MINUTES OF THE ASSEMBLY SUBCOMMITTEE ON COMMERCE Sixty-eighth Session May 15, 1995 The Subcommittee on Commerce was called to order at 5:50 p.m., on Monday, May 15, 1995, Chairman Tiffany presiding in Room 332 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. COMMITTEE MEMBERS PRESENT: Ms. Sandra Tiffany, Chairman Mrs. Maureen E. Brower Ms. Barbara E. Buckley COMMITTEE MEMBERS EXCUSED: Mr. Michael A. (Mike) Schneider GUEST LEGISLATORS PRESENT: None STAFF MEMBERS PRESENT: Paul Mouritsen, Senior Research Analyst Barbara Moss, Committee Secretary OTHERS PRESENT: Mr. Norman P. Becker, Blue Cross/Blue Shield of Nevada Mr. Jim Wadhams, Blue Cross/Blue Shield of Nevada Chairman Tiffany opened the Subcommittee hearing on A.B. 299. ASSEMBLY BILL 299 - Regulates provision of health insurance for small enterprises. Chairman Tiffany stated the intention of the meeting was to go over the proposed amendments reviewed in the last Subcommittee meeting and the amendments would be voted on, as a whole. Chairman Tiffany requested a sentence be added on page 2, section 8, line 2, of the amendment stating there would be a menu of options with pricing offered outside of the core benefits. Mr. Norman Becker, representing Blue Cross/Blue Shield of Nevada, introduced the proposed amendment to A.B. 299 (Exhibit B). He explained the underscored lines were results from the last Subcommittee meeting. He stated section 8 covered the core benefits and section 10 moved the group size down to two employees. The only other underscored section was the repeal of section 34 on page 6. The eligibility period had moved out from 30 days to 60 days. Ms. Tiffany had asked for six months and expected something better than 30 to 60 days. She asked the other members of the Subcommittee their thoughts on the matter. Ms. Buckley said in the ideal world she would like to see it higher, however, the additional time could skew the underwriting and success of the product. That was her only proviso. Mr. Becker stated he was unable to give an actuarial cost but, in essence, it would be giving an employee six months to make a decision on whether he/she wanted insurance. If they were healthy it would be good to have them determined in the pool with the sick ones. Ms. Buckley asked if it could be moved to 90 days. Mr. Becker said that would be better than six months. Ms. Brower stated she was not unhappy with it as presented but she would not be opposed to 90 days. Ms. Tiffany requested 90 days. Ms. Tiffany wished to ensure that any insurer wanting to obtain a policy had the ability to go to the tax department and request the names of employers who employed 30 people or less. She requested Mr. Mouritsen to find out if that would be needed in statute or a letter-of-intent to the agency. Therefore, insurers could obtain a mailing list for marketing purposes. Ms. Buckley pointed out Nevada Revised Statutes (NRS) 689B.061, in reference to Preferred Provider Organizations (PPO) and non-PPO's, stated what differences were allowable. For example, they could not go more than a 70/30 ratio and if the terms of the deductible were too skewed, in effect, there were not two actual policies. She wondered if NRS 689B.061 should also be applicable in the bare bones policy. Mr. Jim Wadhams, representing Blue Cross/Blue Shield of Nevada, gave a brief history. The law was passed in 1985 at the advent of PPO's which were just beginning to be developed in the state of Nevada. If differentials were too large it ended up with economic preemption of choice between the preferred and the non- preferred. It became so economically prohibitive that no one would choose to go to their personal physician and be forced to use the PPO. It was the view of the legislature then, and probably fair to say at the present time, that in those circumstances if a person wanted the HMO they had their choice rather than being coerced. He did not think it was a problem if that particular section was incorporated or made applicable to the plans in the bill offering PPO's at differentials -- the policy would still be the same. Ms. Buckley, for purposes of time, said she would bring that concern back to the full Committee to be discussed. She would also bring back a few of her concerns regarding the additional medical underwriting criteria recently added in the last amendment. Chairman Tiffany recessed the Subcommittee for one-half hour to attend the mock joint session on the Assembly floor. The Subcommittee resumed at 7:30 p.m. Ms. Buckley stated the remainder of her concerns had to do with the amendments presented at the last hearing. All her concerns from the first hearing were answered by the second hearing. She was concerned with page 3 in the present amendments with the addition of the word "objective" having to do with adding the medical underwriting criteria; and the rate differences for both participation and contribution levels. Her concern was with things that were not in the first draft and had been added. It tended to basically deny coverage for small employers and she surmised it was a guarantee issue. Therefore, it said insurance was not guaranteed if there were special conditions and added rate differentials for employers. One of the things she had thought positive in the first hearing was an attempt to eliminate that by having a large pool and eliminating the differences. At the last hearing she had addressed those issues and asked Messrs. Becker and Wadhams if there was any response. Mr. Becker indicated this was an incremental reform and recognized it was not the last of it. In fact, they would probably return every session with the next level of reform. On medical underwriting, in the amendments, the industry felt it important that it stated directly versus indirectly that a group could be accepted or rejected based on medical underwriting when they came in. Therefore, they would not be required to take any group for which they did not desire to underwrite the risk. However, once they had taken a group, each employee hired was allowed into the group without medical underwriting. Therefore, there were two parts to it. Mr. Becker went on to explain the other pieces were objective differences. The industry had suggested it be deleted. On page 3, line 19, for consistency they inserted "case characteristics", which was referred to in the rating. The other differences were for minimum participation and contribution. It was standard accepted industry practice to lower discount rates based upon the employer contribution. If the employer contributed 100 percent there would be 100 percent employee participation, which meant they would get all the good and all the bad. People who opted out of plans tended to be those who were healthy. Therefore, it ended up with more risk. That was an adjustment in the rates to accept and acknowledge more risk than if everyone in the group participated. Ms. Buckley still expressed concerns but asserted they would not stop her from voting for the amendments. She pointed out those concerns might be considered in the next legislative session. She felt some things had been taken away and she would have been happier if they had been added, but she said it was important to first get something that worked. She was more willing to err on the side of seeing if this was successful first before adding those things. However, they did hurt small employers. Mr. Becker said the next evolution was to eliminate any medical underwriting, however, the big fear in the industry was if that window was opened at the present time, everyone would exit the small group and there would be no insurance carriers to write it at all. He felt incremental reform made a lot of sense in that respect. Chairman Tiffany questioned section 8.5, page 2. Mr. Becker stated it was to clear up the definition of "late enrollee". After the 90-day period a person was considered a "late enrollee", however, an eligible employee or dependent shall not be considered a late enrollee if they met the following criteria: - The individual was covered under qualified and previous coverage at the time of initial enrollment. It could have been under spouse's coverage, for example, or another plan offered by the employer. - The individual lost coverage under qualified and previous coverage. - The individual lost coverage as a result of termination of employment. - The individual lost coverage as a result of divorce, death of a spouse, or any other qualifying event. Basically, what it said was at the end of one of the qualifying events there was another 90 days. At the end of that 90-day period a person was considered a "late enrollee". Mr. Wadhams indicated that was an important point. In many plans at the present time a late enrollee was somebody who would fall under what was accepted. In other words, if a spouse was covered by other coverage or an employee opted out because they had duplicate or additional employment under which coverage was provided. For example, a person had two jobs, the first job ended and the employee wished to get into the plan of the second employer. The person would typically be considered a late enrollee. The statute change would make it across-the-board not a late enrollment as long as it fell under one of the four criteria. He felt it was a significant change in the existing law. Chairman Tiffany wished to review section 18.5 regarding pre- existing condition limitations of six months. Mr. Becker indicated for those who did not enroll during the 90-day window, pre-existing conditions would be imposed upon that person. Section 18.5 specified if a person was treated for a condition six months prior, that condition was not covered during the first six months following the effective date of the health insurance. This was known as "six/six". The late enrollee may be excluded from coverage for 18 months with respect to services related to the treatment of the pre-existing condition. Therefore, if the person did not enroll during the 90-day period, with the option to enroll during that time, then there was an 18 month pre-existing condition limitation. Chairman Tiffany asked if there was any incremental change in the bill regarding pre-existing condition? Mr. Becker said the incremental change was if a new hire came into an existing group, a pre-existing condition was imposed regardless of what he/she had previously. Therefore, if it was continuation of coverage there was no pre-existing condition. Ms. Tiffany asserted the time had been extended to 90-days. Mr. Becker agreed. Chairman Tiffany reviewed the changes the Subcommittee had discussed: - The 90-day change. - The inclusion of 689B.061. Ms. Brower asked for an explanation of 689B.061. Ms. Buckley said it basically was consumer protection for the small employer and employee that was enacted long ago. It said if both a PPO and a more traditional plan were offered, such as the 70/30, there had to be certain things included in the plan in order to make it a real choice. For example, if the insurance was going to cover a certain amount it had to be at least 70 percent. If it was much lower people would be forced to go with the PPO, therefore, it would not be a choice between the PPO and traditional plan. They were pretty conservative protections. Mr. Wadhams pointed out there was one more sentence to be added to the amendment to section 8, page 2, line 2 regarding core benefits. The sentence would read something like: "An array of additional benefits satisfactory to the commissioner or subject to approval by the commissioner must be offered with prices for each benefit." Chairman Tiffany stated by Wednesday, May 17, 1995, the amendments would be added. She also reiterated Paul Mouritsen's task on how to handle the business tax for the tax department to ensure they would have access to the names of the employers who had 30 employees or less. Chairman Tiffany entertained a motion. ASSEMBLYMAN BROWER MOVED TO ACCEPT THE SUBCOMMITTEE'S RECOMMENDATIONS TO AMEND AND DO PASS A.B. 299. ASSEMBLYMAN BUCKLEY SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. Ms. Buckley indicated she would raise in full committee the issue regarding pap smears, mammograms and maternity benefits. She did not feel it was important enough to add to the motion at that point in time. Chairman Tiffany requested Mr. Becker to return to the full committee on Wednesday, May 17, 1995, with a synopsis of the bill and a brief overview of the significant changes on the amendments. She indicated she would write a synopsis of the accomplishments of the Subcommittee and present it to the full committee as well. She requested Mr. Wadhams to be present to answer questions. After the presentations of Mr. Becker and Ms. Tiffany the meeting would be opened up for discussion by the full committee. Chairman Tiffany thanked the Subcommittee for a fine job! The meeting was adjourned at 7:45 p.m. RESPECTFULLY SUBMITTED: Barbara Moss, Committee Secretary APPROVED BY: Assemblyman Sandra Tiffany, Chairman Assembly Subcommittee on Commerce May 15, 1995 Page