MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session January 19, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:30 a.m., on Thursday, January 19, 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 John B. (Jack) Regan Senator Joseph M. Neal, Jr. STAFF MEMBERS PRESENT: Beverly Willis, Committee Secretary Scott Young, Senior Research Analyst OTHERS PRESENT: Attorney General Frankie Sue Del Papa Kevin Higgins, Director, Workers' Compensation Fraud Unit David F. Sarnowski, Chief Deputy Attorney General, Criminal Justice Division Douglas Dirks, General Manager, State Industrial Insurance System (SIIS) Cecilia Colling, Assistant General Manager, State Industrial Insurance System Gayle Sherman, Chief Benefit Services, State Industrial Insurance System Frankie Sue Del Papa, Attorney General, was first to testify. Ms. Del Papa presented Exhibit C and gave a detailed explanation. This exhibit dealt with the Workers' Compensation Fraud Unit for fiscal years 1994 - 1995. Senator O'Connell inquired if the attorney general was able to monitor cases where the employee has left the state, but is still collecting from both the employer and State Industrial Insurance System (SIIS). Ms. Del Papa stated there are a number of these types of cases, however, it is much more difficult to keep track and get records when people cross state lines. Senator O'Connell then inquired if there were any successful conclusions to cases of this nature. Kevin Higgins, Director, Workers' Compensation Fraud Unit, State Industrial Insurance System (SIIS) noted there were, especially if claimants might lose substantial amounts of money. Ms. Del Papa continued with her testimony on Exhibit C, Mr. Higgins praised the attorney general for her comprehensive coverage of Exhibit C. He went on to say the fraud unit was successful, but would be grateful for additional resources, i.e., more investigators. Next to testify was David F. Sarnowski, Chief Deputy Attorney General, Criminal Justice Division. Mr. Sarnowski stated, in order to have the most complete coverage, the fraud unit worked with many other law enforcement agencies, both in and out of the state of Nevada. They also work with regulatory officials from a variety of public service agencies. Ms. Del Papa, Mr. Higgins and Senator Neal had a conversation clarifying points in Exhibit C. In answer to an inquiry regarding refunds, Mr. Higgins referred Senator Lowden to page 7 of Exhibit C. Mr. Higgins stated one of the changes that is being sought, is the retention of excess funds, as opposed to these excess funds going into the General Fund at the end of the fiscal year. On the same note, Senator Townsend inquired why, since funds are paid by premium payers, is the money not given back to the premium payers instead of going into the General Fund. Mr. Higgins replied he did not know. Senator Lowden made further inquires of Ms. Del Papa regarding further premiums and their dispensation. Senator Lowden asked if further funds would come from another assessment, from self-insureds and employers. Ms. Del Papa said that was correct. Senator Lowden asked for clarification stating she understood the fraud unit would be self-sustaining, there would be a one time assessment and was curious why more money was being sought. Ms. Del Papa indicated it was because of heavy caseloads and a backlog of cases. Mr. Higgins gave further explanation. Ms. Del Papa went on to say more personnel were needed simply because of growth and size of the state. There was further discussion between Ms. Del Papa, Senator Townsend and Senator O'Connell regarding new personnel and new equipment that might be obtained. Senator Lowden reiterated her objections in asking employers of Nevada to pay anything more when they are paying top dollar now and she felt if the fraud unit could not sustain themselves, she could not back asking more money from the employers. Next to testify was Douglas Dirks, General Manager, State Industrial Insurance System (SIIS). Mr. Dirks opened by stating the Governor's Biennial Report to the Nevada State Legislature January 1995 (Exhibit D) would be given to the committee for their perusal at a later date. Mr. Dirks then presented Exhibit E. This document will be developed to be the business plan for SIIS. Exhibit E contains two components. The first are items that may need to be addressed statutorily. The second component are items needed to be addressed operationally. Opening his presentation on page 27 of Exhibit E, Mr. Dirks proceeded to start his explanation. He stated there were technical items for the committee's review that would make for more efficient operation. Mr. Dirks stated SIIS was asking for a 2-year moratorium on the provision of pooled self-insurance. Mr. Dirks noted it was felt this was necessary in order to get SIIS in a positive cash situation. There were a number of questions regarding Managed Care Organizations. Geographic parameters and clarification regarding the date managed care went into effect were among the most urgent. Another was being able to transfer funds by wire transfer instead of always by check. The payment of premiums monthly, quarterly or yearly was another point brought forth. There were a number of other clarification issues as noted in Exhibit E. Senator Lowden stated she felt SIIS was well over reserve and was fearful of self- insured because of lack of premiums. She went on to state several cases of over reserve. Mr. Dirks gave an explanation of reserves. Case reserves are when there is a reserve set on every claim. Another type of reserve is aggregate where the actuary looks at the overall trends as opposed to claim data. Mr. Dirks further stated he was not anxious to have people in SIIS who did not want to stay. However, he noted he had a fiduciary duty to policyholders to assure the system stays afloat. There was further discussion on this matter between Senator Lowden and Mr. Dirks. Senator Neal stated he has a problem with employers wanting to self-insure and still be provided with the cushion of protection from responsibility, by the State of Nevada, in case of lawsuit by employees. Senator Townsend told Mr. Dirks self insurance was not going to become a stumbling block for the committee. He stated the committee's purpose was to set policy for SIIS for the next 2 years, as well as self-insurance. Senator Townsend went on to say the committee must not lose sight of the goal which was a continuation of workers' compensation reform and financial stability for SIIS. Senator O'Connell asked Mr. Dirks to investigate the possibility of including a preferred workers' employee program in future recommendations for SIIS. Senator O'Connell felt this is a very good program and a money saver. Senator O'Connell also mentioned the safety issue regarding the people who are put in the "unfortunate 500" category. Senator Townsend announced he was handing out a list of subcommittees, which each member had signed up for. There being no further business, the meeting was adjourned at 10:30 a.m. RESPECTFULLY SUBMITTED: Beverly Willis, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor January 19, 1995 Page