MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-First Session
April 18, 2001
The Senate Committee on Commerce and Laborwas called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Wednesday, April 18, 2001, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was video conferenced to the Grant Sawyer State Office Building, Room 4412, 555 East Washington Street, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Ann O’Connell, Vice Chairman
Senator Dean A. Rhoads
Senator Mark Amodei
Senator Raymond C. Shaffer
Senator Michael A. (Mike) Schneider
Senator Maggie Carlton
GUEST LEGISLATORS PRESENT:
Assemblywoman Barbara E. Buckley, Clark County Assembly District No. 8
STAFF MEMBERS PRESENT:
Scott Young, Committee Policy Analyst
Crystal M. McGee, Committee Policy Analyst
Silvia Motta, Committee Secretary
OTHERS PRESENT:
James L. Wadhams, Lobbyist, American Insurance Association
Donald E. Jayne, Lobbyist, Nevada Self-Insured Association No. 200
Leslie Bell, President, Nevada Self-Insured Association
Roger Bremner, Administrator, Division of Industrial Relations, Department of Business and Industry
Robert A. Ostrovsky, Lobbyist, Employers Insurance Company of Nevada
Charles R. Nort, Lobbyist
Jack Kim, Lobbyist, Sierra Health and Life Insurance Company
Nancyann Leeder, Nevada Attorney for Injured Workers, Department of Business Industry
Jeanette K. Belz, Lobbyist, Liberty Mutual Insurance Company
John E. Jeffrey, Lobbyist, Southern Nevada Center Labor Council
Danny L. Thompson, Lobbyist, Nevada State American Federation of Labor- Congress of Industrial Organizations
Barbara J. Gruenewald, Lobbyist, Nevada Trial Lawyers Association
Cliff King, Appeals Panel for Industrial Insurance, Department of Business and Industry
Daryl E. Capurro, Lobbyist, Nevada Motor Transport Association
Ronald P. Dreher, Lobbyist, President, Peace Officers Research Association of Nevada
Eloise Ritter, Concerned Citizen
Stephen G. Turner, Lobbyist, Peace Officers Research Association of Nevada
Chairman Townsend opened hearing on A.B. 44, which was authored on behalf of the Legislative Committee on Worker’s Compensation.
ASSEMBLY BILL 44: Makes various changes concerning industrial insurance. (BDR 53-772)
Senator Carlton:
The one important provision pointed out to me, was that on the Assembly Floor this bill was amended to abolish the Legislative Committee on Worker’s Compensation, and I would like to make sure the committee takes note of that.
James L. Wadhams, Lobbyist, American Insurance Association:
As this committee is aware, this bill actually represents a composite of several issues which were presented in the interim committee on workmen’s compensation. I would like to address sections 2 and 3, requested by the organization that I represent. Section 2 deals with electronic records. We had a historical issue in the statute, that seems to require hard-copy original documents, and in this era virtually everyone keeps their records in an electronic form. This language allows the insurance companies, the employers, and the insurers, who maintain such records, a requirement the records be reproduced in printed form for claimants and claimants-representatives alike. You will notice there is a requirement that active files be reproduced and delivered within 24 hours, which appears on line 44. Line 45 refers to closed claims that may be reopened under a lifetime reopening provision, which must be reproduced within 7 calendar days; there may be some requests to extend that time. Basically, it allows maintaining an electronic form and reproducing it upon request.
Section 3 deals with the provision of an office within the state. Again, this is consistent with the electronic transaction of business, but it does require there be a place, an office in the state, where these records can be obtained. So it complements section 2. A claimant attorney, or the regulatory agencies, should be able to go into an office and request to see the files, the files then would be printed out at that particular location in Nevada.
Donald E. Jayne, Lobbyist, Nevada Self-Insured Association (NSIA) No. 200:
I would like to testify on section 5, which comes from another consensus bill that came about in the interim committee as part of a different bill, and was amended in A.B. 44. The bill addresses the method of calculating the medical fee schedule changes and its revisions. There was a working group that met during the interim session, involving individuals from insurance companies, self-insurers from the regulator and medical communities; they came together with this language to develop, calculate and establish a baseline for the medical fee schedule and peg it to an index system, so that every year the Division of Industry Relations (DIR) would not have to go through a rather significant process for getting regulations.
In Las Vegas today, we have Leslie Bell, who is the president of the Nevada Self-Insured Association. She was a member of the working group, and would like to offer her testimony.
Leslie Bell, President, Nevada Self-Insured Association:
I participated in the working group, along with the medical community, comprised of physical therapy and clinical applications. We had consensus that this method, if we could make this legislative change, the state could then collect data that had more value. Currently the data is required to be paid in the state of Nevada. What happens, which is unfortunate and unfair to the medical provider, the data they collect is already discounted, because in today’s group-insurance age, most of them are HMOs (Health Maintenance Organizations). They also are not collecting co-payments which are paid directly by the individual, therefore, the state is collecting already discounted information, then discounting it for workmen’s compensation purposes. We do not believe the outcome of that is legitimate, nor they are equitable to providers.
What the consensus group would like to propose is this change so we can collect the billed and paid data, so the information would be readily available. In addition, under these proposals, the information will only be required to be collected once. The IRIS (Integrated Rehabilitation Information System) will then go back into a beginning fee schedule. Subsequent to that, we are proposing it be increased by a CPI (Consumer Price Index). We believe that will stop some of the inequitable results that currently occur, as a result of what is going on when collecting the data.
Roger Bremner, Administrator, Division of Industrial Relations, Department of Business and Industry:
I am here to speak in favor of section 5 of the bill. We also participated in the working plan. We believe it would simplify the updating of the medical fee schedule, make our life easier, and in the long run be cost-efficient, since we were forced to go out to bid for this service every year. Generally, we got one bid, maybe two, it was a cumbersome process, and quite frankly, the results were not always what we thought they should be. We think by adopting this procedure, we can simplify it, and in the long run save money.
Robert A. Ostrovsky, Lobbyist, Employers Insurance Company of Nevada:
I also participated in the committee that developed (the information on) section 5, and we would like to go on the record to voice our support. We understand there may be some cost increase for insurers, but we believe in the long run, providers would be fairly compensated, and therefore, appeal to more and better providers who are willing to serve insured workers in this state.
There are many details (in this proposal) to be considered, but we are confident the DIR will develop a good baseline. We strongly support section 5, as we support section 2, however, we would ask that the committee consider an amendment (to be brought forward) regarding the 7-calendar days for the production of closed claims to be increased; we think 7 days is not sufficient time, because some of these claims are very old.
Charles R. Nort, Lobbyist, President, Nevada Alternative Solution:
As Mr. Ostrovsky indicated, we are here to offer a proposed amendment (line 45, section 2, subsection 2 of A.B. 44) with regards to the 7 calendar days, and have had discussion regarding this proposed amendment with Nancyann Leeder, Nevada Attorney for Injured Workers (NAIW). We are proposing a time frame of 14 days. The reason the 7 days was established, was because when the NAIW, which was the party most affected by this, had to wait 30 days to receive the copied files, however, they would not get them within the 30 days, the NAIW did not have enough time to prepare for the hearing. On the 7 calendar days, the burden is placed on a TPA (third-party administrator), such as a small business. We have many of those closed claim files, off-site, in storage facilities, which have been controlled by two or three different administrators, in different styles of boxes. We put them in storage, and try to calendar and label them as best as possible. If I get that request on Friday afternoon, Saturday and Sunday are gone; then on Monday we are looking out in the storage facility; even if we find it that day, it may take a day, or day and a half, to copy the information, leaving us 2½ days at best, to organize and copy the file, draft a (cover) letter, and send it or hand it to NAIW. The office of the Nevada Attorney for Injured Workers is not in opposition to this amendment, therefore, we would ask that you consider it.
Senator O'Connell:
Sir, was this amendment offered on the other (Assembly) side?
Mr. Nort:
I believe it was not.
Jack Kim, Lobbyist, Sierra Health and Life Insurance Company:
I think when this bill was originally drafted, it reflected 30 days, then it was changed to 7 days.
Nancyann Leeder, Nevada Attorney for Injured Workers, Department of Business Industry:
As Mr. Nort said, we have discussed the proposal, and I understand their problem. Originally, when I proposed the 7 days, my rationale was that we could get a file, which is kept in hard copy and not on computer, from the library and archives in 7 days, I figured a big company that keeps records in the computer would be able to find those records within that period of time. Mr. Nort, and Mr. Ostrovsky as well, explained there were some difficulties, so we can accept the 14 days.
Jeanette K. Belz, Lobbyist, Liberty Mutual Insurance Company:
You have before you a proposed amendment (Exhibit C) to section 2, subsection 2, lines 34 to 46. It has two purposes: One, clarifies the language regarding open and closed claims in subsection 2 (of section 2) where we just clarify that we are discussing open and closed claims; also taking out the word “physical records,” as we are trying to incorporate the computer age; Second, we are requesting an increase from the time frame of 7 days to 20 days, but certainly, we can agree with the 14 days proposed.
Senator O'Connell:
I will ask you the same question. Did you present this amendment on the Assembly side?
Ms. Belz:
No we did not. When the bill (A.B. 44) was printed out, it still had language that seemed inconsistent, in terms of the terminology of open and closed claims, and this (proposal) makes it clear. Also they used the term “current claim” instead of “open claim,” so we are just trying to develop some consistency in its third reprint.
Chairman Townsend:
How can you have a bill that has worked for 20 months, but now it is in its third reprint and apparently going to its fourth? One, it could mean they (interim committee) are not doing their job in the interim, which is one of the reasons they want to repeal it. It just seems strange.
John E. Jeffrey, Lobbyist, Southern Nevada Center Labor Council:
We have no problem with the 14-day proposal, but I was not aware of the 20 days.
Senator Carlton:
What Ms. Belz just proposed was not my understanding of what we were trying to do. The discussion of the physical records item was basically that they would be allowed to keep the actual hard copy records in another state, but the records could be accessed electronically from a site here within the state. I am a little uncomfortable with totally eliminating all physical records, and (not) being able to double check, and tab into it at some time in the future. I do not believe that was discussed in the interim committee at all. My understanding was that a hard copy would be maintained somewhere in the state.
Mr. Ostrovsky:
I understand these repeals were not discussed in the other house (Assembly) committee, and appears to have been a floor amendment, and it create and manage the interim committee on workmen’s compensation, which would eliminate the committee in its entirety. In response to Senator O'Connell’s question, the situation in the other house is a little different, when they go to work session in that particular committee they do no take additional testimony from the table, so frequently the members of that committee will make amendments which would be added to the bill without further input. Then changes are made at the last minute, and that is the explanation for the extra reprints. I do not know the intent of the maker of these motions, such as to eliminate the committee. I know there were some concerns that a number of bills were proposed in the Assembly, which have never been brought to the attention of the interim committee. Some people raised the issue whether or not the interim committee was really functioning appropriately, if important bills just appeared that were not discussed in the interim. At the same time, there were a number of interim bills that did not make it through their committee. My client does not have a position in this matter, with or without the interim committee.
Senator Carlton:
Could you tell me who proposed the floor amendment to eliminate the interim committee?
Mr. Jeffrey:
I believe it was Assemblywoman Christina R. Giunchigliani, (Clark County Assembly District No. 9) who presented the amendment on the (Assembly) floor.
Senator Carlton:
I found this committee to be very interesting, and was lucky enough to participate and asked to be vice chairperson. I am sorry if there were frustrations with it, but bills the presentation of the presenter’s choice, as far as bringing these issues to the committee.
Mr. Ostrovsky:
I am just trying to portray what some members felt about the effectiveness of the committee in terms of getting all the issues on the table, apparently, they were not. There are a number of items that came from the Assembly that were never discussed, but if the presenter chooses not to come before the committee, there are no requirement that do so, in order to bring an issue to this Legislature.
Danny L. Thompson, Lobbyist, Nevada State American Federation of Labor-Congress of Industrial Organizations (AFL-CIO):
I do not think it was the frustration as much as the fact that when we created this statutory committee, workmen’s compensation was in crisis in 1993, and we were in debt up to $2.1 billion. It was a very difficult experience for all of us. I believe at that time, it probably made sense, but now, I think it is on a pretty even keel, and we have not seen the extremities given all the problems that we face today, certainly the money would be better spent in study energy.
Senator O'Connell:
As I understand, the money is paid for by the employers, and not from state money.
Mr. Thompson:
I do not think that everyone saw the need to continue meeting when everything had been on even keel. For the record, this is the first time I have seen this amendment proposed by Liberty Mutual Insurance Company. We do object to the “physical records” being deleted, and to the 20-calendar days.
Barbara J. Gruenewald, Lobbyist, Nevada Trial Lawyers Association:
I would like to address the amendment presented by Liberty Mutual Insurance Company. We also object to the striking of the “physical records” for the same reasons, and also agree with Senator Carlton’s concerns on this issue. I have a case that is currently pending, where the physical records were lost, yet if they were found, it would have been a major difference in deciding the case. We ask that you leave the physical records as is.
Mr. Jeffrey:
The reason we have not participated in the (interim) committee, is because it takes a large amount of time from the people who participate, and all the proposed legislation suggested, comes out in the form of a bill, or in some cases, in several bills. We just feel more comfortable submitting our own bill and not have it mixed up with all the various technical changes that are normally made. I am not really convinced that it (the committee) is needed anymore. I think most people that deal with this committee on a regular basis understand the system, and if there is a question or problems, it seems to me, that it would be more effective to take the time and deal with it individually.
Mr. Jayne:
We (Nevada Self-Insured Association) have been regular participants in the interim committee and have monitor and provided testimony during discussions. We also share the concerns of prior testifiers and other members of this legislature, that the crisis we were faced with when we created the interim committee is not as prevalent. Certainly every legislative session, as expected, will always have workmen’s compensation issues and bills to discuss, regarding the same issues. I do agree the crisis we had back then and the needs for having it (the committee) may not be as critical today as in the past, and the assessment money could be better spent. The funds come from assessments from employers and insurers.
Ms. Belz:
I apologize to the committee for having caused some concern about the “physical records” issue, and would be more than happy to withdraw that portion of our amendment, it was not our intent.
Chairman Townsend:
We will close the hearing on A.B. 44, and open the hearing on A.B. 47.
ASSEMBLY BILL 47: Makes various changes concerning policies of industrial insurance. (BDR 53-769)
Mr. Ostrovsky:
The Employers Insurance Company of Nevada participated in a working group during the interim, which was put together by the insured workers’ compensation policyholders. We had a group of insurance companies that met and reviewed the statutes, because we felt there were places in the statutes that needed some clean up, after we had gone to this current two-way system. That particular group did not include self-insured employers or self-insured groups. So clearly, I am here today on behalf of the insurance companies, I needed to differentiate them from the other group; it does not mean they disagree necessarily with what we did, but we are the ones that brought forward these issues.
Section 1 of this bill eliminates the requirement for the insurer to produce a certificate of insurance. A certificate of insurance is not something normally created for a policy; it is a piece of paper that was developed when it was the old NIC (Nevada Industrial Commission). Every employer, when they sign up with the system receive a certificate of insurance, and some of those remain posted for however many years the employer is in business. Now all insurance policies include a declaration page, specifying when the policy expires, the terms of the coverage, and other information; and that declaration page meets the standards which are developed by the insurance commissioner’s office.
The certificate contains all of the information necessary for the Division of Industrial Relations, where the fraud unit of the attorney general’s office determines, whether or not the employer has coverage; subject to required contact with the DIR to check its database system. Even if you have a declaration page, it is possible you are not insured, because if you did not pay the premium, you may have been cancelled. The only way to know is for the DIR, or the fraud unit, to check the database at the DIR. This provision would eliminate the certificate of insurance required that a declaration page or a certificate of self-insurance must be available for inspection at each work site. Keep in mind that “D1” which is a document required by the DIR, must be posted. That same document provides information to employees, telling them who the insurer is, the toll-free telephone number to call, where to go in case of emergency, where and how to file a claim. That poster and information are still required under law. We are just asking that the declaration page be available for inspection, not necessarily posted, and the “D1” will continued to be posted.
Mr. Wadhams:
I am appearing on behalf of Nevada Independent Insurance Agents. In addition to eliminating the redundancy and as importantly, as Mr. Ostrovsky mentioned, the notice to the employees that the employer is covered; that is the D1 notice which is not affected by this change, but the old certificate that was required, contains market-sensitive information. We support the independent insurance agents, who are the brokers who go out and compete with this business, and they support this amendment. We think the regulatory purpose is served, but we do not have to expose the market-sensitive information in this competitive marketplace.
Mr. Ostrovsky:
In regards to section 2 addresses the issue of reporting a cancellation of a policy. There was some confusion in the statute; it appeared that it was the responsibility of the employer and the insurer to report cancellations and renewal of policy. The cancelled and new carrier, both report to the Division of Industrial Relations through the NCCI (National Council on Compensation Insurance Incorporated). Their computer then determines if there were no gaps in insurance, when the employer cancelled with one company and picked-up with another. Many employers did not know they had to report a cancellation, and we would like to shift that burden to the insurer, however, the file responsibility still lies with the employer, to make sure they have workmen’s compensation insurance. It is the employers’ responsibility to see if they have a policy in effect. It is the law in Nevada, that every employer has coverage, so this portion of the bill shifts the responsibility to the insurer, to make those reports appropriately.
Continuing on to section 2 of A.B. 47, there is some language regarding what happens if the data is not acceptable to the DIR or if the DIR questions the data. The insurance companies have asked to have an opportunity to show that they submitted the appropriate data to the NCCI, if they did, then the insurers are off the hook, and the problem is between the DIR and the NCCI. If we were to give bad data, then we would be responsible for that, but we would like some time to correct that and, under the current system, there is no investigatory period to determine whether it was the NCCI’s or the insurers’ problem. We think section 2 is good for employers, we do this in the normal course of business. We communicate with the NCCI by data records on a regular basis and it is really quite simple for insurance companies to do it; on the other hand, it is very difficult for employers to do it.
Section 3 just goes on with that, and if an insurer intends to cancel a policy, there was a requirement that the employer notify the DIR, now, it would be the insurance company’s responsibility. The same in section 4, where there is cancellation language; those cancellations will be reported by the insurer instead of the employer. Section 5 eliminates the requirement that the employer give the DIR a 10-day notice before canceling a policy of workmen's compensation insurance; I am sure employers did not know they were obligated to do that by law.
Mr. Ostrovsky:
The purpose of all that language being in the statute, was a concern on the part of this committee, that there were no gaps, in insurance, and that workers were always covered, so there would be built certain standards of notice, so the DIR could have readily available data in advance of a change. But, the fact of the matter is, these changes are sometimes made at the last minute. I have an insurance agent who is shopping around for workmen’s compensation insurance, which is going to expire this Friday, he places with a new carrier on Thursday because he got a better deal, and there is no way that I am going to get a 10-day notice. The fact is, we have to rely on the NCCI system, and I think, if the DIR was here, they would tell you occasionally there are some gaps of a few days when you may or may not know when an insurance policy was canceled. But, I think the requirement put on the employers was a total incapability of the employers meeting that requirement. Most employers could not tell you what the DIR is or where to find them. Section 7 says that insurers, who violate the law prior to this change, do not escape prior provision of the law. What that means is that we are going to make changes in these sections and if you previously violated those, we can still pursue those violations. This bill becomes effective on July 1, 2001.
Senator O'Connell:
Section 7 then, would not apply, or would certainly affect the case we just heard in the government affairs committee meeting. My only concern is there does not seem to be any due process for someone who has a problem, or who is arguing the point of cost or monies owed.
Mr. Ostrovsky:
I believe we will find the answer in A.B. 48, which addresses specifically that question. I am not sure if the due process issues in this bill pertain to the issues in government affairs.
Senator O'Connell:
When we say, in section 7, that the provisions of this act do not apply to offenses committed before July 1, 2001, can you explain to me what the impact of that session is?
Mr. Ostrovsky:
The best I can figure, is if someone failed to provide the appropriate notice, prior to the effective date of this act, they will still be subject to being fined by the Division of Industrial Relations.
Senator O'Connell:
I need you to give me an example. I do realize this amendment has to do with when a person (an employer) goes out of business and they do not notify (DIR or NCCI), and if they owed anything at all, prior to this time, the interest and the fees or fines would continue on.
Mr. Ostrovsky:
I think this section relates more to the issue of changing policies, canceling one and buying another, but in fact, you are correct, you could cancel a policy if you are going out of business, then have no insurance after that, because you no longer had employees that are covered under the act. My assumption is, that language was meant to make sure the DIR had the authority to fine individuals or insurance companies who fail to notify under the old provisions. But A.B. 47 does not go to the heart of the issue of someone who does not believe they should have coverage.
Senator O'Connell:
Mr. Chairman, could we get clarification from the legal department as to how broad the language in section 7 could be interpreted.
Crystal M. McGee, Committee Policy Analyst:
I believe, as Mr. Ostrovsky indicated, it is limited specifically to the provisions of this bill (A.B. 47).
Senator O'Connell:
I would just like to make part of the record, what LCB (Legislative Counsel Bureau) feels that this does.
Ms. McGee:
I will ask the Legal Division.
Chairman Townsend:
We will close A.B. 47, and open A.B. 48.
ASSEMBLY BILL 48: Makes various changes concerning policies of industrial insurance. (BDR 53-768)
Mr. Ostrovsky:
I am representing Employers Insurance Company of Nevada. These are technical changes we believe are necessary, now that we have experience with the two-way system in the last 2 years. The (interim) committee proposed various amendments and changes to Chapters 616A-D and 617 of NRS (Nevada Revised Statutes). Assembly Bill 48 is the result of our presentation to the interim committee on workmen’s compensation. This bill covers a number of different issues in the statutes, most of them unrelated to each other. Section 1 defines a policy year, the prior language in the statutes, spoke of calendar year or years; there was no term, ”policy year.” Policies are now issued upon the execution of an agreement between a business and an insurance company, and run for a policy year. Under the old system, it did not matter, policies were issued and existed for as long as the employer existed and they paid that premium because they had to provide workmen’s compensation insurance through a state-run monopoly. The term “policy year” is consistent with the other statutory provisions in the insurance section of the law and we bring that term, policy year, in for consistency throughout the statute.
Section 2 is a technical change by the LCB. Section 3 refers to some OCIP’s (Owner-Controlled Insurance Program’s) concerns the insurance industry had. When an OCIP is in place, it gives the primary insurer, who is the contractor, the right to cover those owners. The problem is when someone works in an OCIP environment and then leaves the OCIP site, then goes back to their contractor or subcontractor to work on another job that is not part of the OCIP, we need to make sure that employee has insurance coverage. Our interpretation of the existing law was, when you were sold a policy of workmen’s compensation insurance, that covered you for all risks, but in fact, because now OCIPs exist, it is not true, because if you have a policy of workmen’s compensation insurance, and your employees work on an OCIP site, they are not covered by the OCIP’s policy. This change just makes it clear that we cannot just sell a limited policy to contractors and subcontractors, which says, “We are only going to cover you when you are off the OCIP site,” so the employees always have coverage. He has coverage on the OCIP site, but when he leaves the site and does work for his employer, which is unrelated to the OCIP, he can be covered by a policy. We think the law has been inconsistent in permitting us to do that, and this language, we think, clears that up, so that worker can always have coverage from one employer to another.
Mr. Ostrovsky:
Section 4 changes the $36,000 rule to comply with provisions of section 1, that is, we change it to the policy year. Notice that the old language talked about the “year” and we want to talk about “policy year.” Section 5 is for the reporting of tip income. At one time tips were not included in workmen’s compensation claims. This legislature determined, as a matter of policy, tips should be included in calculating the average monthly wage of the individual, who is a tip earner. In doing so, you set up a mechanism, where employees would report tip income to their employers, and the employers would have to then provide that tip income information to insurance companies. The employees were very uncomfortable in having to execute the Federal Tip Declaration Form; therefore, the legislature directed the Division of Industrial Relations to create it is own tip-reporting form by regulation. We had some situations where the employees did not want to complete the federal form, but wanted to provide the state information, so they could get the workmen’s compensation coverage.
In the interim, years ago, the IRS (Internal Revenue Service) changed its policies. Employees do not have to fill out this tip form. You can in some small businesses. Currently employees’ tips are calculated one or two ways, either actual tips, or a deemed-tip rate. The IRS has determined if you work in restaurants, you are going to earn $5 or $10 an hour in tips, so they put that on your record. There are no forms to fill out, there is no requirement of a signature, it just appears on the employee’s check, whether that is right or not, that is the process today. We want to change this section of the law to permit employers to report the tip information electronically, and eliminate the requirement to provide the form, which no one fills out anymore.
Mr. Ostrovsky:
Will this language, in any way, inhibit employees from receiving appropriate compensation for the tips they receive? I want to assure the committee, section NRS 616A.065, which is the average monthly wage defined, says, “Wage is increased by the amount of tips reported by an employee to his employer, pursuant to the United States Code, except tips in a form other than cash.” This section requires tip income to be included in the calculation of average monthly wage, but we are not requesting any changes on that section of the law.
This is only in how the information is gathered and reported, it is an issue that has long gone away, I have not heard any complaints or concerns about tip income in years; I believe the statutes are already consistent with the way tips are actually reported.
Chairman Townsend:
Was there any discussion/debate provided, as to whether the language on page 2, section 5, paragraphs (a) and (b), puts any employee at risk with the IRS?
Mr. Ostrovsky:
There was discussion among members of the interim committee, especially from Senator Carlton, who has personal experience with these matters. Part of the problem here, as you will notice, the language written in this section talks about the amount of tips allocated to each employee, pursuant to the formula applied by the employer, whether by agreement of employees or imposition of the employer. The IRS has asked the employees to agree to this (reporting mechanism), but the fact of the matter is, if they do not (agree), the IRS will then tell the employer, “You will impose this.” I do not believe it creates any situation that is better or worse for employees than where they stand today. Perhaps, Senator Carlton and I talked about this, it is an unfortunate situation involving employees in our particular industry, more than any other industry that I know of. Most employees have not adopted the system, and still find it distasteful to have tips handled this way. Now the IRS are trying to raise those tip rates. What they will do is come in and subpoena all of our records from the employer. They come and look at all tips (received) even the tips put through credit cards, and any other ways that they can find to determine, even if it means having them come into a restaurant and watch employees receive the tips; somehow, they believe they can calculate the appropriate tip rate.
Chairman Townsend:
I read it that way also, the burden lies on the employer. It is not like the employee is making a choice under paragraph (b). I just want to make sure that was on the record that the employees are not going to be disadvantaged, vis‑à‑vis the IRS by something we did at the state.
Senator Carlton:
That is just what I was going to emphasize. I had Mr. Ostrovsky walking over hot coals for about 2 weeks on this particular issue, it made me feel more confident to participate through the allocation system. But I do know, some employers do impose it (tip reporting), and we feel under the threat of the IRS right now, doubling and tripling some of these allocated tip amounts, which we are trying to work out at the federal level. However, these provisions make me comfortable to represent employees who receive tips.
Mr. Ostrovsky:
Section 7 of this bill (A.B. 48) changes the requirement involving sole proprietors. The law indicates if a sole proprietor wanted to purchase a workmen's compensation insurance policy, they have to undergo a physical examination first. We would like to change that policy, because we do not believe it should be a requirement if the insurance (company) wants to sell a sole proprietor a policy without a prior physical exam that would be between the sole proprietor and the insurance company. Section 8 of the bill refers to section 3, where (insurance) coverage is provided to employees who are not working on the OCIP site, making sure they are covered when they are off. It also affects self-insured groups.
Senator O'Connell:
Would you explain to me, if an employer who now has his employees working at an OCIP site, that he really had much choice in discontinuing their policy. It was continuing coverage, so most employers, I thought, were part of the problem. The contractors had stated to us that they were carrying insurance still on that worker because the worker was coming and going from the job site or working on something else for the employer, not (necessarily) full time on the OCIPs. Would you please clear that up for me?
Mr. Ostrovsky:
Many of these contractors that work on the OCIP sites, as I understand it, are part of self-insured groups, and as a result, when they work on an OCIP site, the self-insured group has to review its internal policy, whether or not it is going to discount that contractor’s payments, by the amount of payments that would have been made otherwise, because the person is on the OCIP. I believe it is internal as to how the self-insured group operates, whether or not to say, “Well, John Smith is working on the OCIP today, I am not going to pay my premium towards his hour of work, because you don’t provide the coverage. That has to be determined inside the individual SIG (self-insured group). What we were trying to address is the problem to the insurance carriers, who had, what we believe under the law, if we sold a policy covering that employee, we were responsible for that employee in all risks. We just wanted to narrow that to say the only risk we want to cover is when the employer is off the OCIP site, otherwise you are buying twice as much insurance than you need; you have the OCIPs and the contractor’s paying and covering. From an insurance company’s point of view, we want to be able to write a policy that is exclusive to the OCIP. From the SIG’s point of view, obviously that has been quite contentious because it has had a significant impact on their groups. The fairness of that issue, as a policy issue which this committee has faced on more than one occasion, and to what extend, I know that you just processed a bill of ours here, relative to that issue.
Senator O'Connell:
It does tells us that this is something the employer has to work out with the policy, depending on how much time the employee is going to spend on the job site with the general contractor on an OCIP, and how much on other projects. But, this policy is just to give another choice, which may not always be applicable, but in those instances, it would be another opportunity.
Mr. Ostrovsky:
We believe it allows us to write a policy where we do not have to carry the entire coverage.
Cliff King, Appeals Panel for Industrial Insurance, Department of Business and Industry:
Every employer with employees must carry workmen's compensation insurance. When you have a consolidated insurance program, such as an OCIP or CCIP (Contractor Controlled Insurance Program), there is a special policy issued specific to that project. Whenever employees are away from that project, they still must have workmen's compensation insurance. There is a problem occasionally with the self-insured groups, they do not buy a policy, they participate in a self-insured association by choice, and we do not get involved with how they assess their members. However, for an employer who buys a workmen's compensation policy, there are endorsements available that have been approved, it is an NCCI form that allows the policy to limit or eliminate coverage, while the employee is at the OCIP; once he leaves the OCIP, he goes back on to his employer’s coverage.
Mr. Ostrovsky:
Section 9 is a change consisting with the term “policy year”. Section 10 goes back to the sole-proprietor issue to make the statute consistent, where the sole proprietor would only have to take a physical examination upon request.
Section 11 is the repealed language, which the old SIIS (State Industrial Insurance System) applied an interest rate on paid premiums. Because the old SIIS was a state agency, this legislature determined that it was appropriate, if there were late payments, that an interest charge was proper; interest charge was established in the statute. You will notice the interest rate was a 1 percent per month or portion thereof, until the premium, plus accrued interest is received by the insurer, so the insurer in this case always referred to SIIS. We are asking that it be repealed, that going forward an insurer has to cancel a policy, talk to his employer and make terms for payment if there is a problem. It really now becomes a contractual issue between the insurer offering insurance policy, and the employer paying for it, to determine whether they want to cancel it, they want to make payment terms, or that they want to handle a normal course of business; each company may handle it a little differently. So there is no longer a need in the statute to apply a statutory interest that a state agency would charge.
There are five lawsuits pending from the old SIIS in an attempt to recover claims. Those lawsuits, I believe, would not be impacted by this proposal. This is really just cleaning up an old issue that these interest rates would never be applied again. However, they were applied to the case Senator O’Connell referenced earlier that was addressed by Senate Bill 566, I believe. Section 12 is the effective date of this proposal, July 1, 2001.
SENATE BILL 566: Requires release of certain liens created by former state industrial insurance system. (BDR S-1478)
Mr. Wadhams:
I would like to offer two amendments for A.B. 48, (Exhibit D and Exhibit E) on behalf of the American Insurance Association, which contain substantial information. The first one (Exhibit D) was an amendment offered for this bill in the Assembly Committee on Commerce and Labor. Both, the amendment and the bill lost (the votes) in that committee. I would like to summarize the purpose and what it (the bill) is designed to do. It deals with the assessment formula, being the manner in which all insurers of whatever form they may appear, participate in paying for the workmen's compensation system. It does not change any of the functions that are covered by the assessment; it merely addresses the formula in which it is assessed to the participants. For the last several years, DIR has done the assessment based upon actual claims incurred by each segment of the insurance community. Consistent with prior testimony on these other bills, and as this committee is well aware; it is only recently that participation has included private insurance companies. What this amendment (Exhibit D) would do, is cause that process to have two steps: DIR would first make a gross assessment formula on claims, allocating to the self-insured and the self-insured groups that portion attributable to them; and then the remainder would be assessed against the private carriers, reallocate that portion of the assessment, based upon premium.
It is obvious to this committee that premium is paid only in the context of private carriers, which is one reason why its not particularly relevant or relevant at all for the self-insured employers, to explain why the private carriers would recommend this and have asked for this change, is that among the private carriers imputed and presumed in every dollar of premium is some loss; it would depend on what kind of business is being insured, but some cents out of every dollar is anticipated to pay for losses. From the private carrier standpoint, it is both more fair and it costs everybody who writes premiums to participate in the burden of paying for this system, irrespective of whether in one particular year, they have no losses or had tremendous losses. It is good for their budgeting, and it does not allow anybody to avoid participating in the system. We would appreciate the committee’s consideration on this amendment.
Senator O'Connell:
Could you tell us the specific objections and why the amendment was not accepted at the Assembly?
Mr. Wadhams:
The original bill draft came out of the interim committee, and unfortunately in the language that we used, trying to create a premium equivalent for the self-insured employers, they raised an issue, after they explained it to me, I understood, so we tried to craft this amendment. With the language and the amendment added by Mr. Capurro, I think I accomplished satisfying any concerns that were there. The DIR testified that they could accommodate this recalculation; it just failed to pass in the Assembly. I would also publicly confess it happened to be the first bill on a hearing in the Assembly commerce and labor committee, and the prime proponent, that is me, did not get there until the second bill, and by the time I got there, it had died for lack of a witness. I am not sure if there was any specific opposition to it, but since I was not there, it would be difficult for me to speculate.
Daryl E. Capurro, Lobbyist, Nevada Motor Transport Association:
I will testify in representation of the Nevada Motor Transport Association and as trustee of the Nevada Transportation Network Self-insured Group. We have no objections to the amendment that is being offered. Basically, what was offered in A.B. 43, which, as Mr. Wadhams explained, did not make it through the committee process. Provided that the information on the last page (19) of Mr. Wadhams’ proposed amendment (Exhibit D) must be fitted into the rest of the pages, it demonstrates in what sections the changes need to be done. It is appropriate for private carriers to use the language, which reflects the relative hazard to the employment, but it is not relevant to self-insured groups or self-insured employers, because the private carriers use it in establishing industrial insurance rates, according to risk classifications. If you consider adding this as an amendment to A.B. 48, we would appreciate you (also) consider adding the entire amendment as Mr. Wadhams has proposed. I believe that EICON (Employers Insurance Company of Nevada) had objected to some of the wording, but I am not sure if they would object to the proposal being amended.
Senator O'Connell:
I am assuming that you both are opposed to the bill as written, and therefore, you would like to replace the bill with your language.
Mr. Wadhams:
I am sorry Senator (O’Connell) if I did not make that clear. I support A.B. 48 and request it (Exhibit D) as an additional amendment.
Mr. Capurro:
We support A.B. 48 as currently written in addition to the amendments.
Mr. Ostrovsky:
We had testified in opposition to this provision in the bill, prior to the amendments, however, after lengthy discussions with the insurance industry and Mr. Wadhams, we were satisfied with the additional language, and will support this amendment.
Chairman Townsend:
I know that both Senator O’Connell and Senator Carlton worked diligently on the interim committee as they do during the session. The goal was to try to get bills that both houses could agree to, and I do not remember us authorizing a bill to be drafted on a 4-to-3 vote. I am sure they (the Assembly) have a legitimate reason for not approving it.
Senator Carlton:
Just as a point of clarification, Mr. Wadhams, you have under section 8 (page 17) the language “an act.” Could you tell me how that applies to private carriers?
Mr. Wadhams:
The assessment formula covers a wide range of activities that are part of the worker’s compensation system, including: the Nevada Attorney for Injured Workers, Department of Business and Industry; the appeals of the Hearings Division, Department of Administration; certain aspects and most of the budget of the DIR; and the subsequent-injury fund, which will be addressed in the second amendment (Exhibit E). I would like to refer to the second amendment (with first page fully printed). The text here is, hopefully, a direct electronic lifting of what appeared in the Assembly as A.B. 322.
ASSEMBLY BILL 322: Limits payments of compensation. (BDR 53-787)
That bill was heard in the Assembly and I was present. There was opposition, and you may hear more on that today or perhaps in a work session. Let me address specifically what we are attempting to do. At this point and time, there are three subsequent-injury funds. The purpose of subsequent-injury funds is to reimburse the second employer for an injury that occurs to an employee that is a reinjury that first occurred while that employee was in somebody else’s employment. We have three funds because we have three groups of insurers today: self-insured groups, which are the aggregation of employers; self-insurers, which are the typically the large self-insured employer; and now commencing with what I still call three-way, we have now a subsequent-injury fund for private carriers.
My amendment addresses the fund for private carriers. The system was originally set up to encourage employers to hire persons who had prior workmen's comp injuries. As this committee is well aware, the American’s With Disabilities Act of 1990 (ADA) virtually preempts this issue. You cannot ask those sort of questions, should somebody have a disability, accommodations could be made otherwise. Currently there is no direct benefit through the private-carrier fund for employees. And because the way private-carriers rate and price in accordance with the system established by this committee, by the comparable committee and by the system we now have in place, there is no direct benefit to employers. What happens is an application could be made for reimbursement of such costs. The private carriers, who would make that application under the private-carrier subsequent-injury fund, believe it is more cost-efficient to pay those costs directly by the insurer, as opposed to, the administrative burden of creating a secondary insurance company for the benefit of the insurance companies. So, the beneficiary of the system, as it might be, would be the insurance companies at an additional cost to the insurance companies, and they are suggesting that as to private carriers, the subsequent-injury fund should be repealed. So what this language does, it creates a phase out of the subsequent-injury fund, which is only in its beginning phase and has not build up a large backlog; although, I have been informed that there have been some claims submitted for reimbursement. This is an opportunity, literally, to nip a potential problem in the bud. So I would offer that, again, indicating that A.B. 322 did not pass and did not make it out of the committee, and did have opposition. I would appreciate the committee’s consideration to both of these amendments, independently of each other.
Senator O'Connell:
I believe the DIR did some graphics for us on this, and presented them to the interim committee, showing how that fund was currently being used.
Mr. Bremner:
We did develop some statistics that showed who was availing themselves to the fund, who was paying to the fund, and the various amounts that were received from employers. We can locate those statistics and present them to this committee.
Senator O'Connell:
I think it would be helpful to those who did not sit on the interim committee.
Mr. Thompson:
We would request time to review the first amendment (Exhibit D) to this bill, the second amendment, however, we oppose. We view subsequent injury as an employee benefit, and in fact, with the ADA, there was no financial incentive to an employer to keep someone who has the kind of injuries that you are talking about here. There was testimony in the Assembly by numerous employers, and I would suggest, Mr. Chairman, if the committee plans to process this amendment, that after the bill is processed it be scheduled for another hearing, because there were many employers who came forward, who utilize the subsequent-injury fund and were opposed to that bill, as we were. In addition, there was testimony from the state, showing that by doing what you are proposing, there would be a substantial impact on the state, which I believe is reflected in the budget. We are in opposition to this amendment and would like the opportunity to review the others.
Ms. Gruenewald:
I would agree with Mr. Thompson’s testimony. We view the subsequent-injury fund as a claimant benefit also, and I am speaking about the second amendment (Exhibit E). I also would like to enforce that there was testimony by numerous employers, who were opposed to A.B. 322, which tried to do the same as this second amendment does. I could give you the names of the people who testified, but I agree with Mr. Thompson that you should reschedule this, because Susan Dunt, the risk manager for the state, did testify against the elimination of the subsequent-injury fund, because it had an average of $1.4 million refunds, something to that effect on the state, and there was other testimony. There was testimony, earlier, that there is no direct benefit to the claimant, and that is incorrect. I have settled many cases at the appeals officer level, because the employer said, “If I agree to this, I can go to the subsequent-injury fund and get relief from my employer.” So there is a benefit to the claimant. We oppose this amendment.
Mr. Capurro:
We do not object to the amendment as offered, except to the extent that it should also apply to the self-insured employers and groups of self-insured employers. For the very same logic that was offered in respect to insurers, that same logic would extend to self-insured groups, particularly, because the insurance companies have not been in business long enough to build a large inventory of this type of claim, but the same applies to self-insured groups. In all fairness, if you were to consider processing this amendment, it should be augmented by also the phase-out for self-insured employers and self-insured groups.
Chairman Townsend:
We will close the hearing on A.B. 48, and open the hearing on A.B. 160.
ASSEMBLY BILL 160: Revises provisions governing industrial insurance. (BDR 53-1097)
Assemblywoman Barbara E. Buckley, Clark County Assembly District No. 8:
I am pleased to be presenting to you Assembly Bill 160. During the interim, I was fortunate, as some of you may have been as well, to receive telephone calls on this issue with the privatization of the worker’s compensation system. One of the things that EICON used to do, was to allow individuals, sole proprietors, not with any employees other than their own business, to obtain a certificate saying they complied with the workmen's compensation law, and that they did not need workmen's compensation (coverage), because they had no employees. Typically, the situation came up where an individual may own their own business, their consultant, they want to sign a contract with the state and give them $20,000 worth of consulting contract, for example. The state and that person, do not have an employer/employee relationship, it is pure independent contractor, but the state still said, “Where is your workmen's compensation insurance?” Previously, they went to EICON and got the certificate saying they did not need it, documentation was submitted to the state and everything was fine. After workmen's compensation was privatized, the EICON declined to perform that function any longer, so there was no one to perform that function. Then, sole proprietors and nonprofit organizations, with just one individual, no employees, if they chose to get health insurance or disability insurance, but did not want to get workmen's compensation insurance because they felt it was a regulatory burden, they were forced to get it anyway. That is the reason this bill came about.
The memorandum (Exhibit F) before you was prepared by Ms. McGee (Committee Policy Analyst), which explained the history of the bill, and the solution that the committee from the Assembly reached. Additionally, Assemblyman Lynn C. Hettrick (Assembly District No. 39) and Joseph (Joe) E. Dini, Jr. (Assembly District No. 38) asked that it be clarified on page 4 (section 6, subsection 3 of A.B. 160) in reference to an officer who owns a corporation with no employees, but for themselves, who chooses a more cost-efficient way to cover themselves, that they, likewise, not be forced to acquire worker’s comp insurance. That is a brief history of the bill, it does not cover any organizations, or corporations that have employees, obviously those would belong in the workmen's compensation system, it is for the sole proprietorship.
Chairman Townsend:
An individual, or a private company/sole proprietor, who is a vendor to another company, which happens to be part of a self-insured group, who is notified that she could not come on the property and provide her services in her vendor capacity anymore, without an actual policy, which was determined, not by the employer, but by the self-insured group. I have tried to get an answer on this issue, however, this only occurred 2 weeks ago. I do not think that many people understand sole proprietor issues.
Assemblywoman Buckley:
The concerns brought to my attention were mostly when government was requiring it. I think what happens is that people are getting the employer/employee relationship mixed up with an independent contractor relationship; that second vendor, those two separate individuals, obviously, are not employer/employee, they are contracting to provide each other services. I guess what I am concerned about, these additional burdens for small businesses: why are we creating yet another burden for them when they do not need one. Whose choice should it be? I think it should be the small business person’s choice if they want to get workmen's compensation insurance, because they cannot price private health insurance, but why are we making that small business owner choose or require them to get their own expensive health or disability insurance, and worker’s comp when they do not have an employee/employer relationship. I think people are just getting confused and do not know the legal structure.
Chairman Townsend:
The point is that this is kind of a sensitive issue, because it happens to be a person who provides a very unique service, she is the highest rated in that area and is in high demand all over. Obviously, all of her accounts are important to her, but why should one group of insurance, self-insured group individual say, ”You are not going to do that,” because she should have to go out looking for her next contract, if she has performed appropriately. My comments are not, in any way, intended to change your bill, I just wanted to bring it to your attention.
Mr. Jeffrey:
The construction industry operates a little differently, the exclusive remedy runs from the general contractor to the subcontractor, and my understanding is that it also runs to the vendor. If a person is not paying premiums, I believe the general contractor is responsible for what happens. You may need to check that chain of events to see what could be worked out. I understand the problem, but I think there is a problem in that employer/employee relationship from the general contractor through everybody on that project.
Chairman Townsend:
This is a concern, because when she priced it (the insurance), it was $700, that is too much money to a small business or a sole proprietor.
Mr. Jeffrey:
I think anybody on the project has to pay the general construction rate, where, if that same person were working in an office, the premiums would be practically nothing.
Assemblywoman Buckley:
On the Assembly side there were some initial concerns about the language in the bill (A.B. 160), if the sole proprietor came back to government and said, “Well you are now responsible for my workmen's compensation.” We have language in the bill to protect that. There was no opposition and we had very hard work done by a few people on the amendments.
Chairman Townsend:
There is a potential that it may have happened to a number of sole proprietors, who do not need that extra expense. If there is no further testimony, we will close the hearing on A.B. 160, and open the hearing on A.B. 217.
ASSEMBLY BILL 217: Repeals certain provisions that prohibit payment of death benefit under industrial insurance to surviving spouse who remarries. (BDR 53-1251)
Ronald P. Dreher, Lobbyist, President, Peace Officers Research Association of Nevada:
The need for this legislation came to light right after University of Nevada, Reno, police sergeant George Sullivan was murdered in the University of Nevada, Reno Campus, on January 1998. His widow, Carolyn Sullivan was informed if she was to remarry, her worker’s compensation benefits would cease after she received a lump sum payment. However, if she did not remarry, she would receive worker’s compensation benefits for the rest of her life. Mrs. Sullivan could not attend this morning, due to the fact that two of her children are scheduled for surgery this morning. She asked me to relate to all of you, that spouses should not be penalized by losing benefits when they remarry. I would like to submit Mrs. Sullivan’s written testimony (Exhibit G).
Jeanne Minnie, whose husband, Washoe County deputy, Frank Minnie died in an on-duty motorcycle accident, could also not be here this morning, because she has a new job and she feared she might lose her job, if she took time today to testify. Both (widows) testified before the Assembly committee, and presented excellent reasons why this penalty should be removed. Carole Hashimoto, who’s husband, Reno Police Officer, Keith Hashimoto, was killed in an on-duty accident; and Theresa Norman, an advocate for wives of Reno police officers, and the wife of police officer Brad Norman, wanted to attend the meeting this morning, but conflicts with their children prevented them from being here.
The Nevada Legislature, in addition to enacting the legislation that benefits spouses and children of officers killed in the line of duty, they have eliminated the PERS (Public Employees’ Retirement System) remarriage penalty in these cases. However, the current provisions of NRS 616C.505, contain every penalty for spouses and, as stated, currently if those spouses remarry they receive a settlement and their benefits cease. By eliminating the provisions dealing with the remarriage, then the spouses can remarry without suffering a penalty for doing so. I would like to also add that this bill received unanimous approval at the Assembly committee, on April 6, 2001, without amendments and as written. We also had testimony which offered a very good example of what could happen if this is not removed. For example, an individual got married, they received a settlement, then a month later, they divorced and lost their lifetime benefit. I guess the penalty goes along with this proposal. We hope you will approve it as the Assembly did.
Senator Carlton:
For clarification, how large is your organization? And does this particular legislation only apply to peace officers?
Mr. Dreher:
We have 26 member associations throughout the state. This applies to everyone. There was much discussion and some proposed amendments by workmen's compensation representatives who wanted to make this not retroactive and have it go into effect until January or July 2002. It is our intent to ask that the current legislation, A.B. 217, take into consideration those people who have not remarried, and are currently receiving the benefits, to continue to receive their benefits; even if they choose to remarry after this legislation goes into effect July 1, 2001.
Senator Carlton:
I have been learning about the (money) tables, how we adjust and plan the money on workers’ comp. Do we know if the remarriage part is worked into the long run of this money and how it is spread out? Is that a component of how we budget for this? Will this be changing the fiscal impact the state may have to bear?
Senator O'Connell:
It would have to change that impact. I think there are figures, right now, being researched.
Mr. Ostrovsky:
There are 563 individuals currently receiving the survival spouse benefit, dating back to 1942, which there are still 3 claims open (Exhibit H), obviously in later years, there were more individuals receiving the benefits. We do not know the total cost, they are all death-benefit claims. The state industrial insurance, the old SIIS, paid out $97.598 million and some change in the year 2000, as a result to this benefit. I hope these numbers you are getting now would help you in reviewing this proposal. The information in this statement (Exhibit H) is from EICON, this information was also provided to the committee on the Assembly side. Part of these issues, I believe, were addressed in prior testimony. The way we read this bill, people could come, who were remarried sometime ago, even back into the 1940s and 1950s, and ask to have their benefits reinstated. I think a proposed amendment, just to cover those 563 individuals with surviving-spouse benefits, and if you have to remarry and take advantage of the 2-year lump sum. Our only concern is the effective date and how it affects premiums we have collected. Obviously, the State Industrial Insurance System has no way of going back to collect money for these payments, but we are very sympathetic to the concerns of these spouses, who may be put in an untenable situation, and would hope there is some way to work out the language to protect the insurance companies, and at the same time try to protect the surviving spouses.
Chairman Townsend:
Lets try to focus on two segments of the bill. Prospective and then the current persons receiving benefits, can we at least assume that prospectively we can find a solution for anyone in the future; the hard part becomes those persons who are actually in the current system, which would fall under the old SIIS program. The difficulty there is how do you, since you are going to basically change the actuarial standard, how do you capture the money? And there is multiple ways to do that, once the committee decides on the policy. One of the ways is to go to EICON as a new company and say, “OK, you know, x percent overage on your actual “profit and loss” statement is going to be rebated back, or there can be a system-wide benefit, an assessment through DIR. There is multiple mechanisms the committee just has to understand. There are two things going on here, if you go prospective, then it is actuarially set, and you establish it as to where the rates are, then we have to go back. Are these actual claims of surviving spouses?
Mr. Ostrovsky:
My understanding actuarially is about 20 years you expect to receive the benefits. And that is a balance, some people may get married sooner, some later, and some never at all. So, what happens is the 20 years is now going to be spread out to become 30 or 40 years. There is an increase in cost relative to these. The bigger cost is if we benefit people who are currently married and come back to claim the benefit, there are probably thousands of those. The other alternative is to increase the lump sum to some larger amount of money, and there are various ways to do this. We are very sympathetic to it. Going forward is very simple, we can build it into the new rates. Obviously, it is going to cost employers more money, but you cannot build it particularly in high-risk industries where we suffer more deaths.
Chairman Townsend:
Let me understand what is written on this paper (Exhibit H). Using the three individuals from 1942, those persons are currently getting surviving spouse benefits because they have not remarried, is that correct, and that is the way all of the rest of the people on the list are. And, we have no clue how many people took the lump sum because they did get remarried?
Mr. Ostrovsky:
That information has not been researched, I am sure we could find out, but it has to be a substantial number. We could look back at the number of deaths that occurred in each one of those years, but unfortunately, we were averaging some 30 deaths a year or more, some in mining, some in police officers, and several other areas.
Chairman Townsend:
Ms. Gruenewald, could you tell us if there is a legality relative to those who have subsequently taken the 2-year lump sum and remarried, or a liability between going back and picking up these individuals who have chosen not to remarry, but are still receiving their benefits. Do you have any sense of the two relationships, if we were to say, “This is retroactive.” I guess the question is, do you have to pick up these people now? It is a very sensitive and tragic situation, and we are all sitting here trying to talk like actuaries, but we are not. We are just trying to get a sense of the money.
Ms. Gruenewald:
I think you should make a distinction between what this bill applies to, in other words, my understanding is that it presently applies to ongoing people who have not remarried and actuarially that is already built into the payments that were paid. So, if you were going to go back, and pick up those people who did take the 2-year lump sum and remarried, then you would probably need to state that in the bill; otherwise, I have made arguments with regards to whether it should apply retroactively. Generally speaking, there has to be something in the bill that says it does apply retroactively, in order for it to operate retroactively.
Chairman Townsend:
The question would be, the ratio activity of the two classes, those who have already made their choice and take the settlement versus the individuals who have chosen not to do so. If the committee decides they want to go back, the bill is a prospective bill as I read it, and they say, “We want to go back retroactively and pick this up, and we will figure out some mechanism to fund it.” Does that also include the persons who have chosen to remarry?
Ms. Gruenewald:
I think you will just have to make that clear, and how you state it in the bill.
Mr. Ostrovsky:
In determining what the value of those old claims might be, we have to go back and find out whether the surviving spouses are still alive, and at what point they might have come out of it; at upon their death their payment would have stopped also. Unless there were surviving children under 18, you would still have to recalculate all of those again.
Eloise Ritter, Concerned Citizen:
I am the widow of Stan Ritter. In 1989, he died, after 25 years of being a fireman, of a massive coronary. It took me 2½ years to win my benefits, then after I started to receive my benefits, I was informed I would lose them if I remarried, which really made a big impact on my life. I depend on some of the financial support that I got from my benefits. In 1993, I was lucky enough to meet a wonderful man I would have loved to have married, but 2 months after we met, he was diagnosed with cancer of the liver, and, although we only had 4 years together, it was a beautiful relationship, and it would have meant a great deal to us if we could have married. I am here today to support this bill, because I think even though I rely on the financial support, I also could use somebody to stand beside me emotionally. I would like to have the choice to remarry.
Stephen G. Turner, Lobbyist, Peace Officers Research Association of Nevada:
I know the spouses really wanted to be here today, because like this lady (Mrs. Ritter), they had some compelling testimony. A number of these spouses, especially the police spouses are still young, and after some of the things that have happened with the other spouses, for instance, the one who got remarried, then got divorced shortly thereafter and lost her benefits. None of these spouses have any intention of remarrying, their families are too important to them and the protection they have. In essence, they have no intention of getting married, and have all stated as much, because they do not want to jeopardize their benefits.
There was a lot of questioning from the Assembly committee, whether or not they felt that was going to affect their actuary or not, but these women do not have any intention of remarrying. That is very sad, because they are giving up any future relationship of happiness for their family, and because they do not want to give up their benefits. It is especially troubling to see young spouses with children who would benefit from the intervention of a good relationship, having a father figure in the house. They (spouses) do not want to take the risk because they do not know if the relationship is going to work out. There is some family concerns which I would like to see addressed from an equity issue, as well as the family dynamics.
Chairman Townsend:
I am sorry it did not work out, but I know the importance of their families to the spouses, as I, unfortunately, had to attend the funerals of some of the officers mentioned before, I cannot imagine what it is like for you (Mrs. Ritter) and those families. I think there is an understanding, now we just need to figure out the mechanism that can be beneficial to everyone.
Mr. Dreher:
I just want to reinforce one other point. As Mr. Ostrovsky has stated that he would like an amendment to obliterate the retroactive application. It has never been our intent to ask for this legislation to have it go retroactive to those folks who have already remarried and taken the lump-sum payment. We were told by the LCB that would be the case, it would not be retroactive to those people, but it would be available to those people who are currently receiving the benefits.
Mr. Jayne:
I need to point out the information brought forward by Mr. Ostrovsky does reflect data from EICON and SIIS. And, as the committee is well aware, back in about 1981, we allowed for self-insurance, and today, depending on which measure and what point in time you are looking at, the self-insured market is about 50 percent of the covered lives in Nevada. So, unfortunately, we do not have any central repository for data, I cannot offer any statistics like this on behalf of the self-insured, but I am very encouraged to note that someone is taking a look at it as best they can, with the data we have. We can spend a lot of time trying to figure out what actuaries do and how they do it. I, myself, have been a carrier in insurance and I do not know that I can sit here and adequately understand exactly how actuaries figure out different information. I would like to highlight that we have some concerns about the bill, and unfortunately, I have no data and no central repository for data. The best I can find is similar to what Mr. Ostrovsky did, in checking the OSHA (Occupational Safety and Health Administration) registers. In Nevada, we look at approximately 35 deaths each year in the industrial area.
Chairman Townsend:
I think it is a science and an art to try and figure out those actuaries.
Mr. Jayne:
I tend to try and simplify and say that actuaries explain what is going to happen in the future by looking into the past. When they look into the past, they also incorporate in, as an example used earlier may have been accurate, that an actuary may predict a benefit of this nature in today’s world with today’s law, may average 20 years. They will come up with that through an incredibly complicated series of calculations taking into effect, such as, ages, number of individuals who would historically remarry, they would calculate all of that in, but I am in no position, nor would I want to, it actually goes to a rather rigorous 10-part testing program to get the certification.
Mr. Thompson:
I would like to go on record in support of this bill. It is unfortunate all those who testified in the Assembly could not be here today, because they offered very compelling testimony. In addition, as a board member of the DIR advisory board, our DIR does a very good job in tracking all of that information, they have all of those on-the-job tests at DIR; that information is readily available.
Chairman Townsend:
There will not be a committee meeting on Tuesday nor on Wednesday, so that would allow us to work on this. I would encourage anyone who would like to participate in that, along with Mr. Ostrovsky and Ms. Gruenewald, if you have the time (Mr. Dreher) to do that, or any of the parties interested in participating. Let us try to get our arms around the amount of money we understand that it would take to go backwards, how the money would be allocated, either just from divided across the system relationship with EICON, or larger lump-sum; lets review all of the options, narrow them down in writing, possibly by next work session.
This committee is notorious for dealing with tough issues; this may be the toughest one yet, because of its sensitiveness. Every time we loose someone, particularly in our public safety arena, it touches an entire community, such as the tragedy that occurred at UNR. While we are sleeping, somebody out there is working to keeping us safe, it is something that we as Americans, tend to take for granted. Officer Hashimoto happened to touch me personally, because he and I and a number of other officers used to lift weights together; one day he was there, then the next day he was gone.
On Tuesday and Wednesday morning, Ms. McGee will be available in this room (2135) at 9:00 a.m. for providing assistance. If there is no one else to testify on this bill (A.B. 217,) I will close the hearing.
Chairman Townsend:
The meeting is adjourned at 10:25 a.m.
RESPECTFULLY SUBMITTED:
Silvia Motta,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE: