MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-second Session
February 21, 2003
The Senate Committee on Commerce and Laborwas called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Friday, February 21, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4412, 555 East Washington Street, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Warren B. Hardy II, Vice Chairman
Senator Ann O'Connell
Senator Raymond C. Shaffer
Senator Joseph Neal
Senator Michael Schneider
Senator Maggie Carlton
STAFF MEMBERS PRESENT:
Scott Young, Committee Policy Analyst
Courtney Wise, Committee Policy Analyst
Kevin Powers, Committee Counsel
Makita Schichtel, Committee Secretary
Lynn Hendricks, Committee Secretary
Maryann Elorreaga, Committee Secretary
OTHERS PRESENT:
Samuel Sorich, Lobbyist, National Association of Independent Insurers
Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry
Joseph Guild, Lobbyist, State Farm Insurance Companies
Susan Bithell, Lobbyist, Farmers Insurance
Charles Knaus, Contract Actuary, Division of Insurance, Department of Business and Industry
James L. Wadhams, Lobbyist, Nevada Independent Insurance Agents
Steve G. Holloway, Lobbyist, Associated General Contractors
John E. Jeffrey, Lobbyist, Southern Nevada Builders and Construction Trades Council
Ruedy Edgington, Assistant Director, Operations Division, Nevada Department of Transportation
Michael Tanchek, Deputy Labor Commissioner, Office of Labor Commissioner, Department of Business and Industry
Don Jayne, Lobbyist, Nevada Self-Insured Association
Robert A. Ostrovsky, Lobbyist, Nevada Resort Association
Fred L. Hillerby, Lobbyist, Association of Insurance Professionals
Lawrence P. Matheis, Lobbyist, Nevada State Medical Association
Chairman Townsend opened the hearing on Senate Bill (S.B.) 12.
SENATE BILL 12: Makes various changes regarding insurance. (BDR 57-99)
Samuel Sorich, Lobbyist, National Association of Independent Insurers, read a prepared statement (Exhibit C) in support of S.B. 12. He said the proposed changes to the law would create a more efficient, reasonable, and competitive regulatory environment.
Senator Hardy asked what system was used by the other states if half of the states use prior approval? Mr. Sorich said they use flex rating or forms of use and file.
Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry said S.B. 12 was identical to S.B. No. 4 of the 71st Session.
Senator O’Connell asked how long it took to process a requested rate change. Ms. Molasky-Arman said there is a statutory 60-day time limit to approve the change or it is deemed approved. She said it was difficult to meet the 60-day deadline with 2500 filings per year and a small staff.
Senator O’Connell asked how many staff members were dedicated to processing rate change requests. Ms. Molasky-Arman said there were two actuaries assigned to the task.
Senator Neal asked the commissioner if she had the authority to review rates for title insurance, surety insurance, and medical malpractice liability insurance. He also asked if the commissioner’s office was able to review rate change requests within the statutory time limit. Ms. Molasky-Arman said her office had both the authority to review the rates and the ability to review them within the time limits.
Senator Neal asked if S.B. 12 would deregulate title, surety, and medical liability insurance companies. Ms. Molasky-Arman said those insurers would not fall under the provisions of the bill.
Senator Neal referred to the wording in section 2 of the bill and asked if passage of the bill would change the commissioner’s authority. Joseph Guild, Lobbyist, State Farm Insurance Companies, said the bill excludes title, surety, and liability insurance for medical malpractice from file and use flex rating. The only rate change requests covered by the bill were for automobile and homeowner insurance. Requests for rate changes for title, surety, and medical liability insurance would still have to be submitted with a full rate-filing request. The rate could not be changed without the approval of the commissioner. He also said the provisions of flex rating would not apply if the commissioner determined there was not a competitive market, coverage was not available in a voluntary market, the rates of the insurer required closer supervision, or a proposed rate change exceeded the 7 percent flex band.
Senator Neal asked what time frame was defined by "as soon as practicable" as used in the bill. Chairman Townsend said he shared Senator Neal’s concern whether the commissioner’s office could review and approve rate changes within the statutory time limits. Ms. Molasky-Arman said a rate change has never been deemed approved because her office did not respond in a timely manner.
Senator Neal said he was still troubled by the disjunctive language in the bill. Chairman Townsend suggested Senator Neal and Kevin Powers meet and discuss the bill.
Kevin Powers, Committee Counsel, said:
Mr. Chairman, I can offer an explanation now. Senator Neal, you need to read sections 1 and 2 of the bill in conjunction. Page 2, line 27, provides that rates for title insurance, surety insurance, and liability insurance for medical malpractice must be approved by the commissioner pursuant to Nevada Revised Statutes 686B.110 before the insurer may use the rates. That’s the legal standard that requires those types of insurance to be approved by the commissioner before the rates may be used. In follow through to section 1, subsection 2, if the commissioner determines a filing is one of those types of insurance, the legal standard in section1, subsection 5 takes hold and requires the commissioner to approve the rates before they can be used.
Senator Hardy asked if passage of the bill was an attempt to encourage competition. Mr. Sorich said the market is competitive, but it could be better. The constraints of the prior approval law restricted flexibility in the market. Flex rating would enhance the existing competition.
Chairman Townsend said the responsibilities of the division were to ensure rate increases do not discriminate against consumers and rate decreases do not prevent insurers from covering risk. The 7 percent flex band would allow insurers to be more competitive.
Mr. Sorich said the lack of competition provision is a safeguard. If the market was not competitive, the commissioner could impose prior approval on all rate change requests.
Senator Neal asked if the bill allowed the commissioner to deny new companies entering the market if the market was not competitive. Mr. Sorich said the bill does not grant such authority. The philosophy of the bill was to open the doors to everyone who wanted to enter the market. More competition would benefit the consumers.
Senator Neal asked how the 7 percent flex band was determined. Mr. Sorich said it was the percentage used in Texas and it seemed reasonable. He asked if a rate change could be imposed every 12 months. Chairman Townsend said rate changes could be requested at any time. The criteria for approval would not change under S.B. 12. This is a timing issue only. The change would allow the insurers to use a new rate prior to the commissioner approving or disapproving the rate.
Senator Shaffer asked how frequently rates could be changed. Chairman Townsend said those changes would occur at the end of a policy period.
Senator Neal asked for an explanation of "total average premium" as used in section 2, subsection 1, paragraph (d). Ms. Molasky-Arman said 7 percent is the average over all categories of insureds.
Chairman Townsend said insurers file for rate changes based on the average of all policies they have written in Nevada. If the average is less than 7 percent, the change can go into effect prior to the commissioner’s approval. If it is more than 7 percent, the rate cannot be used prior to approval by the commissioner.
Senator Carlton expressed concern that rates would represent an across‑the‑board 7 percent and consumers would not know how much their premiums would increase.
Chairman Townsend said the bill only pertains to when rates go into effect. The criteria and categories have not changed. If the change is within the 7 percent band, the rates can go into effect prior to approval by the commissioner.
Mr. Guild said if the bill did not pass, rate increases could be larger at a later date because insurance companies would not be allowed to respond to the market and make minor adjustments from time to time. Senator O’Connell said passage of the bill would help avoid spiking of rates.
Susan Bithell, Lobbyist, Farmers Insurance, said the bill gave insurers flexibility to keep assessing the market and changing rates as needed. Companies were more likely to bring in new automobile and homeowners’ insurance products into a market that has flex rating in place.
Chairman Townsend said the bill had only one thing to do with insurance; the timing of filings. Consumer protections have not been altered.
Charles Knaus, Contract Actuary, Division of Insurance, Department of Business and Industry, said if an insurer were considering two categories of insureds when calculating a rate adjustment, it would be possible one category would not see an increase in rates while another would see a 14 percent increase. The average for the two categories would be 7 percent.
James L. Wadhams, Lobbyist, Nevada Independent Insurance Agents, referred to the comparison guides in the publication, Nevada 2002 Consumer’s Guide to Auto Insurance (Exhibit D. Original is on file in the Research Library.). He pointed out the variations in premium costs in Nevada.
Chairman Townsend closed the hearing on S.B. 12 and opened the hearing on S.B. 71.
SENATE BILL 71: Authorizes contractor to withhold money or require surety bond to guarantee payment of certain indebtedness of subcontractors and other contractors. (BDR 53-402)
Steve G. Holloway, Lobbyist, Associated General Contractors, presented a proposed amendment to S.B. 71 (Exhibit E). Chairman Townsend explained the process for submitting a bill and proposed amendments to Mr. Holloway.
John E. Jeffrey, Lobbyist, Southern Nevada Builders and Construction Trades Council, asked for time to have trust attorneys review the amendment.
Ruedy Edgington, Assistant Director, Operations Division, Nevada Department of Transportation said his department had no concerns with the draft. Michael Tanchek, Deputy Labor Commissioner, Office of Labor Commissioner, Department of Business and Industry, said his office had reviewed the bill and had no concerns.
Chairman Townsend asked Mr. Jeffrey to provide Kevin Powers with a written statement explaining the intent of the amendment, which would enable him to draft the amendment.
Chairman Townsend closed the hearing on S.B. 71 and opened the work session with S.B. 65.
SENATE BILL 65: Allows formation of certain professional corporations. (BDR 7‑335)
Senator Carlton said the subcommittee agreed to amend S.B. 65 by removing medical doctors from the definition of professionals providing mental health services. Chairman Townsend asked if the change would affect access to Medicaid or Medicare. Senator Carlson said it would not change anything because the specialties listed in the bill did not have access to Medicaid numbers.
Scott Young, Committee Policy Analyst, said the proposed changes were contained in the work session document (Exhibit F. Original is on file in the Research Library.) submitted by the Legal Division.
SENATOR CARLTON MOVED TO AMEND AND DO PASS S.B. 65.
SENATOR SHAFFER SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR NEAL ABSTAINED FROM THE VOTE.)
*****
Chairman Townsend introduced S.B. 9.
SENATE BILL 9: Revises provisions governing exclusivity of certain rights and remedies under industrial insurance. (BDR 53-632)
Chairman Townsend read the proposed amendment contained in the work session document (Exhibit F).
Senator Hardy asked if the new language prohibiting plea bargaining, in the proposed amendment, was used in any other areas of Nevada law.
Mr. Powers said, "Yes, Mr. Chairman. This language is taken directly from Nevada Revised Statutes 484.3795. It prohibits driving under the influence of alcohol or in an impaired state, which causes substantial bodily harm or death."
Don Jayne, Lobbyist, Nevada Self-Insured Association, said he had not had prior opportunity to review the proposed amendment to the bill, but had no problem with its philosophy. He asked if the bill applied to uninsured employers only. Chairman Townsend responded the proposal said "any employer." He also said the amendment would be addressed in a future work session.
Mr. Jayne asked if prosecutors thought the bill would remove their flexibility. Chairman Townsend said he did not want prosecutors to have the flexibility to plea bargain in consideration of what happened at Depressurized Technologies Incorporated.
Senator Carlton said the employer knew he was violating the law, he ignored that fact, he proceeded and an employee died. Employers violating laws that result in the death of an employee should be sent to jail.
Robert A. Ostrovsky, Lobbyist, Nevada Resort Association, said the language in the amendment was acceptable.
Chairman Townsend introduced S.B. 23.
SENATE BILL 23: Provides for independent review of certain final adverse determinations made by health maintenance organizations and managed care organizations. (BDR 57-209)
Fred L. Hillerby, Lobbyist, Association of Insurance Professionals, advised Chairman Townsend he would be discussing the bill with Assembly Majority Leader Barbara Buckley in conjunction with a similar bill in the Assembly. He would then discuss S.B. 23 with Senator Neal. Chairman Townsend recommended Senator Neal be included in any discussions on the issue.
Chairman Townsend introduced S.B. 24.
SENATE BILL 24: Provides for access for certain persons to health care records of deceased. (BDR 54-178)
Chairman Townsend asked Senator Neal if he had received information he needed. Senator Neal said he understood Kevin Powers would review the bill and make sure it complied with the accountability law. He said he was unable to attend the subcommittee meeting.
Lawrence P. Matheis, Lobbyist, Nevada State Medical Association, said the subcommittee discussed removing section 1 of the bill and determining if the wording in the bill complied with the Health Insurance Portability and Accountability Act (HIPAA).
Senator Hardy said he understood the original intent of the bill was to make available the death records of an individual. He did not think the bill would make those records available to anyone. He asked Senator Neal if his intent was to have the health records or the death records of a deceased made available. Senator Neal said his intent was for a family member to obtain health records related to the death of an individual.
Senator Hardy said he did not think the bill would do that. The bill said each provider should provide health care records of a patient to the individuals outlined in the bill. He said he understood health care records and death records were dealt with in different statutes.
Mr. Matheis said the intent of the bill was to provide medical records to the family or legal representative of a deceased. The death certificate should already be available.
Senator Neal asked Mr. Powers if the amendment would remove the section of the bill that was unnecessary. Mr. Powers said, "As I understand the committee's discussion, all of section 1 of the bill would be deleted and section 2 would remain as it is. It is the opinion of my office the bill complies with HIPAA."
A written testimony from Charles Duarte (Exhibit G) was distributed to committee members without discussion.
Chairman Townsend asked for the proposed amendment to be ready for presentation at the next work session. He adjourned the meeting at 9:52 a.m.
RESPECTFULLY SUBMITTED:
Maryann Elorreaga,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE: