MINUTES OF THE ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT Sixty-eighth Session May 25, 1995 The Committee on Labor and Management was called to order at 3:30 p.m., on Thursday, May 25, 1995, Chairman Nolan presiding in Room 321 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Ms. Saundra (Sandi) Krenzer, Chairman Mr. Dennis Nolan, Chairman Mr. David Goldwater, Vice Chairman Mr. Lynn Hettrick, Vice Chairman Mr. Bernie Anderson Mr. Douglas A. Bache Mr. John C. Carpenter Mr. Pete Ernaut Mr. Mark Manendo Mr. Brian Sandoval STAFF MEMBERS PRESENT: Mr. Vance A. Hughey, Senior Research Analyst Mr. Fred W. Welden, Chief Deputy Research Director Jennifer Carnahan, Committee Secretary OTHERS PRESENT: Alice Molasky, Insurance Commissioner Douglas Dirks, SIIS Kevin Higgins, Deputy Attorney General Leonard Ormsby, General Counsel, SIIS Cecilia Colling, Assistant General Manager, SIIS Dan Williams, "Dare to Dream" Barbara Costello, "Dare to Dream" Paul Aakervik, W. R. Gibbens, Inc. Stella Marchand, "Dare to Dream" Danny Thompson, AFL-CIO Katie Armstrong, Nevada Trial Lawyers Nancyann Leeder, Nevada Attorney for Injured Workers ASSEMBLY BILL 498 - Makes various changes related to industrial insurance. Chairman Nolan called committee attention to the proposed amendment to A.B. 498 which is a mock-up draft of the bill (Exhibit C). Also before them were the amendments in total (amendment 508) submitted as (Exhibit D). He indicated amendments had been approved with the exception of amendments to Section 7. That section on the mock-up has been transposed to Section 13. Referencing Section 13, Vance Hughey walked the committee through the proposed amendments. Mr. Nolan stated in light of recent information as to the accessibility of the bonding market and expense with relationship to the cost of achieving a surety bond for the purpose of covering net worth, he thought Mr. Hettrick would like to make a motion. ASSEMBLYMAN HETTRICK MOTIONED TO "PUT BACK IN WHERE WE REQUIRE BOND FOR SURETY A SIMPLE STATEMENT THAT WOULD BE EITHER A BOND OR CERTIFIED FINANCIAL STATEMENT SATISFACTORY TO THE COMMISSION." MR. CARPENTER SECONDED THE MOTION. Committee discussion ensued. Vance Hughey discussed changes referencing the original bill. Mr. Hettrick suggested bill drafting take care of the changes. He noted "We just need to get the "either-or" provision for certified audits. That's all we're after." THE MOTION CARRIED. Mr. Nolan said he was willing to accept a motion on A.B. 498 with the provision the bill would be held until there were amendments and the bill completed in draft. Ms. Krenzer said she would like to see it back before voting again. Mr. Nolan stated they would wait for amendments to come back before taking action. Alice Molasky, Insurance Commissioner, referencing Page 6, said, "If you are going to apply the alternative language of the solvency bond...or the net worth... that it not be deleted...that represents a combined net worth of the members in the Association." Douglas Dirks, SIIS, stated they would defer to the Insurance Commissioner. ******* ASSEMBLY BILL 587 - Revises provisions regarding workers' compensation fraud. Chairman Nolan called committee attention to work document on A.B. 587 prepared by Vance Hughey (Exhibit E). Mr. Hughey walked the committee through the proposed amendments. Mr. Anderson said he could not in good conscience support the language in Section 1. Kevin Higgins, Deputy Attorney General, referencing Section 1, said he thought the concern was a mandatory $5,000 fine with no room for discretion, the intent being to give room between zero and $5,000, so if someone accidently failed to pay SIIS premiums, they would not be tagged with an automatic $5,000 penalty. He noted if the amendments to S.B. 458 go through, the manager would have the discretion in the triple penalty area. "This section would only come into play if the employer refuses to pay that triple penalty...then our office would have the jurisdiction to enforce that." Mr. Bache voiced the same concerns as Mr. Anderson and stated he would support it if it was amended not less than $5,000 for each "willful" failure to pay. Mr. Nolan advised Mr. Hughey the committee agreed on the language, "not more than $10,000 for each act of willful deception." Mr. Hughey walked the committee through subsequent sections. Following Section 3, Mr. Nolan entertained a motion to adopt. ASSEMBLYMAN HETTRICK MOVED TO ADOPT AMENDMENT NUMBER 1 CHANGING LANGUAGE TO $1,000 ...AND TO ADOPT NUMBER 3. ASSEMBLYMAN KRENZER SECONDED THE MOTION. Mr. Carpenter expressed dissatisfaction with agencies keeping fines and suggested monies should go into the fund and be appropriated back out; Mr. Bache wondered it the motion could be split as he could support only two-thirds of it; Mr. Hettrick subsequently withdrew his motion. Mr. Nolan entertained a motion for Amendment number 1: MR. HETTRICK MOVED TO ADOPT AMENDMENT NUMBER 1 CHANGING THE NUMBER $5,000 TO $10,000. MR. CARPENTER SECONDED THE MOTION. THE MOTION CARRIED WITH ASSEMBLYMAN ANDERSON ABSTAINING AND ASSEMBLYMAN BACHE VOTING NO. The committee agreed against adopting amendment number 2. MR. CARPENTER MOVED TO ADOPT AMENDMENT NUMBER 3. MR. HETTRICK SECONDED THE MOTION. THE MOTION CARRIED. Mr. Hughey explained 4A was the first of seven proposed amendments dealing with the issue of suspending benefits for persons who have been charged with violations of NRS 616.675. He subsequently walked the committee through same. Committee discussion ensued. Mr. Carpenter thought 4E was the best possible choice as benefits would continue. Also the lump sum payment would be held in abeyance until a trial is over. Mr. Higgins concurred, saying the entire intent was to try and stop those occasions where a lump sum might get paid out before a crime was resolved. He noted 4E would be the least burdensome to the claimant and accomplishes the result of not letting the lump sums disappear. Leonard Ormsby, General Counsel, SIIS, expressed concern with the first sentence of paragraph 1, Section 6 of A.B. 587...specifically "Except as otherwise provided in this section." Following discussion on that point, Chairman Nolan said they would take testimony from Las Vegas on this section; however, the subject would be held over until later. Continuing on the subject of amendments to 4A and 4E, Dan Williams, "Dare to Dream", said he would like to see subsection 3 of section 6 completely taken out and expressed disapproval with the terminology used. Barbara Costello, also of "Dare to Dream" questioned benefits. Mr. Higgins replied benefits would not be terminated until cause of action was filed in the court. Ms. Costello said there should be guarantees for quick recovery of benefits and if fraud is suspected, it should not take one or two years to resolve. Referencing the proposed amendment on 4A, Mr. Hettrick quoted "suspend benefits for 30 days or until probable cause is established". Probable cause normally is 14 days; if not done in 14 days, the Attorney General has 30 days; if not done in 30 days the benefits are restored. Paul Aakervik, W. R. Gibbens, Inc., briefly discussed the subject of fraud from the Worker's Compensation claims examiner's point of view. At the inception of a claim, there are two types of fraud: 1) An individual is injured off the job and reports it as an on-the-job injury; 2) fraud occurs during the occurrence of the claim, i.e. three months into the claim the employee goes back to work but would continue to draw his temporary disability. Mr. Aakervik noted the latter is the type of payment they are trying to avoid making, as these people are truly fraudulent and a discovery sometimes takes months or years. Mr. Nolan called committee attention to (Exhibit F), a letter from the State Contractors Board referencing S.B. 458 and A.B. 587. Ms. Krenzer disclosed she worked for Sierra Health Care Options (an MC0). Since ten of the sections in S.B. 458 directly relate to the operation of an MCO, she indicated she would not vote on S.B. 458 as a whole. ASSEMBLY BILL 601 - Makes various changes concerning state industrial insurance system. Chairman Nolan noted Sections 1 though 4 and Sections 18 through 20 had not been covered. He subsequently asked Mr. Hughey to walk committee through same. Section 1, according to Mr. Hughey, stemmed from the SIIS business plan. Douglas Dirks, SIIS, gave an overview on the purpose of Section 1. He noted Section 1 was a technical correction to revisions made in S.B. 316 in the last session. Leonard Ormsby, General Counsel for SIIS, noted the only difference between Section 48 of the Senate Bill and Section 1 of the Assembly Bill is, in Paragraph 2 of the Senate Bill "private carriers" are included, whereas they are not in the Assembly Bill. Mr. Nolan stated that should be included in A.B. 601. Mr. Ormsby explained Section 2 of A.B. 601 is found at Section 49 of S.B. 458. Mr. Hughey subsequently gave a brief overview of this section. He noted Section 2 makes it clear that it is the manager who selects the Managed Care organizations. Inasmuch as a quorum was not present, Chairman Nolan said they would proceed as a subcommittee. Douglas Dirks commented there were provisions in the Senate Bill they supported which would require bidding processes for Managed Care be done on a reasonable basis in accordance with procedures adopted by the General Manager. Even though the system would not be covered by the purchasing act, it still must go out on a competitive bidding for any services that it obtains from private vendors. Cecilia Colling, Assistant General Manager, SIIS, commented that when discussing discount fees between MCOs and physicians, that is a contract relationship between providers and the MCO. SIIS does not get involved with that. Section 3 of A.B. 601: Mr. Hughey gave a brief overview stating currently an injured employee who resides or is employed in a county with population of 100,000 or more, must choose a treating physician from the managed care network; but if that employee's residence is not within 20 miles of a provider health care on a managed care panel, that employee does not have to get his medical care through the MCO. This section proposes to delete that 20 mile rule. Committee discussion ensued. Ms. Colling noted they would maintain control over approval of a change in a treating physician. Las Vegas caller, Dan Williams, testified injured workers could not handle long rides and did not think deleting the 20 mile rule was useful. Ms. Collings noted the injured worker in an emergency situation would not be penalized by going to the closest and most available provider for treatment. She noted this has to do with the ability to continue to manage the care of an injured worker if they move outside of the network. Stella Marchand, "Dare to Dream", also complained about having to travel long distances for therapy. Mr. Ernaut explained there was nothing in the provision disallowing a person to go to closest physician for a specialized injury in an emergency situation. Danny Thompson, AFL-CIO, stated the right to choose a provider is being eliminated if a person is outside the 20 mile radius. Ms. Colling stated managed care organizations outside the SIIS system often set up reciprocal agreements. The doctor does not have to agree to the discount but would have the ability to manage or use the protocols, the utilization review. That is so important in making sure the treatment is of the appropriate quality. Section 4: Mr. Hughey gave an overview of this section. There were no comments from the committee. Sections 18 and 19: Following Mr. Hughey's overview, a lengthy committee discussion ensued. Mr. Ernaut stated the whole point is to provide care as cost efficiently as possible. Mr. Dirks stated they were approaching the issue from a cost standpoint. He stated, "We believe if you remove the guarantee that there are at least 12 players in Nevada, you will get a considerably more competitive bid. Again, if you've got large organizations knowing that at least 12 of them will survive, they are not as competitive as we believe they will be if there is not a guarantee." Mr. Nolan asked if it is conceivable that there could be one organization providing managed care statewide. Mr. Dirks stated under the language as drafted, that would be a possibility. He noted there can be managed care but there must be contract with at least three, five, or seven managed care organizations. The goal is to make it as free market as possible and let the system operate in that environment. Responding to Mr. Bache's inquiry as to whether eliminating MCO's entirely and going to any provider that meets their regulations and standards would be a consideration, Mr. Dirks added that despite shortcomings, MCO's represent a successful program. Key components in a managed care program, he added, were the protocols, peer reviews and the utilization reviews. Katie Armstrong, Nevada Trial Lawyers, emphasized the cheapest medical care is not always the best. "Allow for the possibility if we have a single provider we will have less than standard care...and that is not a benefit." Mr. Dirks said he proposed a reasonable bidding process, their goal being to provide the highest quality of medical care at reasonable cost. Regarding Section 20, Mr. Hughey said he thought it was a provision dealing with an unfunded mandate. Nancyann Leeder, Nevada Attorney for Injured Workers, stated it was necessary to make sure MCOs comply with due process. Mr. Ormsby responded by stating there are sections from S.B. 458 dealing with due process, appeal rights within an MCO organization. Since there was no further testimony, the hearing adjourned at 8 p.m. RESPECTFULLY SUBMITTED: Christine Shaw, Committee Secretary Assembly Committee on Labor and Management May 25, 1995 Page