MINUTES OF THE meeting
of the
ASSEMBLY Committee on Judiciary
Seventy-Second Session
May 12, 2003
The Committee on Judiciarywas called to order at 8:13 a.m., on Monday, May 12, 2003. Vice Chairman John Oceguera presided in Room 3138 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.
Note: These minutes are compiled in the modified verbatim style. Bracketed material indicates language used to clarify and further describe testimony. Actions of the Committee are presented in the traditional legislative style.
COMMITTEE MEMBERS PRESENT:
Mr. John Oceguera, Vice Chairman
Mrs. Sharron Angle
Mr. David Brown
Ms. Barbara Buckley
Mr. Jerry D. Claborn
Mr. Marcus Conklin
Mr. Jason Geddes
Mr. Don Gustavson
Mr. William Horne
Mr. Garn Mabey
Mr. Harry Mortenson
Ms. Genie Ohrenschall
Mr. Rod Sherer
COMMITTEE MEMBERS ABSENT:
Mr. Bernie Anderson, Chairman (excused)
Mr. John Carpenter (excused)
GUEST LEGISLATORS PRESENT:
Senator Dina Titus, District No. 7, Clark County
STAFF MEMBERS PRESENT:
Allison Combs, Committee Policy Analyst
Risa B. Lang, Committee Counsel
Sabina Bye, Recording Committee Secretary
OTHERS PRESENT:
Dorothy Nash Holmes, Administrator, Mental Health Programs, Nevada Department of Corrections
Laurel Stadler, Lyon County Chapter Director, Mothers Against Drunk Driving (MADD)
Lynn Fulstone, representing Physicians Insurance Companies (PIC) of Wisconsin
Larry Matheis, Executive Director, Nevada State Medical Association
Bill Bradley, representing Nevada Trial Lawyers Association
Bobbie Gang, representing Nevada Women’s Lobby and National Association of Social Workers, Nevada Chapter
Alice Molasky-Arman, Commissioner, Division of Insurance, Nevada Department of Business and Industry
Vice Chairman Oceguera:
We are going to take the bills out of order this morning. Let’s open the hearing on S.B. 264.
Senate Bill 264 (1st Reprint): Makes various changes to provisions pertaining to Department of Corrections. (BDR 16-1182)
Dorothy Nash Holmes, Administrator, Mental Health Programs, Nevada Department of Corrections:
[Introduced herself.] This bill, introduced by Senators Terry Care, Joseph Neal, Dennis Nolan, and Sandra Tiffany, looks complicated but basically does three things. I would like to refer to the bill by section and simplify it for you.
Section 5 discusses compassionate release sections that are already law in Nevada. Currently the law allows release to the community on parole supervision offenders who are going to die within 12 months as certified by two doctors; these inmates must be determined not dangerous to re-offend and not ambulatory. We release about four to six inmates a year, essentially carried out on stretchers. The way the law is now written, they are required to go on house arrest (residential confinement), which costs $14 a day. The Division of Parole and Probation (P&P), Nevada Department of Public Safety, asked us to change this because there is no money in their budget to pay for house arrest; if an inmate cannot pay, he can’t go out. We have several inmates on dialysis who are terminally ill from cancer, from HIV (human immunodeficiency virus), or other diseases, and who may die in 13 or 14 months but are well enough to get up and walk across the room and go to the bathroom. If they are ambulatory, they do not qualify under the current statute. We are paying thousands of dollars a year to confine and treat these people in our prison hospital, regional medical facility, or mental health unit, if they are mentally as well as physically ill.
This statute would broaden compassionate release to allow for seriously ill offenders; it adds the phrase “who are seriously ill” to allow more leeway with those who are somewhat ambulatory. It does not change the requirement in the statute that they have to be determined by P&P “not likely to re-offend” or “not dangerous.” This covers our most seriously ill inmates who do not present a threat to society. We think another 6 to 10 inmates a year will get out on this, but by taking out the requirement for residential confinement and putting in the language “or other appropriate supervision as determined by the Division of Parole and Probation,” it gives P&P the leeway to put them in a hospice or allow their families to put them in an extended care facility; right now this isn’t the case. If they come out they have to go in a home, even if the home is not equipped to care for them.
The Division of Parole and Probation asked us to change it to allow them the leeway of defining whether residential confinement is appropriate or not and be able to put these people in appropriate medical care facilities. When an inmate is in prison, he or she is not eligible for federal benefits. When they are not in prison, some of them can reestablish their disability or Medicare to pay for the medical care we are not equipped to provide.
The second request we have put in Section 5, part 3, is for inmates who are pregnant upon imprisonment. Director Jackie Crawford has asked us to put this in the bill and the Senators have agreed. We had 16 babies in prison last year and 14 the year before. The provider that runs our women’s prison in Las Vegas tells us they are losing more than a million dollars a year on medical costs alone because prison inmates, especially pregnant ones, are very high-risk cases. All pregnant inmates, especially those who have a drug background, are considered high-risk—some of them are seen by their doctor more often than I was seen by my doctor during my pregnancies. This is very expensive for the state of Nevada. Most of these women are in prison for nonviolent property, drug, or bad check offenses.
[Dorothy Nash Holmes continued.] In Nevada, the woman is kept in prison until she goes into labor; she is rushed to the hospital, has her baby, and the next day she is back in prison and the baby is gone. The baby can go to the grandparents or a foster home or perhaps to the drug-abusing father in the community. Director Crawford is an advocate of women offenders and children in prison; she is a published author in that respect. Director Crawford came to Nevada in 2000 and re-instituted programs in our prison camps for women, even though we had only 850 women in our prison system. She believes that society is not served when these women are being deprived of a bonding period with their children.
Most of the nonviolent, non-serious offenders can be in the community with supervision by P&P. They go back to the community and are monitored by the courts and P&P; they have their babies at home with the assistance of their family, or perhaps a supportive spouse; they serve their time to society on parole.
We have discretion with the State Board of Parole Commissioners and P&P as to which women these would be. If it is a serial killer, she is not going out on pregnant release; if we have a problem with women getting pregnant while they are on their way to prison so they get out again, that is not going to happen. A woman who wrote bad checks because her husband had left her or beat her up, and she ended up in prison and had her baby in prison and lost that baby, that creates a continuous cycle.
We know from national research and Nevada statistics that children of inmates are five times more likely to go to prison themselves. This serves the interests of society by promoting the supervision and the punishment of these women; they are under parole supervision in the community, promote family reestablishment, and do not burden the prison system with babies.
The second part of this bill relates to work release in Sections 16 through 21, and 26 through 33. In 1977, there were statutes enacted in Nevada Revised Statutes (NRS) Chapter 213 to allow offenders to work in the community during the last six months of their sentence and to sleep in the jails at night. Obviously, there is no room in our jails, and there probably has not been since 1977. The statute was mandatory, saying, “The Director shall set up a work release program for these inmates and the inmates shall be quartered in the local facilities.”
[Dorothy Nash Holmes continued.] We are attempting to change this statute by saying, ”The Director ‘may’ set up a work release program…” We are in violation of the law because we have not complied with the law in 30 years. To make it a discretionary program of the Division of Parole and Probation, we have taken out language regarding mandatory quartering of inmates in local facilities and provided residential confinement, or other appropriate supervision, granting the inmate the privilege to work, seek employment, or obtain additional schooling or enter a training program; it is for offenders in the last six months of their confinement.
The discretionary program in the Nevada Department of Corrections does not have the authority on its own to put anybody out of prison; everything we do goes through the Parole Board or through the reentry courts. By making the statute more relevant today and taking out the parts that make it impossible to enact, it gives us one more avenue of transitional services and reentry rehabilitation by allowing us to do a work program and refer the appropriate inmates to the Division of Parole and Probation and to the Parole Board to determine if they should go into the program during the last six months of their confinement.
The third part of the bill refers to Sections 1 through 4, 6 through 15, 22 through 25, and 34 through 40. In the 2001 Legislative Session, the Legislature passed Senate Bill 519 of the Seventy-first Legislative Session, which provided for reentry and transitional services for offenders. It was set up under the auspices of the courts as reentry programs. Presently, there is a drug court system in Clark and Washoe Counties and one started in the rural areas. This was to provide the same sort of reentry programming and supervision for non-drug offenders, such as burglars or thieves. We have received a $1.4 million federal grant for transitional services. Every state received this; there are actually 68 grants out there now. Eight federal agencies put $179 million together to allow the states to provide transitional and reentry services for offenders.
This bill clarifies there are both judicially created reentry programs and correctional reentry programs. The courts are relying on S.B. 519 of the Seventy-first Legislative Session, the statutes that are now in effect from last session, because their drug court legislation sunsets on June 30, 2003, and they want to keep the drug courts going. On the other hand, they are not necessarily ready to set up reentry courts for all offenders. Our grant, which is in effect and has already begun, does not necessarily attach to a reentry court; it is a correctional reentry program.
In this case, we have a reentry court because the Eighth Judicial District in Las Vegas has agreed to serve as a reentry authority for our grant. This does not change the law that was already passed last session; the parameters for the inmates getting into it are the same—no sex offenders, no conviction of violence in the last five years, no previous history of escape, if they have not programmed in the prison they are not eligible. There are criteria that they have to meet to be eligible. It also defines the types of services that can be in a transitional program—job finding, education, referral to family counseling, referral to mental health. There is a whole litany in the statute, as it currently exists. This simply clarifies that there can be correctional reentry programs run by the Director of Prisons [Corrections], as well as judicial reentry programs run by the courts.
Vice Chairman Oceguera:
I have some questions on Section 5 about the pregnant offender. Which part did you say you have not been complying with for the last 30 years? That concerns me.
Dorothy Nash Holmes:
That refers to work release in Sections 16 through 21 and 26 through 33; there is no room in the jails for our offenders and the statute says we “shall” set up that program; we simply have not been able to do that.
Assemblyman Horne:
I have a number of questions along the line that Mr. Oceguera stated relating to Section 5. Of the ill inmates, it seems like we are ushering them out because we can’t afford to care for them anymore. Are we sending them out to where they have no care or where they may be able to get care? Are we not shifting funds that would have been spent from the prison system to another state-funded area? Either way, we are paying.
On the pregnant inmates, I don’t know if it is good policy to set up something like a semi-free pass because you are pregnant and you have committed a crime. I can understand your scenario on the woman who wrote bad checks because of a poor relationship at home, but those aren’t all the women who have gone in pregnant and I would hate to see that type of policy set up.
Dorothy Nash Holmes:
Presently in our prison system we have a kidney dialysis unit set up; we had that years ago. We have a graying population; we probably have 300 inmates over 65 years of age and the two largest growing sections of our population are the elderly and the seriously ill. Our Northern Nevada Correctional Center has been targeted by us to become our geriatric and medical prison because we have in Nevada, as does every state, inmates so crippled by their drug use and other problems, HIV, hepatitis, tuberculosis, that prison is not just about confinement, it is about the medical care as well.
Yes, the costs are going to get transferred someplace. They are going to get transferred to the family and the inmate himself who can get coverage through his Social Security or disability, which we cannot access for them while they are in prison. If an inmate has worked before and has any entitlement to Social Security, disability, or a previous disability or veteran’s benefit, they cannot get it while they are in prison and we, the taxpayers, pay for that dialysis or HIV medication or hepatitis medication. If they are put out into the community under the supervision of the Division of Parole and Probation, whether it is at their own home, in a hospice or medical facility, they pay for it based on what they have available to them. The policy decision that needs to be made in both of these cases is how far does the incarceration system go in providing unusual, and in some cases catastrophic, medical care to these kinds of inmates?
The pregnancy issue is a policy issue; it is one that Director Crawford feels strongly about. Her first job as a warden when she was 27 years old was at a women’s prison in Nebraska; 30 years ago she was allowing the women to have their babies in prison and keep them for a few months to bond. That is being done in California as a pilot project this year. Families are a strong issue and one of the ways we go about turning around the cycle of incarceration is to strengthen the families. In some case we can; in others we cannot. There will be women who don’t go out, but at the same time the issue to be raised here is whether as a policy matter the prison system should support these kinds of individuals through this kind of medical care. If they are out in the community, they are their own responsibility. Some of them will go on welfare; some of their families are already on welfare, but some of them will also have access to medical care, hospice services, support of their own families that might help heal and reestablish some of the family bonds, things that we cannot provide in prison.
We are doing a lot in the Nevada Department of Corrections that we never did before in terms of inmate programming and transitional services, in terms of doing something to turn these people around because 95.7 percent of them are going to get out of prison. Only 4.3 percent of our inmates are on death or life sentences, and up until now we have not done a whole lot except warehouse people, put them out, and watch them re-offend. We put them out with $21 in their pockets if they have not had a prison job or earned anything.
This is an effort to separate out those who warrant compassionate release. We are not abdicating our authority to supervise them, the Division of Parole and Probation will keep doing that; we are not throwing out someone who is a problem for us to handle. Some dialysis patients will stay in; some terminally ill patients will stay in; if they are serial murderers they are not going to be let out into the community. Someone who is terminally ill and not likely to re-offend and not a danger to society, who is a burden on the prison system, would merit compassionate release. It is a question of humanity, compassionate release, and balancing. That is the decision that you, as a policymaking body, have to make. We have put this forward because we think it is appropriate; you have to decide whether you agree or not.
Assemblyman Horne:
On the reentry programs, does the Division of Parole and Probation fall under the authority of the Department of Corrections?
Dorothy Nash Holmes:
No, it does not. It falls under the authority of the Nevada Department of Public Safety and everything it does comes from the State Board of Parole Commissioners.
Assemblyman Horne:
It seems what we are doing here is giving authority to the Nevada Department of Corrections it does not presently have. We are giving them the authority to have another parole system. How I read this is: You have a prisoner they deem him/her to be eligible for release within two years of the probable release date, you can bring them back if they don’t comply with the conditions. Also, when you bring them back they can lose all their good time. We have a reentry program. We have, as you said, drug court, however, that person has not been placed into the corrections facility as yet, they are still under the purview of the courts.
When they are placed on parole they are released from prison and are parolees. They are no longer under the purview of the correction facility, they are now under the Division of Parole and Probation. The Division has to make a recommendation to the court if they violate their parole; then a judge determines whether or not they are going to go back and serve the remainder of their term. Here you are saying we are going to send them out and it is going to be a parole situation and we ourselves are going to bring them back—am I reading that wrong?
Dorothy Nash Holmes:
Yes, sir, you are. There are a couple of corrections here. We do have people going straight from prison into reentry court. We have inmates now coming out of prison prereleased going into the drug courts in both Clark County and Washoe County; that was authorized by statute in the 2001 Legislative Session. We have had 150 inmates go through the program and that money was put into the Division of Parole and Probation’s budget. This statute is already on the books and is being amended to specify the correctional programs as well. We don’t have the authority to do anything other than set up our reentry programs and identify the inmates we think are eligible and appropriate. The Parole Board decides whether they go into correctional reentry programs, we do not.
The Department of Corrections has no authority on its own to simply put someone on the street. Casa Grande, the transitional housing in our budget request this year, will go through the Parole Board for inmates in the last four to six months. Everything we do goes through the Parole Board or through the courts, so we have no authority to take someone out on our own. Senate Bill 519 of the Seventy-first Legislative Session passed last session to try to broaden drug courts to reentry courts in general; it is now limited to drug-offending inmates. Sixteen percent of the inmates in our system are in on drug-related crimes; 90 percent of them have drug problems, but only 16 percent are in on drug-related convictions.
Drug courts right now are very narrow; in fact, the drug court legislation, the drug court statutes, sunset this June 30, 2003. The drug court judges are relying on the statute that we passed last session, S.B. 519 of the Seventy-first Legislative Session, to continue their authority as reentry courts. It is narrowly defined in the previous legislation, which sunsets as drug courts and now is going to be reentry courts. This simply clarifies that there can be judicial reentry courts and correctional reentry programs. Our programs still have to go through either the courts or through the Parole Board.
Assemblyman Horne:
On page 3, paragraph 5, it says “The Director may return the offender to the custody of the Department at any time for any violation.” It seems like you are reaching outside.
Dorothy Nash Holmes:
Again, we do that through the Parole Board; we don’t do that on our own. I imagine if an inmate was in Casa Grande, our transitional housing, for his last four to six months and didn’t go out and get a job, didn’t do what he was supposed to do, and tested positive for drugs, that person would go straight back into the institution he came out of. That is basically prerelease in the community. Everything we do is through the Parole Board.
Assemblyman Horne:
When it says “within two years,” are you talking about when they are eligible for parole in that amount of time, or are we talking about the term of their sentence?
Dorothy Nash Holmes:
There are a couple of different terms in Nevada. There is “mandatory parole release,” which is 12 months before the end of your sentence and set by statute. This depends on the length of their sentence and is usually those inmates who have been “dumped” on parole—not gotten parole time after time and have to finish and expire their sentence. There is “discharging” (or expiring) the sentence, when you serve every minute of your time and you are done; “mandatory parole release”; and “parole eligibility date” (PED), which is the probable release date with parole.
With our system now, the inmates are seen by the Parole Board four months before their probable release date. They are often not released on that date because they don’t have a housing plan or they have disciplinary issues and are dumped for another year. They are seen every year until they finally get paroled. This is based on the probable release date but could be any one of the three dates. This is a generic term since we have expiration, discharge, mandatory release, or parole—it could be any one of those.
Our system is such that an inmate becomes eligible for minimum-security confinement in our camps and in our less secure facilities if they are 36 months to the door. This basically allows us the opportunity to do some reentry services and start easing them into the community. It does not affect the current residential confinement program; it doesn’t affect or change the DUI program; it doesn’t change any of the other programs that are already set up in statute that say when an inmate can get out. This is just transitional reentry programming that we can start during the last 24 months of an inmate’s confinement.
Assemblyman Brown:
I laud your efforts; I like much of this bill. Is it perfect? I certainly can’t tell you that, but in the arena of corrections I am not sure anything is perfect. What we have today isn’t perfect and can be improved on. I think it is progressive in thinking; I think you are trying to reach out and utilize some things that can be of benefit to those in confinement. In particular, I like your recognition of the family; I think there are things a family can do that no other body or entity can. There is research on pregnancies, child deliveries, and that bonding period that follows thereafter. To recognize that and try to do something about it is worthy of our time and attention and can have benefits down the road for that child. When you pull that child away from the mother and there is little or no contact, we are almost guaranteeing that child some type of mental issues in the future. The studies are absolutely clear on that. I just wanted to thank you for your efforts.
Assemblyman Mabey:
I have a question about medical care in the prisons. Would those prisoners be on Medicaid or are they just paid straight from the state?
Dorothy Nash Holmes:
Dr. Ted D’Amico is the one to talk about the specifics of medical care. They are not eligible for Medicaid. If they are out of prison and are eligible for Social Security disability, Medicaid, or their own family’s insurance, then that would pay for it. It comes out of our General Fund budget and the taxpayer’s pockets when we provide for extended or catastrophic medical care in prison.
Some states, for example Oregon, allow the inmate and his family to continue with the previous health insurance he had when he got out; in fact, if the inmate comes in with a preexisting condition, the state of Oregon pays the inmate’s insurance premiums so the state doesn’t have to pay for catastrophic care.
Maybe someday Nevada will get there; I don’t know if we want to do that as a policy or not. Right now, it comes out of the taxpayer’s pocket. The question is which pocket and how far we want to extend this kind of medical treatment in prisons.
Assemblyman Mabey:
Then this bill makes sense. Even if the prisoner gets out and qualifies for Medicaid immediately, the federal government is going to pay 50 percent of that care. It seems to me there was a problem with a prisoner in California that needed a heart transplant and the state ended up spending hundreds of thousands of dollars for that person. Can a prisoner get on leave and then get pregnant?
Dorothy Nash Holmes:
No, there is actually a furlough law on the books in Nevada—it is another one of those laws that we don’t comply with—sorry, some of those are just financially impossible. We have not had a furlough policy in our department for many years. I don’t know if it was the Dukakis Presidential race and the Willie Horton thing that shut it down or if it was some inmate in Nevada. It was many years ago; that was discretionary. We have the ability to put people out on furlough but we do not do it.
We have limited ability to let an inmate go to a family funeral or see a family member who is dying in the hospital. That is done with an escort and under very limited conditions, only in-state and for 24 or 48 hours. It is a limited policy and very seldom happens.
Assemblyman Gustavson:
On page 12, Sections 19 and 22, you have two different definitions of “director.” Is there a reason for that?
Dorothy Nash Holmes:
The way this is laid out in the statutes, the Legislative Counsel Bureau (LCB) literally changed everything throughout all the statutes that apply. In one case, it will change the statute that deals with reentry correction and in another it means the Director of the Department of Parole and Probation, I think. The LCB has gone through this step by step with every statute. There are sections of NRS Chapter 213 that govern the Parole Board and the reentry bill from last time was also put into NRS Chapter 213 and NRS Chapter 209.
Assemblyman Gustavson:
It just didn’t show which section this is referring to so it looked like it was under the same section. Do you only need one definition?
Dorothy Nash Holmes:
I agree with you, but I don’t have the answer to that.
Risa Lang, Committee Counsel:
They are added to different subheads and I am trying to find where we added these. In Sections 17 to 21, it is added within NRS 213.300 through NRS 213.360; the other definitions are being added in another place. In drafting when we add new sections to a chapter they all go in the same place; we usually put definitions in alphabetical order and that is why it starts over again after a program because these will be added someplace else.
Laurel Stadler, Lyon County Chapter Director, Mothers Against Drunk Driving:
[Introduced herself.] I have some concerns about the bill; most of them have already been stated. The concern in Section 5 regarding the compassionate release was originally introduced a few sessions ago so people could die at home near their families. We stated at that time that victims of crime don’t get to choose where they die. A lot of them die on the roadways as victims of vehicular crashes; a lot of them die in other places where they are not with their family and friends. I would just ask this Committee to keep the perspective of the victim in mind as you talk about compassionate release.
Also, with the pregnancy, there are a lot of babies that don’t have their parents because the parents have been victims of a crime, and there are a lot of families torn apart that do not have their children—the babies are killed, the parents are killed. I agree with Assemblyman Horne that pregnancy could become a free pass out of jail. The only people that are going to know about this statute when it is passed are the criminals. It could be a very real possibility that the criminals recruit pregnant women to assist in crimes; their pregnancy may get them a lesser sentence or lesser confinement.
My other concern is on page 2, subsection (c) on lines 30 and 31, with the “two years from probable release.” That could be two years prior to the first time a person is looked at for parole and that person could be in that programming. Under this section, it looks like they could be on residential confinement for those two years prior to their first parole hearing, and if they don’t reach parole at that first hearing it is continued again and that person could end up on residential confinement for several years in the community. Putting additional people out without closely looking at what we are doing and who we are putting out into the community could be a concern.
Dorothy Nash Holmes:
The Department has great respect for Mothers Against Drunk Driving (MADD) and Ms. Stadler; I have known her for many years and worked with her organization when I was the District Attorney for Washoe County. We are cognizant of the needs and concerns of victims. In fact, in our budget request this year we have requested one position to create a victims unit. We are one of only two prison systems in the entire country that does not have a victims unit. We already have several secretaries doing independent duties to notify victims and handle our mandates under state and federal law, but we are going to create a victims unit to provide those kinds of services.
Those inmates in a correctional reentry program would not go out on residential confinement 24 months prior to their first parole date because they have to go through the Parole Board to get out. The Parole Board is not going to release anyone two years before they have been seen on their first parole hearing. Everything we do goes through the Parole Board. We do nothing independently; we are not going to usurp their authority in any way. Obviously if the probable release date is 24 months prior, those prisoners will be on the tail end of their sentences, not the beginning. Again, it has to be reviewed by the Parole Board.
Assemblyman Horne:
I understand what this bill is trying to do and I think it is really good and will probably support it; however, I think it is important to shed some light on the following. On the cost I mentioned regarding transferring, some of the federal entities may pick up the tab but other state entities may end up picking up the tab for some of these ill patients. The University of Nevada, Las Vegas (UNLV) Medical Center, for instance, where a lot of people who can’t afford care end up, we pay for that.
We also talked about the families picking up the tab. I am just curious how many here have had family members in prison? I have a sister who has been in and out of prison her entire adult life; I have cousins who have been in prison; an uncle who is in prison a good portion of time, and friends who I have grown up with and their family members are in prison. I can tell you that oftentimes family support is not readily available. When I was studying criminal justice, 80 percent of those inmates that were in prison were poor and came from poor families. Even if they got out and their families were willing to help pay for these costs they could not do so. Just keep that in mind when we think we may be saving money. We very well may be, at least from the corrections point of view, but that cost may be transferred to another state agency.
Dorothy Nash Holmes:
You are right. On the other hand, we also might be transferring those inmates to other facilities or systems that are more capable of providing the kind of care that we can’t provide in prison, and that is one of our concerns as well. Even if it does cost the taxpayers and moves from one pot to the other, we simply can’t always provide the kind of medical care that some of these people need.
Vice Chairman Oceguera:
Is there any other testimony? Seeing none, we will close the hearing on S.B. 264.
[Committee recessed until 9:30 a.m.]
Let’s open the hearing on Senate Bill 122.
Senate Bill 122 (2nd Reprint): Makes various changes regarding malpractice insurance and actions. (BDR 57-265)
Lynn Fulstone, representing Physicians Insurance Company (PIC) of Wisconsin:
[Introduced herself.] I want to give you a little history of my client’s involvement with this bill. Initially S.B. 122 was presented to the Senate Committee on Commerce and Labor in a different form. In the form that was presented originally, PIC of Wisconsin, a physician-owned insurance company that insures about 300 physicians in Nevada and primarily in Clark County, had a number of concerns about the bill. We worked with Senator Titus to amend the bill in the form that you see now in the second reprint. I will walk through the sections and tell you generally what each section does and be available for any questions.
Section 1, page 2, of the bill generally states that the Insurance Commissioner is not permitted to exempt medical malpractice insurers from certain rate-making provisions that currently exist in the NRS for making medical malpractice rates. Although she has the ability to exempt other insurance companies from certain of these provisions, this bill will require her not to make those exemptions in this particular case.
Section 2 of the bill also on page 2 states that a medical malpractice insurer will not be able to include in their rate filings information regarding investment losses or losses resulting from any fraud or criminal activity.
Sections 3 and 4 of the bill are drafting changes to make it conform to existing law.
Section 5, page 4, of the bill discusses rate hearings. This section allows interested parties to participate in rate hearings with the provision they supply to the Commissioner a brief statement of who they are and their interest in the matter. Their testimony can be time-limited by the Commissioner to control the rate-making process so it does not get bogged down.
Sections 6, 7, 8, 9, 10, and 11 concern definitions used in the bill. These were definitions that were conformed to industry terminology in the course of drafting.
Section 12 deals with what everyone commonly refers to as “tail coverage,” which was a concern of physicians. This section now requires a disclosure. It requires that an insurer offer tail coverage initially, a disclosure as to how that tail coverage is priced, and finally a restriction on the price limited to two times the premium amount at the end of the policy.
Section 13, page 5, deals with obstetricians. This may be an area that everyone heard about where an obstetrician’s insurance is limited if he delivered 125 babies or fewer. There were some instances of underwriting physicians based on the number of deliveries rather than actuarial analysis and loss experience. This section of the bill now states that rates cannot be based on the number of deliveries but must be based on losses. I think the Commissioner actually dealt with this in some fashion as well.
Section 14, page 6, deals with the problem involving certain specialties being unable to find insurance when St. Paul left the market. This section now provides that those insureds falling into one of the specialty categories receive a 120-day notice if the insurance is terminated; they only receive a 60-day notice under existing law. In addition, the Commissioner has the discretion to see that a physician in these high risk specialties who cannot find replacement coverage to extend the current coverage an extra 60 days be given a total of 180 days to find replacement coverage.
Section 15 of the bill requires the Insurance Commissioner to collect certain information, monitor certain market trends, and report to the Legislature annually in order to detect problems in the marketplace that could result from increased or decreased rates or credits to hopefully predict a problem before it occurs.
Section 16 of the bill deals with settlement agreements and requires that certain terms of settlement agreement not be made confidential so that the fact of the settlement agreement is available to anyone and this information reported to the Board of Medical Examiners and the National Practitioner Data Bank. This is not stated in the bill but is something that occurs.
Section 17 deals with another study that the Commissioner was asked to do in connection with tort reform and its effects. It requires the Commissioner to solicit from the current medical malpractice insurers a revised copy of their plans 60 days after there has been a constitutional ruling on a challenged tort reform in this state explaining what would be the result of that ruling on their rates.
Senator Dina Titus, District No. 7, Clark County:
[Introduced herself.] Insurance is not an area in which I am an expert by any means. I have not served on the Senate Committee on Commerce and Labor, so I don’t know all the nuances or the jargon. I did serve on the Senate Committee on Judiciary in 1989, with Senator Charlie Joergwhen we created a subcommittee to work on the original Medical Legal Screening Panel. I also served on Ms. Buckley’s Interim Legislative Subcommittee to Study Medical Malpractice. We all sat through the 18th Special Session and here we are back again. We have heard this topic repeatedly in a number of hearings.
I have said consistently that in order to deal with the medical crisis facing the state you don’t just look at doctors; you don’t just look at lawyers; you look at insurance companies. That is what this does: it puts in place some insurance reforms that provide more oversight on the process, more restrictions that would prevent a situation occurring again like what happened with St. Paul. We worked with the Commissioner and the industry and came up with this compromise bill.
Larry Matheis, Executive Director, Nevada State Medical Association:
[Introduced himself.] I think the way Senator Titus characterized it is correct. I think most of you have the same opinion. There are multiple factors involved in the medical liability crisis the state has been in. I think we are all pretty crisis-fatigued at this point and maybe we will go into post-crisis stress syndrome before it is all over. Clearly a number of our important systems have failed. The failure contributed to both the existence and the depth of the crisis. Unfortunately, it may take a long time for the health care infrastructure to come out of the crisis, especially in southern Nevada; it may not happen in this decade. I think we all need to be willing to face those consequences.
Clearly, we have talked a lot and tomorrow we will talk more about the civil justice system issues that contributed to the crisis. Clearly there are problems with the way the professions deal with concerns about behavior and how to discipline those behaviors. There is a bill that is coming over from the Senate that addresses a range of those kinds of issues for the health and legal professions—how to lessen the problems when those professions are not appropriately accountable in taking care of problems they should be taking care of.
There is also an insurance aspect to the problem: how liability insurance is understood; how it is written; how it is developed; how it changes over time; how it specifically affects certain key parts of the medical care system. There seems to be patterns of problems that occur and reoccur. That list of specialties in the bill seems always to be right on the edge of a crisis—obstetrical services, surgical services, and emergency care. Looking at how the insurance industry deals with providing liability for those specialties, for the overall profession, and how we regulate and deal with the oversight is what S.B. 122 tries to deal with.
It is quite likely because we are trying new things in civil justice, professional licensure, and insurance reforms that we are not going to get it all right, and you are probably going to be back to this subject as we find out what doesn’t work. You don’t want to imbalance what is already a system and a market that clearly is showing significant problems, particularly in southern Nevada. The principles and ideas are ones that we think need to be looked at and need to be tested; let’s see if we can’t improve the system, first mitigate the effects of the current crisis to get us out of it as fast as possible, make us whole again as soon as possible, and forego repeated occurrences down the road. If this has happened repeatedly it is because we have probably made the same mistakes repeatedly. We need to look at those, take them apart, and try to repair the system before we have further collapses.
For those reasons and the issues that are raised we are in support and think they are appropriate.
Bill Bradley, representing the Nevada Trial Lawyers Association:
[Introduced himself.] As you know, Nevada Trial Lawyers Association feels very strongly about insurance reform in this ongoing debate. Senate Bill 122 institutes reforms. We think that, in combination with some of the reforms you have already considered in A.B. 320; this is a good insurance reform package. We are here in support of S.B 122.
Bobbie Gang, representing Nevada Women’s Lobby and the National Association of Social Workers, Nevada Chapter:
[Introduced herself.] We did not look at this issue until after the 18th Special Session. The 18th Special Session came up quickly; we did not feel that we would have much influence and were not present. We did see the result of the Special Session and thought that it would be a good move to bring insurance rates down. However, when the initiative petition was circulated, we realized that this issue was coming back to the Legislature and was an issue that concerned women because of the situation with obstetricians and gynecologists (OB/GYNs), we thought we should take a look at it.
We decided to look at it independently from attorneys and doctors. We convened a round table discussion of some organizations, a diverse group of people who represented or cared for consumers, citizens, and patients. We also had an out-of-state facilitator. We came to the conclusion that the biggest problem was the insurance industry not coming to the table during the 18th Special Session; there were many things related to the insurance industry that needed to be addressed.
We also realized that the Interim Legislative Subcommittee to Study Medical Malpractice was about ready to review the insurance industry practices when the 18th Special Session was called and those matters had not been carefully studied. In looking at this bill, we feel that the elements go a long way to resolving some of the problems in the insurance industry and we think there are a lot of key points and hope you will pass S.B. 122.
Alice Molasky-Arman, Commissioner, Division of Insurance, Nevada Department of Business and Industry:
[Introduced herself and submitted (Exhibit C).] I have enormous respect for Senator Titus and Wiener for their focus on trying to find solutions to a problem that has really touched all of us with enormous concern and worry for the last year. I appreciate the Legislature’s willingness to work on a collaborative basis with members of the industry. At the same time, I find myself questioning the impact some of the provisions of this bill will have, even in its amended form.
It is my belief that with A.B. 1 of the Eighteenth Special Session, insurers tended to look positively at the state of Nevada. We were fortunate enough to have 10 insurance companies remain in the state after the withdrawal of St. Paul. Those insurers, with one exception, still remain, and I think it is because of their looking towards the results of A.B. 1 of the Eighteenth Special Session.
I am not so certain this bill won’t cause them some reconsideration. What the bill does, particularly in Section 2, is single out the medical malpractice insurers for a different kind of review than they experience in the rate-making process. Subsection 2 of Section 2 in paragraph (a) prevents the consideration of capital losses and diminished cash flow from any dividends, interest, or other investment returns.
In the rate-making process, insurers are required to consider their rates along with the investment income from premiums, which includes the interest received on loss reserves and unearned premiums. That is all they are required to do. They are not required to reduce rates where there are interest percentages represented for income derived from surplus. When you see the rates we have approved, those rates have almost always been reduced from those indicated by loss experience by a factor that represents the interest that has been gained from premiums.
With this provision, however, some insurers, unlike what we are seeing as a developing practice, will not give policyholders the benefit of that interest that is earned from surplus. I think the reason for that is they would not want those factors to be considered in the future, and they are not required today. I believe this could have an adverse effect on premiums and would not give physicians the advantages they think are going to be there.
The idea promoted here regarding losses as a result of criminal or fraudulent activities of a director, officer, or employee of an insurance company stems from possible mistakes in relating the experiences of corporate disasters such as Enron and Tyco to the medical malpractice insurance industry. I have seen stories in the media stating that St. Paul Insurance Company raised their rates as a result of the loss in investment income due to investments in Enron. That is not correct.
[Alice Molasky-Arman continued.] St. Paul’s losses in Enron occurred because they were an insurer of the directors and officers of Enron and their losses were insurance losses. Those losses would not be considered in the rate making process with respect to medical malpractice, principally because it is a different line of insurance. Any losses that were suffered would certainly not have been considered because the St. Paul rate filing, which increased rates approximately 70 percent statewide, occurred prior to the discovery of the Enron and Tyco corporate disasters.
I do have some concerns with the hearing provisions. We historically and by regulation have had a provision allowing intervention by any person who has a direct and pecuniary interest in a rate filing. That sweeps in all policyholders and could complicate our rate-making process. I am not certain how insurers would accept a simple rate hearing becoming complex litigation and have an intervener take any decision made by the Commissioner in that recurring process on appeal. We have had appeals of our rates that have gone through the judicial review process. I shouldn’t say rates; generally the appeals occur with rate rules, but those have been appealed in that process and take from three to six years to settle. An appeal is made by the insurance company, not by the Commissioner; in this scenario the appeal process could be invoked by “any person.”
With respect to Section 13, restrictions on the rating for obstetricians and gynecologists, particularly obstetricians and the number of deliveries, yes, the Division did take action last summer. We had two insurers who were using this tiered system whereby different rates were imposed based on the number of deliveries. The origin of that rule actually came from the Nevada Medical Liability Insurance Company. It was originally to act as a benefit and a discount to those doctors who were delivering 125 babies or fewer. Somehow what was intended as a discount would suddenly be seen as a surcharge for doctors who delivered more than that number.
We told the two insurance companies who still had those rules that they must abandon them unless they could produce actuarially reliable evidence that those delivery restrictions were based on experience. One of the insurers immediately changed the rules; the other committed to changing the rules, but in changing those rules they had to level the premiums. It is like a seesaw.
One of my staff did a demonstration that showed the rates were down for those doctors who had fewer deliveries and up for those who had more deliveries. On balance, the premiums for the doctors with the higher number of deliveries lowered and for those doctors who had fewer deliveries rose. There was enormous protest by those obstetricians who had the discount by that insurer.
We found ourselves in the unenviable position of trying to determine a standard that would be fair across the board. What we finally did, because of the protest by those doctors who chose to have a form of insurance based on fewer than 125 deliveries, was maintain their policies if they wished with the rate that was based on the number of deliveries when their contact initially began, but the new doctors were applied new rates.
I do want to say that if this provision is enacted, those doctors who protested and tried to create a fair, balanced environment will have their premiums raised. We expect to hear their protests again.
Assemblywoman Buckley:
I am a little confused by this discussion. It is the Insurance Commissioner’s job to ensure that rates are fair and equal and not unfairly discriminatory. There is no evidence I am aware of that delivering 126 babies is more risky than 125 babies—there is no data supporting it. In my view, the Insurance Commissioner shouldn’t be a mediator but should say, “Is this fair and nondiscriminatory?” and if there is no basis for it, throw it out. Why should some doctor who has been delivering a certain number of babies his entire career suddenly be told he can’t deliver them anymore because some insurance bureaucrat has decided to surcharge it? I don’t understand that.
Alice Molasky-Arman:
As I indicated, these were not considered surcharges. This was originally designed as a discount for those doctors.
Assemblywoman Buckley:
Whenever somebody gets a discount, someone else is paying more. And if there is no basis for it in fact then what was happening was doctors were being discouraged from delivering babies they could safely deliver, thereby helping to create a crisis in the OB community. Why not just step in for them and say, “If this is not a prudent risk, you can’t do it.”
Alice Molasky-Arman:
That is exactly what we did, but in the instance of those doctors who asked for those contracts on the basis that they did not wish to provide more deliveries during a year, we believed they had already entered into a contract with that insurer on that basis and we did not wish to interfere with that contract. As far as any new and renewal business is concerned, that will apply.
Assemblywoman Buckley:
My own opinion is if your office stepped in early and quickly, you would have the power over rates regardless of whether someone feels forced to sign a contract because it is the only rate they can afford. I think we should be tougher with some of these insurance companies when our health care is suffering as a result of it.
Alice Molasky-Arman:
It is my understanding that the doctors who chose to have that rate did so voluntarily; they did so because it was not their intent to fully practice in obstetrics. That was not a decision made by any insurance company.
Assemblywoman Buckley:
I will stop arguing, but that is not what I heard. I heard they had to sign on to that because that was all they could afford. It was a choice between 60 and whatever the other rate was and they couldn’t afford the higher rate. If it were a perfect world they would not have had that restriction.
Alice Molasky-Arman:
What you heard was exactly what we initially heard. That is why we did tell the insurers they had to provide us with actuarially sound data to demonstrate those tiers were appropriate. The second insurer that I referenced did come up with some data that had been acquired and applied outside of Nevada; it was actually data they had collected from Illinois.
Assemblyman Mabey:
I wasn’t with that insurance company, but the rate went from about $29,000 to about $90,000 on the reduced tier, and if you didn’t do fewer than 125 deliveries it went up to about $120,000. With most of the obstetricians, it made more sense for them to do less than 125, the way it was set up. I can’t remember all the details, but it was a huge raise for those doctors.
I also have a question about the tail provision. When my insurance company left, I don’t remember if they changed the tail factor. Do they have to get permission from the Insurance Commissioner to change the tail factor? When I originally signed up with them it was about 1.2 times the last premium; and when I finished with them it was about 1.89. Is that something that the Insurance Commissioner would have given them permission to do?
Alice Molasky-Arman:
Yes, that is within the rate approval process.
Assemblyman Mabey:
Would they have needed to notify me of that?
Alice Molasky-Arman:
Of an increase, yes, they should have.
Assemblyman Mabey:
Would there be documentation that was done?
Alice Molasky-Arman:
Generally, in the absence of withdrawals from the state, we do not require the notices to be provided to us, but yes, we do expect every insurance company to provide notification of any change in the insurance contract, particularly with respect to rates. In fact, there is a provision that requires a notice of renewal with altered terms; a change in rate would be an altered term.
I understand the physicians looking at this bill find the measures favorable, but I want to remind those physicians that the insurance companies that remain in the state are physician-owned. They are principally mutual insurers and reciprocal insurers and I think as owners of those companies, they need to be aware of the impact that may occur. I believe they have a stronger voice among those insurers than they perhaps are aware of.
Assemblyman Mabey:
My concern as a physician in a high-risk specialty is that it is very likely throughout your career you are going to be sued. Bad outcomes happen; you might make a mistake, but if you have one lawsuit your premiums go to a level too high to afford to practice. In obstetrics if you have a couple of lawsuits you may not be able to afford insurance anymore. If you get in a car accident, you can still afford the car insurance, but when you get into a malpractice case you can’t afford the malpractice insurance.
You have gone to four years of medical school, four years or more of residency, you are just starting to practice and within a few years you may not be able to afford the liability insurance and you are out of a job. To me, something has to be fixed. You see surcharges on these physicians where the base rate is $90,000 but their total premium is $260,000.
Alice Molasky-Arman:
That is standard methodology among all insurers. Unfortunately, insurers are expected to pay a higher rate in the event there are claims against those policies, and it is generally anticipated there may be more. I wish I could say it was otherwise, but that is the standard among all insurers.
Vice Chairman Oceguera:
Are there any further questions for the Insurance Commissioner? Is there anyone else wishing to speak on S.B. 122? We will close the hearing on S.B. 122.
This meeting is adjourned [at 10:15 a.m.].
RESPECTFULLY SUBMITTED:
JoAnn Kula
Transcribing Secretary
APPROVED BY:
Assemblyman John Oceguera, Vice Chairman
DATE: