MINUTES OF THE meeting
of the
ASSEMBLY Committee on Commerce and Labor
Seventy-Second Session
March 3, 2003
The Committee on Commerce and Laborwas called to order at 2:09 p.m., on Monday, March 3, 2003. Chairman David Goldwater presided in Room 4100 of the Legislative Building, Carson City, Nevada, and, via simultaneous videoconference, in Room 4401 of the Grant Sawyer State Office Building, Las Vegas, 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. David Goldwater, Chairman
Ms. Barbara Buckley, Vice Chairwoman
Mr. Morse Arberry Jr.
Mr. Bob Beers
Mr. David Brown
Mrs. Dawn Gibbons
Ms. Chris Giunchigliani
Mr. Josh Griffin
Mr. Lynn Hettrick
Mr. Ron Knecht
Ms. Sheila Leslie
Mr. John Oceguera
Mr. David Parks
Mr. Richard Perkins
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
None
STAFF MEMBERS PRESENT:
Vance Hughey, Committee Policy Analyst
Wil Keane, Committee Counsel
Diane Thornton, Committee Policy Analyst
Sharee Gebhardt, Committee Secretary
OTHERS PRESENT:
Kevin Higgins, Chief Deputy Attorney General, Director, Worker’s Compensation Unit
Ruth Annette Mills, Board President, Nevada Health Care Reform Project, Las Vegas
Cynthia Bunch, Nevada Nurses Association, Las Vegas
Bonnie Parnell, League of Women Voters
Larry Spitler, Nevada Associate Director, Advocacy at American Association of Retired Persons
Bobbie Gang, Legislative Advocate, Nevada Women’s Lobby
Fred Hillerby, Legislative Advocate, Nevada Association of Health Plans
Keith Lee, Attorney, representing State Board of Medical Examiners
Judy Booe, Nevada Alliance for Retired Americans
Raymond Badger, Esq., Carson City
Danny L. Thompson, Legislative Advocate, Nevada State AFL-CIO
Jack Jeffrey, Southern Nevada Building and Construction Trades Council
John Wiles, Division Counsel, Division of Industrial Relations (DIR)
Charles J. Verre, Chief Administrative Officer, Nevada Department of Business and Industry, Division of Industrial Relations
Robert A. Ostrovsky, Legislative Advocate, Nevada Resort Association, and Employers’ Insurance Company of Nevada.
Donna Sweger, Nevada Attorney for Injured Workers
Rose McKinney-James, Legislative Representative, Clark County School District
Steve Demeree, Assistant General Counsel, Clark County School District
Mary Lau, Executive Director, Retail Association of Nevada
Christina Dugan, Director, Government Affairs, Las Vegas Chamber of Commerce
Don Jayne, Legislative Advocate, Nevada Self-Insured Association
Chairman Goldwater called the meeting to order at 2:09 p.m. All members were present and there was a quorum present.
Chairman Goldwater opened the hearing on A.B. 140.
Assembly Bill 140: Provides penalty for failure to comply with order to cease business operations at place of employment for failure to maintain or provide industrial insurance. (BDR 53-437)
Kevin Higgins, Chief Deputy Attorney General, Director, Worker’s Compensation Unit, introduced A.B. 140 on behalf of the Attorney General. At his request, his letter addressed to the Chairman and the Committee (Exhibit C) was distributed. Mr. Higgins said the investigators from the Worker’s Compensation Fraud Unit (WCFU) and the investigators from the Division of Industrial Relations (DIR) often accompanied each other to job locations where uninsured employers were conducting business or where there had been reported an uninsured injury. Currently, he said, Nevada Revised Statutes (NRS) 616D.110 required law enforcement to assist the DIR in the pursuit of their duties. Under the statute, DIR had the authority to close an uninsured business. While law enforcement rendered that assistance under the statute, he noted, there was no crime involved and unless an employer became so obstreperous that he was interfering with a peace officer, there was not much, from a criminal standpoint, he could do to force them to close the business. A.B. 140 would create a misdemeanor penalty if a business refused to close after an appropriate order had been issued. Previously, he said, the most recalcitrant of employers reopened their businesses within a half hour and continued to operate their businesses without insurance. Then, he said, any injured employee would draw directly from the uninsured employer fund. DIR supported the bill, which would provide a tool to encourage negligent employers to become insured or at least to keep their businesses closed until they obtained insurance. He mentioned that John Wiles and the Division joined him in supporting A.B. 140.
Assemblywoman Giunchigliani asked where “employer” was defined in the statutes. She said she supposed the definition would apply elsewhere and not just for worker’s compensation.
Mr. Higgins responded that the definition of “employer” was an arcane portion of the law. He said NRS 616A included several definitions for “employees” and “employers.” Generally, if a person was engaged in a course of business, he was the “employer,” provided that his “employees” were furthering his course of business. He noted that there were many exceptions. The law was unclear as to who was and who was not an independent contractor. He mentioned the Internal Revenue Service had a 27-point test to determine whether an employee/employer relationship existed.
Ms. Giunchigliani agreed that if an individual met two of those criteria he could be considered an employer.
Mr. Higgins said there was case law in Nevada that further defined the matter.
Ms. Giunchigliani asked him to elaborate.
Mr. Higgins responded that the Supreme Court case set criteria, such as setting the hours of employment, providing the necessary equipment, hiring and firing employees, and supervising the quality of work. If some of those criteria were met, there was an employer/employee relationship.
Ms. Giunchigliani asked whether an “independent contractor” was in a different statutory section, and whether the same criteria could still be applied.
Mr. Higgins confirmed they were. He noted there were differences between a true independent contractor and an employer who attempted to operate his business by claiming his employees were independent contractors. Generally, he said, if it was an activity that the business was not normally engaged in, then the person working on that activity would be considered an independent contractor. For example, Mr. Higgins explained, if a moving company hired someone to weld a truck, the welder could potentially be considered an independent contractor. However, he said a moving company that claimed all of their movers were independent contractors would be suspect; it was probably an employer/employee relationship.
Ms. Giunchigliani asked about “dance halls.”
Mr. Higgins said there was an exemption in the statute for entertainers. He said one of the dance halls in Las Vegas actually covered its employees. He said they had investigated fraud cases out of that dance hall, and they were mostly exempt from the statute.
Ms. Giunchigliani commented that she believed that should be rectified. She mentioned that the fraud issue was going to be revisited in the budget hearings.
Chairman Goldwater said that he saw a fiscal note to local government on the bill. He asked whether that was just an increase on the penalty or did it create a new crime.
Mr. Higgins answered that he was not aware of a fiscal note. He assumed there would be a slight note since potential was there for someone to be arrested and go through court proceedings.
Chairman Goldwater asked whether the District Attorney would have criminal jurisdiction in that situation.
Mr. Higgins advised that it would be a joint jurisdiction. The Worker’s Compensation Fraud Unit had exclusive jurisdiction over crimes committed under NRS 616A through NRS 616D and NRS 617, but the District Attorney enjoyed concurrent jurisdiction.
Chairman Goldwater said it would be inconceivable to put a “cease and desist” on the bill and use the word “knowingly,” when there might have been an administrative or clerical problem. Chairman Goldwater cautioned that the purpose of the bill was not to implicate an innocent person who had not intended to commit fraud.
Mr. Higgins agreed. He said the intent of the statute was to close a business until an employer obtained insurance if the DIR and/or the Attorney General’s Office discovered that an employer had no insurance and had never been insured. So if the employer did not comply and an hour later returned to operate the business without insurance, there was a tool to use to arrest the employer. Mr. Higgins explained that if an employer’s insurance lapsed for two days, this would not apply.
Chairman Goldwater said that for purposes of the hearing he recommended A.B. 163, regarding financial practices, fraudulent activity, destroying documents, and misleading investigations. He asked Mr. Higgins to review the bill and see if it applied.
Mr. Higgins agreed to review the bill.
Assemblyman Beers asked whether the statutory penalty was described elsewhere and noted that he did not see a specific penalty in the bill.
Mr. Higgins said the standard penalty was described in Chapter 193 of the Nevada Revised Statutes.
Assemblywoman Giunchigliani said an interim committee had made a recommendation to eliminate a number of misdemeanors. She asked whether it made more sense to have some kind of fining capacity.
Mr. Higgins responded that the intent of the bill was to penalize an employer who was not concerned with fines. He said the bill would not apply to the majority of employers who made an effort to operate within the law.
Ms. Giunchigliani inquired whether the local government could withdraw a violator’s business license since the district attorney had concurrent jurisdiction.
Mr. Higgins said they had worked with the district attorneys and entities who licensed businesses, alcohol licensing, and also the health department on various types of businesses that were in violation of every possible regulatory scheme. But if it was simply a matter of an employer who refused to have insurance, he said he did not believe he would have much interest in the district attorney enforcing it. He believed it was up to the Attorney General and the Worker’s Compensation Unit to respond.
Chairman Goldwater said he believed they had plenty of tools to find fraud against the employees; there certainly were more tools in the toolbox against the employers. With no other questions or testimony, he closed the hearing on A.B. 140.
Chairman Goldwater opened the hearing on A.B. 79.
Assembly Bill 79: Provides for external review of certain determinations made by managed care organizations and health maintenance organizations. (BDR 57-955)
Assemblywoman Barbara Buckley, District No. 8, Clark County, introduced A.B. 79. She said the bill would require an independent review when there was a denial of an individual’s ability to seek medical treatment from his Managed Care Organization (MCO) based on the “doctrine of medical necessity.” She stated that MCOs, unlike typical indemnity plans that paid for any treatment that one incurred, relied on the doctrine of medical necessity and sometimes would not authorize treatment based on their determination that a certain procedure was not medically necessary. Ms. Buckley said in instances where the treatment was expensive and its medical necessity was questioned, there was consternation on the part of the patient who questioned whether the decision was made for financial reasons rather than legitimate medical reasons. She said often there were concerns whether the MCO had the patient’s best interest in mind. Ms. Buckley said external review would inject some independence into the process. She mentioned that she had sponsored the same bill last legislative session and had worked with the Nevada Health Care Reform Project. She recognized the diligence of the members of the Health Care Reform Project, particularly Annette Mills and Cynthia Bunch, in working with the MCOs.
Assemblywoman Buckley advised that some entities that used external review had found it to be an effective tool to help them on cases where medical expertise was needed and also to insure their members’ satisfaction with the plan. She said the only disagreement in drafting the bill was deciding who would pick the external review organization. She said she had wanted it to be the Office of Consumer Health Assistance, the health care ombudsman position created by this Committee in 1999, because she thought that an independent selector would guarantee the most consumer confidence. The MCOs, however, had preferred to do it internally because they already had contracts with some organizations. Ms. Buckley said they were able to reach an acceptable compromise that allowed the Office of Consumer Health Assistance to select the reviewer, but minimized the bureaucracy by having them send the medical records directly to the independent reviewer.
Assemblywoman Buckley referenced Exhibit D, a revised version of A.B. 79. She said a number of individuals had worked on the bill and the revision. She said the amendment was very similar to the original bill and offered to discuss the mechanics of external review with the Committee.
Chairman Goldwater agreed that would be helpful.
Ms. Buckley said Section 1 explained the licensing procedure for an external reviewer organization. She advised the DIR would be the regulatory body. The external review organization would apply to be licensed in Nevada and would be certified by the Commissioner of Insurance. The organization would first have to demonstrate their capacity, prove that they could perform the work, and prove to the Commissioner that there was no conflict of interest. Citing paragraph 4, she said they did not want the external review organizations intertwined financially with the insurance companies, as that would defeat the purpose of an independent review. She said this was more fully set out on page 2, lines 22 and 23, of Exhibit D.
Chairman Goldwater suggested that before they reviewed further Sections of the amended bill, they should take any questions from the Committee regarding Section 1 in an effort to keep the discussion as narrow and focused as possible.
Assemblywoman Buckley advised the Chairman there also were representatives present from the insurance companies and the Office of Consumer Health Assistance who, having worked on different Sections of the bill, could answer questions as well.
Chairman Goldwater asked Ms. Buckley who she envisioned could provide the proper expertise to serve in the certifying capacity who had no affiliation with a health care plan.
Ms. Buckley said Section 1 referred to someone who had a proprietary interest in both. She advised that there were a number of existing external reviewer organizations. She mentioned, anecdotally, an opportunity she had to speak to a physician in an external review organization for her mother’s HMO, which was a Blue Cross in Pennsylvania. One of the reviewing physicians discussed with her the problems HMO had in denying out-of-state claims. She said the physician advised her how to prevent that from happening. She said the reviewing physician did not work for any Nevada insurance company; he worked out-of-state to provide that kind of independence. She noted it was not a novel concept anymore.
Chairman Goldwater said he appreciated her efforts in Section 1, and agreed the removal of “conflict of interest” was essential.
Ms. Buckley proceeded to Section 2 of the amended bill. She said Section 2 provided that the Commissioner of Insurance transmit to the Office of Consumer Health Assistance the list of certified external review organizations. She added this would be further explained in a later section where the Office of Consumer Health Assistance would randomly select the name of the reviewer.
Ms. Buckley said Sections 3 and 4 were mostly conforming language that required each HMO to establish the external review procedures within their contracts of insurance. She advised that Section 10 and Section 10a defined “adverse determination” as a decision that health care resources and services were not medically necessary and appropriate or were experimental or investigatory. It confirmed whether or not something was a covered benefit that would go to external review. A.B. 79 covered medical necessity, experimental, and investigatory procedures. She said that currently, if an MCO denied treatment, there were internal review procedures that were adopted in the Patient Bill of Rights by the 1997 Legislative Session. It set up a right to appeal a decision. A.B. 79 would allow an individual to skip right to external review if there was a serious dispute. She explained that final adverse determination was when someone had gone through the appeal process and it was still denied on medical necessity.
Chairman Goldwater noted that the last time the proposal was discussed, the medical-legal screening panel was in place. There was a question whether or not they could use the external review for the purposes of the legal screening panel and whether or not negligence occurred. He asked Ms. Buckley’s opinion whether the external review was “fair game” for all parties since the legal screening panel was eliminated.
Assemblywoman Buckley responded that the concepts of a medical-legal screening panel and external review were quite different. She explained that an external review board worked with an insurance company and a patient who disagreed whether a course of treatment was necessary. In contrast, a medical legal screening panel helped a patient who believed he was injured due to the negligence of a health care provider. She thought the two might be on a continuum, but she said the external review was in place to fix disagreements that resulted from a health care plan and a consumer. Ms. Buckley said the bill should promote trust between the patient and the health plan.
Chairman Goldwater agreed that trust was essential. He expressed his concern that legislation should prevent frivolous lawsuits and asked whether an objective external review board would be available. He further inquired whether their findings could be used in a court proceeding in order to prove negligence. Chairman Goldwater said he was comfortable with the old form where the medical-legal screening panel could review and determine whether a case was worthy. He asked Ms. Buckley whether A.B. 79 would provide a sufficient check.
Assemblywoman Buckley agreed that there should be an interrelationship between the external review board and the medical-legal screening panel. She said there had been some movement at the federal level in pending legislation that said one could not go to court against his HMO unless he had gone to external review first. Also, she noted, the federal government encouraged states to consider external review and suggested that where states had external review, they should insert an exhaustion requirement. She explained that the interplay was an early alternative dispute mechanism to prevent the courts from deciding medical necessity. She urged that an early decision by physicians was needed to avoid drawn-out litigation later.
Chairman Goldwater offered the following hypothetical situation: An HMO denied a test requested by a patient’s physician; the patient went to an external review and the test was approved; the test results showed the patient had cancer and, had he been treated earlier, he would have been healed or his prognosis might have been better. Mr. Goldwater asked whether the patient could use the external review as his sole piece of evidence to prove negligence.
Assemblywoman Buckley said she was not aware of any provision in the bill that would say the external review report was confidential. She thought it could be used like any other piece of medical evidence or expert witness. As a general rule, she added, that would not be negligence on the part of the physician because the treating physician wanted the test; it would be negligence on behalf of the HMO only.
Chairman Goldwater said the gist of his original question was in his hypothetical scenario: the medical-legal screening panel was there to weed out the truly frivolous cases. Since the screening panel had been removed, Mr. Goldwater asked whether the courts would be flooded with lawsuits and if that would affect the decisions of the external review.
Assemblywoman Buckley acknowledged Chairman Goldwater’s concern. She added that a later section of A.B. 79 made the decision binding on the insurer, not on the insured. If the insured felt that he still needed something, he retained the right to litigate. She said that was agreed upon early on by the insurance companies. She said this language was similar to other states’ legislation. She added that the Nevada insurance industry was very adamant in including that same protection in the law. For example, she said, if someone had cancer and thought the doctor had erred in treatment, he could still litigate. She noted that it was a credit to the insurance companies that they insisted on that provision.
Assemblywoman Buckley next referenced Section 11 on page 7, which defined “medically necessary” as “health care services or products that a prudent physician would provide to a patient to prevent, diagnose or treat an illness, injury or disease or any symptoms thereof that are necessary. . .” Then she noted the five conditions included in the section. She observed there was always a balance and the “devil was in the details.” She said the definition was one the sponsors had struggled over the most, but it was one they recommended.
Ms. Buckley continued that Section 12 required the assignment of the external review organization. In summary, she said the DIR certified and provided the list of reviewers, and the Office of Consumer Health Assistance picked the reviewers on a rotating basis.
Ms. Buckley said she was discussing only the major provisions and moved on to Section 14, which provided an expedited review procedure to accommodate matters of immediate health safety. The section provided for two external review organizations that would be rotated and available within a 72-hour time frame.
She noted Section 16 at the bottom of page 9 as the second most contentious area. Section 16 covered the criteria an external review organization must follow in making their determination. She said the decision must be based on documentary evidence, including recommendations of the treating physician, other medical evidence, such as professional standards, reports in peer-review literature, evidence-based medicine, and opinions of independent physicians who were experts. She continued to Section 17, which said it was “final and binding” upon the MCO. She cited paragraph 2, which applied to any potential malpractice claims; an external review board was not liable for civil damages if their decision was made in good faith. She said this was standard peer review language, which had been taken from other peer review statutes.
Ms. Buckley concluded that the rest of the amended bill codified and conformed the language to ensure that it applied to other health plans. She noted one major exception on page 12, Section 24, subsection 3: that it did not apply to Medicaid, because, she said, the federal government had already set forth stringent requirements for Medicaid and the sponsors did not want to interfere with that process. She said the rest of the language of the bill conformed with the various health plans and chapters.
Chairman Goldwater inquired whether A.B. 79 applied to industrial providers and the medical system under industrial insurance.
Assemblywoman Buckley responded that it did not. She said she had consulted with Dean Hardy and various other professionals, who had recommended that the hearing officers appoint individuals to do external review, and Mr. Hardy thought that was one area of worker’s compensation that actually was effective. Upon his recommendation, industrial insurance was excluded from the bill.
Chairman Goldwater asked about subrogation. He said he knew the bill provided for prompt decision-making, but if someone wanted to pursue treatment on his own and he received a favorable decision, he wondered whether the patient could subrogate that to get his money back. For example, the patient wanted a test, the HMO turned him down, so he went ahead on his own and paid for the test. Afterward, the HMO changed their determination.
Ms. Buckley said that was not implicated by the bill.
Chairman Goldwater asked if that would be her intent.
Assemblywoman Buckley said the intent of A.B. 79 was to provide independent external review so that an individual would not have to pay for the test. She said the majority of people could not pay for medical tests, so the bill was to address that problem. She said they were not arguing about subrogation or whether an HMO should have paid later. She noted the law was complicated with regard to health plans. There were issues with the Employment Retirement Income Security Act of 1974 (ERISA), which had been interpreted in some jurisdictions to preclude a person from suing his HMO based on their decisions. One could adjudicate, she said, if it was a covered benefit, and then only for the amount of the covered benefit. Ms. Buckley noted there was a lot of confusion in the law, although more courts were siding with patients. The bill sought to avoid that murky area for consumers and determine a good way to get decisions made expeditiously.
Lastly, Ms. Buckley recognized Ruth Annette Mills and Cynthia Bunch in the Las Vegas audience, who had been instrumental in working on A.B. 79.
Chairman Goldwater thanked Ms. Buckley for her excellent presentation.
Ruth Annette Mills, Board President, Nevada Health Care Reform Project, Las Vegas, testified via videoconference from Las Vegas. Ms. Mills spoke from prepared testimony (Exhibit E) in support of A.B. 79. She explained the mission of the Project was to assure all Nevadans comprehensive and affordable health care coverage and to improve the quality of health care. She remarked that Cynthia Bunch, the Nevada Nurses Association, and Larry Matheis, Executive Director of the Nevada State Medical Association, supported the bill.
Cynthia Bunch, Nevada Nurses Association, Las Vegas, testified via videoconference from Las Vegas in support of A.B. 79. She said that Larry Matheis and she had negotiated the amendments with the health insurance industry.
Chairman Goldwater remarked that he and Mr. Matheis had discussed the difference between peer review and an external review. He asked for a brief differentiation of the two reviews.
Ms. Bunch said a peer review was more common within facilities like hospitals where there was a medical executive committee that reviewed mortality rates and adverse events within that facility. The purpose of the peer review was to investigate medical error and to intervene to prevent its reoccurrence. This type of independent external review, she believed, was more specific to insurance plan denials. Regarding the earlier question of whether this type of review would be accessible for legal counsel, she stated that the patient would receive a copy of the review and had the right to share that information with legal counsel if he desired.
Former Assemblywoman Bonnie Parnell, representing the League of Women Voters, spoke from prepared testimony (Exhibit F). In endorsing A.B. 79, she said the League had been active in the work of the Nevada Health Care Project and explained how an external review committee would present an option of review that was not currently available.
Larry Spitler, Nevada Associate Director, Advocacy at American Association of Retired Persons (AARP), testified in support of A.B. 79 via videoconference from Las Vegas. Mr. Spitler spoke from prepared testimony (Exhibit G). He added that he was pleased with the bipartisan support of the bill evidenced at the hearing. He stressed the importance of providing enrollees in a health plan with the right to have plan decisions reviewed by an independent entity. He remarked that his organization approved of the amendments introduced by Assemblywoman Buckley.
Chairman Goldwater thanked Mr. Spitler for his remarks and noted that Mr. Spitler had once been the Chairman of the Committee on Commerce and Labor.
Bobbie Gang, Legislative Advocate, representing Nevada Women’s Lobby, spoke in favor of A.B. 79. She noted that the Lobby had worked for this bill last session and expressed her pleasure that there was a bill agreed upon by all parties. She commended Assemblywoman Buckley and the members of the Health Care Reform Project, of which the Nevada Women’s Lobby was a member, for their accomplishments in promoting the bill. She urged passage of the bill.
Fred Hillerby, Legislative Advocate, representing the Nevada Association of Health Plans, stated the Association was proud to be in concurrence with every element of A.B. 79. He said most of their health plans already voluntarily practiced external review. He noted the benefits of the external review organizations included not only help with disputed claims, but also assistance with their own medical staff in understanding new procedures and whether or not they were medically necessary. He also noted that they had worked with the Nevada Trial Lawyers’ Association and stated it was probably one of the few times that the insurance industry and the Nevada Trial Lawyers’ Association agreed upon legislation. He thanked Matthew Sharp, especially, for his help in the process.
Assemblywoman Buckley thanked Mr. Hillerby and also recognized Jack Kim with Sierra Health Services, Inc., for his work on the bill.
Chairman Goldwater acknowledged Keith Lee’s work on A.B. 79 and noted that his suggestions (Exhibit H) were incorporated into the revised bill.
Keith Lee, representing State Board of Medical Examiners, spoke on behalf of A.B. 79. He said he appreciated the recognition, but added that his suggestions were more technical in nature.
Judy Booe, representing Nevada Alliance for Retired Americans (NARA), testified via videoconference from Las Vegas. She spoke from prepared testimony (Exhibit I) in support of A.B. 79 and said NARA represented thousands of retirees and senior citizens in Nevada. She noted the gravity of the issue and its effects on their members. She also emphasized the need for expedient remedies and that the external review organization must not be affiliated with a health plan.
Chairman Goldwater inquired whether there were any additional speakers in the audience or in Las Vegas who wished to testify either in support or in opposition of A.B. 79. There were none. There were no further questions and Mr. Goldwater closed the hearing on A.B. 79.
ASSEMBLYMAN HETTRICK MOVED TO AMEND AND DO PASS A.B. 79.
ASSEMBLYWOMAN LESLIE SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
Chairman Goldwater opened the hearing on A.B. 168.
Assembly Bill 168: Revises provisions governing industrial insurance. (BDR 53-255)
Assemblywoman Chris Giunchigliani, District No. 9, Clark County, introduced the bill and thanked former Assemblyman Douglas Bache for his efforts working on the bill in the previous session. She identified the key components of the legislation. First, she said, was to allow for “any willing provider.” She said that because of the privatization of worker’s compensation, many workers, unfortunately, used their own medical health care program to cover worker’s compensation. She said if a doctor was willing to accept the rate on the medical fee schedule, then she believed an individual should be able to access that provider. She said a second component dealt with the adoption of the American Medical Association (AMA) “Guide,” which was in its fifth edition. The final section noted was about extending matters for hearings. She then turned the discussion over to Raymond Badger.
Raymond Badger, Carson City Attorney, reported that over 90 percent of his law practice was representing injured workers. He referenced a two-page outline of A.B. 168 (Exhibit J) and an article entitled “The Adequacy of Cash Benefits Prescribed by Workers’ Compensation Statutes” authored by two labor professors that was published in Workers’ Compensation Policy Review, a national journal (Exhibit K). He said the authors studied state laws’ performance against a model act that a federal government committee promulgated in 1984. He said that the authors then looked at the law as it existed in 1998. Mr. Badger said Nevada finished “dead last.” He noted that Nevada got some benefit increases in 2000 to cover some of the losses to the workers in 1993.
Mr. Badger advised he would discuss the bill chronologically and invited the Committee to ask questions at any time. The first issue, he noted, was benefit penalties. He said that up until 1995, an injured worker could institute a lawsuit in Nevada without any kind of legal justification if he thought that his insurance company had denied him benefits. The Legislature gave immunity to industrial insurers for any and all acts, and the workers’ remedy now was a benefit penalty. He said under present law an injured worker would present his case to the DIR who then would do an investigation and issue a decision if they found an insurer was responsible. The DIR also would give a citation for a monetary amount and the insurer could challenge that decision in front of an administrative law judge.
Mr. Badger explained that A.B. 168 accomplished several things. First, he noted that an injured worker’s acceptance of an award for permanent disability would not terminate an investigation whether there was bad faith insurance practice on the claim by an insurer. The DIR had previously ruled that if a worker accepted a settlement of his case, any complaint was also extinguished. To depict the irregularity, he gave an example that if a drunk driver injured his wife in a car accident, and she received a settlement with that person’s insurer for her injuries, that should not stop the district attorney from his duty to prosecute the drunk driver. He noted that Section 12 remedied that problem.
Section 14, Mr. Badger said, was the “guts” of the benefit penalty changes. One significant change, he noted, was the removal of the requirement that the aggrieved parties prove that their insurer acted through “fraud, coercion, duress or undue influence.” He said that as a civil attorney, he was fortunate that he had never had to prove that in court because, he opined, absent an admission or a “smoking gun” document, it would be impossible. He said the conclusion ought to be that if there was no justification, then that was an improper insurance act and subject to penalties.
The last significant change, he said, was insertion of language to expedite the process. He said presently, the DIR would get a complaint, investigate the complaint, and then issue a decision. Next, the case could be adjudicated. From his experience he observed that the insurer would challenge many significant penalties in front of an administrative judge. A.B. 168 would provide that if the DIR were unable to act on a complaint within 30 days, the parties could move forward. He suggested that the DIR was overworked and he did not believe the bill would infringe on anyone’s rights if they moved to the hearing without an investigation.
Following the outline provided in Exhibit J, Mr. Badger noted in Section II, that Managed Care Organization (MCO) was a misnomer because under present worker’s compensation law, an insurer or an employer could contract with a MCO or they could contract directly with medical providers. Either way, their injured workers had to go to the provider with whom they contracted. He said there was nothing to prevent a large insurer or self-insured employer from contracting with one doctor in a specialty, regardless of how many employees he might have insured. Mr. Badger advised there were no rules under present law for those contracts. He said one goal of A.B. 168 was to provide medical services under the Workers Compensation Act in a manner that insured availability and accessibility of adequate treatment to injured workers, while still maintaining the insurance companies’ right to provide appropriate financial incentives to reduce the cost of health care within the system. He said the worker’s compensation field no longer had any statutory language limiting employer or insurer activity or providing a minimal number of physicians with whom they would choose to contract.
Danny L. Thompson, representing the Nevada State AFL-CIO, spoke in favor of A.B. 168. He recalled that the 1993 Legislature had enacted drastic changes to worker’s compensation that was followed by a privatization of the state fund. He said the protections enacted at that time had since been eliminated. He said the provider of the MCO for the State Industrial Insurance System (SIIS) had discounted the rates to doctors to the extent that there were no doctors on the lists for many areas. He cited a case where a worker in Fallon whose finger had been severed had needed to be driven to Carson City for treatment. He said under worker’s compensation law, an employee could not sue anyone but the doctor who treated him. He suggested that if an employee’s finger was cut off and then he had to be transported long distances to find a doctor who was on one of the lists, the likelihood was greater there would be medical complications. He added the chances were also greater that the doctor treating that employee would be sued. He said to allow this to continue made no sense. He said there needed to be protections in place to insure that those lists of medical providers were adequate. He noted when Care Net contacted the doctors to demand discounts, the discounts in managed care were a standard way of doing business, except in worker’s compensation law, wherein an employee could not sue an employer. In 1995 a benefit penalty was legislated because of a bad faith lawsuit in order to prevent an insurance company from denying a case out of hand. That provision, along with the protections that were removed from the law, had led to a system where not just employees, but employers, as well, were frustrated at the lack of doctors on the Care Net provider list. He said it was a crisis and noted that they had formed an alliance of injured workers.
Chairman Goldwater mentioned that legislators had received correspondence addressing physicians’ concerns regarding medical malpractice claims. He said the problem could be addressed through the tort system, but stated that avenue had been traveled extensively by the Legislature. Noting the competitive nature of contract negotiations and private deal-making, and the fixed costs of a physician, he asked whether adopting “any willing provider” language would help address the problem of physicians leaving the state.
Mr. Thompson responded that “any willing provider” language would have helped to eliminate the problem regarding the injured worker in Fallon. He said one of the problems was the DIR established the medical fee schedule that set a ceiling rate for doctors’ fees in worker’s compensation cases. He said Care Net would approach doctors requesting discounts of up to 25 to 35 percent. He said if a doctor refused, that doctor was removed from the panel. He noted that a doctor, in many cases, could not afford to take that large a discount in his fee. Unless Care Net could guarantee the doctor a full office, he said it did not make sense, from a business standpoint, to enter into a contract. A doctor who offered a large discount could seriously impair his business. Mr. Thompson said that at the time Care Net approached doctors, the DIR had not adjusted the medical fee schedule for two years. He said that asking for a 25 to 35 percent reduction on rates that were already two years dated only compounded the problem.
Mr. Thompson further stated this was a crisis not just for injured workers, but for employers who, in some cases, had to transport an injured worker long distances for treatment. He said the employer not only lost that injured employee while he was being transported, but the employer was liable for any vehicle accident during the transport. He believed this was not an intended consequence of recent legislative changes. Mr. Thompson noted that those protections had been taken out since 1993, when the “20-mile rule” was removed.
Chairman Goldwater noted those were excellent points. With no other questions, he asked Mr. Badger to continue.
Mr. Badger said the next major changes to A.B. 168 were in Sections II, III and IV. He reiterated his belief that appropriate financial incentives could be drafted into the legislation and said he welcomed the expertise of others to help with the work.
Mr. Badger proceeded to Section IV of his outline, the American Medical Association’s (AMA) Guides to the Evaluation of Permanent Impairment. He said he had been an attorney in the field of worker’s compensation in Nevada since 1979 and that attorneys referred to the AMA’s Guide to help them evaluate permanent injuries in Nevada. He said the Guide affected the financial settlement an injured worker could receive for his injury. He said the Guide was used in at least 35 to 40 states.
To provide some background information on the Guide, Mr. Badger said the AMA published the first edition in 1971 and amended it in 1984. He said Nevada was slow to adopt the second edition, which included new medical procedures and discoveries. The third edition, published in 1988, was never adopted in Nevada. The fourth edition was published in 1993 and was adopted by the DIR on May 1, 1997. Mr. Badger believed the fourth edition was adopted in Nevada under threat of the AMA to institute legal proceedings against the state regulators because the second edition, used by Nevada, was obsolete. He noted that the Guide, according to its authors, provided the most recent advances in medicine. The current law provided that the DIR had the option to consider the latest edition and adopt or amend its guidelines. He noted that when the DIR adopted the fourth edition of the Guide, they added three major amendments after holding public hearings.
One amendment recognized that in the spine field, the book used in Nevada hurt injured workers so the DIR adopted a regulation to cover some of the smaller permanent back injuries. Mr. Badger said a self-insured employer had instituted a lawsuit in Las Vegas. A Las Vegas district court judge enjoined that amendment.
Mr. Badger said Nevada was currently using the fourth edition with two amendments, but the AMA had now published a fifth edition of the Guide. He noted that the fifth edition of the Guide was twice as large as the previous edition and that the AMA encouraged those entities using their Guide to use the latest edition. In the summer of 2001, organized labor and the trial lawyers had filed a petition to force the DIR to adopt the Guide. He said the National Council on Compensation Insurance (NCCI), which currently set the work compensation rates, offered a short handout that predicted, if the fifth edition was adopted, it would raise overall work compensation rates in the state 4.7 percent. The Chairman of the DIR, Mr. Badger said, was not in favor of passing a regulation that would cost every employer in the state a 5 percent rate increase. He had not heard of any methodology of how the 4.7 percent figure was calculated. He noted a recent handout from NCCI estimated a 1 to 3 percent rate increase.
Chairman Goldwater inquired whether NCCI had explained how they reached that number.
Mr. Badger said he believed there was a well-recognized physician in Las Vegas hired by the DIR who had reviewed the matter. He noted that there would be some changes and generalities, such as fluctuations in costs, but he believed spinal impairment was a major consideration.
Assemblywoman Giunchigliani reported the NCCI percentage was 4.7 because it was based on “pain;” however, she noted a court case in Nevada that did not rule on pain because there was no statutory allowance for it. She said NCCI’s most recent letter said that, should Nevada choose to adopt all but those add-on pain provisions, there would be no quantifiable impact on benefits and costs.
Chairman Goldwater said he would like to know why the DIR in Nevada did not adopt the fifth edition, if it was the most current.
Mr. Badger said he knew of eight states that had enacted a law that automatically adopted the newest edition of the Guide when it was published. He noted that A.B. 168 had similar language but gave the DIR the right to hold public hearings and amend the provisions of the Guide.
Mr. Badger discussed Section V of his outline, which covered Sections 11 and 13 of A.B. 168. The provision, he said, addressed problems with temporary “light duty job offers.” He said when a worker was injured and unable to perform his previous task, an employer might offer him a temporary “light duty” job. The rationale from the 1993 Legislature was that if an employer was willing to pay the worker his previous wage, it would be better for the worker to be employed rather than idle, and it would also benefit the employer to receive some service from the employee rather than just pay his disability wages. To enact that, Mr. Badger said, the legislators had eliminated certain rules, such as the requirement of a written offer and pre-approval by the attending physician. He noted that this had caused problems, citing court cases wherein the employer had alleged job offers were made to an injured employee who then did not show up for work. The employee would deny he had received the job offer. Mr. Badger noted there were tremendous problems for an administrative law judge deciding a case when offers were made verbally. He said A.B. 168 would still allow verbal job offers, but it required that, subsequent to the job offer, there would be a written offer, thereby providing a paper trail.
Mr. Badger said the second item in his Section V was to distinguish between a temporary light duty job and a permanent one. He said an employee retained the right to reject a temporary job without losing his other rights as an injured worker. A.B. 168 would clarify the employee’s rights. He said the criteria for a permanent job would be addressed later.
Mr. Badger said the last item in Section V dealt with the right of an injured worker to retain his seniority or benefit level despite accepting a temporary job offer. He said he understood that this was the employer taking initiative and offering a job for which the employee had not bargained. If the worker accepted light duty work, he would not be punished and lose his other injured worker rights.
Mr. Badger next discussed Section VI of Exhibit J, which dealt with the removal of safety devices (Section 17 of A.B. 168). He said that since the Nevada worker’s compensation law was enacted in 1913, there were provisions about the removal of safety devices resulting in an injury. He explained that if an employer removed a safety device or safeguard that caused an injury, he could be liable for a penalty of $300, not to exceed $2,000. That payment, however, would not go to the injured worker. To the contrary, if an injured worker had removed the safety device and that removal was the cause of his injury, every financial benefit that he would receive on that claim was reduced by 25 percent. As an example, Mr. Badger said, if an employee failed to fasten his seat belt while running a business errand and then was in a car accident, every worker’s compensation insurer he knew would reduce the employee’s benefits by 25 percent for his failure to fasten his seatbelt. A.B. 168 provided that if the injury was caused by the employer’s removal of the safety device, there would be a 25 percent increase in the compensation as there was a similar decrease if the employee moved the safeguard.
There were no questions from the Committee and Chairman Goldwater thanked Mr. Badger for his presentation.
Jack Jeffrey, representing the Southern Nevada Building and Construction Trades Council, testified in favor of A.B. 168. Mr. Jeffrey noted that had it not been for the benefits removed in 1993 and 1995, A.B. 168 would not be necessary. He said changes were made in 1993 and 1995 to save the system money, and managed care was instituted with few rules. In contrast, he noted the private MCO that was working on the health insurance side had many rules. He said that worker’s compensation law provided no guarantee of adequate physicians. He noted the difficulty to collect a benefit penalty that required proof of fraud, coercion, duress, or undue influence. Mr. Jeffrey said there was nothing in current law to penalize an insurer who refused to pay or that required an injured worker to endure numerous hearings to stall the compensation process. He opined the entire system was stacked against the injured worker and that many employers agreed. He said he had known of employers who would argue a case on behalf of an injured worker and it was still denied because the insurance company either had to do another investigation or hearing or would put off the case indefinitely. He said that not only were the financial implications bad, but the longer an injured worker went without treatment, the worse off he would be when he finally received treatment, and the longer it would take for his recuperation and ultimate return to work. Mr. Jeffrey noted that prior to 1993 an injured worker could go to almost any doctor in the state for medical treatment. He said that Managed Care removed the “any willing provider” and “20-mile rule” provisions and the industry had supported them at the time in an effort to “bail the system out.” He said he doubted there were any rules in the managed care system that benefited the injured worker. He strongly urged the enactment of A.B. 168.
Chairman Goldwater thanked Mr. Jeffrey and acknowledged he was the second former Chairman of the Committee to testify.
Assemblywoman Giunchigliani summarized that A.B. 168 attempted, after ten years, to swing the pendulum back on behalf of injured workers. She said she believed the Legislature had done a great disservice to injured workers in recent years. She expressed her willingness to work with those wanting further changes and acknowledged the bill still needed some work. She particularly wanted to stress to the Committee that the NCCI was comprised of insurance carriers. She said she tended to discount their “nay-saying” or “doom and gloom” of the cost and impact regarding both the adoption of the AMA Guide or its impact on the legislation.
Chairman Goldwater thanked Ms. Giunchigliani for her testimony.
John Wiles, Division Counsel, Division of Industrial Relations (DIR), first addressed the fifth edition of the AMA Guide. He said he agreed with the testimony delivered, but wanted to clarify that NCCI had previously indicated that the potential rate increase associated with the adoption of the fifth edition would be approximately 4.7 percent. Based on recent provisions in the Guide, Mr. Wiles said Mr. Verre had just received from NCCI a new estimate of the cost of the implementation of the fifth edition and now NCCI projected a 1 to 3 percent increase based, again, primarily on pain. He stated the testimony delivered concerning the court case was essentially correct. The DIR, he said, during the pendency of the fourth edition, adopted a regulation to allow consideration of pain as part of an impairment related to the activity of daily living. A district court judge had invalidated that finding, saying that the inclusion of “pain” conflicted with a statute that provided only a rating for a physical impairment. The judge opined that the regulation was an improper attempt to enforce an award based on pain. Mr. Wiles said he wanted to provide that perspective on behalf of the DIR.
Chairman Goldwater said he appreciated hearing that perspective, but inquired why, if that was the case, the DIR was hesitant to adopt the fifth edition.
Mr. Wiles responded that the DIR was reviewing new information. He said Mr. Bremner of the DIR had commented that it was appropriate and prudent to also consider the rate impact on the employers of the state when considering adopting the fifth edition. In conjunction with a study of the medical fee schedule, the DIR had estimated an eight percent increase. He advised that, assuming NCCI’s first set of numbers were correct, Nevada employers would be facing a double-digit rate increase. Mr. Wiles advised that at the time of Mr. Bremner’s projection, he had not yet seen NCCI’s letter with the new estimate. He said he was sure Mr. Bremner would take that under advisement and look at it again as they moved forward with the new medical fee schedule which they anticipated having on line by July 1, 2003.
Chairman Goldwater said that Mr. Wiles’ testimony put a lot of weight on the decisions of NCCI. He said he knew they worked a lot with the legislators and with the legislative chairmen of the committees of jurisdiction, and acknowledged that they did good work. He asked if there was anyone on the DIR’s staff who examined the modeling that NCCI did to ensure their work was sound and worthwhile. He expressed concern that the legislators put so much credence in what NCCI said, if there was no other confirmation of their studies.
Mr. Wiles responded the DIR did not have that technical ability to review.
Chairman Goldwater asked whether it was blind faith on the state’s part.
Mr. Wiles said it was the DIR’s faith in the recognized rate service organization for the Division of Insurance. The Commissioner had selected them and they had relied on them.
Chairman Goldwater commented that in insurance and actuarial modeling, “what goes in equals what comes out” and that if “it’s no good going in, it’s no good coming out.”
Charles J. Verre, Chief Administrative Officer, Nevada Department of Business and Industry, Division of Industrial Relations, said he had nothing further to add to Mr. Wiles’ testimony.
Mr. Wiles added that A.B. 168 had been reviewed by the DIR and the DIR saw no substantial impact for the first few sections, but he noted that Sections 14 and 16, which dealt with the benefit penalty and the appellate mechanism, needed some revision. He offered his assistance to the Committee in order to achieve a good product.
Robert A. Ostrovsky, President, Ostrovsky and Associates, Government Affairs Consultants, spoke on behalf of Nevada Resort Association, but said he also represented Employers’ Insurance Company of Nevada, the owner of Care Network, Inc., which was the MCO that handled claims. He commented that there was a much smaller panel of doctors. He said in 1999 Employers’ Insurance Company of Nevada had, under its management, about 36,000 active claims. He said Care Network’s active claims handled by Employers’ Insurance Company of Nevada were about 4,000. He said there was an obvious difference in need for the size of any panel. He opined there could be endless discussion on the adequacy of doctors on the list to cover the geographical areas. He said the managed care language allowed the state to “rein in” a system that allowed any licensed doctor in the state to be considered a “paneled” physician, but noted the DIR still had the power of removal of a doctor. Mr. Ostrovsky also offered to provide each Committee member with a copy of Care Network’s complete system of doctors statewide. He said he believed the list would show that it was adequate to handle the 4,000 cases.
Chairman Goldwater asked if Mr. Ostrovsky would acknowledge that “doctor shopping” could occur when all physicians were members of the panel, and he asked whether the opposite end of the continuum would be that abuses of physicians and “insurer doctor shopping” could occur. He suggested that the more narrowly the panels were limited, the more abuses would take place.
Mr. Ostrovsky said he could not deny the possibility of that, but he added he also understood there was an established appeal mechanism available to the claimant to go before a judge for a determination of medical necessity and whether other referrals were required.
Chairman Goldwater inquired whether that would work on a full large provider in front of a judge if every physician were a member of the panel.
Mr. Ostrovsky agreed that the appeal mechanism would still exist in any case.
Chairman Goldwater asked if it would work for one, would it not also work for the other, and Mr. Ostrovsky concurred.
Assemblywoman Buckley questioned the adequacy of the providers on the list. She said she believed there should be an array of choice and that especially in some areas, such as orthopedics commonly needed by injured workers, there should be a selection of providers. She said a large number of doctors were needed in the area of worker-related injuries. She asked what he recommended as a good guide towards having an adequate number of specialists per claims or per population.
Mr. Ostrovsky responded that he believed a compromise was necessary. He noted that any time one limited access there was a compromise. He said he believed the Division of Health offered some guidance as to what was acceptable policy on behalf of the state and what the size of a panel should be. He said the language in A.B. 168 would require Clark County to have 157 general practitioners, 157 orthopedists, and 157 neurologists, and those were impossible numbers to reach. He said he doubted that in some specialties there were that many providers available. He said the bill gave a formula based on population and he thought some common sense was needed in the regulatory process.
Assemblywoman Buckley inquired about the Health Division’s standard.
Mr. Ostrovsky cited NAC 695C.1255, entitled “Organization to establish that it has met requirements.” He said an organization was deemed to have an adequate number of providers in each category of provider health care pursuant to NAC 616 and 617, if the providers of contracted health care were conveniently located; non-emergency services were available and accessible during business hours; emergency services were available at any time; scheduled appointments were made within a reasonable time; and a treating physician was accessible. He noted that there were ten or twelve items included in the regulation, some of which, he believed, did not fit into worker’s compensation. He noted all of the regulations were under the control of the Board of Health. He said he thought the DIR might be a better-suited location for control. Mr. Ostrovsky advised that when the group was narrowed, issues arose. He noted that Ms. Giunchigliani’s proposal would open a very broad door.
Assemblywoman Buckley commented that she thought there was a problem in this area. She did not know if the word “adequate” was sufficient because it was not clearly defined. She said Care Network had provided her with a list that had only two orthopedists, both of whom were located in the same office.
Mr. Ostrovsky responded that there was some confusion between an “orthopedist” and a “spine specialist.” He said there were two spine specialists in Clark County on the Care Network listing. He said all spinal cases and surgeries were referred to the spine specialists, as opposed to orthopedists, who treated other broken bones. He said he understood the public’s misconceptions of the definitions of specialties.
Assemblywoman Buckley said she thought there should be some choice and listing only two physicians in one specialty did not provide adequate choice. Additionally, she said a patient needed reassurance he would receive good medical treatment. She stated her belief that the workers’ rights had been compromised by removing their right to sue.
Chairman Goldwater inquired about the accuracy of testimony that Care Network was demanding physicians to accept their rates or threatening to remove them from the panel.
Mr. Ostrovsky said he had no knowledge of that and suggested the Committee should talk to Care Network. He said his understanding was that Care Network negotiated rates below the standard fee schedule with physicians. He said he did not know to what extent they were hard negotiations as opposed to less stringent negotiations.
Chairman Goldwater commented that the physician contacts sounded more like threats than negotiations.
Mr. Ostrovsky said he considered a “hard” negotiation to be one where a contract said “Accept this discount, or we are moving on,” as opposed to “We would like to talk to you about your rate.”
Chairman Goldwater noted that hard negotiations put a physician in a difficult position when fixed costs like medical malpractice insurance premiums continued to increase.
Mr. Ostrovsky agreed and said he understood that this got intermixed with the fee schedule. He said the fee schedule established an upper limit payment for a service by a physician and noted that a fee schedule had been in place for nearly three years. He said he had served on an ad hoc group that tried to resolve differences. He mentioned a study approved by the Legislature last session to establish a baseline fee schedule and then annually compute a medical inflation number to the baseline that would be fair to all parties. He said there still was no agreement as to what the baseline should be. He said the fee schedule rated services by what physicians were paid by other providers, whether privately or by Medicare or Medicaid. He said worker’s compensation had a broad range. Some specialties, he advised, received 350 to 400 percent of what they would get if they did the same procedure under Medicare and some might only get 150 percent. He noted that Medicare had relatively low numbers. He said some recommendations were to use Medicare as a base, and he explained that would have both a positive and negative impact. Some physicians would receive increased compensation for certain procedures and some would receive less. He recalled an incident in the 1970s and 1980s when there was a dispute with the anesthesiologists in the state about what the compensation rate was and noted that it was never easy for the DIR to make those decisions. He noted someone was always on the right or left of the baseline. He expressed hope for a satisfactory solution. He said the fee schedules influenced what was paid.
Mr. Ostrovsky continued that he was there on behalf of employers, not insurance companies. He said any changes in the law caused a counterbalancing rate decrease or increase, depending on what policy decisions were made. From the insurance companies’ point of view, he said, the panel directly affected how they contracted. The percent of increase would be incorporated into the rate so that insurance companies could collect the appropriate premiums to pay the new benefit; therefore, benefits were not an issue to the insurance company; it was more a question of complying with the mandates of the law. He said insurance companies collected adequate premiums to ensure compliance, but they were mostly concerned with the effective date of the bill. The number of doctors was a financial decision. He acknowledged the Chairman’s concerns about the adequacies of the National Council on Compensation Insurance (NCCI), but noted they were the agency selected by the state Insurance Commissioner to do the ratings.
On behalf of employers, Mr. Ostrovsky said the previous testifiers saw A.B. 168 as making small steps towards returning to laws enacted in the 1980s and early 1990s. He said employers saw the bill as encompassing more than that. Having served in various capacities throughout the previous legislative negotiations, he said, he saw A.B. 168 as making a much greater change.
Turning to Section 7, Mr. Ostrovsky explained that historically claims had been rated for range of motion. Pain was never considered. The range of motion, he explained, had a corresponding formulaic number, which computed the award. When the measure of pain was introduced, many court challenges arose. He said the issue of whether pain could be an additional compensation had yet to be resolved at the Supreme Court level; for years, Nevada had compensated only for physical injury measured in certain ways. The AMA Guide departed from that in the fourth edition and made further departures in the fifth edition. He said Nevada might have to adopt regulations that conformed to that. He said he believed it was unwise to put into the law by reference an unknown, referring to the proposed change to adopt the most recent edition of the AMA’s Guide. He thought it was more appropriate to keep the responsibility with a regulatory agency, which could review the Guide and make amendments as they saw necessary. He said if there was a dispute with a regulatory agency, it could be resolved.
Chairman Goldwater noted that the Legislature dealt all the time with regulatory agencies that did not seem to be invoking the will of the people.
Mr. Ostrovsky thought Section 8 was a conforming section, but said he did not understand Section 9. He said it made reference to how the phrase “take claims for compensation” was used. Section 10, he added, had to do with the word “shall.” He said that language forced the appeals officer to schedule hearings, which were always problematic regarding time. He said they had tried to hold hearings in an expeditious manner, but noted that there had always been delays in the hearing process. He recalled the Legislature had discussed how to improve the appeals process many times.
Chairman Goldwater asked Wil Keane, Legal Counsel, for clarification of Section 9. Mr. Keane explained the change was made in Section 9 to account for the changes made in Section 16, where the appeals did not necessarily pertain to contested claims pursuant to NRS 616C.360. He said the intent was to ensure authority to deal with the new appeals, which would be heard pursuant to the changes in Section 16 of the bill.
Mr. Ostrovsky continued that Section 11 would open up vocational rehabilitation to people who were light-duty qualified. He referred to vocational rehabilitation sections of NRS that allowed an employee who was out of work for 28 days to receive an assessment. The assessment determined what the employee’s work skills were, and he noted there was a whole statutory construct to determine whether intervention was necessary where employees were out of work for extended periods of time. He said the law determined in some cases where an employee needed a full vocational rehabilitation program. Before the Legislature adopted that construct, Mr. Ostrovsky said, Nevada had spent about $87 million to $89 million a year on vocational rehabilitation. After the construct of the law was changed, he reported, the cost dropped to about $16 million. He said it was arguable whether the drop was because Nevada was removing a benefit from someone or whether there was a better construct of the law, which placed people in more appropriate jobs. He acknowledged there had been enormous abuse in the vocational rehabilitation area, which necessitated several audits that had found a myriad of problems. He said if vocational rehabilitation benefits needed to be expanded because they were more appropriate for some workers, he would agree amendments to the law were necessary. However, if it was just for the purpose of getting vocational rehabilitation benefits for everyone who was light-duty eligible, he thought the Legislature would incur huge expenses.
Chairman Goldwater asked whether Mr. Ostrovsky had heard Mr. Badger’s testimony, to which Mr. Ostrovsky responded affirmatively.
Chairman Goldwater said he did not think Mr. Badger identified either of those issues. He said he thought Mr. Badger identified the problem as refusing one part of the compensation package, but not the other.
Mr. Ostrovsky said he understood that Mr. Badger was only clarifying the language. He said he had a different interpretation of the language of A.B. 168 and said he would be agreeable to talking to Mr. Badger.
Chairman Goldwater said he thought what Mr. Badger outlined was reasonable and appeared to be the intent of the legislation since the beginning. He stated that he had interpreted the intent of the legislation was not to deny someone everything if they rejected one portion of the settlement offer. He said that clearly the proponents of A.B. 168 agreed with the language.
Mr. Ostrovsky agreed with the Chairman and added that he thought the judge had made a “bad decision” in the court case described in previous testimony. He said he thought the present language of the bill needed to be clarified.
Continuing, Mr. Ostrovsky noted problems with the seniority and benefits section. The benefits package would change over time, he said, which would make it difficult to meet the current standard for injuries incurred two years earlier. He advised they needed to study that with the proponents of A.B. 168.
Section 12, Mr. Ostrovsky said, would permit a person to carry a claim on beyond the lump sum for certain prohibited acts. The whole purpose of a lump sum, he said, was to close a claim. He noted there was language in the law that permitted an injured worker to reopen a claim under certain circumstances. He wanted more clarity about the rights of a worker to reopen a claim. He also had concerns if penalty provisions were used as a roadblock for settling a claim.
Mr. Ostrovsky said that Section 13 again used the seniority and benefits language, which was difficult for employers to meet. Regarding Section 14, he noted a public policy decision. He said NRS 616D.120 was enacted as a mechanism to ensure that insurance companies and self-employers did not use their power over an injured worker to otherwise remove benefits the worker should receive. He cited the language of the original statute and the proposed amendments at lines 12-19 of Section 14.
Chairman Goldwater intervened to acknowledge that Section 14 of A.B. 168 required further work.
Mr. Ostrovsky contrasted a felony where an employer intentionally hurt a worker to a misdemeanor where an employer made an error in handling the claim. He said the two should be handled differently. Continuing with Section 14, he noted it removed the discretion of the DIR. He said Section 16 had an interesting concept whereby, if a regulatory agency failed to take action, a worker could file an appeal to enforce it to take an action. He contrasted this to the usual procedure where a regulatory agency took an action and if the worker did not like it, he could appeal it. He said he would not defend bad employers and bad insurers and, if a benefit penalty was deserved, the violator should receive it. He added that if an insurance company was not acting responsibly, they should be penalized; if there were repeated violations, the Insurance Commissioner should revoke their license.
Mr. Ostrovsky asked how often the 25 percent rule in Section 17 was used. He said the problem with the proposed language was that if a worker made an oral request to the employer to install a safety device or some other protective act and the employer did not comply, it was unclear who would decide whether that protective measure was adequate and appropriate. He noted Nevada’s no-fault system that said no matter what the employee did, the employer would pay his benefit. He said the one exception was the 25 percent rule. He said that before he would amend Section 17, he would remove it. He thought the new language in Section 17 of A.B. 168 caused real problems to employers by allowing a verbal request and providing no time to comply.
Mr. Ostrovsky offered the Committee the NCCI analysis of A.B. 168 (Exhibit L), which reviewed the bill by sections. He said the NCCI was primarily concerned with the increase in cost. He said he thought the memorandum was important to be included in the record and noted that NCCI made the analysis as an unofficial, cursory review, with their estimates based on their knowledge of other states. He advised that the rehabilitation language recently added to California law had had such a major impact on the cost on worker’s compensation that the California Legislature had repealed that provision of the law.
Assemblywoman Giunchigliani expressed concern about the NCCI document (Exhibit L), noting that the Committee had not solicited it. She said she did appreciate the DIR making her aware of the analysis, and added that the first she had seen the analysis was an hour before the hearing. She stated, however, that Nevada could perform its own analysis and actuarial studies.
Mr. Ostrovsky advised that NCCI was the selection of the Insurance Commissioner and that NCCI was recognized around the country as a source of rating information. He said he could not say whether they were the only source. He noted that there were others who were more insurance-oriented. He said he gave the NCCI analysis to the Committee as preliminary data and it was the Committee’s decision whether to direct the LCB or the Insurance Committee to study the actuarial costs.
Chairman Goldwater said the Committee should note that the NCCI analysis was not requested and that the Committee knew nothing about the models. He said they knew only the name on the letterhead and could take it “with a grain of salt.” With no further questions for Mr. Ostrovsky, Chairman Goldwater thanked Mr. Ostrovsky for his testimony.
Mr. Ostrovsky concluded that any Committee that dealt with worker’s compensation had tough decisions.
Chairman Goldwater thanked Mr. Ostrovsky for some worthwhile suggestions and asked that Mr. Ostrovsky work with the sponsor and the proponents of the bill in a good faith effort to achieve a satisfactory product. He noted that the pendulum had swung away from the rights of injured workers and that it was time the pendulum swung towards the middle.
Mr. Ostrovsky answered that he would appreciate the opportunity.
Donna Sweger, Nevada Attorney for Injured Workers, offered her support of A.B. 168 for the reasons that were stated by earlier witnesses. She said she agreed with the Chairman that workers’ rights had been compromised.
Chairman Goldwater asked for other testimony in favor of the bill. There was none. Mr. Goldwater then asked for those speakers to come forward who wished to speak against A.B. 168.
Rose McKinney-James, Legislative Advocate, representing the Clark County School District, said the District was one of the larger employers in the state. She said there had been a number of comments solicited and received from individuals in the District who worked either directly in the Worker’s Compensation Division or in Risk Management. She reported that their responses consistently expressed concern that there were hidden fiscal implications for the District. As a result, she reported, they had asked her to oppose the bill. She introduced Steve Demeree to address further issues that the School District had with the bill.
Steve Demeree, Assistant General Counsel, Clark County School District, testified in opposition to A.B. 168, via videoconference from Las Vegas. Mr. Demeree stated that he thought the fiscal notes on the bill were wrong. He said he thought the bill would have a fiscal impact on local governments as well as on the state because it was going to lead to a general increase in the cost of worker’s compensation. He said he wanted to address four sections of the bill because Mr. Ostrovsky had thoroughly addressed his other concerns.
Chairman Goldwater asked how Mr. Demeree determined what models to use.
Mr. Demeree said the District referenced Section 7 in the AMA Guide. He said the Risk Management Department reported $803,703 in claims last year. He said the Department met with a rating physician, agreed upon by both claimants and the School District, to review the claims and “cost” them out using the fifth edition of the AMA Guide. The estimate indicated the cost would have gone from $800,000-plus to a range from $1,232,495 to $2,218,490. He noted the wide range was due to the physician advising that the patient would need to be examined to determine which category he fell into in the rating.
Chairman Goldwater asked whether that was a bad thing.
Mr. Demeree said that he had been working in worker’s compensation for more than ten years. He noted there were injured workers who never missed a day of work, yet received a substantial award. The question, he said, was why would the District want to increase an award when there was no impairment of the person’s earning ability.
Chairman Goldwater asked whether Mr. Demeree had participated in the drafting and revisions of the AMA Guide.
Mr. Demeree said he had not. He said it was interesting to note that in the preface to the AMA Guides, the doctors drafting it advised that the Guide should not be used to determine financial compensation under worker’s compensation. He said the doctors were there only to suggest ratings of impairment, and he cautioned there were only a few doctors who were a part of the drafting procedure and each brought to it his bias as well as his expertise. He said ratings changed quite often and the doctors vacillated in their methods of rating.
Mr. Demeree continued that if one went back to the origins of worker’s compensation, the first goal was to get prompt medical treatment for injured employees. He noted that before the first law was passed by New York in 1910, the employer simply fired the injured worker because he could no longer perform his job. The employer did not worry about treatment or rehabilitation. Mr. Demeree said one of the premises for permanent partial disability was that the person’s earning ability over a lifetime had been impaired and the worker deserved some sort of compensation for that impairment. He explained that under the current system in Nevada, an employee might not have missed a day of work, his earning ability might not have been impaired at all, yet an employee in Clark County School District could get over $3,000 per point of rating. He said those were concerns that needed to be addressed.
Mr. Demeree continued that the fiscal note was wrong because there would be a financial impact. He warned if the legislators decided that the employer should bear those costs, there would be an impact on the finances of all the employers in the state by way of rate increases.
Referencing Section 3, the loss of the MCO discounts, Mr. Demeree said, the School District saved $500,000 last year over the fee schedule. He said he had not heard of a single case, during his seven years with the District in which an employee was unable to receive medical treatment. He said the injured worker was seen the same day of the injury and then referred to a specialist, if necessary. He said he thought there were a number of specialists in all of the categories on the District’s MCO panel. He cited earlier testimony regarding problems with a worker’s access to a doctor and advised that had never been a problem to the District.
Mr. Demeree said that the District was self-insured, and if they were able to save $500,000 on fees because doctors were willing to accept a reduction in fees, that money could be used for other programs such as text books, lab supplies, or middle school athletics.
Mr. Demeree thought one provision of A.B. 168 impaired existing contracts between private individuals. He advised that was a constitutional issue. Referencing Section 2, which required a certain number of doctors per population, Mr. Demeree noted that Clark County, with a population of 1.7 million, would be required to have 170 doctors in each area of specialty. He said the Las Vegas phone book listed only 31 neurologists. He asked what was the responsibility of insurers if the law mandated a high number of available health care providers. He wondered if it would become the duty of the insurer to attract more physicians to the area, and if they did not, would they be in violation of the law. He said it allowed claimants to appeal to a hearing officer if the requirement was not met. He asked if that meant a hearing officer could order the state to solicit the necessary number of specialists within a certain deadline.
Chairman Goldwater acknowledged that there would be some reconstruction of the language in sections of A.B. 168. He asked Mr. Demeree to comment on the three areas that the sponsor identified needed work, including the “any willing provider” language.
Mr. Demeree said that specific language caused a number of problems. He noted that an injured worker solicited his friends, neighbors, and relatives to be his treating physician and claims were opened longer, and people were off work longer because a personal associate would not deny a claimant’s request. He recalled five or six cases his first year with the District before the law was changed in 1993.
Chairman Goldwater asked Mr. Demeree whether he knew of current instances where insurers and self-insurers forced physicians into contracts and coerced physicians, who favored their point of view, into contracts by guaranteeing them volume.
Mr. Demeree said that from the District’s perspective, the goal was to get the workers well. Consequently, he said, the District wanted the best medical providers. He said the District tended to seek out good health care providers and then they would have an MCO negotiate contracts with them to see if they were willing to take a fee reduction. He noted that the District, with approximately 28,000 employees, provided a considerable market for the doctors. He said he had no experience with other insurers and what they might do. He noted that a “good” doctor to the District meant one who provided very good medical care and who also provided prompt reporting to the District of the progress of the employee. He said the District encouraged doctors to make prompt reports, and those who did not respond would be dropped from the list.
Chairman Goldwater said choosing physicians who would get employees back to work faster was a noble pursuit. But, he added, one problem was that the employer did not address when the employee was healed and ready to return to work.
Mr. Demeree said that his experience with the doctors on their panel was just the opposite. The employee would not return to work until the doctor advised it, or if the employee needed further treatment, the doctor would prescribe it. He said that was why the District wanted the doctors’ reports promptly. He said their goal was to get the employees well. He added part of the wellness process was getting employees back to work, noting that inactivity did not necessarily promote the healing process. He said from the doctor’s perspective, he was not aware of any District employee being rushed back to work too soon.
Chairman Goldwater asked Mr. Demeree to summarize his concerns regarding the “light-duty” provisions in A.B. 168.
Mr. Demeree said he had concerns as to how the provision was worded as he believed the appeals officers might incorrectly interpret the language of the bill. He said it had not been his experience to see an employee be rejected for rehabilitation benefits because the employee had previously rejected light duty. He noted that if an employee could not return to his previous work, he was certainly entitled to rehabilitation.
Assemblywoman Giunchigliani agreed that the “temporary duty” language needed to be reworked and encouraged him to offer his suggestions. She asked whether it was Mr. Demeree’s understanding that the Clark County School District provided worker’s compensation to employees for all their duties. As an example, she asked whether extra-duty work that occurred after the school day would be covered.
Mr. Demeree said it would depend on whether or not the extra duty was voluntary or paid compensation.
Assemblywoman Giunchigliani noted that most teachers were not paid for their extra-duty or their “voluntary” activities despite being advised by their employers that it was required. She asked for clarification whether employees under those circumstances would be paid.
Mr. Demeree responded that he did not believe worker’s compensation law would cover an employee under certain circumstances, such as a student council sponsoring a faculty/student basketball game.
Assemblywoman Giunchigliani inquired who would be performing the after-school activity, if not the employees.
Mr. Demeree responded that it was the employee’s choice and opined that people made choices all the time. He said that he had been a teacher for 16 years and chose to volunteer for many activities, but that he did not believe everything would be covered by worker’s compensation.
Assemblywoman Giunchigliani asked whether Mr. Demeree was on retainer for the Clark County School District.
Mr. Demeree answered that he was an in-house counsel.
Chairman Goldwater invited Mr. Demeree’s final comments.
Mr. Demeree concluded that for self-insured employers, like the state and local governments and other entities, any money that went out of the budget for worker’s compensation meant that other programs would be funded less or not at all. He said he hoped the Committee would consider that.
Chairman Goldwater noted there were no other questions for Mr. Demeree and thanked him for his presentation.
Mary Lau, Executive Director, Retail Association of Nevada, stated her testimony would be redundant. She introduced Christi Mosher, Claims Liaison, Nevada Retail Network Self-Insured Group, who worked for Pro Group Management. Ms. Lau said she and Ms. Mosher had similar concerns to those expressed by Mr. Demeree and were available to answer any questions. She also expressed their willingness to work with the sponsor on the bill.
Chairman Goldwater said that their concerns had been noted by the Committee and asked if there were questions. There were none.
Christina Dugan, Director, Government Affairs, Las Vegas Chamber of Commerce, said she shared the concerns already expressed regarding A.B. 168. She noted problems with the “any willing provider” language and the “duty” aspect of it. She added that the Chamber was looking forward to working with the sponsors on rewording the language.
Chairman Goldwater asked whether her concerns regarding “any willing provider” had already been addressed.
Ms. Dugan responded affirmatively.
Don Jayne, Legislative Advocate, representing the Nevada Self-Insured Association, said he was opposed to A.B. 168 for reasons that had already been discussed. He said he wanted to go on the record stating his Association’s willingness to work with the sponsor of the bill to reach a compromise and improve the language of the bill.
There was no further testimony for or against A.B. 168. Chairman Goldwater thanked all the people who had come forward to share their concerns. He then closed the hearing on A.B. 168. He noted that the bill would not be included in the coming Friday’s work session agenda.
Chairman Goldwater asked for a Committee introduction to a bill revising limited practice of podiatry.
BDR 54-997: Authorizes State Board of Podiatry to issue limited license to practice podiatry. (A.B. 231)
ASSEMBLYWOMAN BUCKLEY MOVED FOR COMMITTEE INTRODUCTION OF BDR 54-997.
ASSEMBLYMAN BEERS SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
Chairman Goldwater reminded the Committee that A.B. 168 would not be on the Committee’s work session for Friday. He said the bill would be included on the following week’s work session. He encouraged all the proponents and opponents of the bill to arrive at something that was workable and to address their comments through him to Ms. Giunchigliani. He stated his belief that there were some good faith commitments from people to accomplish that goal. He told the Committee that Friday’s agenda was posted with a few quick bills and then a work session. He advised the Committee that he was going to revise the agenda to change the time of the Friday hearing to read “upon the adjournment of Floor Session.” He further advised the legislators that they would be voting on the bills at the work session.
Chairman Goldwater adjourned the meeting at 4:40 p.m.
RESPECTFULLY SUBMITTED:
Sharee Gebhardt
Committee Secretary
APPROVED BY:
Assemblyman David Goldwater, Chairman
DATE: