ASSEMBLY COMMITTEE ON COMMERCE

MINUTES OF THE meeting

of the

ASSEMBLY Committee on Commerce and Labor

Seventy-First Session

February 7, 2001

The Committee on Commerce and Labor was called to order at 3:45 p.m., on Wednesday, February 7, 2001. Chairman Joe 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

Mr. Bob Beers

Ms. Dawn Gibbons

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Ms. Sheila Leslie

Mr. Dennis Nolan

Mr. John Oceguera

Mr. David Parks

Mr. Richard D. Perkins

COMMITTEE MEMBERS ABSENT:

Mr. David Humke, Excused

GUEST LEGISLATORS PRESENT:

Assemblyman Roy Neighbors, District 36

STAFF MEMBERS PRESENT:

Vance Hughey, Committee Policy Analyst

Crystal McGee, Committee Policy Analyst

Margaret Judge, Committee Secretary

OTHERS PRESENT:

Paula Berkley, Lobbyist, Chiropractic Physicians Board of Nevada

Roy Barraclough, Administrator, Pahrump Medical Center

Larry Matheis, Nevada State Medical Association

Fred Hillerby, Nevada Association Health Plan/Hometown Health Plan

Barbara Gruenewald, Nevada Trial Lawyers Association

Jack Kim, Health Provider of Nevada

Robert Ostrovsky, Employers Insurance Company of Nevada and Nevadans for Affordable Health Care

Bill Welch, Nevada Hospital Association

Jack Jeffrey, Southern Nevada Central Labor Council

Terry Rankin, Appeals Officer, State of Nevada

Marcia Holmberg, University Medical Center

Bob Gagnier, State of Nevada Employees Association

Guy Perkins, Division of Insurance, State of Nevada

Following roll call, Chairman Dini introduced himself and his staff, providing a brief personal background on each. Vance Hughey, Principal Research Analyst, gave an overview on the days and times the committee would meet. He also provided a list of deadlines to the committee members (Exhibit C). A brief overview of past legislation was discussed.

MR. GOLDWATER MOVED FOR APPROVAL OF THE ADOPTION OF THE RULES (Exhibit D).

MS. GIUNCHIGLIANI SECONDED.

MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.

* * * * * * * *

Crystal McGee, Committee Policy Analyst, Legislative Counsel Bureau (LCB), discussed involvement of the committee concerning workers’ compensation and workplace safety issues, and provided LCB Bulletin No. 01-19, “Legislative Committee on Workers’ Compensation: January 2001” (Exhibit E). Ms. McGee also provided LCB Background Paper 01-1, “A Study of Subsequent Injury Funds,” which discussed the purpose of subsequent injury funds, how that benefited employers, national trends, and history of subsequent injury funds in Nevada (Exhibit F).

Assembly Bill 32: Revises provisions regarding practice of chiropractic. (BDR 54-167)

Assemblywoman Gibbons representing Washoe County Assembly District 25, introduced (A.B. 32). Ms. Gibbons read her prepared testimony in support of A.B. 32 and indicated the bill addressed three revisions to Chapter 634 of the Nevada Revised Statutes (NRS). The first two revisions were essentially housekeeping changes while the third was more substantive. Ms. Gibbons indicated that Section 634.090 of the NRS described qualifications for applicants who took the exam to become a chiropractor. Section 1 of A.B. 32 improved the wording of NRS 634.090, and clarified that an applicant must first graduate from an approved and accredited chiropractic college. The statute also required that an applicant’s paperwork be submitted at least 60 days prior to the examination. Ms. Gibbons suggested that additional language be added that would allow the board to recognize through reciprocal agreements schools that are outside the United States. The Council on Chiropractic Education, which served as the accrediting body for chiropractic schools in the United States, had reciprocal agreements with schools outside the United States even though those schools might not be accredited. The modification of the wording allowed the board to recognize a foreign school graduate as long as his or her school had a reciprocal agreement with the Council on Chiropractic Education.

Ms. Gibbons further stated Section 2 of A.B. 32 would amend NRS 634.115 and clarify the conditions under which a person may get a temporary license to practice chiropractic in Nevada. The bill provided a person who sought a temporary license must hold a license that was in good standing in another jurisdiction and be actively practicing chiropractic in that jurisdiction. The change would clarify the board’s authority to deny a temporary license to a person who did not have an active license in another jurisdiction. Ms. Gibbons stated that Section 2 of the bill would reduce the time from the current 45 days to 30 days in which a person must apply for a temporary license before that license would be effective. This section also gave the president or secretary of the board the ability to authorize an application in less than 30 days if good cause was shown. The board’s executive director believed that 30 days was a sufficient time to process a temporary license application. Certain circumstances, such as illness or death of a chiropractic physician, required the necessity of having the ability to waive the 30-day requirement, which would assure patient care continuity.

Paula Berkley, lobbyist with the Chiropractic Physicians Board of Nevada, read testimony in support of A.B. 32 that was prepared by Dr. Bill Bailey, Legislative Chair for the Chiropractic Physicians Board of Nevada (Exhibit G). In his memo, Dr. Bailey suggested that the first change should say that the doctor must have a license/certificate in good standing in another jurisdiction and was actively practicing in that jurisdiction. The justification was to prevent new graduates from practicing before they had completed the necessary licensure and testing requirements. A suggestion was made to delete language in Section 3(c).

Ms. Berkley, through Dr. Bailey’s memo, indicated the last change would be to increase the number of chiropractic assistants (CAs) supervised by a chiropractor from two to four.

Ms. Giunchigliani asked Ms. Berkley about the foreign school requirement and expressed her agreement to do a reciprocal which had to be in statute rather than regulation by the board.

Mr. Nolan asked Ms. Berkley for an example of good cause as opposed to a bad cause or bad faith which could cause the application to be denied. Ms. Berkley indicated that a good cause and the reason for the exception was in the event of a sudden death or illness and required flexibility. Ms. Berkley added a bad case scenario was when somebody tried to manipulate the situation. The original bill was intended to be used for sports therapists where a chiropractor would know in advance that he would be traveling with a team. She indicated that the board wanted the ability to have 30 days to make sure the person was of good character before coming into the state.

Chairman Dini asked for background information regarding the increase from two to four chiropractic assistants a chiropractor supervised at the same time. Ms. Berkley indicated that two years ago the chiropractic board reviewed their regulations and identified the need to address potential problems when a chiropractor had massage therapists who worked in their offices. If a complaint was received who would be responsible for taking care of that complaint. The Chiropractic Board then created a new designation for chiropractic assistant regarding massage that required that if a chiropractor billed for the massage, the assistant had to have passed specific testing and was knowledgeable of Nevada laws. The chiropractor was also liable for the actions of the chiropractic assistant.

Ms. Giunchigliani asked if the minimum temporary license requirement was a four-year college degree and practice. Ms. Berkley confirmed this and added that when they became licensed in Nevada, there was an exam here and also a national exam. Ms. Giunchigliani inquired if both counted. Ms. Berkley indicated that if there was an individual obtaining a temporary license, they would not necessarily have to be licensed in the state of Nevada but would have to have an active one from another state in order to practice here.

Ms. Giunchigliani inquired if both the state and national tests were taken for a regular license. Ms. Berkley indicated that the national exam was for the chiropractic portion and the Nevada exam was for state law. The board wrote their own tests.

Ms. Giunchigliani inquired if an apprenticeship or internship was required for those that were practicing for the first time. Ms. Berkley indicated there was no requirement, but they had an existing regulation that provided for a doctor who wasn’t licensed but had graduated to work under the supervision of a licensed doctor.

Mr. Beers looked at line 11, page 1 of A.B. 32 which was added language; he suggested the “council on chiropractic education” at the end of that sentence should be capitalized. Ms. Berkley agreed.

Mr. Parks pointed to page 3, Section 3 of A.B. 32 where the request was made from two to four, and inquired if any statutory limits existed for other medical professionals, such as a dentist and dental assistant or a physician and physician’s assistant, as to the number they would be allowed to supervise. Ms. Berkley indicated she did not know the answer to this question but Mr. Hillerby would.

Fred Hillerby, Hillerby & Associates, indicated there were limits on the amount of pharmacy technicians that could be supervised by pharmacists and believed there were limits on the number of physician’s assistants also. Mr. Hillerby indicated he thought there was a bill forthcoming regarding physician’s assistants.

There being no further testimony, Chairman Dini concluded and closed the hearing on A.B. 32 and opened the hearing on A.B. 36.

Assembly Bill 36: Revises various provisions governing approval and payment of claims. (BDR 57-460)

Roy Neighbors, Assemblyman for District 36, introduced Mr. Barraclough, Administrator from Pahrump Medical Center (PMC), and referred to a handout regarding the current time frame for reimbursement (Exhibit H). Mr. Neighbors discussed current law, proposed language, and legislative changes. Mr. Neighbors indicated that A.B. 36 proposed to amend applicable sections of the NRS which had two objectives. The first objective was to require insurance companies, managed care organizations, and other third party payors to process rebilled medical claims within 30 days of the resubmission of the claim to the payor rather than the current 60 days. “Rebilled” claims were defined as those claims which were previously submitted by the provider for payment but were denied by the payor, returned to the provider for correction or additional information, and then resubmitted to the payor for processing. Mr. Neighbors indicated that the second objective was to preclude insurance companies from denying an entire claim because the payor determined that a portion of the claim was incomplete or inaccurate. Instead, a requirement of third-party payors would be to pay any or all portions of a complete and eligible submitted claim and only those incomplete or inaccurate portions would be returned to the provider for correction and resubmission. Mr. Neighbors provided testimony in support for the passage of the bill. First, the time frames defined in the current law often resulted in a denied claim and easily aged in excess of 90 to 110 days before payment was actually made and received. When a claim was denied multiple times it was typical that 150 to 180 days would pass before reimbursement was received.

Neighbors also pointed out the reimbursement flow was the stability of a health care facility and delay of reimbursement created a cash flow reduction that could create a compromise with the ability of the provider to meet routine operational expenses. Those impacted most were the rural and smaller, nonurban facilities.

Mr. Neighbors stated that passage of A.B. 36 would shorten the length of time a payor had to process and pay a rebilled claim from the current 60 days total (30 days for review and 30 days for payment) to 30 days total (15 days for review and 15 days for payment). Mr. Neighbors indicated that only updated or corrected data are necessary to complete the claim for processing.

Mr. Neighbors recommended changes to include the amendment of applicable sections of NRS 689B.255 for commercial insurance companies and 695C.185, which dealt with HMOs. Efforts had been made to resolve delays in the reimbursement denied through administrative channels with the insurance company.

Mr. Neighbors indicated that he and Mr. Barraclough met with one of the insurance companies who inquired why it couldn’t be worked out administratively. Mr. Neighbors indicated that a great deal of time could pass, up to two years, without any changes. Mr. Neighbors believed the legislative change was important and should apply to the HMOs and industry in general.

Roy Barraclough, Administrator, Pahrump Medical Center, stated his support of A.B. 36 and reiterated that he was present in an effort to change the time frame within which medical claims efforts were reviewed and ultimately paid and to effect a change in the law which would preclude insurance companies from denying an entire claim because a portion of that claim was determined to be incomplete or inaccurate. Mr. Barraclough added that he believed the system itself contributed to the problem. Providers wanted and needed to be paid for services rendered as quickly as possible. Payors, on the other hand, benefited from delaying payments in order to facilitate short-term investments and other activities, which was financially advantageous to their organizations.

Mr. Barraclough stated when the federal government and HCFA developed their plans a few years back in an attempt to curb the increase in Medicare spending, according to follow-up testimony presented to the Senate Finance Committee on June 10, 1999, by Paul Vandewater, who was the Assistant Director for Budget Analysis for the Congressional Budget Office, the growth for Medicare spending had slowed sharply in the previous two years due “to successful efforts on the part of HCFA to combat fraud and from delays in payment to healthcare providers.” Mr. Barraclough believed, due to the philosophy changes in the reimbursement process, Medicare and other third-party payors had passively adopted and applied these changes. He believed a contributing complication in the submitting and preparation of a claim was created due to the nonconformity of forms and protocols. He felt that a collaborative effort that involved both payors and providers that would result in a set of standards and protocols that facilitated and expedited the billing process was necessary, and because of its absence such standardization substantially added to the procedures necessary to process these claims. Mr. Barraclough advised that the legislation should be passed. If Pahrump Medical Center should no longer exist, it was his belief this would cause an elimination of urgent and emergency care and much needed diagnostic and therapeutic services. Another result would place extreme, possibly fatal pressure on the town’s ambulance service, which was already struggling. The alternative would be a 55-mile trip to Las Vegas for these services. PMC generated an average of $450,000 in gross patient revenues. A continuing average denial rate of 20 percent of claims submitted equated to approximately $80,000 being tied up in denied claims that then needed to be reworked, corrected, resubmitted, and redocumented before a portion of those revenues could be received.

Mr. Barraclough clarified that he was not suggesting if the billed passed it would solve all of the operational and financial problems, but believed it could assist the cash flow and ability to continue operations. He concluded that a fair, timely and equitable process was necessary and believed the passage of this bill was a necessity to maintain the financial viability of the health care system in this state. Mr. Barraclough asked for the committees support in this bill.

Mr. Neighbors claimed the interest section of this amendment sounded good and was covered under NRS 99.040. NRS 99.040 indicated the interest would be at the current prime rate of the largest bank in the state of Nevada plus 2 percent, and stated that if an agreement was worked out between the provider and the insurance company it could result in a 0 percent penalty.

Chairman Dini asked if the committee had questions.

Mr. Barraclough was asked by Mr. Nolan at what point in the process was he permitted to notify the patient their claim had been denied and payment was being sought from the patient. A standard expectation was the continuation of the process until the resources were exhausted, then go to the patient for the outstanding balance. Mr. Barraclough was also questioned if he felt the practice was unique to Pahrump Medical or was it common practice for some medical providers to seek parallel billing both with the patient and the insurer once a claim had been initially denied or denied a second time.

Mr. Barraclough couldn’t specify if the practice was unique to Pahrump Medical, but indicated that both practices occur in the industry, though it was basically up to the specific facility and their level of comfort in dealing with the patient population as it would relate to the collection of the bill.

Ms. Giunchigliani remarked that there was still a problem with billings, she still received calls from constituents and was concerned if the business practice could still handle the paperwork end of the process if the timeframe was changed from 30 to 15 days.

Mr. Barraclough replied the effort was to shorten the time frame to expedite processing even though logistical issues still needed to be dealt with, but it only applied to a rebill situation to get those payments processed within the 30-day period. While the background information was already in the system when the original invoice was received, it only applied to the updated information that had to be processed by the third party payor.

Ms. Giunchigliani thought the delay was caused only if the whole claim was denied. Mr. Barraclough agreed and indicated that it was not uniform with every third-party payor.

Ms. Giunchigliani then asked Mr. Barraclough if a problem arose when individuals who had pre-approval for surgery, etc., went through the process and then their claim, or a portion of it, was denied which they were not aware of. He indicated that it posed a problem, and payment was dependent upon on how the referral was processed with most third-party payors for procedures that were outside the contract or for those within the contract that required special approval. Mr. Barraclough declared that a comprehensive set of criteria needed to be satisfied before the service was rendered.

Ms. Giunchigliani asked if the bill would only affect those that were not state- affected or would it include both? Mr. Barraclough indicated as the current bill was prepared, the applicable section of the NRS covered state jurisdiction payors to include a third-party administrator to a fraternal organization, an HMO, a commercial insurance or private insurance. He stated the self-insured and unions would be the most affected.

Chairman Dini dismissed Mr. Neighbors and Mr. Barraclough and called Larry Matheis to the witness table.

Larry Matheis, Executive Director, Nevada State Medical Association (NSMA) supported A.B. 36 with a technical reservation in the first part regarding the definition of a claim. Mr. Matheis stated that he would not want to hold up the whole process while resolution was being conducted. There was agreement as to the intent.

Mr. Matheis testified it was his belief that the interpretation of the law meant you owe what you owe and that was the purpose of not permitting a part to be considered as full compensation for a claim. He further stated that he did not want to have that idea get lost while addressing this other issue, which was incorrectly delaying payment for a claim that had been approved while others were being sorted through. Mr. Matheis stated the statute specifically indicated a 20-day rule where they had 20 days to ask for additional information. A denial or approval of a claim could be done at this point and to request additional information was in violation of the intent of the law.

Mr. Matheis stated that what was being discussed here was about timely payment for claims that have or should have been approved. He stated that they had considered a change from thirty days to fifteen days, but did not put it in. He indicated he had no problem with the bill and would support it at this point. He asked if the committee had any questions.

Ms. Buckley asked how well the law was working since the last session. Ms. Buckley had heard some complaints regarding the delay in payments. Mr. Matheis believed that the penalty was not severe enough. He stated that he had received a number of complaints regarding nonpayment and delayed payment practices by some of the contract HMOs.

Ms. Buckley asked if complaints had been filed with the insurance commissioner and what action had been taken to enforce the law. Mr. Matheis replied that complaints were filed with the Insurance Division and had been taken to the Office of Consumer Health Assistance. Those claims were resolved. He stated new laws took a considerable amount of time from the filing of complaints through the resolution process. Mr. Matheis opined that the physicians were frustrated over the time it took for resolution. The Insurance Division put together a task force to work on implementation issues. Mr. Matheis believed the statute was about working out the ground rules.

Ms. Giunchigliani asked about “parallel billing,” and whether that was supported by the industry and the doctors. Mr. Matheis replied that there would be no parallel billing and billing notations were necessary for services rendered. Ms. Giunchigliani suggested a clarification.

Chairman Dini dismissed Mr. Matheis and asked for further comment.

Guy Perkins, Chief Insurance Assistant Examiner for the Life and Health Section of the Division of Insurance, directed the committee to the analysis of A.B. 36 which stated that the industry standard across the country was 30 days and that standard did not make a distinction between new and resubmitted claims. He remarked that the industry standard was established by the National Association of Insurance Commissioners (NAIC) in the Unfair Claims Settlement Practices Act and the accompanying regulations. Mr. Perkins stated that recently the final regulation related to claims procedures under ERISA, and the only part of claims payment timeliness mentioned, was 30 days. He added there might be a competitive disadvantage for keeping and attracting health insurers in this state.

Mr. Perkins discussed the point Mr. Matheis brought up regarding the task force. In November, the Division of Insurance sponsored and facilitated a task force for providers and insurers’ HMOs. That task force consisted of both administrators on the HMO insurer side and claims technicians. The same thing was true with the providers. There were administrators on the committee from individual practices and the office administrators who prepared claims. The Medical Association and the Nevada Hospital Association were also represented on the task force. Three meetings had already taken place. Mr. Perkins indicated that the purpose of the task force was to get to the problem before it actually became a bill. Analysis of what the problems were and what the solutions are were discussed from both sides. To date, the task force had been positive.

Mr. Perkins stated that it was unlawful for a payor, insurer, or HMO to have sought additional information and, once that information was obtained, they could not to ask for additional information for no stated reason.

Mr. Perkins verified that a large number of people were not aware of the fact that one-third of the population that is covered in the state of Nevada are covered under self-insured ERISA-exempt plans, which has kept the Division of Insurance from enforcing any kind of actions against them. Another third was covered by conventional insurance coverage that the Division of Insurance did have jurisdiction over, and the final third were under Medicaid or Medicare, or were uninsured.

Chairman Dini stated it appeared the division was on top of this issue. There were no questions so Chairman Dini dismissed Mr. Perkins.

Jack Kim, Health Plan Nevada and Sierra Health and Nevada, followed up on Guy Perkins’ comment about the task force. Mr. Kim gave some historical background regarding the task force. The Insurance Commissioner created the task force after she received a number of complaints. Industry representatives were brought together, including insurers, hospital providers, and agents. Mr. Kim indicated issues were discussed to improve the process. The same words were used with different definitions, which created a communication problem. The first problem that needed to be addressed was identified as the different procedures used for processing claims. For every health sector present there was an improvement process which could be implemented. One recommendation made to the insurance commissioner was that this particular committee would stay together through the conclusion of session.

Chairman Dini questioned if any issue arose that could not be settled in the task force. Mr. Kim replied, “No,” and noted that different requirements were necessary for different insurance carriers in order to process a claim. The task force provided educational material to effectuate needed claims processing. He further stated insurers typically attempted to process the claim once and made payment as quickly as possible. Their average rate was approximately 90 percent at twenty-two days.

Chairman Dini asked Mr. Kim how he could have assisted Mr. Neighbors and Mr. Barraclough. Mr. Kim declared that he mentioned the task force to Mr. Barraclough and asked if he was interested in participation. Mr. Kim understood Mr. Barraclough’s issues and felt there were some valid concerns. Mr. Kim indicated that they could have worked within the same time frames that had previously existed. Legislation which passed two years ago was being worked on. Payors believed that legislation applied to all health care providers. Mr. Kim agreed it did not apply to self-funded plans or two-thirds of the health care payors, but did apply to one-third of the population.

Mr. Nolan indicated that last session there was an implementation of this section concerning notifying the patient when the claim was denied within a ten-day or two-week period. Mr. Nolan indicated the patient was notified after 60 to 90 days lapsed. He understood that the insurers were notified when a claim was denied. Mr. Nolan asked if that process was performed. Mr. Kim indicated that he assumed it had been done but would double check.

Chairman Dini called Fred Hillerby to testify.

Mr. Hillerby, Nevada Association Health Plan/Hometown Health Plan, complimented the commissioner for past work performed. Hometown Health Plan processed over 13,000 claims from August 1999 to September 30, 2000, with an average process period of 22 days. Ninety eight percent of those claims were paid within the 31 days. When Hometown Health Plan “went over,” they paid interest. Mr. Hillerby stated the importance of both sides facing that issue was to expedite the processing of claims. He believed that although the process had not moved as quickly as they would have liked, it was moving in the right direction. They wanted to pay the claims quickly. There needed to be a good relationship established with the providers also. Mr. Hillerby indicated that a large amount of time was still needed to process those claims. The 22-day average for Hometown included those that were sent back and reprocessed. All of the claims got paid within 22 days. Mr. Hillerby asked for the committee’s patience and inquired if additional information had been provided by Mr. Perkins and/or the division. Mr. Hillerby questioned if they needed to have addressed by statute some definitional issues.

Chairman Dini excused Mr. Hillerby and asked for further testimony on A.B. 36. Chairman Dini asked Mr. Barraclough if he had a rebuttal.

Mr. Barraclough clarified he was not aware of the fact that the task force had met for the purposes of dealing with these particular issues. They were not a member of the Nevada Medical Association, nor were they affiliated with the Nevada Hospital project, which may have explained why notification was not received. Mr. Barraclough’s primary objective as administrator of the facility was to facilitate cash flow to the fullest extent possible and as expeditiously as possible. Mr. Barraclough indicated that if that objective was accomplished, the desired outcome would be accomplished for the entire industry. Mr. Barraclough believed this was a completely equitable process. He stated the billing and reimbursement process was not controlled. Collectively, Mr. Barraclough stated he would have liked to have seen differences worked out because the ultimate objective was payment in a timely fashion.

Chairman Dini concluded that he had a problem with the 15-day proposal from Mr. Barraclough because if the customary 30 days was used in the industry then too much modification was possible and could create a problem of being physically impossible. Chairman Dini stated this would be investigated further.

Mr. Barraclough agreed with Chairman Dini that, because of the logistical challenges that existed, the 15 days was a starting point. An effort had been made to draw attention to what was happening and created more of a problem than a solution. If industry standards suggested a modification in the time frame, then consideration would be given to change the process.

Mr. Neighbors stated that the late payment practice with HMOs nationwide came back to the fact there was a considerable savings of money on interest. Mr. Neighbors expressed concern that a problem existed and suggested that an inquiry be made on how payments were processed. Chairman Dini thanked Mr. Neighbors and concluded the hearing on A.B. 36.

Chairman Dini opened discussions on A.B. 42.

Assembly Bill 42: Clarifies applicability of provision providing certain reemployment rights with executive branch of state government to certain employees regardless of status of such employees with department of personnel. (BDR S-771)

Crystal McGee, Research Analyst, Legislative Counsel Bureau, presented an overview of A.B. 42. A.B. 42 would revise a section of S.B. 37 from the Seventieth Session, which authorized the privatization of the State Industrial Insurance System (SIIS). The compromises included: (1) the placement of EICON employees maintained on a list by the Department of Personnel and a preference on the list; (2) served a probationary period which was not necessary. During the 1999 interim, attention was brought to the Legislative Committee on Workers’ Compensation regarding S.B. 37 of the Seventieth Session, which applied to only classified employees. The Department of Personnel and their counsel issued a legal opinion that indicated that those provisions should have applied only to classified personnel. Members stated that those provisions were intended to apply to all EICON employees, meaning both contract and unclassified employees as well as classified. Other committee members indicated that was not the intent, and the provisions were explicitly for classified employees. The Department of Personnel did not maintain or create lists for other positions. The only lists that were maintained were for classified positions. Based on the information that was provided to the Legislative Committee on Workers’ Compensation they adopted a recommendation to clarify that specific provision of S.B. 37 of the Seventieth Session and stated that employment rights that had been extended were allowed for all EICON employees.

Mr. Parks, who was chairman of the Interim Committee on Workers’ Compensation, stated that he understood the discussion was that issue applied to a limited number of employees who had fallen “into the crack” between those who were extended benefits compared to those who had not been otherwise eligible.

Chairman Dini asked if there was any further testimony on A.B. 42.

Mr. Robert Gagnier, State of Nevada Employees Association, was a neutral party who brought up some questions that would be raised by the passage of A.B. 42. Mr. Gagnier indicated that each classified employee competed for employment for a position in state government and, after serving a probationary period, became a permanent employee. Mr. Gagnier requested the committee consider the passage of A.B. 42, which allowed the reemployment list benefits to be extended to temporary workers and included contract employees hired for a specified period. Another possible scenario, to which Mr. Gagnier stated he had some objection, was when a temporary employee bumped a long-term employee that had worked for EICON.

Chairman Dini dismissed Mr. Gagnier.

Jeanne Greene, Director of Department of Personnel, indicated that 260 individuals would be affected by this bill. These are individuals who served in a contract capacity with EICON, emergency appointments or were not classified individuals.

Mr. Hettrick asked Jeanne Greene if the 260 figure was the total number of people. Ms. Greene indicated that she was unsure how many of those people were eligible under that provision and how many had been interested in placement.

Mr. Hettrick pointed out the testimony given should not have affected that many people, but requested Ms. Greene to gather more information. Mr. Hettrick expressed concern that employees were not able to get back into a position near what they were capable, being at the top of the list, being offered jobs that were far lower in pay and rank which made it almost impossible for them to take them. First, there were not many openings and then there was a hiring freeze. Mr. Hettrick further commented that it was very difficult for them to stay in positions. The intent was to privatize the system and let these people who were just franchised continue to be employed with the state. Mr. Hettrick recommended a look into this situation. Chairman Dini agreed to the need for more information.

Ms. Greene offered testimony indicating that they have reemployed 463 EICON employees into the state system since S.B. 37 of the Seventieth Session was passed. Ms. Greene stated that they currently had 291 employees still on a list, though many of those names on the list were not interested in transferring into state employment. Ms. Greene further stated that a total of 8,197 jobs were offered which were turned down by EICON employees.

Mr. Parks asked Ms. Greene to produce this in writing and forward the statistical information to the committee. Chairman Dini concurred with the request.

Bob Ostrovsky, representing EICON, stated EICON was neutral in their position regarding this particular bill, which did not impact EICON one way or another.

Chairman Dini concluded the hearing on A.B. 42 and opened discussion on A.B. 45.

Assembly Bill No. 45: Requires administrator of division of industrial relations of department of business and industry to create pamphlet concerning use of subsequent injury funds. (BDR 53-770)

Crystal McGee opened testimony with the introduction of LCB Bulletin No. 01-19, which was the final report of the Legislative Committee on Workers’ Compensation (Exhibit E). Also provided was LCB Background Paper 01-1, “A Study of Subsequent Injury Funds,” which explained how injury funds worked, both in Nevada and in other states, and pointed out what the original intent of these funds were (Exhibit F). Ms. McGee further stated that the issue arose during the Seventieth Legislative Session with a recommendation the issue be studied by the Legislative Committee on Workers’ Compensation. The matter was studied during the interim. Three separate hearings were conducted and testimony was heard. The committee decided to retain the funds. Ms. McGee said Nevada was the only state to have had three separate funds. The funds were: a fund for self-insured employers, a fund for associations of self-insured employers and a fund for private carriers. A recommendation by committee required that the Division of Industrial Relations (DIR) create and maintain a brochure that was publicly available which served to educate employers and interested parties on how the subsequent injury funds work. Interim testimony included South Carolina’s successful attempt and use of a brochure in addition to other educational material.

Chairman Dini asked for information about the fiscal impact. Ms. McGee stated that Mr. Bremmner had that information to provide to the committee. Chairman Dini called Roger Bremmner to testify.

Mr. Roger Bremmner, Administrator of the Division of Industrial Relations, indicated that a fiscal note had been prepared. For the first year, the cost would be $65,845, of which $48,000 was just for the printing of the brochure, as reflected in a bid received from the state in-house printing office. Mailing was about $14,000 to $15,000, which was part of the fiscal impact that could be saved. Fiscal year 2003 and beyond, the cost would decrease to $1,580. Mr. Beers asked Mr. Bremmner for the first year’s fiscal impact.

Chairman Dini indicated that Mr. Bremmner was a former chairman of Ways and Means so he understood fiscal notes.

Ms. Giunchigliani questioned if an alternative distribution method was possible to the business associations and chambers, or was that mandated. Mr. Bremmner stated there could be a consideration for alternative distribution methods because no mandate existed. Bob Ostrovsky testified as an individual who worked in the workers’ compensation field for 25 years. Mr. Ostrovsky believed that the bill was “trying to kill a fly with a 10,000 pound boulder instead of a fly swatter.” Mr. Ostrovsky explained subsequent injury funds were out of balance, with some employers making more applications and claims that then resulted in those employers having received more dollars from the fund than others. Mr. Ostrovsky commented the state of Nevada and Hilton Corporation had been big users of the fund. Mr. Ostrovsky felt $65,000 was a considerable amount of money to have spent and may not have resulted in the equivocal value. The $65,000 came from employers who were then assessed for all costs of the Division of Industrial Relations.

Mr. Hettrick expressed his appreciation to Mr. Ostrovsky for testifying. Mr. Hettrick indicated that he argued throughout the interim that the subsequent injury funds should have been eliminated and felt this created knowledgeable companies with aggressive third-party administrators who have obtained a great deal of money. A very small number of companies out of three hundred brought in a great deal of money without contributing as much in both beneficiaries and assessments. Those small companies that made up the rest did not receive any funds due to a lack of manpower, or because they were not sophisticated enough to benefit from these funds (Exhibit I). Mr. Hettrick felt that once companies were correctly assessed, everyone would benefit. The argument was made that this fund helped rehire injured workers because they did not have to worry about receiving workers’ compensation benefits. Mr. Hettrick summarized that injured workers being rehired or improving the conditions for those that were injured had nothing to do with this issue. He also thought it was a “slush” fund for the people who knew how to access it while others were charged for it.

Donald Jayne testified on behalf of the Nevada Self-Insured Association. Mr. Jayne agreed with Mr. Ostrovsky’s opinion that the mailings to all employees were an overkill and third-party administrators and self-insured administrative departments of the insurance company departments instigated this type of action. Mr. Jayne supported the elimination of subsequent injury funds in the past. He had not been aware of the $68,000 impact attached to A.B. 45 and concluded that the Nevada Self-Insurance Association opposed this.

Cheryl Blomstrom who represented the Associated General Contractors of America, Inc., offered services in distributing the pamphlet to members of the association and other organizations where they were members.

Chairman Dini concluded the hearing on A.B. 45 and opened the hearing on A.B. 49.

Assembly Bill No. 49: Makes various changes concerning duties and professional conduct of hearing and appeals officers of department of administration. (BDR 53-767)

Crystal McGee, Legislative Counsel Bureau, Research Division introduced A.B. 49 and referred to page 30 and 31 of LCB Bulletin No. 01-19 (Exhibit E). Pages 30 and 31 of the Bulletin transferred certain appeals hearings issues from the Division of Industrial Relations to the hearings department with respect to vocational rehabilitation. A.B. 49 also addressed appeals officers’ conduct. S.B. 55 of the Seventieth Session dealt extensively with the conduct of appeals officers and did not pass. Recommendation 15 from LCB Bulletin No. 01-19 came from that bill. Those two items are the foundation of A.B. 49.

Bob Ostrovsky, Employers Insurance Company of Nevada, indicated Sections 1 and 2 of the bill came from a working group which included insurance companies. Section 1 of this bill changed old language. The benefits were outlined in the statute pursuant to 616C.585. This section allowed an employer to appeal a decision of the insured (which was SIIS) if some benefit had been given under that section that wasn’t appropriate. The appeal went to the system and then the administrator. The term “administrator” meant the administrator of the Department of Industrial Relations and it was suggested by Mr. Ostrovsky to remove that language completely, which would not change the types of disputes that occurred between principal contractors. Section 2 dealt with who the insurance company was and who should cover a claim. Under the language, the administrator of the Division of Industrial Relations resolved those disputes. It was suggested that the proper venue should have been at the appeals offices’ level. Presently, a disputed problem that occurred between two insurance companies on an automobile claim ended up in district court. Mr. Ostrovsky contended this should have ended up in the workman’s compensation appeals’ court and then to District Court if needed. The regulator, who was the administrator, should not have been the one to decide.

Chairman Dini asked Mr. Ostrovsky the location of this language in the bill, to which Mr. Ostrovsky replied it was on page 2 of A.B. 49, Section 2, paragraph 2 stated that ”until the final resolution of the issue of responsibility for payment of a claim is obtained, the current insurer of the employer shall pay benefits to the claimant pursuant to” NRS 616A.617 inclusive.

Mr. Don Jayne, representing Nevada Self-Insured Association stated that Sections 5 and 3 were the sections that addressed the appeals officer provision. Mr. Jayne qualified that there are two different levels in the appeals process that are available to injured workers, employers and insurance companies. Mr. Jayne concluded that the hearing process was meant to be an informal clarification and informal hearing. After the hearing process was completed, the hearing then moved to the appeals level, which was a little more formal. A legal record was made that was used in district court. Often times both sides are represented by attorneys and the process may be more formal in nature. Through this bill, the Self-Insured Association requested that the appeals officers adhere to some form of a code of conduct. Mr. Jayne stated that the imposed regulation was necessary so that the process was not undermined.

Mr. Nolan asked Mr. Jayne what percentage of hearings were appealed? Mr. Jayne indicated that he did not have that information but the information was available through the hearings division itself. Mr. Jayne indicated he would check on that. Mr. Nolan asked Mr. Jayne what kinds of ethical problems specifically were seen which required the necessity of this provision in the statute? Mr. Jayne stated he was not prepared to testify on that matter. Mr. Jayne concluded that some components of S.B. 55 of the Seventieth Session addressed the same issues and the levels of protection extended to both the injured workers as well as employers and insurance companies, which provided a standard of performance for those appeals officers.

Ms. Giunchigliani commented that an appeals officer was required to be a licensed attorney in this state before they became an appeals referee. Ms. Giunchigliani thought that an ethical code existed for attorneys and this proposal seemed redundant. Mr. Jayne believed there was an ethical code for attorneys but was not able to explain how the division utilized that code of conduct with the appeals officers. If someone alleged a violation of a code of conduct, Mr. Jayne indicated that the language allowed creation of a process by the director. He also indicated the director had the ability to review and evaluate the challenges or appeals received. Those individuals whose performance was satisfactory were not reappointed.

Ms. Giunchigliani suggested a cautious approach.

Mr. Hettrick pointed out the language included the director, who in his capacity as chief with the hearings division wrote regulations that were favorable. Mr. Hettrick stated that Section 5, Subsection 2 said, “rules of practice pursuant to the director’s designee will hear complaints.” The purpose was to establish a procedure that was necessary and did not exist.

Bob Ostrovsky testified in Section 4 the Legislative Counsel Bureau reinserted language that EICON opposed and gave the employer the right to appeal those decisions on vocational rehabilitation issues. Mr. Ostrovsky suggested Section 4 be removed entirely since the whole purpose was to keep disputes out of the courtroom.

Chairman Dini stated the first Section was B and this was C, and asked if they were the same. Mr. Ostrovsky thought both had referenced 616C.585 but would meet with staff.

Ms. Terry Rankin, Appeals Officer with the State of Nevada, proposed the amendment on A.B. 49. She served as Commissioner of Insurance for the state of Nevada for five years. She was a charter casualty underwriter. A charter casualty property underwriter was subjected to a code of conduct. As an attorney in the state of Nevada and Arizona she was also subject to a code of conduct. A.B. 49 proposed the regulation be adopted. Ms. Rankin recommended that “penalties” be removed and replaced with “disciplinary action” so the scope was broader than monetary fines against the appeals officer. Section 3 of the bill was referenced in NRS 616C.540. Ms. Rankin recommended if the phrase regulations were effective that an amendment be prepared to say “disciplinary action.”

Barbara Buckley expressed concern with the lack of parameters.

Ms. Rankin referred Ms. Buckley to the Nevada Supreme Court, which produced an opinion approximately three weeks ago against Judge Fine in Las Vegas. Ms. Rankin stated, for a judge, there existed a standard in judicial review. The State Bar had similar proceedings for complaints against attorneys that were reviewed by a disciplinary panel. If the panel recommended discipline against an attorney it was forwarded to the Nevada Supreme Court. Ms. Rankin further stated that since appeals officers were required to be attorneys, procedures were already in existence within the State Bar. This language was in addition to that. Ms. Rankin that they sat as judges, although they were an executive branch, administrative law judges, and provided a notice and procedure for that.

Mr. Hettrick asked if a problem existed if Section 5, line 37, was taken out and added after the word regulations “substantially similar to the judicial discipline commission” or whatever group Ms. Rankin believed appropriate.

Ms. Rankin indicated S.B. 55 of the Seventieth Session included language on the canons of judicial ethics being met and the difficulty of fitting the executive branch into the judiciary’s discipline system as a third branch of government. A model Administrative Law Judge Act showed up on the National Association of Administrative Law Judges website. Very few states had adopted that model. A federal committee reviewed the model code; Congress abolished the committee and its funding two years ago on the federal level.

Mr. Hettrick believed there was a need for a procedure and attempted to satisfy the concern. If a control on the procedure was necessary then he wanted to know what the control was. Ms. Rankin indicated that remedy currently was provided by appeal to the District Court for decision. Fifty percent of the people who appeared in front of appeals referees lost; fifty percent went to District Court. Working under the public hearing requirements of Chapter 233B of the Nevada Revised Statutes, Mr. Jayne’s individual and group remedy was to participate in that process and sculpt the regulations through that public process the way they wanted.

Don Jayne, on behalf of the Nevada Self-Insured Association, indicated he did not want to force an absolute use of either model or any other appropriate model. Mr. Jayne agreed that a process to make sure that the regulations satisfied our needs existed. Mr. Jayne had no objection to Ms. Rankin’s request to change “penalties” to “disciplinary actions.”

Jack Kim, Sierra Insurance Group, testified on A.B. 49. Mr. Kim indicated Section 1 basically said “a principal contractor has a right to file an appeal with the Division of Industrial Relations if they receive a letter under 616B.645.” Mr. Kim interpreted 616B.645 to mean if you were a principal contractor and subcontractor, and if the subcontractor dropped his insurance, the insurance companies notified the principal contractor. The principal contractor had the right to file an appeal with the DIR. Mr. Kim was not sure what was being appealed and the language did not make sense at this point. Mr. Kim suggested that the need to pull that all out.

Chairman Dini stated that there would be a work session on A.B. 49.

Jack Jeffrey, Southern Nevada Building and Construction Trades Counsel and Southern Nevada Central Labor Counsel, indicated they were neutral on Sections 1 and 2 and it appeared to be an administrative change for the insurers and did not affect the injured worker. The injured worker was protected in either event. A concern was raised regarding the remainder of the bill. Mr. Jeffrey believed that S.B. 55 of the Seventieth Session contained more onerous provisions which handled the hearings and appeals officers that failed in this committee. Mr. Jeffrey felt the bill was redundant and a code of ethics already existed for the appeals officers who work as attorneys. Mr. Jeffrey stated that appeals officers needed to be objective and had the potential of being very intimidating. Mr. Jeffrey strongly opposed S.B. 55 of the Seventieth Session and believed A.B. 49 was not positive for the appeals process system. He saw this as a redundant provision that should not be enacted.

There being no further questions, Mr. Dini dismissed Mr. Jeffrey.

Barbara Gruenewald, an attorney who represented injured workers, testified on behalf of the Nevada Trial Lawyers (NTLA) and voiced objections similar to those of Mr. Jeffrey. Ms. Gruenewald indicated their objection to Sections 5 and 3. They also opposed an option to another level of review. They felt the appeals officers answered to the Governor and that had worked well for many years. The appeals officers had a two-year appointment and the remedy already existed that if they were not doing their job they would not be reappointed. Ms. Gruenewald testified that NTLA wanted all appeals officers to retain their objectivity. The appeals officers should have the decision-making ability without constant supervision. Section 5 would place too much discretion in the director’s hands. Under that provision, the director was supposed to adopt the rules, hear the complaints, issue the decisions and impose the penalties. Any person can lodge a complaint with the State Bar, who then investigated that complaint, a due-process hearing was performed, and recommendations were made to the Nevada Supreme Court. Concerns regarding the ethical behavior of an appeals officer had a remedy already in place and had checks and balances. Ms. Gruenewald agreed with Mr. Jeffrey that the process was broken and did not feel it required an involved process.

Nancy Ann Leeder, Nevada Attorney for Injured Workers, testified on A.B. 49. Ms. Leeder believed that three avenues existed for disciplinary checks and balances. The time and effort required somebody’s time, which would be paid for and seemed to be an inefficiency.

Ms. Gibbons asked Ms. Leeder if there was a problem hiring attorneys if Section 5 was adopted. Ms. Leeder believed there could be.

No further discussion was held on A.B. 49. Chairman Dini closed the hearing on A.B. 49 and adjourned the meeting at 6:37 p.m.

RESPECTFULLY SUBMITTED:

Margaret Judge

Committee Secretary

APPROVED BY:

Assemblyman Joe Dini, Jr., Chairman

DATE: