MINUTES OF THE meeting
of the
ASSEMBLY Committee on Commerce and Labor
Seventy-First Session
February 19, 2001
The Committee on Commerce and Labor was called to order at 3:50 p.m., on Monday, February 19, 2001. Chairman Joseph Dini, Jr. presided in Room 4100 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Mr. Joseph Dini, Jr., Chairman
Ms. Barbara Buckley, Vice Chairman
Mr. Morse Arberry Jr.
Mr. Bob Beers
Mrs. Dawn Gibbons
Ms. Chris Giunchigliani
Mr. David Goldwater
Mr. Lynn Hettrick
Mr. David Humke
Ms. Sheila Leslie
Mr. Dennis Nolan
Mr. John Oceguera
Mr. David Parks
Mr. Richard D. Perkins
STAFF MEMBERS PRESENT:
Vance Hughey, Committee Policy Analyst
Crystal McGee, Committee Policy Analyst
Margaret Judge, Committee Secretary
OTHERS PRESENT:
James Wadhams, Legislative Representative, American Insurance Association, Las Vegas, Nevada
Robert A. Ostrovsky, Legislative Representative, Employers Insurance Company of Nevada, Las Vegas, Nevada
Daryl Capurro, Managing Director, Nevada Motor Transport Association, and Trustee, Nevada Transportation Network Self-Insured Group, Sparks, Nevada
Robert Vogel, Vice President of Operations, Pro Group Management, Inc., Carson City, Nevada
Mary Lau, Executive Director, Retail Association of Nevada, Carson City, Nevada
Wayne Carlson, Executive Director, Public Agency Compensation Trust, Carson City, Nevada
Donald Jayne, Legislative Representative, Nevada Self-Insured Association #200, CDS of Nevada #200, Gardnerville, Nevada
Cliff King, State of Nevada Division of Insurance, Carson City, Nevada
Danny Thompson, Legislative Representative, Nevada State AFL-CIO, Carson City, Nevada
Nancyann Leeder, Nevada Attorney for Injured Workers, Carson City, Nevada
Leslie Bell, President, Nevada Self-Insured Association
Jack Jeffrey, Legislative Representative, Southern Nevada Building and Construction Trades Council and Southern Nevada Central Labor Council, Henderson, Nevada
Barbara Gruenewald, Legislative Representative, Nevada Trial Lawyers Association, Reno, Nevada
Roger Bremner, Administrator, State of Nevada Division of Industrial Relations, Carson City, Nevada
Rusty McAllister, Legislative Representative, Professional Firefighters of Nevada, Las Vegas, Nevada
Lisa Black, Legislative Representative, Nevada Nurses Association, Reno, Nevada
Jack Kim, Legislative Representative, Sierra Health and Life Insurance Company, Las Vegas, Nevada
Kevin Higgins, Chief Deputy Attorney General, Director, Workers Compensation Fraud Unit, Carson City, Nevada
Following roll call, Chairman Dini discussed three Bill Draft Requests (BDRs) that required committee introduction:
ASSEMBLYWOMAN GIUNCHIGLIANI MOVED TO INTRODUCE BDR 43-560.
ASSEMBLYMAN HUMKE SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT.
* * * * * * * *
ASSEMBLYWOMAN GIUNCHIGLIANI MOVED TO INTRODUCE BDR 52-1091.
ASSEMBLYMAN HETTRICK SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT.
* * * * * * * * *
ASSEMBLYWOMAN BUCKLEY MOVED TO INTRODUCE BDR 57‑293.
ASSEMBLYMAN HUMKE SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY BY THOSE PRESENT.
* * * * * * * *
Chairman Dini opened the hearing on A.B. 43 and noted Assemblyman Parks would chair the hearings on the industrial insurance bills.
Assembly Bill 43: Revises formula for assessments related to program of workers’ compensation. (BDR 53-877)
Crystal McGee, Committee Policy Analyst, provided background on A.B. 43 and indicated each bill the committee would hear resulted from recommendations adopted by the Legislative Committee on Workers’ Compensation. She noted the interim committee adopted 21 recommendations resulting in eight bills.
Ms. McGee stated A.B. 43, as printed, amended provisions related to the assessment for the Workers’ Compensation and Safety Fund, the Uninsured Employers Claim Fund and various Subsequent Injury Funds, and required the formula used to determine the equitable distribution among insurers of certain costs associated with the workers’ compensation program be based on annual premiums for private carriers for self-insured employers and association of self-insured associations and expected annual expenses for ex-med employers.
Ms. McGee stated that because the self-insured employers did not collect premium per se, the bill defined the premium for self-insured employers and associations to be 105 percent of the average claims cost for the preceding 3 years, or the lowest of 3 quotes from a commercial carrier.
Ms. McGee provided the committee with a copy of a proposed amendment to A.B. 43, which was prepared by the Legal Division of the Legislative Counsel Bureau (Exhibit C). The amendment required the formula used to distribute the costs of the state’s workers’ compensation program be based on premiums for private carriers and annual expenditures for claims for self-insured employers, associations and ex-med employers. Ms. McGee noted the proposal was brought before the interim committee as a compromise to the provisions of the original bill because a number of parties were dissatisfied with the language of the bill.
James Wadhams, Legislative Representative, American Insurance Association, testified on behalf of the American Insurance Association, which was a trade association of approximately 230 insurance companies that bought workers’ compensation insurance in the state. Mr. Wadhams indicated he was speaking in support of the proposed amendment rather than the bill, indicating several self-insured groups objected to the language contained in the original bill. Mr. Wadhams pointed out there were several levels of workers’ compensation, including administration, regulation and adjudication, which were all paid for by an assessment. He noted the current assessment was used to cover most of the functions of the Division of Industrial Relations (DIR), hearings and appeals officers, and attorneys for injured workers, and was in the range of $23,000,000. Accordingly, Mr. Wadhams observed the bill did not deal with the reason for the assessment, but dealt with the apportionment of the assessment on the participants in the workers’ compensation system. Mr. Wadhams noted the assessment was currently broken into two parts, on the basis of claims, between self-insured employers and groups and private carriers, including commercial insurance companies. The amendment would take the portion of the assessment allocated to private carriers and sub-allocate it to individual private carriers, based on premiums rather than claims. Mr. Wadhams stated self-insured employers were comfortable with the claims basis; however, commercial carriers generally preferred allocation based on premiums, because premiums estimated claims and were easier to budget than actual losses that occurred in a particular year. Mr. Wadhams explained the total assessment dollars would still be paid, but the amendment would change the allocation among commercial carriers based upon their relative premium volume rather than a calculation of actual claims.
Ms. Giunchigliani asked whether the term “commercial carriers” had the same meaning as the term “private insurers.” Mr. Wadhams indicated the terms were the same.
Ms. Giunchigliani asked whether the proposed amendment accomplished the goal of allowing private insurers to allocate by premium and others insurers to allocate based on claims. Mr. Wadhams indicated the amendment would accomplish that goal.
Ms. Giunchigliani questioned whether there would be any fiscal or negative impact by allowing one group to allocate based on claims and another group to allocate based on premiums. Mr. Wadhams stated the allocation itself was a separate issue from the allocation format being discussed.
Robert Ostrovsky, Legislative Representative, Employers Insurance Company of Nevada (EICON), testified in opposition to A.B. 43. Mr. Ostrovsky indicated EICON currently paid approximately 60 percent of the assessment assessed to commercial or private carriers due to the share of the market EICON owned. He calculated that pursuant to the change proposed by A.B. 43, EICON’s costs would increase and other insurers’ costs would decrease, and he felt it was inappropriate to shift more of the burden to EICON. Mr. Ostrovsky commented that the function of the Department of Industrial Relations (DIR) was essentially a function based on the number of claims made because the size of the audit that DIR performed was dependent upon the number of complaints received and/or claims that required review. It was EICON’s position that a higher level of claims dollars resulted in more work for DIR and, accordingly, allocation should be based on claims rather than premiums. Mr. Ostrovsky noted a premium payer paid a great deal of money into the fund with no services from the DIR. Mr. Ostrovsky understood why the industry wanted to allocate on the basis of premiums, noting that calculating the cost of premiums was less difficult than estimating the cost of claims. Mr. Ostrovsky concluded by urging the committee not to pass A.B. 43.
Mr. Dini asked Mr. Ostrovsky if he was speaking to the amendment. Mr. Ostrovsky indicated that he was speaking to the amended bill, which required the premium to be the method for determining the payment on the part of a commercial carrier. EICON wanted claims dollars to generate that payment.
Mr. Dini asked how much more EICON would pay if A.B. 43 were passed. Mr. Ostrovsky indicated he did not have that number but indicated he would provide it to the committee.
Mr. Nolan inquired as to the average cost EICON paid for claims and noted that premiums related to loss experience. Mr. Ostrovsky did not know what the average cost of a claim was, and indicated that the assessment was not based on the number of claims but the total expense related to a claim. He observed, with regard to premiums, there were so many financing mechanisms utilized that there were many different ways to look at the issue and different numbers that could be used. Mr. Ostrovsky indicated he would attempt to provide the committee with the actual numbers.
Mrs. Gibbons asked whether Mr. Ostrovsky was involved in the interim committee’s discussion on the original A.B. 43. Mr. Ostrovsky indicated he was present but did not testify. Mrs. Gibbons asked for Mr. Ostrovsky’s opinion on the original language that referenced “105 percent of the average expenditures for claims.” Mr. Ostrovsky indicated the language applied to the self-insured employers and was inappropriate because it required quotes to be obtained in a marketplace in which employers were not going to buy a product. Mr. Ostrovsky was not sure why the 5 percent was included and felt it was a way to shift the burden of cost to the self-insured employers. Mr. Ostrovsky felt the amended version of the bill was clearly a better solution to distribute the money.
Mr. Beers asked for clarification regarding the amount of the claims paid. He noted that the dollar amounts were not significant because what the bill looked at was essentially the percentage of total claims paid by each of the two types of carriers. Mr. Beers asked whether it was the percentage split that would change between an assessment as a percentage of the claims value or a percentage of the premium paid. Mr. Ostrovsky confirmed that it was the ratio that would change, and, therefore, the absolute values of the numerator and denominator and the ratio were less significant.
Mr. Beers clarified that the activities that were funded by the assessment were delivered as the workload presented itself regardless of which type of insured employer produced the claim requiring review. Mr. Ostrovsky indicated Mr. Beers was correct and noted the assessment funds were also used to conduct an audit once every three years, in addition to performing follow-up on complaints and providing OSHA and other safety services to employers in the state.
Mr. Beers asked if those services were provided without regard to whether the employer was a self-insured employer or a commercial carrier. Mr. Ostrovsky informed Mr. Beers that once the budget was determined and the allocations were made, the division did not look back to see how much of the assessment was actually paid by an individual employer.
In response to Mr. Beers’ question, Mr. Ostrovsky confirmed there was not an apportionment of the expenditures, but merely an apportionment of the assessment.
Daryl Capurro, Managing Director, Nevada Motor Transport Association, and Trustee, Nevada Transportation Network Self-Insured Group, indicated opposition to the section regarding division of assessment based upon 105 percent of average expenditure for claims, particularly with respect to the requirement to obtain three quotes from private carriers. Mr. Capurro believed that it was inappropriate to require employers that did not do business with private carriers to obtain bids from private carriers. Mr. Capurro felt the language contained in the amendment addressed that concern by returning the division of the assessments to a claims-paid basis for both self-insured employers and associations of both public and private self-insured groups. However, Mr. Capurro indicated the language in the amendment at Section 6, subsections b and c, which read “reflects the relative hazard of the employments covered by the associations of self-insured public or private employers,” should be stricken, and the language should read “Associations of self-insured public or private employers that results in an equitable distribution of costs.” Mr. Capurro indicated the change was necessary because “the relative hazard of the employment covered” was a term used in the private insurance industry, and not the self-insured industry, with respect to the setting of premium rates by class codes.
Robert Vogel, Vice President of Operations, Pro Group Management, Inc., advised the committee Pro Group Management was the Plan Administrator for the Nevada Transportation Network, as well as three other self-insured groups in the state of Nevada, including the Nevada Retail Association self-insured group, Nevada Franchise Auto Dealers self-insured group, and the Builders Association of Western Nevada self-insured group. Mr. Vogel indicated the language referred to by Mr. Capurro, as it related to apportioning the assessment on the basis of expected annual costs, did not fit because the relative hazard was a rating process and not an expected annual cost. Mr. Vogel stated the cost of a claim was the cost of the claim, regardless of how a group rated its hazards on its class codes and the language simply did not belong in the section pertaining to the self-insured groups.
Mr. Capurro indicated the language would be appropriate with respect to the sections regarding private carriers and he was not suggesting the language be removed from those sections.
Mary Lau, Executive Director, Retail Association of Nevada, indicated Mr. Vogel was the administrator for the Retail Association of Nevada, and she supported the testimony provided by Mr. Vogel and Mr. Capurro.
Wayne Carlson, Executive Director, Public Agency Compensation Trust (PACT), told the committee PACT was the only public self-insured association. Mr. Carlson concurred with the comments made by Mr. Capurro and Mr. Vogel regarding the “relative hazard” language. He indicated the language referred to a rating method used to allocate based on charges against payroll. Mr. Carlson indicated PACT disagreed with A.B. 43 as originally proposed because of the 105 percent issue and the requirement to obtain quotes from other carriers. Mr. Carlson stated that if the language as discussed was removed from the amendment, PACT would no longer have a concern regarding the bill.
Donald Jayne, Legislative Representative, Nevada Self-Insured Association, indicated he too had problems with the initial bill. Mr. Jayne advised Mr. Wadhams addressed most of his concerns with the amendment and he noted the comments on relative hazards of employment were not as relative to his association, because it did not use any rate-making mechanisms. Mr. Jayne observed the “relative hazard” language was referenced in the current language and felt it was more appropriate for private sector companies, although he did not have a particular problem with that language.
Mr. Parks closed the hearing on A.B. 43 and opened the hearing on A.B. 44.
Assembly Bill 44: Makes various changes concerning industrial insurance. (BDR 53-772)
Crystal McGee, Committee Policy Analyst, stated A.B. 44 addressed four basic matters: the handling of claims, the audit of insurers, the investment of associations of self-insured public employers, and the payments made to help health care providers.
Ms. McGee indicated A.B. 44 authorized insurers to keep information pertaining to a claim at a location outside of this state and further required that such information be available at an in-state office. As to the audit of insurers, A.B. 44 extended the time period in which the administrator of DIR must audit insurer from at least every three years to at least every five years, and allowed for abbreviated audits and for joint-audits between the Division of Industrial Relations and the Division of Insurance. Ms. McGee indicated A.B. 44 clarified the authority of a board of trustees of an association of public employers to invest certain money of the association and required insurers, MCOs, and certain employers to notify an injured employee when a medical bill submitted was denied and to notify the employee of his rights to appeal.
Mr. Ostrovsky indicated he would speak only to the items in the bill which he proposed. Mr. Ostrovsky indicated some of the items in the bill were the result of a review of the statutes by various commercial carriers in an effort to clean up language that did not reflect the current two-way system in commercial carriers or self-insured employers, and to find ways to streamline the statute. As a result of the review, certain proposals were presented to the interim committee.
Mr. Ostrovsky addressed section one, and indicated that under current law the administrator of the Department of Insurance (DIR) was required to cause an audit of all insurers to be conducted at least every three years. Mr. Ostrovsky proposed a minimum five-year audit cycle, and suggested language be added to Section 2(a) to provide for partial audit to be conducted on a random basis, on any insurer who had a history of violations of the provisions. Mr. Ostrovsky explained the regular audit cycle would be expanded to five years; however, companies with a history of violation could be audited more frequently and the workload for the DIR would be reduced.
Mr. Ostrovsky requested a minor change on page 2 to remove the words “at any time” from the phrase “may at any time cause to be conducted an audit that examined a fewer number of files than a full audit.” He noted the intention was to give the DIR flexibility to determine the size of the audit to be performed on any given insurer.
Mr. Ostrovsky further suggested the DIR should conduct audits in conjunction with the Insurance Commissioner, noting the Insurance Commissioner conducted different types of audits than those conducted by the DIR, and Mr. Ostrovsky believed it would be easier, from the insurer’s point of view, to have all the auditors come in at one time. Mr. Ostrovsky noted the amendment did not require DIR and the Insurance Commissioner to conduct audits in conjunction with each other, but made the option available. Mr. Ostrovsky concluded by urging the committee to pass Section 1 of the bill with the words “at any time” removed.
James Wadhams, Legislative Representative, American Insurance Association, addressed Sections 2 and 3 of the bill. Mr. Wadhams stated the intent of Section 2 was to modernize record keeping to reflect the fact most records were both generated and kept in an electronic form. Mr. Wadhams stated a balance was needed to recognize electronic storage while maintaining accessibility for the purposes of both claimants and auditing. He indicated Section 2 dealt with the electronic storage issue and, with minor editorial exceptions, reflected that record keeping must be maintained in an acceptable manner that could be prepared and reproduced in a fashion. Ms. Wadhams stated the minor exceptions were necessary in order to eliminate potential confusion. He suggested the reference in lines 38 and 43 used the phrase “open in the context of that claim” in order to recognize the difference between opened and closed claims. Accordingly, Mr. Wadhams requested the word “open” be added in subsection 2, at lines 38 and 43.
Mr. Wadhams noted subsection 3 was also pertinent to the record keeping issue, and dealt with the in-state office. He stated the section required an office to be maintained in the state where files would be accessible for purposes of claimants, their attorneys, auditors and examiners.
Mr. Beers asked whether this type of office currently existed. Mr. Wadhams indicated an in-state office did exist. Mr. Beers wondered if the office served as a central repository of all industrial insurance records. Mr. Wadhams indicated the in-state office was not a central repository. He had no objection to having an in-state office where files were accessible, but he indicated most billings and invoices were computer generated and maintained, and the implication of the language in the bill was that a physical hard copy filed with the original invoices must be available. Mr. Wadhams noted most hospitals were utilizing electronic billing and most insurers, including EICON, were conducting electronic transactions and he believed the statute should reflect that records must be maintained, electronically if desired, and accessible.
Mr. Beers felt the language on line 36, page 3 would add expense to the insurance process by requiring a toll-free statewide phone number and he wondered whether there were any efficiencies that would be gained. Mr. Beers indicated his understanding that a company utilizing electronic record keeping would not be in compliance with the provision and would have to print out copies for public access in order to comply. However, Mr. Beers felt allowing electronic record keeping would essentially turn every office of an insurance company into a qualifying facility because everyone could electronically access the organization’s records. Mr. Wadhams agreed with Mr. Beers’ statement and noted Section 4, regarding a toll-free telephone number, was an existing requirement. Mr. Wadhams stated the entire industry was moving to electronic transactions and the current requirement reflected an earlier age. He felt the language would facilitate record keeping and accessibility in as efficient manner as possible.
Mr. Goldwater asked whether the home-office tax credit would be affected by the legislation. Mr. Wadhams stated that the home-office tax credit was based upon certain functional activities within a building owned in the state and the tax credit would not be undermined by the legislation.
Mr. Hettrick took the opportunity to explain a proposal that would amend A.B. 44, prepared by Crystal McGee (Exhibit D). Mr. Hettrick explained current law allowed homeowners’ policies to provide for workers’ compensation for domestic employees; however, most insurance companies chose not to write such a policy, making the policy difficult to obtain. Mr. Hettrick advised the intent of the amendment was to require insurance companies to write such a policy if requested by the homeowner; it would be covered under casualty insurance and could be provided at a lower cost. Mr. Hettrick stated the proposed amendment would require a casualty insurer who wrote homeowners’ policies to provide industrial insurance to a homeowner who (1) was insured by that company, and (2) employed a person engaged in domestic services.
Mr. Hettrick moved to adopt the proposal so that staff could prepare the language and provide an amendment to the committee.
Mr. Goldwater asked whether the employee making a claim would be subject to the exclusive remedy of workers’ compensation or whether the employee would have a remedy under tort law or negligence against the employer, if the proposal were made part of the legislation and ultimately signed into law. Mr. Goldwater indicated, given the state of workers’ compensation, he was unsure whether he would be in favor of subjecting a domestic worker to that exclusive remedy if there was negligence on the part of the employer.
Mr. Hettrick indicated previous discussion centered on whether the domestic employee was better off with workers’ compensation or with an insurance policy that would pay medical bills without question. He noted exclusive remedy applied if the homeowner bought the insurance; however, if the homeowner had not purchased workers’ compensation insurance, tort law would apply. Mr. Hettrick stated the proposal did not mandate a homeowner buy workers’ compensation insurance; it mandated the insurance company provide the coverage if requested by the homeowner.
Mr. Goldwater asked whether the domestic worker had the option to choose between what was offered under workers’ compensation and what was offered under tort law. Mr. Hettrick indicated that the domestic worker could not choose a remedy if the homeowner had purchased workers’ compensation insurance. He stated that if the homeowner did not purchase workers’ compensation coverage, the domestic worker would be forced to proceed under tort law to recover and, conversely, if the homeowner did purchase workers’ compensation coverage, the domestic worker would be forced to proceed under exclusive remedy, which prohibited tort suits against an employer or insurer, including protection from punitive damages and damages for pain and suffering in cases where injuries or occupational diseases were incurred in the course and scope of employment.
Ms. Buckley stated she was interested in hearing from the casualty insurers about what effect the proposal might have and whether they felt they could write the insurance, before a final decision was made. She stated she would like to know why the insurance companies chose not to write the insurance.
Mr. Hettrick asked whether the committee would like to have the proposed amendment language prepared so the committee could look at the actual language.
Cliff King, State of Nevada Division of Insurance, told the committee there were several issues the committee should consider regarding workers’ compensation coverage versus coverage under a homeowners policy. Mr. King indicated the workers’ compensation policy would provide unlimited medical coverage, while a homeowner’s policy would provide medical payments coverage. Medical payments coverage was generally in a nominal amount ranging anywhere from $500 to $5,000, depending upon the amount of insurance purchased by the homeowner. Mr. King indicated the workers’ compensation coverage would have statutory benefits for indemnification, based upon wages. Mr. King noted Nevada Revised Statute (NRS) 616A.110 defined who was not an employee, and he stated the coverage contained in the amendment proposal was targeted at those people who were not legally considered employees because they were domestic workers. Mr. King explained the option existed for homeowners to purchase workers’ compensation coverage; however, if the homeowner chose not to purchase workers’ compensation coverage, the homeowner was subject to the limited medical payments available under a homeowner’s policy and whatever limited liability was purchased on the homeowner’s comprehensive personal liability portion of the homeowner’s policy.
Mr. Goldwater asked whether there was any way the option could be given to the employee to choose between workers’ compensation coverage or remedies under tort law? Mr. King responded agreements were usually entered into prior to anyone getting injured, and the homeowner must elect to purchase workers’ compensation coverage at the time of his policy renewal. Mr. King stated if an employee was injured and thereafter determined which course of action he would take, such a situation was considered “adverse selection.” Mr. King noted the employee would have a greater amount of information as to how the loss should be handled to his favor. Accordingly, Mr. King indicated that there was not a way to give the option to the employee to choose between workers’ compensation coverage versus remedies under tort law. Mr. King reiterated the insured homeowner that paid the premium determined what to buy, not the injured worker who received the benefits. Mr. Goldwater noted the employer had the option to choose coverage, but the employee did not.
Ms. Buckley wondered why insurance companies were not voluntarily writing these policies and inquired as to what effect forcing insurance companies to write such policies would have on premiums. She asked whether any analysis had been performed to determine whether writing these policies could be done more affordably if the writing of the policies was mandated. Mr. King replied the only states in which this type of coverage was offered were states that mandated the coverage. He noted insurance companies typically did not want to provide coverage on an optional basis unless it was very profitable for them. Mr. King indicated insurance companies expressed negativity regarding the coverage, and one major carrier declared it would not offer the coverage unless it was mandated.
Mr. King advised that most states typically charged a $5 or $10 minimum for every homeowner’s policy sold, which automatically included a limited amount of coverage for homeowners that did not anticipate having an employee. Mr. King informed the committee employees who worked less than twenty hours a week were considered “part-time,” and those employees who worked more than twenty hours per week were considered “full-time.” He indicated the premium charge would be cheaper if coverage was mandated with a homeowner’s policy. Mr. King observed a homeowner could purchase a workers’ compensation policy through an assigned risk plan, which would cost $340 and would cover part-time domestic employees. Mr. King indicated the part-time domestic worker did not meet the definition of an employee under NRS 616A.100 and, accordingly, the procedure was for the carrier to attach a voluntary compensation endorsement to the homeowner’s policy and provide coverage on a voluntary basis. Mr. King advised of a complaint by a constituent who expressed concern over the fact that in the past he was able to obtain this insurance for $120 per year, and currently the insurance was approximately $340 per year through the assigned risk plan, making affordability an issue.
Mr. Parks announced that he would accept a motion on A.B. 44.
ASSEMBLYMAN HETTRICK MOVED TO PUT A.B. 44 TO A WORK SESSION.
CHAIRMAN DINI SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY BY ALL THOSE PRESENT.
Wayne Carlson, Executive Director, Public Agency Compensation Trust (PACT), testified on A.B. 44, and spoke specifically to the language found on page 4, subsection 4, line 25. Mr. Carlson stated current law authorized associations of self-insured public and private employers to invest in accordance with Chapter 682A, which was the insurance company investment statute. Mr. Carlson noted PACT was a governmental agency and it found that NRS 355 restricted its investment options, and legal research was unable to definitively determine whether PACT could invest in accordance with NRS 682A where there was conflict with NRS 355. Accordingly, PACT chose to invest only in accordance with NRS 355 and asked the interim committee for clarification on the issue. Mr. Carlson noted a constitutional provision that did not allow PACT to invest in any stock of a private company and accordingly PACT’s investments would be limited to bonds and other instruments listed in NRS 682A. Mr. Carlson urged approval of the bill with that revision.
Ms. Buckley asked which of the currently prohibited investments options PACT wanted to pursue. Mr. Carlson noted NRS 682A provided a lengthy list of options and, by way of example, he noted Fannie Mae’s were not addressed in NRS 355, however, Ginny Mae’s were addressed in another section of the statutes referred to in NRS 355. He stated PACT might invest in corporate bonds, noting it could not invest in a AAA corporate bond of a private company at present. Mr. Carlson noted PACT’s goal would be to utilize rated bonds and he observed PACT had to be conservative because it was dealing with workers’ compensation and they did not want to add risk. Mr. Carlson stated the amendment would put PACT on an even investment playing field with private insurance companies.
Mr. Goldwater inquired whether the insurance commissioner oversaw PACT’s financial solvency and performed audits. Mr. Carlson stated that PACT was under the same regulations as private associations including audit regulations.
Mr. Parks asked whether anyone was present to speak on Section 5 of A.B. 44. There was no one present to speak on Section 5, and accordingly, Mr. Parks took testimony in opposition to A.B. 44.
Danny Thompson, Legislative Representative, Nevada State AFL-CIO, testified in opposition to A.B. 44. Mr. Thompson indicated he was opposed to the change of the audit period from three years to five years, noting audits were needed more often in order to catch discrepancies. Mr. Thompson also voiced his opposition to Section 2, which concerned the physical records for claims that were closed. The AFL-CIO believed that the file should be open and available to the injured worker, and he noted the bill deleted the provision which required records to be placed in a convenient and accessible file and instead provided that if a claim were closed for over a year, the records would not have to be produced for 30 calendar days. Mr. Thompson believed that adding the 30-day provision made records all the more difficult for an injured worker to access. Mr. Thompson expressed concern about Section 5 because it removed a former provision that stated, “other unrelated services which are requested in writing by the patient would be their charge.” He noted an injured worker was not a doctor and did not always know why he needed the treatment he received. Mr. Thompson felt removal of that provision created problems and reiterated his opposition to Section 5.
Mr. Dini observed that Mr. Thompson stated his opposition to Section 5, but discussed Section 6. Mr. Thompson observed that Section 6 stated the provider of healthcare could not charge the injured worker for treatment related to an industrial injury or occupational disease, but must charge the insurer. Section 6 also indicated the provider of healthcare could charge the patient for any other unrelated services that were not related to the employee’s industrial injury or occupational disease. Mr. Thompson pointed out Section 5 set forth a process to appeal the insurer’s denial for payment of all or part of a bill, and noted he was not opposed to the process set forth in Section 5, but when the process in Section 5 was considered in conjunction with the change in Section 6, he was opposed to it. He stated current law provided the insurer was to be charged and not the injured worker. Mr. Thompson felt the provisions of Section 6 would cause many injured workers to appeal the denial of payment by the insurer, and the only way to succeed on an appeal pursuant to Section 5 was for the injured employee to show that the services provided were related to the employee’s industrial injury or occupational disease or prove prior authorization was obtained for the services. Mr. Thompson felt those conditions would be impossible for many injured workers to meet as most of the services would be performed in an emergency room and the injured worker would necessarily assume at the time that the services he was receiving were related to his industrial injury. Mr. Thompson felt a bigger problem would be created than the problem that was being solved by the appeals process.
Mrs. Gibbons referred to the language on page 5, line 8, and inquired what would be considered a “timely manner.” Mrs. Gibbons also inquired about the term “reasonable fee” on page 3, line 4, and wondered why fees were not set forth in a manner consistent with other fees charged by state government.
Mr. Thompson referred to NRS 616C.305 for the definition of a “timely manner,” and indicated he did not have any information on fees.
Nancyann Leeder, Nevada Attorney for Injured Workers (NAIW), expressed her concerns regarding A.B. 44. As to Section 2 and electronic record keeping, Ms. Leeder testified that NAIW was not concerned about billings, but was concerned about those portions of a claim that contained medical records or memos. Ms. Leeder stated courts required hard copies for filing and many times electronic copies were provided but could not be retrieved due to incompatible computer systems. She noted obtaining computer equipment and software to access electronic record keeping and the production of hard copies for use would have an impact on NAIW’s budget.
Ms. Leeder was pleased with the employee notification language in Section 5 because it created a procedure for appeal. However, she expressed concern with Section 6 because it deleted the requirement that there be a writing between the doctor providing the “unrelated treated” and the employee. Ms. Leeder felt the requirement of a writing forced the doctor to discuss the matter with the employee, who would then be made aware that services to be provided were not related to the industrial injury.
Mr. Hettrick noted the conflicting testimony by Mr. Thompson and Ms. Leeder regarding the requirement of a writing in Section 6. Mr. Hettrick felt, in light of all testimony, Section 6 as written was correct and was the right solution.
There being no further testimony on A.B. 44, Mr. Parks closed the hearing on A.B. 44 and opened the hearing on A.B. 46.
Assembly Bill 46: Makes various changes concerning workers’ compensation that affect eligibility, and amount and payment of benefits. (BDR 53-773)
Crystal McGee, Committee Policy Analyst, provided an introduction of A.B. 46, which related to the medical fee schedule. She noted under current law the administrator of the DIR was required to establish a schedule of reasonable fees and charges allowable for industrial insurance accident benefits provided to injured employees by providers with whom insurers had not contracted. Ms. McGee noted the bill further provided that if an industrial injury occurred due to the absence or removal of a safeguard or protection, the compensation of the injured employee must be reduced 25 percent. In addition, the compensation of the injured employee must be increased 25 percent if the absence or removal of a safeguard or protection resulting in an industrial injury was done at the direction of the employer. The bill also required that provisions related to the reduction of compensation must be posted in an open and conspicuous area at the employer’s place of business. Finally, A.B. 46 amended the provisions of the Industrial Insurance Act related to the reopening of a claim and further clarified testing for contagious diseases.
Donald Jayne, Legislative Representative, Nevada Self-Insured Association #200 (NSIA), CDS of Nevada #200, began by addressing Section 1 of A.B. 46, and stated CDS of Nevada brought this section to the interim committee. Mr. Jayne indicated it had been explained to the interim committee that certain tests, such as tuberculosis tests, were not appropriately blood tests and should be classified as skin tests.
As to Section 2 of A.B. 46, Mr. Jayne noted a committee worked throughout the interim to develop a medical fee schedule. Mr. Jayne indicated Leslie Bell of the Nevada Self-Insured Association participated in the process and would provide the committee with more information.
Mr. Jayne provided the committee with a letter from L. R. Zimmerman without comment (Exhibit E).
Leslie Bell, President, Nevada Self-Insured Association, indicated she participated along with the insurance industry and the medical community in many meetings regarding the Nevada fee schedule and she believed there was consensus opinion on the proposed language.
Robert Ostrovsky, Legislative Representative, Employers Insurance Company of Nevada (EICON), indicated EICON worked with the assistance of Department of Industrial Relations (DIR) on the committee that developed the medical fee schedule. Mr. Ostrovsky stated there was a lot of dissatisfaction with the way the current fee schedule operated, noting one of its major problems was the current schedule collected data about paid claims in Nevada. He noted the problem with collecting data about paid claims was that it did not take into consideration items such as copays or deductibles that were paid directly by the patient. Accordingly, the result was a fee schedule that, over the years, came to provide “skewed” information. Mr. Ostrovsky indicated EICON was not sure what the outcome would be for any given procedure, if the language was changed from the amount paid to the amount billed and paid. He felt the change would probably cause an increase for some professions and a decrease for other professions and overall, cause an increase in workers’ compensation premiums. However, Mr. Ostrovsky noted the legislation would make it possible to put together provider lists adequate to service the injured worker, meaning EICON would pay amounts consistent with what EICON believed was necessary to get the best physicians and service providers in the community to work with managed-care companies. Mr. Ostrovsky stated the bill allowed the administrator to designate a vendor who collected national data for the purposes of Medicare, as well as a vendor who collected local data. Mr. Ostrovsky continued by stating A.B. 46 allowed the division to establish a new rate based on collected data, and adjust the rate on an annual basis by the medical component of the Consumer Price Index (CPI), rather than paying for a study every year, which cost up to $25,000. Mr. Jayne believed there may be an added expense during the first year of the process because it might be necessary to go to more than one data house. Mr. Jayne believed A.B. 46 was a streamlined method of handling a difficult problem, and urged the committee’s favorable consideration of Section 2.
Mrs. Gibbons asked what the increased cost to the state would be with the word “billed” added on page 2, line 33. Mr. Ostrovsky did not know, but he acknowledged that amounts billed were higher than amounts paid. He indicated he was not sure what the end result would be and, accordingly, it was unclear what the eventual increase would be in terms of workman’s compensation rates.
Ms. Giunchigliani asked whether there were vendors that compiled information on billed data. Mr. Ostrovsky responded that under the old language there was only one bidder; however, under the new language there was at least one company, if not more, which supplied billed data information to the federal government for the purposes of determining Medicare rates. Ms. Giunchigliani asked who would pay for the vendor’s services. Mr. Ostrovsky indicated all costs related to the development of the fee schedule, including the vendor’s services, would be paid for out of assessments.
Ms. Giunchigliani asked if anyone had any idea as to what the vendor’s services would cost. Ms. Bell responded based on the information the Nevada Self-Insured Association had, the purchase of data was less expensive because it was more competitive and because the data was already collected for the federal government and purchased separately for purposes of developing the fee schedule.
Ms. Giunchigliani asked Ms. Bell to prepare a flow-chart of how the process would work, including who collected what, and how the conclusion was reached that something was less expensive than something else, so the committee could understand what the assessment would potentially be.
Ms. Giunchigliani questioned whether the intent was to create a yearly fee schedule or to adopt a fee schedule that would stay in place for a certain period of time. Ms. Bell indicated the intent of A.B. 46 was to gather the data once, use a conversion factor to back into an appropriate rate and thereafter have the rate go up on an annual basis based on a CPI index instead of the data. Ms. Bell indicated her understanding that data was collected based on the western states region.
Ms. Buckley asked why the bill stated the collection of data would be on a national basis, if data would be collected on a regional basis. She also inquired whether the amount of money a physician could bill was controlled in any other instance, and noted that if a physician felt his time was worth a specific amount of money he had the right to bill that amount, although that amount would not necessarily be paid.
Mr. Ostrovsky responded by calling attention to language on Page 2, line 28 which stated, “exceed the amounts usually billed and paid,” noting that both the amount billed and the amount paid should be considered. Additionally, Mr. Ostrovsky observed that data would be obtained from the national warehouse; however, regional information regarding the state of Nevada, as provided by the national warehouse, would be used. Mr. Ostrovsky advised the language “paid in the state for similar treatment” limited the DIR’s ability to utilize data beyond the state of Nevada.
Ms. Buckley repeated her question regarding amounts billed. Mr. Ostrovsky felt the first fee schedule should be carefully crafted in order to avoid rate inflation and believed when enough data was collected over a broad base, and previous rates were reviewed, it would be possible to come up with a fair schedule. Ms. Buckley asked if Mr. Ostrovsky was presuming that every doctor should bill the same amount for the same procedure, regardless of expertise and credentials. Mr. Ostrovsky indicated his assumption that an average rate would be implemented. It was Mr. Ostrovsky’s understanding when a managed care company negotiated rates, a pool of licensed physicians practicing in a specific field aided in the negotiations.
Mr. Parks asked for testimony or comments on Section 3 of A.B. 46.
Don Jayne, Legislative Representative, Nevada Self-Insured Association (NSIA), commented on Section 3, noting the section involved an issue brought before the interim committee on workers’ compensation due to problems with interpretation of the terminology in the statute. Mr. Jayne stated the terms “not off work” and “off work” were confusing. Mr. Jayne stated NSIA sought to evaluate claims that had been opened, accepted, handled and subsequently closed for a period of one year and to establish criteria for claims that had been closed for more than one year and how to go about reopening claims that involved the term “not off work.”
Leslie Bell, President, Nevada Self-Insured Association, Director, CDS of Nevada, gave the committee some background history of the language. She stated the language was unclear and difficult to understand and NSIA worked administratively to ensure staff was administering the statute as intended. NSIA approached the interim committee and asked for clarification of confusing interpretations contained in the statute. Ms. Bell requested to work with staff to provide language that was clear. She expressed concern that the language might presume to reduce benefits, and she noted it was not the intention of NSIA to take away any benefits that currently existed. Ms. Bell requested an opportunity to clarify the plain meaning of the statute since she felt the language was too complicated to easily administer and needed to be simplified.
Mr. Parks raised a question on page 4, line 5, regarding changing the word “shall” to “may.” He believed the Clark County School District expressed concern with the change and asked Ms. Bell if she had any concerns with that change or the intention of the change.
Ms. Bell advised the language was placed in the bill by the legal staff and was unable to answer that question.
Mr. Parks asked for comments or testimony on Sections 4, 5, 6 or 7 to A.B. 46.
Jack Jeffrey, Legislative Representative, Southern Nevada Building and Construction Trades Council and Southern Nevada Central Labor Council indicated he had concerns with Section 3 of A.B. 46. It was Mr. Jeffrey’s opinion that the existing statute was clear enough. He stated his understanding that a case was lost because of the language that a claimant was “off work,” and there was no definition in the statute as to how long a person had to be off work. Mr. Jeffrey believed if a legitimate on-the-job injury occurred and a person was off work as a result of that injury, the claim should be covered regardless of the amount of time the person was off work. Mr. Jeffrey believed any reopening of cases should also follow that pattern. Mr. Jeffrey told the committee he saw cases in the construction industry where a person had a minor injury, tried to tough it out and ended up in trouble because of it. He noted existing statute provided the injury must be worsened and certified by a doctor or chiropractor in order to be reopened, and he felt those were already tough requirements. Mr. Jeffrey did not believe the statute should require a person to be placed on compensation for five days in order to have their case reopened.
Mr. Jeffrey also noted his concerns regarding Section 5, and stated his belief that Section 5 was an attempt to find fault in a no-fault system. Mr. Jeffrey indicated the provision in Section 5 that increased the compensation when the employer removed the safety device was acceptable, but he felt the provision expanded the existing provisions of the law. He noted under current law a $300 fine was imposed if the employer removed a safety device, and if an employee removed a safety device, the employee lost 25 percent of his compensation. Mr. Jeffrey noted his primary concern was in line 46 which provided that if a person failed to use a safeguard or protection provided by his employer, that person would be liable for a 25 percent penalty. Mr. Jeffrey felt the provision would create controversy and noted his opposition to the Section 5.
Danny Thompson, Legislative Representative, Nevada State AFL-CIO, told the committee he shared in the concerns outlined by Mr. Jeffrey regarding the “reopening provisions.” Mr. Thompson noted, in addition to concerns regarding the removal of safeguard devices, he was concerned about the failure to use the safeguard devices, noting, in some instances, safety equipment was passed out only when OSHA was expected to visit. He felt an employee was not in a position to direct the workforce and generally did what he was told. Mr. Thompson advised the only provision that he supported was giving the 25 percent penalty to the injured worker. He noted current law provided the employer was liable in an amount not less than $300 or more than $2,000 for removing a safety device, while the injured worker who lost 25 percent of his compensation was liable in an amount that was more than $3,000.
Barbara Gruenewald, Legislative Representative, Nevada Trial Lawyers Association, concurred with the objections stated by previous witnesses. As to Section 3, Ms. Gruenewald agreed that when a claimant was off work, the claimant should be allowed to reopen his case, and she did not want the provision further defined to require a claimant to be off work for at least five consecutive days. Ms. Gruenewald also concurred with testimony given regarding Section 5 and the additions regarding an employee’s failure to use a safeguard or voluntarily removing a safeguard. Ms. Gruenewald stated those provisions were too difficult for the claimant to monitor. Referring to the language on page 6, paragraph c which stated “using the provided safeguard for a period but subsequently and voluntarily allowing the safeguard or protection to be removed with his consent,” Ms. Gruenewald told the committee of a case in which a specific job needed to be done and the supervisor suggested that the safety bar be removed in order to make the job quicker. The employee indicated he did not want to remove the safeguard because the employee knew of a person who lost his fingers after removing the safety bar. After the supervisor threatened the employee with the loss of his job, the safety bar was removed and as a result, the employee lost four fingers on his hand. Ms. Gruenewald concluded by requesting the amendments at the end of Section 5 be deleted.
Mr. Hettrick appreciated Ms. Gruenewald’s concern, but stated it appeared to him Section 5, lines 26 to 30, on page 5 and continuing on page 6, covered both sets of circumstances; when the employer or foreman told the employee to remove the safety guard and when the employee voluntarily removed the safety guard. Mr. Hettrick felt the provisions were fair and furthered the idea that if there was safety equipment available it should be used.
Mr. Jeffrey noted that the provisions appeared to be fair. He believed it would be interesting to see numbers on how many people would lose 25 percent of their compensation because of provision and the number of employers that had been fined because the safeguard was not there to begin with. Mr. Jeffrey noted the employer was in a much superior position regarding these types of arguments and he felt the current law was sufficient and the whole provision should be stricken.
Mr. Hettrick felt it was fair to remember that employers suffered certain negative repercussions in every case where an employee was injured and thus had a right to insist that employees used safety equipment. He noted the language clearly provided that absence of safety equipment on the date of injury must be caused by the employee in order for the employee to be penalized.
Mr. Jeffrey commented he was curious to see statistics on how many claims had been reduced by 25 percent and how many employers had been fined. He stated his experience was that the employer generally knew what was going on at the job site and he felt the injured worker paid the price.
Mrs. Gibbons stated her opinion that the 25 percent penalty was punitive to both the employer and the employee because each would have to employ an attorney to make their case. She noted she would prefer imposing a fine of $300 to $2,000. Mrs. Gibbons asked whether language should be added at page 5, line 10, to include occupational diseases contracted.
Mr. Gruenewald noted fees charged by an attorney were between the attorney and the claimant, stating the law did not provide attorney’s fees to be paid above and beyond the amount of the claim.
Ms. Giunchigliani inquired whether the language concerning “full wages” was an addition to the statute or simply a modification of current language.
Ms. Gruenewald stated that the provision on page 4 applied to reopenings that would be made within one year after the date on which the claim was closed and only if the claimant was not off work. She noted the provision provided for a very limited reopening of cases and proponents wanted to expand the provision to include that, even with the limited reopening provision, the claimant, in order to reopen the claim after more than one year, would have to earn wages for at least five consecutive days or five cumulative days.
Ms. Giunchigliani asked for an explanation of the new language added at Section 3, subsection b, regarding benefits for permanent partial disability. Ms. Gruenewald could not provide an explanation of that language. As to the addition of the words “or the date of disablement” added in Section 3, subsection 10, Ms. Gruenewald advised that the language was clarification referring to occupational diseases.
Mrs. Gibbons asked how employers were notified of the requirement contained in Section 5, subsection 3, that notice to employees must be printed in both English and Spanish.
Mr. Ostrovsky indicated he could not answer Mrs. Gibbons’ question, but took the opportunity to state his objection to the removal of language in Section 5, subsection 1, which held the employee responsible when the employee removed the safeguard, unless done by order or direction of the employer, superintendent or foreman of the employer.
Mr. Nolan asked Roger Bremner, Administrator of the Division of Industrial Relations, if the fines and penalties on employers for safety violations referenced in the bill at Section 4, included fines and penalties imposed by OSHA. Roger Bremner, Administrator, State of Nevada Division of Industrial Relations, stated OSHA fines were separate and apart from the fines and penalties referenced in Section 4 and could result in an amount greater than $2,000. He noted Section 4 did not preclude OSHA from levying a more serious penalty for a more serious offense.
Nancyann Leeder, Nevada Attorney for Injured Workers (NAIW), addressed Section 3 by stating the language in Section 3 was not a mere clarification of existing statute but was an attempted limiting of reopening rights. Ms. Leeder felt such a provision would harm workers represented by NAIW, and was worse for occupational disease than industrial accidents.
As to Section 5, Ms. Leeder commented the language appeared to make the situation more equal. She noted on the face of the language, the language appeared to provide that the worker and the employer were both penalized 25 percent. Ms. Leeder indicated the problem with the provision would be proving who was at fault, and she felt litigation would be necessary in order to determine fault. She noted witnesses in such cases would be coworkers still working for the employer, supervisors, and other agents of the employer and based on the testimony of witnesses, a determination would be made as to who removed the guard and why and for what reasons. Accordingly, Ms. Leeder believed deleting the series of provisions creating an “at fault” situation was a far more equitable solution.
Mrs. Gibbons commented she did not feel it was appropriate to penalize workers for making stupid mistakes, noting stupid mistakes happen all the time in life. Ms. Leeder noted stupid mistakes were often made in an effort to get the job done faster, to the benefit of the employer.
Rusty McAllister, Legislative Representative, Professional Firefighters of Nevada, spoke in opposition to Section 5 of A.B. 46. Mr. McAllister was concerned regarding the effect of the bill on emergency personnel, and noted the performance of the job was often time sensitive and certain circumstances occurred in which safety devices could not be used because there was no time. Mr. McAllister noted that in some emergency situations safety devices simply could not be used for practical reasons and he noted under the provisions of Section 5, treatment would have to be withheld in such emergency situations until a supervisor could be contacted for approval to act without safety devices. Mr. McAllister stated it was very impractical in an emergency setting to comply with the provisions of Section 5, noting safety devices were used to the best of their ability because safety devices did save lives. However, he emphasized certain circumstances, such as car accidents and swift water rescues, in which responding units were not equipped with the proper safety devices for the situation, such as life jackets and helmets.
Lisa Black, Legislative Representative, Nevada Nurses Association, shared her experience as to the ramifications of the current statute and expressed her support with previous testimony that portions of Section 5 should be removed. Ms. Black told the committee she sustained a needle stick injury as a nurse that infected her with HIV and Hepatitis C. Her employer and its workers’ compensation carrier tried to use the statute in an attempt to reduce her benefits, asserting that she was not wearing gloves at the time of her injury, even though a glove would not have prevented the injury. Ms. Black stated it took two years of legal battling to keep her benefits whole.
Mr. Parks closed the hearing on A.B. 46 and opened the hearing on A.B. 47.
Assembly Bill 47: Makes various changes concerning policies of industrial insurance. (BDR 53-769)
Crystal McGee, Committee Policy Analyst, provided the committee with background on A.B. 47, which concerned certificates of insurance and notice of cancellation of industrial insurance coverage. Ms. McGee noted A.B. 47 repealed NRS 616B.026, which required an insurer to provide each employer for whom the insurer provided industrial insurance with a certificate of insurance indicating the employer had obtained a workers’ compensation policy. A.B. 47 deleted the provision of NRS that required that a certificate be posted openly at an employer’s place of business. In lieu of the posting requirement, employers must make available to auditors or investigators the declaration page of their industrial insurance policy for private carriers or a certificate of qualification for self-insured employers. Ms. McGee stated that A.B. 47 made revisions to provisions of NRS related to reporting proof of coverage information to the DIR.
James Wadhams, Legislative Representative, American Insurance Association, spoke to Section 1 of A.B. 47, which dealt with the certificate of coverage. Mr. Wadhams pointed out that the repealer was not the repealer of the notice that was required in the workplace for the benefit of the employee under NRS 616A.490. He felt it was important to recognize that the notice to the employees identifying the insurer must still be posted. Mr. Wadhams advised the reason for the repealer in Section 1 was to eliminate the redundancy of having two notices. He indicated the period of time for which the policy was effective was very sensitive and competitive information in the new marketplace. Mr. Wadhams indicated he worked with the DIR and the Attorney General during the interim to ensure that verification of the issuance of a policy could occur without making sensitive market information public and maintaining the notice to the employees. Accordingly, two notices were required: one with sensitive market information and one with information for the employee. Mr. Wadhams indicated Section 1 was modified to require that the policy of industrial insurance, including the declarations page, be delivered and available for inspection by the Attorney General or the DIR.
Ms. Giunchigliani asked what information contained in the repealed section was considered sensitive market information. Mr. Wadhams replied that the period of time that the policy was effective was considered sensitive market information because if an insurance agent knew when your policy was up for renewal, they would call you just ahead of that time. Mr. Wadhams reiterated the new section proposed to remove a redundant certificate and informed the committee the delivery of the policy of insurance constituted the information needed for verification of insurance by the Attorney General or the DIR. Mr. Wadhams confirmed the notice to employee was not being changed.
Jack Kim, Legislative Representative, Sierra Health and Life Insurance Company, addressed Section 2 of A.B. 47. Mr. Kim stated Section 2 did not remove the requirement by a private carrier to notify the DIR when a policy was issued, cancelled or renewed. He indicated Section 2, subsection 1, attempted to eliminate redundancy in reporting requirements, which currently required both the insurer and the insured to report the policy to the DIR.
Mr. Nolan agreed that any redundancy should be eliminated; however, he wanted to ensure that there was not some reason for the requirement that both the insurer and the insured report the policy. Mr. Kim suggested the requirement that both parties report the policy to the DIR was left in the statute because of the adoption of the new three-way system. Mr. Nolan asked the chairman if the committee could explore whether there was any related discussion or debate on the specific requirement at the time of its adoption, prior to eliminating the requirement from the statute.
Ms. Giunchigliani noted Section 2 indicated a private carrier must notify the DIR within 15 days and included in that provision would be a notice of cancellation. She wondered why the employer had 20 days to notify the DIR and the carrier only had 15 days to notify the DIR. Mr. Kim stated the employer’s notice was a subsequent notice and was not necessary. Ms. Giunchigliani wondered whether any form of verification was necessary in order to avoid creating a loophole. Mr. Kim felt there were so many reporting requirements that the DIR would get notice at some point, even without verification. Ms. Giunchigliani asked how the DIR would know when an employer picked up a new insurance company after the DIR received notice of cancellation from the old insurance company. Mr. Kim answered that the new insurer had 15 days to notify the DIR when a new employer was insured. The old insurer notified the DIR of the cancellation and the new insurer notified the DIR that the new policy had been issued. Mr. Kim indicated policies were typically one year long and were renewed on the date they were cancelled.
Robert Ostrovsky, Legislative Representative, Employers Insurance Company of Nevada (EICON), stated there was always a risk that an employer would cancel a policy and not replace it, which would be a violation of the law. Mr. Ostrovsky noted that if an employee was injured at that point, the employee would have to go to the uninsured employers fund to get compensation.
Ms. Giunchigliani asked who would be liable if an employer without coverage, who intended in good faith to get another policy but had not yet done so, had an employee injured while the employer was not covered.
Mr. Ostrovsky remarked that once the policy was cancelled, there was no coverage, and an insurance company would not cover the claim and compensation must be sought under the uninsured fund. He noted it was up to the employer to have insurance in effect and the insurance must be purchased in advance of the date of expiration. Mr. Ostrovsky stated there were issues regarding double coverage, but there were provisions in the law which would determined which insurance company would cover the claim so the injured worker did not get denied a benefit and then allow the two insurance companies to settle that dispute later in an appeal process.
Kevin Higgins, Chief Deputy Attorney General, Director, Workers’ Compensation Fraud Unit, told the committee that, unfortunately, it was not unusual for an employer to allow a lapse in its workers’ compensation policy. Mr. Higgins commented that when the lapse in coverage was for 15 or 30 days the matter was generally settled with a minimal fine. However, if there was an injury the Attorney General’s Office prosecuted the employer to the fullest extent of the law because the injury was being paid for out of the uninsured employers fund. Mr. Higgins noted the employer also ran the risk of being sued in tort because it did not have the exclusive remedy provisions provided by a workers’ compensation policy in place. Mr. Higgins stated the insurer contacted the employer multiple times prior to a lapse in policy and when a lapse occurred it was due to a business decision on the part of the employer not to renew the policy.
Ms. Giunchigliani asked how the Attorney General’s Office received notification that an employer did not have workers’ compensation insurance. Mr. Higgins indicated the Attorney General’s Office worked in cooperation with the DIR, in addition to receiving information from competitors, employees and the uninsured employer fund. Mr. Higgins indicated the fine for a misdemeanor offense for being without insurance for a couple of weeks without injury was several hundred dollars plus the standard court assessments. Mr. Higgins noted the administrative fine satisfied the criminal element, and advised the DIR still had the opportunity to civilly fine the employer. Mr. Higgins noted court fines went to the court, and the cost of investigation and prosecution was added to the court fines. He stated $50 to $100, in addition to the court fines, went to the Attorney General’s reserve account.
Mr. Kim spoke to Section 2, subsections 3 and 4, which addressed the current proof of coverage system. Mr. Kim noted that under the current proof of coverage system administered by the DIR, an insurance company was required to notify the DIR when it issued, renewed or terminated a policy, together with information on payroll, number of employees covered and other policy-oriented information. Mr. Kim noted subsections 3 and 4 would make it possible for an insurance company that believed it had submitted the correct data to the reporting agency to double check its data for accuracy when notified by the administrator of the administrator’s belief that a mistake had been made.
Mr. Ostrovsky added, regarding the earlier discussion on a certificate of coverage versus a declaration page, there were some employers who had very old certificates posted and he felt the use of the declaration page, which was revised annually with the renewal of the policy, was a much better method.
Mr. Higgins spoke briefly to Section 1, noting that with the advent of three-way insurance, it was no longer easy to pick up the phone and determine whether any given employer had insurance. He indicated Section 1 attempted to avoid that situation by requiring proof of insurance to be posted and he stated the Attorney General’s office was not aware that certificates of insurance contained confidential market data when the requirement was put into effect. The Attorney General’s office simply wanted to be able to walk into a business and determine whether or not the business had workers’ compensation coverage.
Mrs. Gibbons asked how the employer knew it was required to notify the DIR pursuant to Section 5, on page 4, lines 29, 38 and 39, when it cancelled or renewed its workers’ compensation policy.
Mr. Ostrovsky explained employers did not know that they should notify someone when they changed or cancelled policies, but noted the statute provided the employer must notify the DIR of a cancellation unless the employer’s subsequent insurer was a private carrier who was required to notify the DIR thereby relieving the employer of the obligation. Mr. Ostrovsky indicated, however, if the insurer did not properly notify the DIR, the employer was still “on the hook.” He noted the system always was and continued to be an employer-based system in which it was the employer’s obligation to purchase insurance.
Mr. Kim stated licensed agents were required to attend workers’ compensation training before they were allowed to sell workers’ compensation policies and, accordingly, the employer’s agent could assist them with the types of issues previously discussed.
Ms. Giunchigliani inquired whether proof of insurance was required in order to obtain a business license, noting the answer might assist the committee to close any potential loopholes.
Cliff King, State of Nevada Division of Insurance, stated NRS 686B contained the provision for the statistical organization, which was appointed by the Commissioner, and he noted every carrier had to report to the statistical organization when it wrote coverage. He indicated the statistical organization acted as a vendor to the DIR for the proof of coverage system, which was called POC. Mr. King noted POC was the system used to determine who had coverage. He stated a policy was normally written for twelve months and the normal scenario never allowed for a lapse in coverage. However, Mr. King noted, there were employers who were out of compliance when they failed to secure coverage on a continuous basis and carriers had to report proof of coverage to POC. Mr. King observed agents did make errors and he noted if a carrier or an agent failed to make the notification the carrier or agent would be the first ones to hear about the lapse in coverage when the Attorney General’s office notified the employer that it was uninsured.
Ms. McGee confirmed that in order to obtain a business license an affidavit must be signed confirming that the employer was insured, or, as a sole proprietor, confirming that coverage had been waived, or, as a self-insured employer, that the employer was self-insured.
Ms. Giunchigliani noted Douglas County did not require a business license.
Mr. King noted that if the provisions of Section 1 were adopted, NRS 616D.270 also needed to be amended which made it a misdemeanor for failure to post notice on the wall.
Mr. Parks closed the hearing on A.B. 47 and opened the hearing on A.B. 48.
Assembly Bill 48: Makes various changes concerning policies of industrial insurance. (BDR 53-768)
Crystal McGee, Committee Policy Analyst, provided background on A.B. 48, indicating the bill allowed employers to utilize computerized payroll records when reporting tip income to an insurer. She noted the bill repealed the provision of NRS that required the accrual of interest on unpaid industrial insurance premiums and also provided that an insurer may request, rather than require, a sole proprietor who elected industrial insurance coverage to submit to a physical examination before such coverage commenced. Ms. McGee told the committee A.B. 48 provided an insurer was not required to provide an industrial insurance policy covering each employee of an employer if certain employees were covered by a policy of a contractor or a subcontractor participating in a consolidated insurance program.
Robert Ostrovsky, Legislative Representative, Employers Insurance Company of Nevada (EICON), suggested modification to Sections 1 and 2 of A.B. 48 in order to recognize the definition of a policy year. As to Section 3, Mr. Ostrovsky indicated the new language would allow insurance companies to sell policies to cover specific events, which would allow an employee who was not covered 100 percent of the time to not be covered by the employer’s insurance for the portion of time the employee was involved in a consolidated insurance program project. Mr. Ostrovsky indicated this type of coverage was currently permitted but did he did not feel that statutory language reflected this permission. He hoped the language would assure the worker that he was either covered by the consolidated insurance program or covered by the employer’s insurance if the employee was not in a covered occupation or covered job assignment at the time.
Mr. Ostrovsky indicated Section 4 of the bill referred to the $36,000 salary cap for the collection of premium and suggested a change in the language to indicate the $36,000 cap should apply during the policy year and not during the calendar year because an employer may change insurers in the middle of the year and reset the clock on paying premiums.
As to the other sections in the bill, Mr. Ostrovsky identified the following changes:
As to the repealer, Mr. Ostrovsky noted when the State Industrial Insurance System (SIIS) existed there was a statute that established an interest rate applied to unpaid premium. Mr. Ostrovsky indicated the employer had to either buy insurance from SIIS or go uncovered, and when the employer was late with a premium, an interest rate, as determined by the Legislature, was applied. Under the current three-way system, if an employer did not pay its premium, the policy could be cancelled, the contractual late payment provision with the insurer was applied, or a deal was negotiated with the insurer, all of which were private business transactions. Accordingly, Mr. Ostrovsky felt it was appropriate to repeal the section that set the interest rate charged on late payments.
Mrs. Gibbons asked whether carriers could misuse the provision in Section 7, which allowed a private carrier to require a physical exam, in order to raise premiums in the second year of a policy. Mr. Ostrovsky replied that the sole proprietor had the option of purchasing workers’ compensation coverage or choosing not to be covered. He felt the original language requiring the physical was included to protect the old SIIS fund so that people with prior medical conditions were more likely to purchase the insurance.
Mr. Hettrick felt that the language at line 7 of Section 3, subsection 2, needed to be adjusted to provide for certain situations and wondered whether the word “who” should be eliminated and replaced by the words “when the employee.” Mr. Ostrovsky appreciated Mr. Hettrick’s comments and indicated he would like the opportunity to further review the section before the bill went to a work session. He noted the intent of the provision was to ensure coverage was always in place.
Ms. Giunchigliani asked whether there was any assurance that the $36,000 salary cap per policy year would not result in any kind of a loss to the injured worker. Mr. Ostrovsky understood the $36,000 salary cap applied to premium collected and had nothing to do with the calculation of the benefit received by an injured worker. Mr. Kim expressed agreement with Mr. Ostrovsky and noted the change would not affect benefits at all but was merely a way to determine how much of a premium an insurance company would collect.
Ms. Giunchigliani asked why a sole proprietor would be required to take a physical exam. Mr. Ostrovsky directed Ms. Giunchigliani to page 4, Section 7, line 9, and noted the old provision required a sole proprietor who elected to accept the terms and conditions of Chapter 616A-D must submit to a physical examination before his coverage commenced. Mr. Ostrovsky noted the change would allow the insurance company to decide whether a physical examination would be required of a sole proprietor. Mr. Kim voiced his agreement with Mr. Ostrovsky’s comments.
Jack Jeffrey, Legislative Representative, Southern Nevada Building & Construction Trades Council, told the committee of a problem in which an employee was injured on one of several consolidated insurance program jobs. While the insurance companies were waiting to assign the risk to the proper job, the employee was waiting to receive treatment. Mr. Jeffrey felt that type of problem needed to be addressed and he felt a provision was appropriate to require someone to be responsible for the injury until insurance matters could be sorted out.
Mr. Hettrick noted his previous comments were aimed at addressing that type of situation.
Assemblyman Parks closed the hearing on A.B. 48 and Chairman Dini suggested that work session on A.B. 48 be commenced at some future date.
The meeting was adjourned at 6:50 p.m.
RESPECTFULLY SUBMITTED:
Margaret Judge
Committee Secretary
By Rebekah Langhoff
Committee Secretary
APPROVED BY:
Assemblyman Joe Dini, Jr., Chairman
DATE: