MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session March 21, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:30 a.m., on Tuesday, March 21, 1995, in Room 119 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 Vance Hughey, Senior Research Analyst OTHERS PRESENT: Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS) Douglas Dirks, General Manager, State Industrial Insurance System (SIIS) Kevin Higgins, Director, Workers' Compensation Fraud Unit Ron Swirczek, Administrator, Division of Industrial Relations, Department of Business & Industry (DIR) Arthur Busby, Horseshoe Hotel & Casino Larry Harvey, Nevada Workers' Compensation Coalition Lynn Grandlund, Employers of Nevada Marsha Birkbigler, Nevada Medical Association Ron Hubel, Industrial Relations Director, Industrial Medical Group Bob Ostrovsky, Lobbyist, Nevada Resort Association Dan Williams, Lobbyist, Dare To Dream Barbara Costello, Lobbyist, Dare to Dream Today's meeting was video conferenced to the Grant Sawyer State Office Building, 555 East Washington Avenue, Room 4401. Opening the meeting, Senator Shaffer and Senator Neal gave brief summaries of action taken in their subcommittees. Senator Shaffer noted an agreement has been reached on the employee leasing issue and asked Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS), to give a short report. Ms. Colling stated there was a meeting with several leasing companies, temporary service people, the insurance commissioner, the Employment Security Department (ESD), and Industrial Insurance Regulation Section (IIRS), who agreed to withdraw all of their proposals and go through a regulation process. A committee will be set up to work on developing regulations. Senator Townsend inquired if this is a satisfactory arrangement, with the ability to come to a resolution and achieve the goal which is to be sure everyone who is working is covered (with insurance). Ms. Colling replied in the affirmative. Senator Townsend then inquired if Ms. Colling feels if it is necessary to have legislation to give statutory authority to draft regulations. Ms. Colling noted she feels the authority is available now. Senator Neal gave a few remarks on his subcommittee on controlled substances. Senator Neal noted another meeting will be necessary since, the standards now available are geared to transportation. Senator Townsend opened the meeting by stating: There has been some discussion by those following this process that the amount of money that, in fact, was never charged as premium over the last 12 years 1982 - 1994 was approximately $1.4 billion in premiums not collected contributing to our unfunded liability. There has been discussion on how to make that up, if you choose to do so. ...... This committee, traditionally, in following its policies of the past 12 years is not a committee that will throw money at anything in an attempt to solve the problem. As a result there will not be any rush to judgement on assessments. ......I will place before the standing committee on workers' compensation for its deliberations taking testimony over the next 18 months on how we would come up with a formula if needed. I would like to emphasize that is a formula that could be used and perhaps in all likelihood would not be used. Senator Townsend continued: The reforms on legislation dealing with workers' compensation and those proposed in front of this committee this session should be allowed to mature under Mr. Dirks' tutelage. We should find the efficiencies we believe are there he can provide if we get the statute constructed correctly and find out in the next session where we are. He currently has approximately $100 million in positive cash flow. The package being proposed here is $100 million to $120 million in additional savings to the system. Those savings, obviously, would be placed in the system's asset base. Mr. Dirks will, over the next couple of days, bring us abreast with regard to his reserving capabilities. The bottom line is, there is no need to rush to assessments, because they may never be needed and over the next 4 or 5 weeks, this committee and its counterpart in the assembly, are just not in the position to take on an issue that is so delicate and so complex and do it justice. It would be my intention to place that on our list of things to deal with tomorrow for consideration and that would be the discussion of it over the next 18 months. Senator Neal questioned where there is information on the $1.4 billion in unpaid premiums. Senator Townsend noted the information is available in a January 1993 analysis of SIIS. Senator O'Connell requested a copy of the January report for the committee. Referring to Exhibit C, the committee discussed Proposal 10. Douglas Dirks, General Manager, State Industrial Insurance System (SIIS), entered the discussion to provide clarification. Mr. Dirks and Senator Lowden held additional dialogue regarding Proposal 10. SENATOR O'CONNELL MOVED TO INCLUDE PROPOSAL 10. SENATOR AUGUSTINE SECONDED THE MOTION. THE MOTION PASSED. (SENATORS REGAN, SHAFFER AND NEAL VOTED NO.) * * * * * Senator Shaffer stated he could not support the motion, since he has pledged to not support further budget cuts. Senator Neal stated he would be opposed to the motion, citing information from Mr. Dirks there will be a weekly benefit loss. Senator Lowden stated she is not happy with the motion, however, feels she must support the concern. Next to be addressed was Proposal 19. Senator Townsend stated he would accept a motion as follows: To include the authority for the system to deal with employee leasing in an appropriate manner. SENATOR O'CONNELL MOVED INCLUDE TO PROPOSAL 19 AS STATED BY SENATOR TOWNSEND. SENATOR REGAN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Proposal 29 was the next item to be considered. Senator Townsend noted this proposal will not set a precedent. Kevin Higgins, Director, Workers' Compensation Fraud Unit, came forward to testify at this time. Mr. Higgins stated, generally when there is a conviction most judges will order the defendant to pay fraud unit costs. Mr. Higgins went on to note last year funds which were not spent reverted to the General Fund. He went on to state the intent is to retain any funds not spent and use them and not have them revert to the General Fund. SENATOR LOWDEN MOVED TO INCLUDE PROPOSAL 29. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR NEAL VOTED NO.) * * * * * Regarding Proposal 51, Senator Townsend noted anyone who is interested in the definition of intoxication or impairment, or any proposals that refer to proposals 51, 52c and 52d, that include the Department of Transportation's definition and use of .04 for intoxication levels, should contact Senator Neal with any input, noting it might be helpful for decision making. At this time, Proposal 56 was addressed. Senator Townsend asked Ms. Colling for an explanation, noting there is a concern in rural communities that people will have to travel to Reno as opposed to having managed care locally. Senator Townsend inquired if there is any assurance care will be available locally. Ms. Colling stated: We had planned on including that in our Request for Proposal (RFP) that if you are going to cover the Douglas and Carson area, your network would have to extend into those areas. Senator Townsend requested from Ms. Colling a stronger statement. Ms. Colling continued, " We are committed to doing that." Ms. Colling went on to state: .......... If they needed specialist care that was not available here they would have to travel to Reno or somewhere near, where they have it, we would pay travel. There was also some discussion about what happens with someone who is out of the network when he/she is injured and moves back to a rural area, there are reciprocal agreements that are functional now with a Health Maintenance Organization (HMO) that we would be looking at putting into the Managed Care Organization (MCO) process where we would have some minimal ability to manage the claim, but we would not have the discount. There are ways to handle situations like that. Senator Townsend reprised Ms. Colling's statement, noting the commitment by the system in the RFP plan for managed care for rural communities; i.e. they have to include the ability to use local physicians and local providers and to include mileage when necessary. Senator Townsend then queried Ms. Colling regarding the current MCO process in handling complaints or objections, whether it be the insurer or the claimant, whether there is a process that works. Ms. Colling stated "I would say in most cases there is a process that works." Answering Senator Townsend's question as to whether SIIS has proper tools to gain the attention of those who are not working properly, Ms. Colling went on to note some language offered to Scott Young, Senior Research Analyst, in that regard, that might be helpful for a dispute resolution, could be included. Senator Townsend inquired if Ms. Colling has the impression that MCOs charge a provider in order to be approved. Ms, Colling stated she has found some MCOs are charging a nominal fee to providers to belong to the network. She went on to state her impression is the fee is a processing fee. Senator Neal asked how many MCOs charge a fee to providers and inquired if SIIS could demand information relative to this situation from MCOs. Ms. Colling stated this is not in any contract with MCOs, however, it could be requested. Senator Neal inquired if Ms. Colling has any knowledge of the probability that some MCOs might be charging (providers) and directing these funds to some other organization. Ms. Colling replied "I don't have that knowledge." Senator Neal said "you never heard of such things happening." Ms. Colling continued: "this is news to me. I have not heard of it." Senator Neal went on to state, "You have not heard of the MCOs having another organization in which they have the administrative fee go to, but it does not show up that they are receiving it." Ms. Colling replied, "It was not anything we were looking for...just didn't realize it was happening till it came up during the session." Senator Neal questioned, "So it is your testimony to the committee then that you don't know anything of this occurrence." Ms. Colling replied, "Not directly, no." Proposal 72 was the next item to be addressed. Senator Townsend and Ms. Colling discussed problems physical therapists have being reimbursed for their services in some instances. Ms. Colling noted a possibility is to include specifics for reimbursement in a contractual agreement, and develop more definitive physical therapy protocols. Next to be addressed was Proposal 75. Senator Townsend posed questions as to how "gatekeeping" is being handled. Ms. Colling gave an explanation. Senator Townsend and Ms. Colling discussed the process required to obtain contracts for MCOs. Senator Townsend asked for an overview of what is in the RFP and ultimately who is chosen. Senator Neal asked for clarification about who handles MCO activities. Ms. Colling stated there is an MCO unit working extensively on enrollment, auditing, site visits, etc. Senator Neal asked for organizational placement of the MCO unit. Ms. Colling furnished a detailed explanation. Senator Neal and Ms. Colling went on with further discussion. Senator Neal stated he feels it would be helpful if those from SIIS, who deal directly with MCOs might be brought to testify. Mr. Dirks gave further explanation. Senator Townsend asked Mr. Dirks for an organizational chart. Senator Townsend confirmed with Mr. Dirks several proposals sponsored by SIIS. Proposals 63, 64 and 78, were confirmed by Mr. Dirks. Senator Regan noted there has been discussion among the committee members regarding the Oregon program on Triage; a 14- point program on identifying potential problems of an applicant. Senator Regan questioned Mr. Dirks on the possibility of a program of this type being useful to SIIS. Mr. Dirks stated he has just become aware of this program and will pursue the possibilities for use in SIIS. Mr. Dirks stated he feels this sort of program could be helpful to SIIS and also feels implementing a program of this type may be possible as a management issue. Continuing, with confirmation of proposals sponsored by SIIS, Proposal 81 was confirmed by Mr. Dirks. Referring to Proposal 80 and 80a, Ron Swirczek, Administrator, Division of Industrial Relations, Department of Business & Industry (DIR), testified next. Mr. Swirczek stated he feels all provisions can be taken care of by the rule making process or regulation. SENATOR NEAL MOVED TO DELETE PROPOSALS 80 AND 80A. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY * * * * * At this time, Mr. Dirks noted Proposals 109, 110 and 119 are SIIS proposals. Senator Townsend requested clarification on Proposal 119. Mr. Dirks stated SIIS is looking for a broader definition of dependant care. Mr. Dirks went on to note, at times if claimants need vocational rehabilitation, SIIS is required to pay baby sitting expenses, noting the law prohibits child care expense. In answer to questions from Senator Regan, Ms. Colling gave several examples, stating: The problem is, perhaps your spouse needs attendant care, and you the injured worker provide that; so while you are at vocational rehabilitation, we have been asked to cover that attendant care for your spouse or your parent. I even heard of one bizarre incident where a pet needed attendance and we paid for someone to babysit the pet. ........I believe that a hearing officer asked us to pay for the coverage of the animal's care. SENATOR REGAN MOVED TO INCLUDE PROPOSAL 119. SENATOR LOWDEN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Mr. Dirks stated the next item to be addressed, Proposal 123, is a SIIS proposal. Mr. Dirks gave reasons for and an explanation of this proposal. Senator Townsend and Mr. Dirks had further discussion on the pros and cons of this proposal. Senator Shaffer, Senator O'Connell, Senator Townsend and Mr. Dirks reviewed the merits of vocational rehabilitation. The discussion also encompassed whether it is cost effective to use the private sector for vocational rehabilitation. Senator Lowden inquired as to how many claimants actually go back to the type of work where they were injured, instead of using the vocational rehabilitation for a new career. Ms. Colling answered about 20 percent. SENATOR NEAL MOVED TO INCLUDE PROPOSAL 123. SENATOR REGAN SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS LOWDEN, O'CONNELL AND TOWNSEND VOTED NO.) * * * * * Proposals 58 and 59, of Exhibit C were the next items to be addressed. Senator Townsend asked for an explanation from Mr. Dirks. Mr. Dirks clarified his position to Senator Townsend and Senator Lowden. Senator Lowden noted she realizes there is a fear among some individuals that one MCO might have the bulk of the business. She continued, noting, however, businesses may choose one MCO simply because of quality and she wants to know if this situation will cause Mr. Dirks any problem. Mr. Dirks stated: I think it's my obligation to insure there is a choice for the employers. I think it would be inexcusable to bring forward one, or two, or maybe three [MCOs], but you have to provide the employers some choice. If, in fact, most of them choose one and they have had that choice, I think that is the marketplace operating. Senator Neal requested information on what kind of choice will be offered. Mr. Dirks replied choice needs to offered in terms of size and perhaps specialty. Mr. Dirks stated he does not want an employer to think SIIS is mandating they (the employer) go to certain MCOs. Senator Neal questioned Mr. Dirks if it is his suggestion to limit MCOs. Mr. Dirks went on to state, "I'm not looking to limit the number of MCOs. I'm looking to leave it open so the marketplace can tell us what the appropriate number of MCOs is." Mr. Dirks went on: ".........Is to totally remove the cap, so there is no requirement, if the system chooses to contract with one....." Senator Neal asked if SIIS wants to leave it (the cap) open- ended, to which Mr. Dirks replied "yes." Senator Shaffer and Senator Augustine joined in the discussion regarding Proposal 59. Senator Townsend spoke, noting he feels if the cap is removed from the number of MCOs allowed in each county, there will be substantial savings. SENATOR REGAN MOVED TO INCLUDE PROPOSAL 59 SENATOR LOWDEN SECONDED THE MOTION THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator Townsend announced there would be a 5-minute recess. Upon resumption of the meeting, Arthur Busby, Horseshoe Hotel & Casino, spoke from Las Vegas, supporting the position held by Mr. Dirks. Senator Townsend next addressed Proposal 61 of Exhibit C. Senator Lowden noted she thought this item of business has already been addressed. Accordingly, Senator Townsend moved on to Proposal 65. There followed a lengthy discussion on Proposal 65, with Senator Neal giving an explanation. The consensus of opinion is that Proposal 65, essentially, is "gatekeeping." Larry Harvey, Nevada Workers' Compensation Coalition, noted this proposal was put together by a group who feel some MCOs may want to "gatekeep," and this proposal will allow this action. Mr. Dirks came forward stating proposal 65 is not a SIIS proposal. He went on to give further explanation on "gatekeeping," philosophically speaking, he stated: ........You prevent people from going to the most expensive specialists, initially and you refer people in through a screening process that identifies who needs the specialists and who doesn't. That's part of the cost containment on a claim. After a rather technical discussion with Mr. Dirks regarding Health Maintenance Organizations (HMOs) and MCOs, Senator Neal questioned Mr. Dirks, stating "Presently we have a number of MCOs functioning in the state under SIIS, is that correct?" Mr. Dirks reply was "Correct." Senator Neal continued, "Under those MCOs are they all staffed with doctors?" Mr. Dirks replied, "The actual MCOs have case managers and a variety of medical advisors. Senator Neal then asked if the HMOs were staffed with doctors, to which Mr. Dirks replied, "Yes, some will be staffed by doctors and nurses and case managers, as well." Senator Neal went on, "Would you not say, then, that you have a greater experience in terms of medical practice, residing with the HMOs than you would have with the MCOs?" Mr. Dirk's reply was "Not necessarily. I think you can establish an MCO that looks exactly like an HMO - It's a legal distinction, but I think operationally, you could make them identical." Senator Neal continued, "Well, I'm not talking about what you can establish, I'm talking about what you know to exist here in the state now." Mr. Dirks stated, "Some of our MCOs have established HMOs, as well, as a part of their business. We are not contracted with the HMOs, but under their corporate umbrella they have HMOs, and their MCOs operate, more or less, like their HMOs, except they don't accept risk and it's purely an administrative arrangement." Referring to Proposal 65, Senator Neal questioned, "If we permit this to go into statute, what benefit will it serve to the injured worker?" Mr. Dirk's reply was, "It's not a provision necessarily to benefit an injured worker." Mr. Dirks went on with further explanation. Lynn Grandlund, Employers of Nevada, testified next from Las Vegas. Ms. Grandlund expressed her opposition to Proposal 65. The next item to be addressed was Proposal 67. First to testify, Marsha Birkbigler, Nevada Medical Association, presented Exhibit D, proposed language for Proposal 67. Ms. Birkbigler gave an explanation of Exhibit D. Senator Neal, Mr. Dirks and Ms. Colling had a detailed discussion regarding pre-authorization procedure. Referring to Exhibit D, Senator Townsend noted to Ms. Birkbigler he feels this language is more of a regulation than a statute. Ms. Birkbigler stated her organization needs some kind of legislative clarification on what defines pre-authorization. Bob Ostrovsky, Lobbyist, Nevada Resort Association, came forth with his views regarding pre-authorization. Ron Hubel, Industrial Relations Director, Industrial Medical Group, testified from Las Vegas, giving his views on pre- authorization. Proposal 111, was next to be addressed. Ms. Colling gave a short explanation of this proposal. SENATOR NEAL MOVED TO INCLUDE PROPOSAL 111. SENATOR SHAFFER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * The committee next addressed Proposal 114, of Exhibit C. Ms. Colling testified, giving a brief explanation of the Breen formula which is being used for the portions of settlements for subrogation cases in SIIS and other insurance areas. Ms. Colling stated: We are required to pay costs and portions of the attorney's fees, which, oftentimes ends up with us getting a very small portion of the settlement, so we would like to see you set up a more equitable approach to subrogation. Ms. Colling and Senator Townsend discussed this issue further, with Senator Townsend inquiring if anyone has come up with a formula deemed to be as fair to the issue. Senator Townsend went on to state: This commerce committee is just that; the committee that deals with commercial policy and we have been very reluctant to interfere with the contractual relationship between two parties. Very reluctant to step in and say someone should ........contract with this attorney and not that attorney. We have really been reluctant to jump into that, which would include the whole issue of how attorneys are paid with regard with their relationship to their client. That's not pro-attorney or anti-attorney, that just is a position the committee has taken about interfering with a contract relationship. So a formula that might come forward would probably be one that would be left to the parties that are involved to come to a consensus, if there is going to be a formula at all, that is going to change Breen. There was further discussion between Ms. Colling and Senator Townsend, with Ms. Colling asking if the committee would like SIIS to coordinate discussion on this matter, to which Senator Townsend replied in the affirmative. Senator Townsend went on to state he would like the Breen case applied to some basic cases so the committee can understand how it is applied. Senator Neal and Ms. Colling had further discussion on Proposal 114. Bob Ostrovsky, Lobbyist, Nevada Resort Association, testified, giving several examples of subrogation. Dan Williams, Lobbyist, Dare To Dream, speaking from Las Vegas gave views on Proposal 114. Senator Townsend thanked Mr. Williams for a 61-page fax the senator has made available for perusal in his office. Barbara Costello, Lobbyist, Dare to Dream, then gave her views regarding Proposal 114. Senator Townsend then reviewed the issues the committee will address at the next meeting. Exhibit E, from Senator Neal, was presented to the committee; however, there was no testimony. Exhibit F, a memo from Vance Hughey, Senior Research Analyst and Exhibit G, a memo from Mr. Young, were presented to the committee, with no testimony. There being no further business, the meeting was adjourned at 10:50 a.m. RESPECTFULLY SUBMITTED: Beverly Willis, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor March 21, 1995 Page