MINUTES OF THE ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT Sixty-eighth Session May 30, 1995 The Committee on Labor and Management was called to order at 4:05 p.m., on Tuesday, May 30, 1995, Chairman Saundra Krenzer presiding in Room 119 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 OTHERS PRESENT: Ms. Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS) Mr. Lenard Ormsby, General Counsel, SIIS Ms. Arleen Henton, Management Analyst, SIIS Mr. Ron Swirczek, Administrator, Division of Industrial Relations (DIR) Ms. Jan Myers, Northern District Manager, Industrial Insurance Regulation, Division of Industrial Relations Mr. Mark Habarsack, President, Nevada Self-Insurers Association Mr. Dan Williams, Dare to Dream Network Ms. Barbara Gruenewald, Nevada Trial Lawyers Association Mr. Jack Jeffrey, Southern Nevada Building and Construction Trade Council Mr. Bob Ostrovsky, Nevada Resort Association Mr. Danny Thompson, Nevada State AFL-CIO Ms. Nancyann Leeder, Nevada Attorney for Injured Workers Ms. Stella Marchand, Dare to Dream Network Mr. Arthur Busbee, Horseshoe Hotel and Casino Mr. Michael Busick, Painters & Allied Trades Local Union 567 Mr. Lyle Taylor, President, Geotemps, Inc. Mr. Glenn Goza, Olsten Staffing Services Mr. Larry Hawke, Government Relations Counsel, Nevada Mining Association Ms. Kim Van Dyck, Certified Rehabilitation Counselor, James Wilcher & Associates Mr. Jim Wilcher, James Wilcher & Associates Mr. Stephen Shaw, Department of Employment, Training and Rehabilitation Mr. Sam McMullen, Nevada Self-Insured Associations Mr. Mark Balen, Professional Firefighters Ms. Eloise Koenig, Department of Insurance Chairman Krenzer called attention to the agenda for today's meeting. The committee would address Senate Bill (S.B.) 458 today with the first order of business being those sections which relate to real estate brokers. SENATE BILL NO. 458 - Makes various changes to provisions relating to industrial insurance. Cecilia Colling, Assistant General Manager of SIIS, testified. She explained she was contacted by real estate brokers who are presently involved with many people moving from real estate broker to real estate broker, letting coverage lapse, and finding themselves faced with large audits. After looking at statistics, she found real estate accounts open and close frequently. While they cover costs, the administrative costs for real estate are very high. She opined an exemption for those in real estate is appropriate. If they could chose to have coverage or not it would not be a detriment to the system and probably be more beneficial for the brokers. She cautioned in the event the real estate salesperson is not covered, the broker has no exclusive remedy protection from suit. She pointed out they expressed a willingness to take that risk. Ms. Colling expounded the bill sets up an exemption for real estate persons and brokers who work for other brokers. Assemblyman Carpenter inquired about the claims filed by the real estate industry. Ms. Colling explained the system does receive claims from this industry and they tend to operate like 24 hour coverage because of the nature of the jobs. However, the costs for the claims appear to be low. Mr. Carpenter expressed concern as a broker, he does not want to be held responsible for those who do not have any other coverage. Ms. Colling stated it is a legitimate concern. She explained real estate accounts are about $284 per year and the system could require those payments once or twice a year which would make it easier to keep track of them. If the salespeople moved around they would be covered as they moved. Assemblyman Hettrick asked if SIIS has a provision, where if coverage lapses someone can be informed. Ms. Colling replied if a broker requests it, she will send out notification that their salespeople have lapsed. However, under this circumstance she believes the confidentiality laws might prohibit this because they would no longer be the employer and therefore, SIIS could not provide the information. Ms. Colling continued, when a salesperson lapses, they are given notice. By the time the coverage is canceled, there are 60 to 65 days in which they have to pay their accounts. In response to further inquiry from Mr. Hettrick, Ms. Colling responded she could consider a waiver to the confidentiality provision, if a salesperson signed a contract and provided it to the system. Chairman Krenzer explained the committee would move on to the sections which address employee leasing companies. These are sections 15-17 and 52-53. Lenard Ormsby, general counsel of the State Industrial Insurance System (SIIS), testified. He stated at the beginning of the session, problems were identified with the law regarding employee leasing companies. Companies were hiring employees, leasing them back, and placing them in different classifications. He called attention to the substantial testimony heard in the Senate in regards to the problems which have been occurring. The language was modified several times before reaching a compromise agreed upon by all interested parties resulting in the language reflected in S.B. 458. He explained it has come to his attention, as of late this afternoon, the agreement which was reached might not work now. Mr. Ormsby proceeded to explain the specific provisions. 1) Section 15 of S.B. 458 simply requires the employee leasing company operating in the state shall maintain an office in the state for retaining, reviewing, and auditing its payroll records. There have been problems whereby when the system wanted to do an audit the records have been in another state. This will require the records be available for an audit by the system. 2) Section 16 is a restriction whereby the client company, the company who is using the leased employees, may not lease the employees from more than one employee leasing company at a time. With the existing law, companies were reading the law very carefully and then trying to get around the law by going self- funded, leasing companies, bringing them back in and things of that nature. He recognizes this section is controversial but stated he feels very strongly this restriction is necessary. 3) Section 17 was requested by the SIIS's audit department. It states, "If a person operates an employee leasing company and a temporary employment service in the state, the person shall maintain separate payroll records for the company and the service." Its intent is to facilitate the SIIS's ability to do an audit for the companies. 4) Section 52 contains more dramatic changes. Under the current law, to establish an employee leasing company a written contract is required. Without a written contract you cannot be deemed to be an employee leasing company. He pointed out the system strongly supports the change from "a written agreement" to "a written or oral agreement". An oral agreement can then be used to establish an employee leasing company. Section 3a of section 52 also contains a substantial change. In the existing law, the words, "all or substantially all of the employees", raised many questions. For the purposes of litigation, it was unclear as to what this meant; more than 50 percent or maybe 70 percent. The proposal clarifies the meaning by simply stating if a company "Places any regular, full-time employee with a client company". The addition of section 3b came about as a compromise, meeting with approval by the employee leasing companies and Associated General Contractors (AGC). Section 3b expands the existing definition of an employee leasing company to include a company that leases "five or more part-time or full- time employees or 10 percent or more of the total number of employees within a classification of risk identified by the system." Mr. Ormsby explained the purpose for this section was to allow an employer to lease limited numbers of employees for one time projects and for emergencies without triggering and making the company providing the employee an employee leasing company. The definition has broadened and restricted those companies available to operate as an employee leasing company. 5) In section 53 the prior language allowed an employee leasing company to use their discretion. "An employee leasing company may not offer its employees any self-funded insurance program." The system has recommended the change reflected in the paragraph which is "shall not". They shall not be self-funded and will not provide any self-funded insurance to the employees. Mr. Nolan commented there are various types of companies such as temporary agencies which serve a similar function to that of an employee leasing company. He questioned collectively, how many companies are affected by this change in statute. Ms. Arleen Henton, management analyst for SIIS, interjected the system currently has 25 companies registered with them as employee leasing companies. She expressed there might be another 25 companies identified as employee leasing companies by the Employment Security Department but are not registered with the system. Ms. Henton explained each employee leasing company can represent anywhere from five to six upwards to 200 other employers that are leasing employees also. Mr. Nolan followed up by stating as he reads it, this section prohibits an industry from becoming self-insured and from leaving the system. It restricts the trade and places an undue burden on the employers by forcing them to go to two or three different employee leasing agencies to get qualified individuals. Mr. Nolan stressed his concern is many are being punished in order to catch a few bad apples. Ms. Henton reiterated there have been problems with employee leasing companies nationwide. For clarification, she explained how employee leasing works. An employer has a staff of employees and for some reason that employer does not want the employees on his payroll. He fires the employees and the employee leasing company hires them, placing them on their payroll. The employee leasing company then leases them back to the original employer. The advantage of doing this is the employees are able to obtain pension plans and insurance through the leasing company. Many small to mid-size companies cannot afford to offer these options. Mr. Ormsby interjected there are bad apples. He recognizes the language is restricting but from the system's perspective it needs to be, in order to protect the employees. There are cases where the employees are making the contributions to the leasing company, a claim is filed and the employee finds he is not covered being the company has not made payments to anyone. Chairman Krenzer inquired why the client company cannot use more than one leasing company. Mr. Ormsby responded it is to cut down on abuse due to not being regulated, "uncollaterizing their insurance" and misclassifying employees. Employee leasing companies can save money by being self-funded. Some are operating as unlicensed insurance companies which the law prohibits. Mr. Hettrick stated he understands the problem but his concern rests with punishing those who are doing it right in an attempt to catch those who are doing it wrong. He suggests simply changing the language to read if the law is violated there will be a $10,000 fine and one year in jail. They should not be stopping those who are doing it legally from being in business, employers from using these companies, or employees being able to be insured. Ms. Colling replied those who do it wrong are being penalized. In fact, they can face three times the penalty. The intention of this section is to simplify the administration of the current law. She explained it is hard to get the information, hard to keep track of what is going on because there are too many loopholes in it and it sets up an inequitable situation between people who are operating legitimately and people who are not. Ms. Colling stated she is not clear as to exactly what Mr. Hettrick is opposed to but if it is the section concerning the restriction to only one employee leasing company maybe they could discuss that. Mr. Hettrick, Ms. Colling, and Mr. Ormsby engaged in a discussion regarding Mr. Hettrick's concerns. Ms. Henton added legitimate employee leasing companies do support this language because they also have a concern with their business being taken away by those operating illegally. Chairman Krenzer stated this topic will be placed in a subcommittee formed by Mr. Hettrick and Mr. Goldwater in order for language to be worked out. Mr. Michael Busick, representing Painters Local Union 567, testified against a portion of the language of S.B. 458 found in section 52, subsection 3b. He expressed his concern that this language gives the companies the option to be self- insured and be in the leasing business. He points out in Reno, Nevada, there are approximately 130 painting contractors listed in the phone book. Of that, 80 percent of them hire fewer than five people. There is a temporary service company who is self-insured and promotes itself as an employee leasing company to these contractors. This company could take 90 of those employers out of the SIIS and group self-insure them without ever being regulated. There are also many framing and electrical companies who only have four to five employees on a crew and these companies would all be exempt under this language. Mr. Busick understands the intent is to make sure temporary service companies act as temporary service companies and employee leasing companies act as employee leasing companies. Employee leasing companies cannot be self-insured, they need to be in the system (SIIS). He feels subsection 3b, is contradictory to the intent. The remainder of the language he understands and can agree with. Mr. Lyle Taylor, President of Geotemps, Inc., testified. His company is a temporary service which provides people only to the mining industry. He believes the definition of a leasing company has been confused so that it makes temporary services into leasing companies in an attempt to bring certain temporary service companies back into the system. He is in SIIS and has not experienced any problems. Mr. Taylor stressed the language as it stands now will most likely put him out of business. If the definitions in section 52 are adopted, making him a leasing company as opposed to a niche market, temporary service and forcing the client company to choose only one company to deal with, he will be forced to compete with the larger companies such as Manpower and American Temps. His company is small specializing in technical people in one area only. He referred to his company advertisement. See (Exhibit C). Mr. Taylor declared this section results in throwing out the small businessman and keeping the people they are trying to force out, because they can afford to do it and he cannot. The language as it is, defining his company as an employee leasing company, will place him in a situation where his clients will have to return to SIIS whenever they use him. He has heard nothing which would contradict that. He is not opposed to regulating leasing companies but he does oppose having to be one. Mr. Glenn Goza, owner of Olsten Staffing Services, prefaced his testimony by addressing a few of Mr. Ormsby's remarks. He stated in regards to regulating in order to prohibit companies misclassifying their employees, rules already exist in the system which address that. Referring to Mr. Ormsby stating self-insured businesses may be doing this, it is also a folly because that is their own money. Mr. Goza referred to a table outlining the differences between small businesses working on their own, temporary agencies and leasing companies. See (Exhibit D). He pointed out a couple key points are a leasing company generally takes existing employees and puts them on their payroll where as the temporary agency screens, recruits and assigns the employee out. Also, with temporary agencies the assignments are finite whereas with leasing companies they are ongoing, continuing business relationships. Mr. Goza stated he is also opposed to the language in section 52 believing the word "any" overreacts. This definition would make him a leasing company which he is not. He stated this is not the intent of the law nor should it be the intent of the law. He suggested setting a threshold of 5 to 10 percent of the companies total dollars. He also suggested deleting the brackets in section 52 and the proposed language in subsections a and b. Mr. Hettrick inquired if they left in "all or substantially all" and juggled the language starting on line 42 through 48 changing it to "10 percent of payroll" would that work? Mr. Goza replied that would work as long as it was 10 percent of his payroll and not the client company's payroll because they have no control over that company. He suggested "headcount" might be easier to administer than "payroll" because it is already being used for the business tax. Mr. Larry Hawke, government relations counsel for Nevada Mining Association, testified. He stated his appreciation for this subject being placed in a subcommittee. He reiterated many of the concerns expressed earlier. In terms of the discussion between Mr. Hettrick and Mr. Goza, he stressed one of the problems with using the threshold of 10 percent in a classification risk is he might have a classification risk at a mine that might only entail two people. One additional person would constitute thirty-three and one-third percent or even fifty percent of the particular classification risk. He feels that if they are going to talk about employee leasing companies as they are currently defined and as SIIS has stated they have problems with, the solution is to deal with the employee leasing companies as they operate does not make any sense. Chairman Krenzer asked if there were any others wishing to testify in opposition to these sections. There were no others. She reminded everyone this would be worked out in a subcommittee. The next issue the committee addressed was the American Medical Association Guides, sections 32, 101, and 153. Ron Swirczek, administrator of Division of Industrial Relations (DIR), testified. He began by explaining one of the responsibilities of DIR is to incorporate within their regulations the American Medical Association's Guides to Evaluating Permanent Impairment (AMA Guides). They can change and amend as it fits the circumstances. The three related sections are included in S.B. 458 to address current problems had by both the DIR and the state of Nevada. In section 32, the bill states, "the division shall consider the edition most recently published by the American Medical Association." Mr. Swirczek asserted currently, there are four editions and they use the AMA Guides, second edition. The problems are the second edition is out of print, therefore there is no training to be provided for rating physicians within Nevada. This has led to inconsistent results in ratings, causing increased hearings and appeals, and an increase of financial burden on the entire workers' compensation system. He stressed, however, in moving toward adopting the AMA Guides, fourth edition, there are also questions and concerns. Mr. Swirczek questioned, "Is it medically sound and will it be more reliable than the second edition?" Assemblyman Goldwater stated he has recollection of a study being done on the fourth edition. The study focused on whether or not moving to the fourth edition would cost more or less and they determined there would be no financial impact. Mr. Swirczek responded there have been a number of informal studies conducted by SIIS and other medical providers throughout Nevada. He emphasized the Division also conducted their own study questioning the actual authors of the AMA Guides, fourth edition as well as a noted expert, outside of Nevada, with no vested interest. He summarized the study, comparing the second and fourth editions, resulted in the percentage of impairment based on the fourth edition being less than the second edition. He pointed out it is his understanding of section 153, impairments will be evaluated in accordance with the AMA Guides, second edition until January 1, 1996. On and after this date, impairments will then be evaluated pursuant to the regulations of the DIR as they exist then and are amended pursuant to section 32. Meanwhile S.B. 458 calls for an interim committee to study this issue. Jan Myers, northern district manager, Industrial Insurance Regulation of DIR, testified on section 101 of S.B. 458. The proposed change is the deletion of language in subsection 4 which they are requesting because it creates a complication if the fourth edition is adopted. This language requires a rating evaluation include an evaluation of the loss of motion, sensation and strength of an injured worker but the fourth edition does not necessarily rate by range of motion. Mark Habarsack, president of Nevada Self-Insurers Association, remarked his association has looked very closely at the fourth edition of the AMA Guides. The initial study looked palatable but through more intensive analysis he found some concerns with the fourth edition. Mr. Habarsack expressed his approval for the interim committee to examine both the editions and examine what other states are doing in terms of permanent partial disability (PPD) evaluations and ratings. He also suggested examining the possibility of using a PPD schedule rather than rating guides. In conclusion, he asked the committee to reconsider the issue of the fourth edition, AMA Guides. Chairman Krenzer thanked Mr. Habarsack for his testimony and asked if there were any questions from the committee members. She then asked if there were any others wishing to testify on these three sections. Dan Williams, Dare to Dream Network, voiced his concern with removing the language in section 101. He expressed disapproval for deleting this language when the fourth edition has not yet been adopted. Deleting, "an evaluation of the loss of motion", would be to take out any way of rating back injuries, legs and arms. Barbara Gruenewald, representing Nevada Trial Lawyers, testified she objects to section 32 for the following reasons. First, she would like to stay with the second edition. "If it is not broke, do not fix it." She is also concerned with the situation whereby portions of both the second and fourth editions would be adopted to form a sort of hybrid. However, pointing out Mr. Habarsack's testimony, the AMA will not provide training if some of the sections are legislated out. She explained another reason for continuing with the second edition is the costs are known, the procedures are known, and the appeals officers are familiar with the definitions of PPD. She requested the law be left the way it is, keeping the second edition. While it is out of print, she suggested DIR print more copies and charge people for them. Chairman Krenzer asked why would we want to continue using such an outdated version? Ms. Gruenewald replied it is Nevada's law and has been for many years. Mr. Nolan referring to the fact many other states already use the fourth edition or a hybrid, inquired if Ms. Gruenewald disapproves of the system investigating or considering implementation of another guide. She responded yes, she does because the second edition has been defined in regards to litigation. She pointed out the only people who seem to desire the change to the fourth edition are the "bureaucrats". Mr. Nolan asserted they have not asked for it to be changed. It is an instrument of compromise. It allows for the system to consider using the fourth edition and if they decide they want to, then the legislature does not have to revisit the issue again in statute. The allowance for transition would be in statute. Ms. Gruenewald stated it is her understanding based on the testimony provided, the employers do not want it and the claimants do not want. She inquired why if the system does not really want it, "why should we go through this giant exercise between now and January 1, 1996 to redefine PPD?" Mr. Swirczek expressed he is sensitive to all the concerns which have been raised. He declared DIR is trying to do what makes sense to them. In regards to training, he clarified there is no training even for those physicians using the second edition by recognized bodies. He reiterated it is out of print and he cannot get authorization from the AMA to reprint it. He stressed DIR is not promoting the fourth edition but considering whether or not it is better than the second edition, considering procedures and costs. If it is not better then the study would end. Jack Jeffrey, Southern Nevada Building and Construction Trades Council, testified. His concern lies with section 101, lines 20 through 22. He disagrees with the deletion of this language explaining loss of strength or sensation can be a serious disability. It has been compensated and should continue to be. He is concerned with the situation arising whereby things which reduce costs are chosen and those that increase costs are eliminated. Bob Ostrovsky, Nevada Resort Association and chairman of the advisory council of the DIR, testified. He explained he has chaired hearings regarding the AMA Guides, fourth edition. Based on testimony from rating physicians and other documentation solicited by the DIR, there seemed to be a comfort level with moving to the fourth edition. He explained the fourth edition increases some costs but reduces others. It depends on the type of injury. He recognized Mr. Jeffrey's concerns and admitted he still has reservations of his own. Mr. Ostrovsky stressed "eventually, we will run out of doctors qualified to do second edition ratings." He supports the language in the bill in hopes of finding more answers. Ms. Krenzer disclosed she works for Sierra Health Services. She is not advocating for nor against and she will not benefit greater nor less. She added to the discussion, her frustration with the fact the DIR has not had more trained rating physicians on any AMA Guide. Mr. Swirczek explained when the second edition was still in print and available, there was training provided to any and all physicians who wished to be on the list of rating physicians. It was provided based upon the second edition. Now, with the second edition being out of print and no other edition recognized, the recognized bodies within the AMA will not provide training. Mr. Swirczek reiterated, "DIR is not going ahead, jumping into adopting the fourth edition or any edition until everybody agrees that it makes sense." Chairman Krenzer asked Mr. Sandoval to get together with the interested parties in subcommittee to discuss this issue. Mr. Bache expressed his desire to adopt the fourth edition. More discussion followed on the provisions of the bill relating to the AMA Guides, fourth edition. Danny Thompson representing Nevada State AFL-CIO, Ms. Myers, Nancyann Leeder, and Stella Marchand with the Dare to Dream Network, all contributed. Chairman Krenzer added Mr. Goldwater to the subcommittee which would address the AMA Guide. After a 45 minute dinner break, Chairman Krenzer called the meeting back to order. She explained the next issue the committee would hear testimony on was pre- existing injuries, found in sections 88 and 116. Cecilia Colling, assistant general manager of SIIS, stated section 88 includes a technical change which defines the word "condition" rather than the word "disability". Lenard Ormsby, general counsel for SIIS, testified. He explained in the Americans with Disabilities Act (ADA), passed in the early 1990's, disability is defined legally as "a mental or physical condition which limits a substantial life activity." While it is not his proposal, he believes the intent of the wording change is to get away from the legal definition of disability. Mr. Nolan asked for clarification of lines 4 and 5 of section 88. Ms. Colling gave as an example, someone with a knee problem. This person injured their knee at a softball game a year ago and has since had an operation. Later, they slightly twist their knee at work requiring another surgery. This would not be a compensable claim. The pre-existing law attempts to clarify when, in a situation like this, the employee is entitled to compensation. Mr. Nolan and Ms. Colling reviewed different circumstances which would and would not be compensable. Ms. Colling emphasized a determination needs to be made on what is primarily the reason for the injury. This determination is made by the claims team after their review of medical information. If they have a question about the information they will do an investigation. Ms. Gruenewald submitted an amendment to section 88. See (Exhibit E). Her amendment adds a new subsection 3, which simply states when the decision to deny or accept a claim is being made, the following factors should be considered. She has heard from managed care organizations, the doctors do not understand how the pre-existing condition should be applied. The feeling is that it is very technical. They requested language be drafted clarifying what they need to look for when making this decision. Mr. Nolan expressed his concern with the word "stable" claiming it was too subjective. His second concern stems from proposed subsection 3b. He stated it puts the physician in a very difficult position of having to make the decision. Ms. Gruenewald stressed it is by no means perfect but you have to start somewhere. In response to Mr. Ernaut's question, Ms. Gruenewald answered this provision does not create a lower or higher standard. Currently, only subsection 1 and 2 exist. Subsection 3 is a guideline and how it would be applied is up to the person using it. Mr. Ernaut emphasized he is unclear as to what this provision would be accomplishing. Being he understands the intent is to provide guidelines, he believes subsection 3 creates as much ambiguity as there is now. Ms. Colling fielded questions from the committee members focusing on specific guidelines in regards to evaluating a pre-existing condition, who should make this decision, the effects of these claims on rates, and SIIS's procedures in dealing with pre-existing conditions. Mr. Jeffrey expressed this amendment seems to have found some middle ground or is at least a start. He stated it is a subjective matter to have a doctor determine a percentage of a problem is job related but at least it gets the doctor involved. Assemblyman Bache suggested it might be easier to amend this section to state if you have a pre-existing condition you are not entitled to benefits. He reasoned the language would then match the current practice. Ms. Colling stated this is not the case. She explained the system looks at situations under, "the last injurious exposure rule". A determination is made as to which employer was most responsible or who is going to accept the responsibility for that claim. She stressed she tries to apply it fairly. Arthur Busbee, Horseshoe Hotel and Casino, testified. He stated he has not heard anyone speak about the difficulty for the doctor to make the determination without the original medical records from the original disability. Ms. Colling asserted Mr. Busbee brings up a good point. She stated in the first visit or two, the ability to go back and look at the records from the first injury might not exist but it is the insurer's responsibility to try to research what the primary cause was. A discussion ensued between Mr. Nolan and Ms. Colling concerning how the proposed section would apply. Ray Badger, Nevada Trial Lawyers, recalled he testified in opposition to the bill but stated he favors the proposed amendment. He explained this is the most heavily litigated area of S.B. 316 in his practice by far. Every judge he has appeared in front of asks what is the resulting liability, to which there are no answers. He approves of the terminology "resulting condition", rather than "resulting disability", and he approves of getting the treating doctor involved. Mr. Badger questioned when doctors are having problems determining what 51 percent means, how can claims people make the decision without any medical input. This amendment addresses this. Responding to Mr. Hettrick's inquiry, Mr. Badger expressed this amendment includes items to consider. If one answers yes or no to subsection 3a, it does not mandate a decision. Mr. Badger explained he thought it was to encourage physician input not to have the physician make the ultimate decision. Lenard Ormsby declared the only thing this amendment does is change the percentage. Rather than litigating over whether it is 51 percent or more, now litigation will occur over the whole 100 percent factors because the participating doctors will argue over apportionment. "It will not eliminate litigation in any way, shape, or form." Mr. Ormsby expressed the other troubling factor is obviously, if the insurer denies a claim because of pre-existing conditions the appeal rights are there. This will now be determined by doctors. He expressed disapproval of the whole amendment as he does not see how it will resolve anything. After a request for clarification, a colloquy developed between Mr. Carpenter, Mr. Badger and Ms. Colling. Mr. Hettrick suggested in subsection 1b, after "the subsequent injury is", inserting "medically determined to be the primary cause of the resulting condition." and striking subsection 3. Mr. Badger expressed his desire to replace "medically" with "a physician". This would prohibit the opinion coming from a R.N. or L.P.N. who many times does not see his client. Mr. Hettrick does not have a problem with Mr. Badger's suggestion and would like to hear the system's opinion on his amendment. This would get the physician involved, it gets away from all the subjective terms and conditions, and if there is disagreement it is still sure to go to an appeal. Chairman Krenzer reminded the committee if they can agree on an idea conceptually, bill draft can draft language. Ms. Colling asked if the committee would accept suggested language from her if it had been approved by the other interested parties, such as Mr. Badger. Ms. Krenzer replied yes, she would. Mr. Dan Williams stated he fell twelve feet backwards with 1200 pounds of steel in his hands. He emphasized his wish to see the pre-existing statute completely deleted. However, he does agree with involving a physician to document whether or not the damage is from a pre-existing injury. He also pointed out his concern with injuries such as soft tissue injuries not being considered. Stella Marchand, Dare to Dream Network, testified she does have a pre-existing industrial condition. She explained at one time her hands were numb. If she was to go to work, her hands are numb and she burns herself, she would be "out of luck." Chairman Krenzer explained the committee will be addressing subsequent injuries. She stated a person with a pre-existing condition can qualify for subsequent injury fund and be covered. The Chair closed the hearing on these sections and said the committee would now hear testimony on vocational rehabilitation, sections 95, 98, and 100. Kim Van Dyck, certified rehabilitation counselor for James Wilcher & Associates, Inc., testified. She drew attention to some statistics she provided to the committee. See (Exhibit F). The statistics are a good indication of the success rate of vocational rehabilitation in the private sector. She explained the sampling was done using firms from both southern and northern Nevada over a twelve- month time frame. Success is defined as an injured worker who is re-employed as a result of vocational rehabilitation. Her sampling shows the success rate to be at 65 percent. The statistic with the inclusion of the lump sum benefit showed a success rate of 70 percent. The one area which showed a change is the average cost per case. It went up by approximately $1000 per case. She expressed this is money well spent. (Exhibit F), also displays a list of some of the jobs in which injured workers have been placed. She pointed out many of them are high demand/high growth occupations. Mr. Ernaut asked for clarification of Ms. Van Dyck's statistics. She explained the closed case total is representative of the all of the cases closed among the firms for the twelve-month period. This would include cases closed due to medical issues which needed to be addressed. These cases were closed with regards to vocational rehabilitation. The statistic shown for total cases analyzed does not include lump sum figures or cases that were interrupted. Mr. Ernaut and Ms. Van Dyck engaged in a discussion pertaining to the reported statistics. Jim Wilcher, James Wilcher & Associates, Inc., testified. He explained, typically in the lump sum award, it is a negotiable item considered to be a discount many times. Therefore, the money received is not ample to fund a rehabilitation program. Those people who have received a lump sum usually take care of personal factors first. The remaining portion is left for rehabilitation but is usually not enough. Mr. Ernaut inquired what is the point of a lump sum award for vocational rehabilitation? Ms. Van Dyck stated it is her opinion there are instances where a lump sum can be useful but they are rare. If individuals are nearing retirement age, a lump sum will probably be appealing. Ms. Van Dyck pointed out a couple other situations where lump sums are a positive thing. Jack Jeffrey came forward again to clarify the reason for the lump sum buy-out with regards to vocational rehabilitation, is primarily to address people who are in a position where it is not advantageous for them to be rehabilitated. He reiterated the instances iterated by Ms. Van Dyck. Mr. Ernaut expressed concern with the majority of the cases being people who are using their lump sum as compensation. Mr. Jeffrey explained if the SIIS or the self-insured does not feel it is in the best interest of the injured worker or themselves they just have to say no. This decision is not appealable. He emphasized this was requested because they did not want the decision being made because the person needs a $1000. Mr. Nolan stated it is his opinion a lump sum award is not the same as vocational rehabilitation. He inquired as to why these are interchangeable. Mr. Jeffrey summarized the history of vocational rehabilitation, concluding, "when the buy-out came along, it was partly to replace the historical effect of the tradeoff and it was probably even more to get the guy out of the system." It saves the system and the self-insurers money because they did not have to pay for a rehabilitation program which was many times only to let a person "mark time". Mr. Nolan expounded, currently, the entire section on vocational rehabilitation has been repealed and has been replaced with a proposal to increase the amount of the lump sum or the PPD to those who would have otherwise been rehabilitated. He stated he does not necessarily agree with this. He does believe there are people who can benefit from vocational rehabilitation. Therefore, he suggested permitting vocational rehabilitation with the caveat it is signed off by both the employer and the employee. He believes it should not be lump summed out, either a person is eligible for it and participates or not. He expressed his desire for the committee to consider this proposal. Mr. Jeffrey stated he would oppose the entire concept. He believes the injured worker has given up a cash benefit to gain the option of vocational rehabilitation. If they are now going to lose this option, they should get a benefit back. As far as the whole issue is concerned, he does not support what is in S.B. 458 at the present time. Mr. Jeffrey asserted there has been enough success to maintain vocational rehabilitation. He also pointed out the Senate's proposal exacerbates the following argument: the present PPD award is unfair to the people who are severely injured and generous to those who are not because impairment is being paid for rather than disability. His reasoning is now the benefit which helps the severely injured is being taken away and is being given to those who did not need vocational rehabilitation to begin with. Stephen Shaw, administrator of the Rehabilitation Division, Department of Employment, Training and Rehabilitation, testified. He explained the different programs offered by the Rehabilition Division, the largest being the Bureau of Vocational Rehabilitation. It is the longest, on-going program in the United States. Seventy-eight percent of the program is federally funded and the other 22 percent is through the state general fund. They have 111 full-time equivalents in the program, a $10.6 million budget, and 37 counselors statewide. He explained S.B. 316 tightened the eligibility for vocational rehabilitation, increasing his number of applicants. He had a 145 percent increase in the first ten months of the fiscal year. He is gaining workers' compensation rehabilitation cases at 3 percent per year. He estimates if vocational rehabilitation is repealed in its entirety, there will be approximately 2,800 people eligible for his services. Currently, they serve 5,800. He believes this tremendous amount will "sink" his system. Chairman Krenzer thanked him for his testimony. She informed the committee they would now move on to address the subsequent injuries, sections 23-31 and 81-84. Ron Swirczek, administrator of DIR, testified. He stated these provisions were submitted by the Nevada Self-Insured Association (NSIA). He explained, currently, there are two self-insured funds in effect. One is administered for the employers under SIIS and the other which is currently administered by DIR for the self-insured employers. Under the proposal made, with DIR's administration, he reviews, verifies, and documents the propriety of all requests for payments against the fund. It is a trust fund established by statute. With the proposal by the NSIA, DIR would still review all requests for reimbursements against the fund but then they would merely make a recommendation to the newly established board. The board is addressed in sections 23 through 26. The board may then accept the DIR's recommendation or reverse it. Sections 82 and 83 continue to address the implementation of the board and the recourse available to the self-insured if their request is denied. Mr. Swirczek explained, now instead of going to the appeals officers, they would go directly to district court. He stressed this brings up a question that was not asked in the Senate Committee on Commerce and Labor. This question is who is going to be legal counsel for this board? Mr. Swirczek continued with section 29. It establishes a third subsequent injury fund for group self-insureds or associations. Sam McMullen, Nevada Self-Insured Associations, concurred with what Mr. Swirczek presented and expressed a willingness to answer any questions. Arthur Busbee, Horseshoe Hotel and Casino, testified. He noted the one thing which has not been brought up is the self-insured fund for subsequent injuries is a fund the self-insureds, alone, contribute to. They have had concerns with allowing DIR to make decisions as to how their money is spent and this is why they requested a separate subsequent injury fund board be established. Mr. Jeffrey mentioned the reason the fund was first established was to try to help people who had been injured get back to work and allow a new employer to have no liability at least for the part of the claim based on the previous injury. He stated he does not believe it has worked. The reason is there are "sophisticated employers who use sophisticated people familiar with the system, have been able to get claims covered under the subsequent injury fund that all employers in the state pay for." Ms. Krenzer expressed it is her understanding the subsequent injury fund has been very successful because it is broad-based and everyone pays equally into it. It has resulted in more injured workers returning to work because employers do not feel penalized by hiring someone with a pre-existing condition. Mr. Jeffrey replied he is unaware of many employers who even know the fund exists. The ones that are familiar with it seem to know how to take advantage of it. Mr. McMullen interjected, "I do not think that has anything, specifically, to do with breaking the self-insured funds out or not and his reference to all employers paying for it is not correct when you talk about self-insured only." He stated the driving force for the fund is to get the employer's expertise applied to the funds so they work. They will know of them and be able to rely on them. Nancyann Leeder, Nevada Attorney for Injured Workers, testified. She pointed out the way these provisions read, if you are insured through an association, your appeal would be to the district court. If you are self-insured, your appeal would also be to the district court. If you are SIIS insured, under section 81, your appeal would be to the appeals officer. Ms. Leeder explained because there are instances where she does get involved in the appeals process, her agency would be negatively impacted by having to go to the district court being it is far more expensive. Mr. Swirczek replied in regards to the self-insureds, the intent was for the board to replace the appeals officer. There are approximately 200 employers of which there monies are combined within this fund, only to be expended in terms of the trust. Because it is the self-insureds money, they would have the opportunity to make that decision among themselves as to whether it was a valid claim. If they decided it was not valid it would move directly to district court. Mr. Goldwater asked if this was, "the fox watching the chicken coop." Mr. Swirczek referred to the provisions in section 82, page 33. Currently, DIR makes sure any monies expended are made in accordance with NRS 616.427 and 616.428. With the approval of the new provisions, the board will establish rules and regulations for the administration of this particular fund. If all self-insured employers agree with that, they will police themselves. Mr. McMullen clarified in regards to establishing rules and regulations, this applies only to the process and procedures before the board. The rules and regulations relating to payouts of subsequent injury funds are statutory. It is still a level playing field. He also clarified the board can only act upon the recommendation of the DIR. Chairman Krenzer stated the meeting will continue in the form of a subcommittee. The next issue the subcommittee would address is out of state business, section 73. Ms. Colling summarized section 73 of S.B. 458 deals with a provision included in S.B. 316. At that time, she worked for the Economic Development Commission who was the agency which proposed this language. It was intended to be an incentive to the diversification efforts and should have applied to manufacturing and other types of primary jobs. She explained, at the same time, a law was passed for construction which stated out-of-state construction companies should not be given an advantage. Since then problems have arisen concerning how to handle situations where there are temporary employers in Nevada who are asking to transfer their experience. There have also been problems with employers having offices in seven or eight states wanting to pick one "e mods." The statute does not give her the authority to establish regulations which define how this works. Section 73 establishes a tool for SIIS to regulate and define how experience modifications from other states are transferred in and explains it should not take place for companies who are in the state temporarily bidding on projects. Ms. Colling proceeded to move to the sections regarding benefits, focusing on section 37. She explained the proposed changes came about because of employees' concerns they were not being treated by the SIIS for exposures. In SIIS's opinion, airborne diseases such as mononucleosis, the flu and chicken pox could all be the result of an exposure. These should not, necessarily, be compensable. Ms. Colling stated if this was to be spread to all types of contagious diseases, it would be very expensive. She thinks it is appropriate for HIV and hepatitis B or C. Mr. Nolan acknowledged he has some problems with this portion of the bill the way it is written, having been a risk manager for a medical provider. He pointed out emergency health providers are exposed to a plethora of medical problems. He stressed it is his opinion, these employees who have an identifiable exposure and a proven relationship between that exposure and their disease, should be compensated. Ms. Colling clarified her concern is paying for the testing. If it can be established that a relationship between an exposure and contracting the disease is work related, then it is a compensable injury. She expressed this is dealing more with preventative medicine. Mr. Nolan and Ms. Colling engaged in a discussion concerning the limits and effects of this change in the provision. Mark Balen, representing the professional firefighters, and speaking for Andy Anderson who represents the Police Protection Association, testified. He feels section 37 has severely hampered them and limits them to three diseases they can be compensated for. He explained the verbiage, "a contagious disease while providing medical services, including emergency medical care", should be put back into the law for police, firefighters, and those health care providers who deal with blood-born pathogens and airborne pathogens on a daily basis. He declared to wait until a person develops the full blown disease, exposing his family and his co- workers is ludicrous. Chairman Krenzer formed a subcommittee of Assemblymen Nolan and Manendo to address this issue in detail. Arthur Busbee offered a different perspective of this issue. The Occupational Safety and Health Association (OSHA), has the blood-born pathogen standards in place. They require preventative medication for hepatitis B and follow-up testing for HIV for the lifetime of the employee be administered. The result of this provision is transferring the costs of the testing from the private employer to the SIIS. This will mean a significant fiscal impact. The Horseshoe Hotel vaccinates workers for the hepatitis B virus as a preventative method at $150 per employee. He stated the statute in place is enforceable by OSHA. Chairman Krenzer thanked Mr. Busbee for his testimony and invited him to participate in the subcommittee. She informed the remaining audience the last section to be addressed tonight is section 8. It deals with the confidentiality of records. Mr. McMullen explained section 8 was requested by the self-insurers, in order to address the confidentiality of financial or business information. Their concern is that by filing this information with the Division of Insurance (DOI), it could at some point become public record and be passed out. Mr. McMullen stated he does not have a problem with it being utilized for the proper administration of the chapter but does have a problem when it is used for extraneous purposes or anything else not directly related to the administration of the chapter. After discussing the proposed section 37 with the DOI, these amendments were agreed upon. See (Exhibit G). They alleviate the concerns of the DOI and the NSIA. Mr. McMullen proceeded to review the proposed amendments. For the record, he stated for publicly traded companies this protection probably is next to nothing because a lot of this information would already be disclosed. The issue for the NSIA was those companies who either by corporate or partnership form were closely held and not publicly traded. There needs to be some security about that information. Mr. McMullen concluded these amendments would not restrict the DOI from utilizing it in the course of their normal administration. Eloise Koenig, self-insurance coordinator with the DOI, said she sees no problem with these amendments. She concurs with Mr. McMullen this type of information should be held confidential. Mr. Goldwater asked if these amendments had been reviewed by the Division of Employment and Security. He acknowledged they had written him about concerns with the issue of confidentiality relating to their funding as far as the Department of Labor. Mr. McMullen replied they have not spoken with them but he will be happy to make contact with them. Mr. Busbee interjected he represents one of the few self-insured companies who is privately held by family members. He has been concerned his information might become public in some manner through the DOI. Chairman Krenzer asked if there were any further questions from the committee members. Seeing none she closed the hearing on S.B. 458. With that, the meeting was adjourned at 9:05 p.m. RESPECTFULLY SUBMITTED: Jennifer Carnahan, Committee Secretary Assembly Committee on Labor and Management May 30, 1995 Page