MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session January 17, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:30 a.m., on Tuesday, January 17, 1995, in Room 227 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Randolph J. Townsend, Chairman Senator Ann O'Connell, Vice Chairman Senator Sue Lowden Senator Kathy M. Augustine Senator Raymond C. Shaffer Senator Bernice Mathews Senator Joseph M. Neal, Jr. STAFF MEMBERS PRESENT: Sheri Asay, Primary Secretary Beverly Willis, Committee Secretary Molly Dondero, Committee Secretary Terri Spraggins, Committee Secretary Scott Young, Senior Research Analyst OTHERS PRESENT: Douglas Dirks, General Manager, State Industrial Insurance System (SIIS) Cecilia Colling, Assistant General Manager, Northern Regional Offices, State Industrial System (SIIS) Robert A. Ostrovsky, Nevada Resorts Association Alice L. Molasky, Insurance Commissioner Eloise Koenig, Self-Insurance Coordinator, Division of Insurance The meeting was opened by Chairman Townsend who stated the first responsibility was to adopt Committee Rules (Exhibit C) stating copies were available to the committee members as well as to the public. Chairman Townsend proceeded to read the first rule which states all meetings shall be open to the public. Senator Townsend stated the regular meeting room would be room 119. SENATOR O'CONNELL MOVED TO ADOPT THE RULES FOR THE SENATE COMMITTEE ON COMMERCE AND LABOR. SENATOR MATHEWS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator Townsend explained the schedule for the next few weeks, stating that, hopefully, teleconferencing would be available for southern Nevada. Douglas Dirks, General Manager, State Industrial Insurance System (SIIS) testified, with a general overview of workers' compensation. Mr. Dirks stated SIIS now has a positive cash flow, with the caseload on the decline. Mr. Dirks went on to note implementation of changes brought about by passage of Senate and Assembly bills last legislative session had been an enormous task. He stated a major achievement was taking reforms and building them into the existing system. Other changes noted by Mr. Dirks was the change from 3 years of a negative cash flow to a positive cash flow with continuence projected during the current fiscal year. On November 6, 1993, SIIS converted to a new claims system, a change that had been in the works for 5 years. At the time of conversion, over 54 million files were converted. A new claims reserving system has recently been implemented. This program reviews all lost-time claims and establishes a reserve based on the experience of SIIS. The system can access all active claims in about 24-minutes. A new financial accounting package is expected to be running in about 30 days. This is a move to provide accurate financial statements on a monthly basis. These new programs will enable SIIS to provide accurate financial information monthly. Senator O'Connell was interested to find out from Mr. Dirks if the new reserve system could help an employer monitor the claim from an employee without having to search through several different offices or having to wait prolonged periods of time. Cecilia Colling, Assistant General Manager, Northern Regional Offices, State Industrial System (SIIS), explained this was possible. Robert Ostrovsky, Nevada Resorts Association, stated he felt the problem was finding specific information on treatment programs. He felt the Managed Care Operators (MCO) had that type of information. Senator Lowden wanted to know why treatment information could not be obtained directly from an MCO. Ms. Colling noted it was possible since an MCO provided information once a week to SIIS. This information is available to employers upon request. Senator O'Connell asked who was the source to direct complaints regarding availability of treatment information. Ms. Colling noted the contact was Debra McBride, Head of the MCO Unit. Senator Mathews asked the turnaround time on obtaining treatment records. Twenty-four hours was the answer from Ms. Colling. Mr. Dirks stated emphasis was being placed on education of claims processors, as well as direct communication with employers in order to facilitate claims processing. According to Mr. Dirks, it is the aim of SIIS to provide the highest quality of service. At this time, Mr. Dirks mentioned he had handouts showing the trend towards self- insurance, which he planned to share later in his presentation. He felt employers were leaving SIIS because they were fearful of the financial system. Mr. Dirks wanted to make sure it was known, SIIS was working their way out of this dilemma. Senator Shaffer stated his belief that the reason people were leaving the system was because they could not afford it. Senator O'Connell asked if SIIS had a program to promote a preferred workers' program where workers would be pooled if the present employer does not have a way for them to return to work or a job for them to return to work. Senator O'Connell suggested Mr. Dirks review a bill from last session (Senate Bill (S.B.) 510 of the .Sixty-seventh Session) addressing this situation. Mr. Dirks stated he would be happy to do so. There was a discussion between Senator Neal and Mr. Dirks regarding the liability of employers should the employers decide to self-insure. Mr. Dirks stated he felt under the present workers' compensation law, employers would still have protection from a lawsuit. Senator Neal wanted to know how employers would be affected if they were no longer protected by SIIS. Mr. Dirks noted he felt it would make self-insurance less attractive if employers were subject to general court law. At this time, Mr. Dirks presented several Exhibits. Exhibit D, Exhibit E, Exhibit F, Exhibit G and Exhibit H. A detailed discussion took place between Senator Neal, Senator Townsend and Mr. Dirks, concerning these exhibits. The next order of business was the introduction of Alice Molasky, Insurance Commissioner. Ms. Molasky presented Exhibit I, a memorandum with an overview of the functions of the Division of Insurance in regulating workers' compensation insurance. This includes an organizational chart of the Insurance Division, as well as a self-insured workers' compensation section, Ms. Molasky gave a detailed explanation of the various segments of her memorandum. Senator Townsend clarified some points on the purpose of section 36 in the SIIS legislation regarding self-insured groups for Ms. Molasky. Senator Lowden inquired as to the cost of the application process for various groups who might want to be self-insured. Ms. Molasky replied the only cost was a nonrefundable application fee. Ms. Molasky then presented and gave an explanation of Exhibit J, a proposed regulation of the Commissioner of Insurance. Senator O'Connell asked Ms. Molasky to check on the reasons for the removal of the wording "if collateral is required by the bonding company, it must be maintained in depository in this state." Senator O'Connell stated she felt this was a very important point. Senator Shaffer posed the question as to whether one parent company could own or control more than one MCO. Eloise Koenig, Self-Insurance Coordinator, Division of Insurance was available to answer Senator Shaffer's question. Ms. Koenig stated there is nothing in the law to keep one parent company from owning more than one MCO. Ms. Koenig went on to say there can be no similarity of contract with SIIS. Mr. Dirks came forward to answer the question from Senator Neal regarding payment of the MCOs by SIIS. Mr. Dirks noted MCOs were paid by contract on a per member per month basis at the close of each month. Mr. Dirks gave an in- depth explanation of costs incurred on claims. Senator Lowden asked Mr. Dirks if the number of mandatory MCOs was reduced in the statutes, would he think that SIIS could become more competitive price- wise with the MCOs and reduce the projected cost. Mr. Dirks replied he felt that would bepossible. Senator Lowden stated for the record, "that number of MCO's did not come from this committee." Ms. Molasky gave Senator Neal an explanation of why two self-insured employers had been decertified in 1994. She went on to say there had been no involuntary decertifications in 1994. Chairman Townsend described pending subjects for future hearings. There being no further business, the meeting was adjourned at 10:25 a.m. RESPECTFULLY SUBMITTED: Beverly Willis, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor January 17, 1995 Page