MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session February 6, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 1:50 p.m., on Monday, February 6, 1995, in Room 2609 of the Grant Sawyer State Office Building, Las Vegas, 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 Jack Regan Senator Joseph M. Neal, Jr. STAFF MEMBERS PRESENT: Scott Young, Senior Research Analyst Vance Hughey, Senior Research Analyst Molly Dondero, Committee Secretary OTHERS PRESENT: Samuel P. McMullen, Lobbyist, Las Vegas Chamber of Commerce/Nevada Self Insurers Association Bob Ostrovsky, Lobbyist, Nevada Resort Association Larry Zimmerman, President, CDS of Nevada J. Michael McGroarty, Attorney, Associated General Contractors James J. Kropid, Las Vegas Chamber of Commerce Douglas Dirks, General Manager, State Industrial Insurance System Kevin Spilbuy, President, Employers of Nevada Lynn Grandlund, President, Grandlund, Watson, Clark and Associates, Lobbyist, Employers of Nevada Brandy Hicks, Office Manager, Gilmore and Martin Construction Glenn V. Greener, President, Adminstrative Law Centers, Inc., Arthur L. Busby Jr., Benefits Administrator, Horseshoe Club Patricia A. Law, President, American Settlement Corporation Richard Tetreault, Assistant General Counsel/Risk Management, Southwest Gas Corporation Senator Townsend opened the hearing with an introduction of the committee members and staff and a welcome to the people of Las Vegas. Samuel P. McMullen, Lobbyist, Las Vegas Chamber of Commerce, Nevada Self-Insurers Association, presented Exhibit C (Workers' Compensation Reform Proposals). Exhibit C is a detailed presentation of 80 proposals for workers' compensation reform. He stated the input for reform was given by various state agencies, the Nevada Trial Lawyers Association, and the Office of the Attorney General's Fraud Unit. Mr. McMullen discussed proposals 1-7. Bob Ostrovsky, Lobbyist, Nevada Resort Association, explained proposal 7. He stated the current law is unclear about what would happen to current benefits acquired by claimants since the last legislative session. Mr. McMullen continued with his presentation of Exhibit C. Mr. Ostrovsky stated the law now requires the claimants records to be kept in the state. These records are not the injury records, but are the records of employment for payroll audit purposes. Large employers with corporate headquarters located out of state centralize their records. Mr. Ostrovsky stressed it was their intent, with these proposals, to keep those records available in a timely fashion to the state. Mr. McMullen continued with his presentation of proposals 25-30. Mr. Ostrovsky stated the current law allows for appointment of the hearings and appeals officers without spelling out any required qualifications. Many of the appointees have little or no experience with workmen's compensation laws. Proposal 30 would set minimum qualifications. Mr. McMullen discussed proposals 31-32. Mr. Ostrovsky commented on proposal 33. He stated there are some representatives who are not licensed in the state. He stated: We believe that this was the original intent of the Legislature when this language was put in, to allow members of the Nevada Bar, or otherwise, union representatives to assist the claimant or the claimant can always speak for themselves. We saw this as a loophole in the law. We would like to close [it]. Mr. McMullen continued with his presentation of Exhibit C. Proposal 34 was discussed. Mr. McMullen stressed 34 did not deny payments automatically. It shifts the burden of proof to the claimant. He discussed proposal 35 and 36 dealing with managed care. Mr. Ostrovsky commented on the 20-mile rule. He pointed out that some managed care companies have discovered when someone enters the managed care system and is referred to a specialist outside the 20-mile limit then managed care is over. Decisions should not be made based on treatment available within the 20- mile radius. Mr. McMullen discussed proposals 38-39. Mr. Ostrovsky explained proposal 38. Currently, if the number of Managed Care Organizations (MCOs) falls below the required number all the MCOs then are out of business. He explained there is no provision in the law to allow for a contract with a new MCO to fill the space of one that has left. Mr. McMullen gave an overview of proposals 40-41. Larry Zimmerman, President, CDS of Nevada, stated proposal 41 specifically deals with claims which were closed prior to June 18, 1993. An older claim, if reopened would be allowed to be managed by an MCO. He corrected the words "manager's discretion" to read "Insurer's discretion." For proposal 42 he emphasized the need to recognize the date June 18, 1993. There are claims which fall in between the June, 1993 date and the January, 1994 when MCOs began operation. Mr. McMullen continued with discussion of proposal 42. Mr. Ostrovsky emphasized proposal 42 deals with the administrative services of the MCO. Medical services are a separate issue. Mr. McMullen continued with the discussion of proposals 41-48. Mr. Ostrovsky explained proposal 48. He stated there was a new minimum benefit level for prior pensioners under the provisions of prior legislation. He stated there was a provision requested to increase the pensions for survivors. It did not increase the pension for the pensioner. He stated they support a provision to give the pensioner the same increase a surviving spouse or dependant would receive. He stated he felt it was the original intent of the committee to include the pensioner in the law. Mr. McMullen continued with page 6 of Exhibit C. Mr. Ostrovsky discussed proposal 49. He stated there are cases where individuals have received no permanent impairment rating, but were ordered by the appeals officers to be in rehabilitation. He stated they felt that was inappropriate and if someone has no impairment there is no reason for that person to not return to the prior job. Rehabilitation is not necessary. Mr. McMullen commented on proposal 50 stating survivors should receive the benefits regardless whether the injured worker opted for a lump sum or installment payments. Mr. Zimmerman discussed proposal 51. He stated the Permanent Partial Disability (PPD) award is based on the average monthly wage. He stated the freeze should be maintained. Mr. McMullen discussed proposal 52. Mr. Ostrovsky reminded the committee of proposal, 31 capping attorney fees. He stated the Texas system, which is a graded system, restricts the percentages an attorney might take from an award. He explained how 31 would effect 52 by limiting the amount of dollars available to pay attorney fees. Mr. McMullen continued with a discussion of proposals 53-54. J. Michael McGroarty, Attorney, Associated General Contractors, explained proposal 54 would add "a bit of risk for a claimant on an additional rating so that the best motions of multiple ratings would be used to calculate the PPD rather than the worst motion as is done now, so you keep shopping until you find the worst motion." Mr. McMullen continued with discussion of proposals 55-63. Mr. Ostrovsky stated the rating problem addressed in 56 has been around a long time. The injured worker too often shops for the highest rating rather than the right rating. He commented further on proposal 60 stating they were requesting a substantial change. He stated currently awards are paid out at the end of the process when an injured worker is stable and rateable. The person then receives the award and goes into rehabilitation. He stated they believe a person should receive the final payment (the PPD award) after rehabilitation is complete. Until that payment has been made, the person is still part of the system which is providing benefits. Mr Ostrovsky discussed proposal 64 which was asked for by the Nevada Trial Lawyers Association. Mr. McMullen continued with proposals 65-69. Mr. Ostrovsky commented on proposal 69 stating there had been changes made in prior legislation which put restrictive limits on whether or not a claim could be reopened in the first year after closure. He stated it should be changed to 5 years. He stated they need more time and a year is not enough. He said too many claims close just to get the PPD award and then are reopened within a week. Mr. McMullen continued with discussion of proposals 70-74. Mr. McGroarty commented that proposal 75 sought to clarify the rehabilitation and lump sum payment issue. Some claimants have multiple claims. Proposal 75 would limit those claims to once in a lifetime. He stated there should be language in the proposal to allow for a change of circumstances which might make a person eligible for a second claim. Mr. McMullen read proposal 76. He commented there should have been included in the proposal the phrase, "if there is an acceptance in writing then that should be allowed as well where the claimant can say that they adequately think that is reasonable accommodation for them." He discussed proposals 77- 79. Mr. McGroarty explained proposal 79 came about because of a particular case. He stated a claimant wanted to have a rehabilitation program, but went back to work in a temporary position, threatened the supervisor with a gun, was terminated from the position, then given rehabilitation. Mr. McMullen concluded the presentation with proposal 80 and a discussion of the last page of Exhibit C. Mr. Ostrovsky commented on group self-insurance and how it relates to the State Industrial Insurance System (SIIS). He referred to a previous statement he had heard from SIIS where they felt their financial recovery would be hampered if the promised small group self-insurance is allowed to continue in the state. Mr. Ostrovsky stated from the Nevada Resort Association's point of view, they believe what is necessary is to evaluate the proposals presented at the hearing. He states the association does not support the concept of cutting benefits as is shown in proposal 4. He stated there are alternatives available to improve the delivery of medical care. He felt the reforms presented would be adequate to support group self-insurance. Senator Townsend asked if the majority of the recommendations from the business plan 95 made it into Exhibit C. Douglas Dirks, General Manager, State Industrial Insurance System, stated most of the new business plan proposals were incorporated into Exhibit C. The main difference was the moratorium on self-insurance. Senator Townsend asked how long it would take to assign numbers in regard to the proposals. Mr. Dirks stated some evaluations have already been done. Some would take a long time to evaluate. Some would be impossible to evaluate. Senator Neal asked if the testifiers were representing the employers and the insurers with the proposals. Mr. Ostovsky stated they were. Mr. Dirks stated not everything in the proposals is in the SIIS business plan. Senator Neal commented he felt the proposals gave SIIS a lot of discretionary powers. Mr. Dirks stated he was an observer to the development of the proposals. Senator Neal questioned proposal 34. He stressed the phrase "in any amount." He commented since the shift in the burden of proof would be on the employee, would it make it easier to make an adverse finding against an employee. Mr. McMullen stated the law currently allows for the shifting of the burden of proof. The new proposal would try to make some definition about the level of drug usage that relates to the creation of a rebuttable presumption. Currently the law is subject to confusion and interpretive problems trying to apply intoxication to the issue of controlled substance. Senator Neal questioned proposal 42. He asked what effect there would be due to that change. Scott Young, Senior Research Analyst, answered the question. He explained when the dispute resolution procedure was put in the Managed Care Organizations (MCOs), it was felt the procedure would substitute for the informal hearing. If the worker did not like the dispute resolution within the MCO, then the worker could continue to the appeals officer level. Mr. Young stated: Unfortunately, when the statute was drafted it actually included the statute that encompassed going to the hearing officer. So if you followed the statute literally, you would go to the MCO dispute resolution process, then to the hearing officer, then to the appeals officer. It was clearly meant to bypass the hearing officer and substitute the dispute resolution at the MCO at that stage. Mr. McMullen clarified that the dispute resolution procedure inside the MCO was a recognition that experts ought to be able to agree and the right treatment for the worker should be given. It does not relate directly to the benefit levels. Mr. McGroarty emphasized under the old law a worker went to the hearing officer and the appeals officer. Under the new law a worker was supposed to go to the MCO then the appeals officer, but, he stressed, the language is loose. Senator Neal asked how the new proposal would change the process during the first stage of the hearing. Mr. McGroarty stated it would clear up the ambiguity. Senator Neal asked about proposal 56. Mr. McGroarty stated the quality of ratings is questionable. Some doctors are claimant oriented. Some are employer oriented. A panel of five would give more variety and hopefully a more complete rating. It was hoped this proposal would cut down on the multiple ratings. He stated the claimant still has the right to appeal. Senator Neal asked why a claimant should have to pay for the second rating evaluation. Mr. McGroarty stated it is part of the risk. If a person is required to pay for the rating, he will be certain he has a basis for asking for that rating. Senator Neal stressed many people are only a few paychecks away from poverty. They may not be able to afford the cost of a second rating. Mr. McGroarty stated if the attorney really believes in the case, he will usually "front" the money for the second rating. The issue is the excessive ratings. Mr. McGroarty stated they were willing to accept other ideas to cut down the number of ratings. Senator Neal asked about proposal 64. Mr. McGroarty stated the word "disability" has a very precise meaning in workers' compensation. He stated no appeals officer has agreed with anyone else as to what the term means in the context presented in proposal 64. Senator Neal asked if the term would be related to a preexisting condition. Mr. McGroarty stated it was a question of primary cause of the new injury versus the preexisting condition. He stated: Prior to the primary cause statute, any cause related to the industrial injury [may] be sufficient to make it compensable no matter how minor or remote. This was meant to increase that burden from any cause to some kind of primary cause...like more than 50 percent of the cause. By using the term "disability" we get off into a never, never land of argument over what it means. ...we need some of the term there, so that we can talk about something that does not get into the realm of confusion that "disability" creates. Senator Neal asked if they were asking to remove the term "preexisting" from the statute. Mr. McGroarty stated they were not. Senator Neal asked about proposal 76. Mr. Ostrovsky stated the employee who has been given a PPD award and rehabilitated should not be able to then return to his employer and demand to be accommodated under the American's with Disabilities Act (ADA). He should ask for the accommodation in his old job in the beginning, instead of rehabilitation. Senator Neal asked if proposal 79 would allow an employer to terminate an employee who has been injured. Mr. McGroarty stated there are already guarantees in place under the decision of the Hanson vs. Harrah case. An employer cannot terminate an employee because they file a claim. The employer can be assessed punitive damages for doing so.. He stated that under the current law, an employee can be fired from a permanent, light duty job for cause, such as threatening a supervisor, then obtain a full rehabilitation program, then sue under the ADA for his job back. Mr. Ostrovsky stated there have been cases just as described. Senator Neal questioned proposal 71. Mr. McGroarty stated: Breen is a formula determined by the supreme court of the state many years ago. It sets up a proportional equation. You plug in the values and out the other end comes the percentage of what the employers responsible for and what the claimant is responsible for in the nature of legal fees. You can defeat the intent of that formula simply be agreeing with your client to take a 50 percent contingency fee. At that point anything over a 50 percent contingency fee, the employer owes the claimant money for prosecuting his own claim. The employer receives nothing on its lien. It is 100 percent return. What has happened, I have been told by people in the State Industrial Insurance System and also other attorneys, is that there are two contracts of employment between an attorney, some attorneys, and their clients. One is for 50 percent which is shown in subrogation, and the other is for 33 percent which is shown later on when the split is actually taking place. What happens is that the employer and the insurer receives no money for a third party recovery because, up front, the claimant declares with his attorney that he took 50 percent or more which was taken out in legal fees. Senator O'Connell asked if the formula should be changed back to the way it was before for calculation of the average monthly wage. Mr. McGroarty stated under the current system there are seven or eight ways of calculating an average monthly wage. The old formula was based on six pay periods. The Internal Revenue Service takes the position that it is 84 days rather than six pay periods. Senator O'Connell asked about proposal 9. Mr. McMullen stated it was the recommendation from the self- insured employers that "end of shift" or within 7 days be used. Senator O'Connell stressed her feeling that "end of shift" would be a better term to avoid discrepancies in reporting. Senator O'Connell questioned proposal 33. Mr. McGroarty stated at one time anyone could represent a claimant. There were abuses of the system and many claimants received poor representation. The change requires the attorney to be a member of the Nevada bar. The intent is not to limit it to only the attorney in the law firm. A law clerk could also represent a claimant. The way the law is now, a disbarred attorney from another state can represent claimants. This has occurred. Mr. Ostrovsky stated he would rather have a competent adversary than an incompetent one. He stressed the claimant always has the right to use the free services of the state's attorney for injured workers or a union worker representative for free. Senator O'Connell questioned proposal 38 and asked if this could lead to a monopoly situation. Mr. Ostrovsky stated there needs to be multiple MCOs in any county in which MCOs are required. The purpose of the three (in Clark County) and two (in Washoe County) rule for numbers of MCOs in an area based on population was to raise the debate about what the appropriate number is. He stated they are not certain whether the seven (in Clark County) and five (in Washoe County) rule for MCOs in an area based on population is right either. There is a policy decision to be made whether the committee would like to see more competition between the MCOs. Less competition will force the smaller MCOs out of the state. The seven and five rule for numbers of MCOs in an area is administratively difficult to manage. Senator Augustine asked about proposal 3. She questioned if the government should get into private enterprise. Mr. McMullen responded it would allowe SIIS to function like a business. Empty space is an asset which can produce income. Mr. Ostrovsky stated SIIS can sell a property, but cannot rent the space. Senator Neal asked if any injured workers or labor representatives were on the committee to draft Exhibit C. Mr. Ostrovsky stated they were not. Senator Neal asked when the change was made from the original decision to have MCOs bid on a per claim basis to a per capita basis. Mr. Ostrovsky stated it occurred during the bidding process. James J. Kropid, Las Vegas Chamber of Commerce, responded to Senator Neal's question. He stated at a conference with the MCOs it was indicated by them that because of their up front expenses, they could not survive on a per case basis. To comply with the seven and five regulation and to assure the MCOs would stay healthy, it was decided to pay them on a per employee basis. He suggested the general manager for SIIS be allowed to make those determinations. Senator Neal asked how the MCOs were selected if they did not have the money to operate. Mr. Kropid stated they did ask for the financial history of the MCOs bidding for a contract with the state, but it was acknowledged there were up front expenses. Senator Townsend commented on the seven and five regulation. He asked Mr. Kropid if the capitated rate was used because there were not enough substantially financially strong MCOs to meet the seven and five regulation. Mr. Kropid stated it was the case. S.B. 316 of the Sixy-seventh Session did not provide for what would happen if one of the seven and five failed or if there were five in Washoe County and only six in Clark County. The regulation created a great deal of difficulty because there was no "fall back position for the general manager's [of SIIS] position." SENATE BILL 316 OF THE SIXTY-SEVENTH SESSION: Makes various changes to provisions governing industrial insurance. Mr. McMullen suggested there be a specified dollar or percentage threshold to allow for a certain level of miscalculation in award calculations when assessing fines. They requested if the error was in favor of the claimant then it should not be considered a violation and SIIS should not assess a fine to the insurer. He suggested a notice of error should be sent to the insurer so they know a miscalculation has occurred and their formula may be incorrect. He stressed willful repetition of miscalculations are different from miscalculations through ignorance. Kevin Spilbuy, President, Employers of Nevada, stated his organization represents small employers in Nevada. Lynn Grandlun, President, Grandlund, Watson, Clark and Associates, Employers of Nevada, presented Exhibit D (Proposed Legislative Changes to the Nevada Industrial Insurance Act). Brandy Hicks, Office Manager, Gilmore and Martin Construction, presented two examples of the problems with the Nevada Industrial Insurance Act. The first case was that of a carpenter whose claim was denied by SIIS, denied at the appeals level, and accepted at the hearing level. He entered into the rehabilitation program. He was deemed no longer able to do carpentry work. He requested and accepted a buy out after vocational rehabilitation of $8,000. He then sought employment from Gilmore and Martin Construction knowing he had been permenantly restricted from carpentry work. He went to his doctor and received a full duty work release. They had a second case in which the injured worker took the buy out immediately, then 6 months later wanted to come back to work with a full work release from the same doctor who authorized his PPD award in the first place. She questioned what the purpose was of the PPD award and rehabilitation. Ms. Grandlund stated Gilmore and Martin Construction had paid in excess of $120,000 for the two aforementioned claims. She suggested if an injured worker has been retrained or has received a PPD award and violates the restrictions placed upon him, then the violation should be treated the same as the removal of a safety device. She stated the benefits must be reduced 25 percent. He should not receive another PPD award, and should not be able to receive vocational rehabilitation again. The employer's account should qualify for subsequent injury relief fund. Senator Townsend asked how the very skilled worker who wants to work, and the employer who hires him is to be treated. Ms. Grandlund responded this does not generally occur with the very skilled worker. It tends to be the "scam people" who are using the system for their own gain. The highly skilled workers who are good employees do not violate their restrictions. Ms. Grandlund continued with her discussion of Exhibit D. Senator O'Connell asked for clarification of the language presented under the "Controlled Substances" section of Exhibit D. Mr. Young commented he had requested information on the NIDA standards and the issue of rebuttable presumption and expected information within the week on those issues. Ms. Grandlund stated Associated Pathology Laboratory is a NIDA certified laboratory and they do give the employers a cut off for controlled substance testing. A drug free workplace is the goal, but the employer is unable to present evidence of low use in hearings because the testing labs do not share information where a person has tested below 500 nanograms. Sometimes the drug screens are not accurate. They once had a young man who tested pregnant. Ms. Grandlund stated twice she has had employers call her and ask if it was all right for them to terminate an injured worker. She advised the employer in each case, not to terminate the worker. Their MCOs had called the employers and told them to terminate the injured workers. She stated it is a misconception throughout the state that the MCOs are taking care of the employer. She illustrated how these two incidents could have caused a great deal of difficulty for the employers. It was not appropriate for the MCOs to call and instruct the employers to terminate the employees. She stated, "today one of the medical directors of one of the MCOs called an employer and requested that the employer write a letter to the doctor stating that he would never dispute anything in a claim." An employer should not waive their rights to a claim forever. Richard Tetreault, Assistant General Counsel/Risk Management, Southwest Gas Corporation presented Exhibit E (a letter) and Exhibit F (Comparison of Permanent Partial Disability Awards). Glenn V. Greener, President, Administrative Law Centers, Inc., stated he was not asked to participate in the drafting of Exhibit C and would like to comment on the proposals. He expressed his concern for the language in the Nevada Revised Statutes for the "motion for stay." He stated the language is confusing on the time constraints. He stated: If a PPD evaluation comes about, there is an actual award, the employer appeals that PPD evaluation from an SIIS determination, there is currently no vehicle in place whereby a stay can be had, from the SIIS determination, until we have had an opportunity to go to the hearing officer level. The problem with that situation, which is somewhat appalling... If it is found a PPD award is inaccurate...there is a procedure for administrative write-off through a manager's hearing. But what happens to that money... It is spread amongst the entire classification. That means...all the employers are sharing in the loss. That should not be. Other systems have in place when there is a final medical examination that we obtain all medical records that are pertinent to that industrial injury. This should benefit the injured worker as well as the insurer and employer. What we run into in Nevada is that the PPD evaluator gets the records and we find he is not getting all the records. He is only receiving the records submitted to him by SIIS. Mr. Greener stated he has found in questioning evaluators, they are not aware of percentage disability ratings for the same body part from another agency, such as Veterans' Administration. He has checked SIIS records and has found the references to those disability ratings, but the information never reaches the evaluators. All parties should be aware of any preexisting disabilities including motor vehicle accidents. ADA rules preclude the new employer from finding any information out about a prospective employee and often find themselves hiring someone with a history of medical injuries which end up in a PPD award. He indicated the need for disclosure from the claimant. The employer should only be liable for the portion of disability which occurred during employment. If a person has collected money previously on an injury of a body part, then that person should not be able to collect again for same loss on the body part. Mr. Greener stressed "permanent" should mean permanent. He asked how a person who is permanently disabled can return to the exact same job they had before the injury. These people also receive lump sum settlements in lieu of rehabilitation and often file another claim later on. He stressed the term "light duty" means different things to different doctors. Mr. Greener expressed his surprise there is no reciprocal agreement with other states for the sharing of information. He stated there is a problem in the construction industry with workers traveling from state to state and filing claims. He stressed the importance for Nevada to join the Teal Program developed in California for tracking injured workers' compensation fraud. He stated fraud is excessive in Nevada because the Office of the Attorney General is understaffed and there is no consistent method used to track fraud. He stated he has evidence of workers who file the SIIS form C-37 for vocational rehabilitation benefits who are working in other jurisdictions. He commented there are many workers who are dangerous to themselves and to their employees, especially in the construction business. These people abuse alcohol and drugs, but are smart and know how to use the system. They refuse to take the test until they have flushed their system with orange juice. He suggested a drug test should be given on the date of injury. He stated the injured worker is represented by adequate counsel and this regulation need not be changed. He commented on the PPD evaluations. He stated the rotating list of physicians can have a general practitioner evaluate an injury which should be treated by a specialist. PPD evaluations should be done by the specialist in that injury field. He stressed the need for change of the subrogation laws and the subsequent injury fund. He stated the employer cannot obtain records of an employee held by SIIS for other employers about other injuries without a signed medical release from the claimant. He emphasized there must be a change to allow the employer access to those records. Senator Neal questioned how a worker can flush his system with orange juice. Mr. Greener stated he has been told by his claimants that this works. Arthur L. Busby Jr., Benefits Administrator, Horseshoe Hotel, commented on the termination of the injured worker for cause and presented Exhibit G. Senator Neal asked if a worker is injured then is later terminated for cause, how does the injury affect the termination. Mr. Busby stated if an employee is a good employee then he will be given a light duty job. If an employee willfully violates his terms of employment he should be terminated. He related a case of a worker who was terminated for violating a specific article in the bargaining agreement. She appealed to the union. The union determined she had no grounds to support her grievance. She went through unemployment and unemployment determined she had been terminated for willful misconduct. The hearings officer and appeals officer ruled in the Horseshoe's favor. A district court judge ruled the appeals officer errored and awarded the employee $50,000. The reason given was that the Horseshoe is self-insured and has deep pockets. Patricia A. Law, President, American Settlement Corporation, presented Exhibit H (examples of savings using annuities in lieu of lump sum payments). She stated how annuities can be used as income for the employee by preventing him from spending the settlement all at once on a car or other large purchase. She stated 95 percent of people who receive a lump sum award spend the award within 5 years. Senator Townsend asked if Mr. Dirks would be able to take the proposal in Exhibit H and apply it to potential lump sum payouts to find out how much impact it would have on the unfunded liability of SIIS. Mr. Dirks stated it would need to be done on a case-by-case basis. Senator Neal commented the awards listed in Exhibit H seemed high. Mr. Dirks stated they were not uncommon, especially for a younger worker. Ms. Law stated the awards were not appropriate in all cases. Senator Townsend asked when a claimant has been put in a desperate financial situation due to the injury, if a settlement is made in lump sum to "get them whole again" before the annuity begins. Mr. Busby commented if a claimant can show proof, then the settlement is made directly to the mortgage company, etc. rather to the claimant and the balance is then put into the annuity. Ms. Law stated health care allowances are also made. If a person has a grave medical problem and the health care needs are great in the beginning, this money is paid in larger amounts. Due to the injury a person's life span may be shortened. Mr. Busby stated they did a survey at the Horseshoe and found they would have saved over 8 percent by using annuities over the past 3 years. He stressed many claimants reopen their claims, not because their medical condition has worsened, but because they are out of money. Senator Townsend closed the meeting at 5:25 p.m. RESPECTFULLY SUBMITTED: Molly Dondero, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor February 6, 1995 Page