to $2000 may be imposed per act of violation in lieu of revocation, suspension, or limitation of their license.

Senator Shaffer asked Ms. Molasky-Arman if she had ever exercised any of those options when delinquencies were discovered. Ms. Molasky-Arman said the commission has exercised the disciplinary sanction frequently; particularly where a pattern of violation is shown. She noted that while she would not go into depth on the worst situation the commission had encountered, it involved an HMO that is still under examination. She stated it would probably be raised to an administrative proceeding wherein that licensee will need to demonstrate to the commission why it should still maintain a certificate of authority.

Chairman Townsend asked Ms. Molasky-Arman what she had found in her experience to be the most effective way to deal with the problem of an insurer delaying payment to the provider. She replied that this particular problem had only come to the forefront within the last 2 years and she had found it to be the exception rather than the rule as far as most insurers and HMOs were concerned. She said in one incident, which was a state plan, the commission had very little authority over the third-party administrator for purposes of examination and disciplinary action. She explained the commission never got to the point of fines because it revoked that particular license. She told the committee, that generally, when the commission is contacted and in turn contacts the insurer, the insurer will oblige the commission’s interest by paying what is owed to the provider or the claimant.

Senator O’Connell outlined the amendments agreed upon by the committee. She said those amendments included Ms. Molasky-Arman’s suggestion of making the bill applicable to third-party administrators, Mr. Wadham’s amendment changing "claimant" to "provider," and Mr. Hillerby’s addition of "An insurer shall not make partial settlement of a fully payable claim."

There being no further business, the meeting adjourned at 10:45 a.m.

RESPECTFULLY SUBMITTED:

Ardyss Johns,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

DATE: