MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session April 19, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:35 a.m., on Wednesday, April 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: Scott Young, Senior Research Analyst Vance Hughey, Senior Research Analyst Molly Dondero, Committee Secretary OTHERS PRESENT: Lenard T. Ormsby, General Counsel, State Industrial Insurance System (SIIS) Douglas Dirks, General Manager, State Industrial Insurance System (SIIS) Harvey Whittemore, Lobbyist, Nevada Resort Association Cecilia Colling, Assistant General Manager, Northern Region, State Industrial Insurance System (SIIS) Jan Meyers, Northern District Manager, Industrial Insurance Regulation Section (IIRS), Division of Industrial Relations (DIR), Department of Business and Industry Ron Swirczek, Administrator, Division of Industrial Relations (DIR) Alice Molasky, Commissioner, Division of Insurance, Department of Business and Industry Nancyanne Leeder, Nevada Attorney for Injured Workers, Department of Business and Industry Bill Draft Request (BDR) 54-1956 was introduced to the committee. BILL DRAFT REQUEST 54-1956: Makes various changes relating to the practice of pharmacy. SENATOR REGAN MOVED TO INTRODUCE BDR 54-1956. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. (SENATOR LOWDEN WAS ABSENT FOR THE VOTE.) ***** The fiscal note was read for Assembly Bill (A.B.) 60. ASSEMBLY BILL 60: Makes various changes to provisions governing reporting and investigation of certain accidents occurring in course of employment. SENATOR REGAN MOVED TO DO PASS A.B. 60. SENATOR AUGUSTINE SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. (SENATOR LOWDEN WAS ABSENT FOR THE VOTE.) ***** Lenard T. Ormsby, General Counsel, State Industrial Insurance System (SIIS), discussed the concepts in proposal 61 of Exhibit C. Mr. Ormsby commented that Nevada Revised Statutes (NRS) 616.625 states that "except as otherwise provided by statute, the amount of compensation and benefits to which the person is entitled is set at the date of the injury." He explained in NRS 616.045 compensation is identified as the money which is payable to an employee or his dependents for funeral benefits, accident benefits and money for rehabilitation services. He stated benefits are explained in NRS 616.025 as medical, surgical, hospital, or other nursing and medical treatments. He stated the issue is what is a substantive right, and what is a procedural right. He explained it is his belief if it is a procedural right, it can be changed. He stated: ...procedural rights being the qualifying events. Where it be for [Temporary Total Disability] TTD, or for reopening, or for whatever, the hurdles which must be jumped to be entitled to the amount of compensation and benefits. ...those can be changed by the Legislature without any constitutional question. We are talking about a procedure under which a person qualifies. If we are talking about reducing benefits, then we are talking a stickier situation depending on whether a person has qualified for those benefits and, therefore, is entitled. Mr. Ormsby stated a person who is receiving TTD will not be affected if the law is changed. He said the person met the existing requirements at the time they were entitled, had been receiving those benefits and will continue to receive the benefits. He illustrated if a person is not qualified for Permanent Partial Disability (PPD) and the law changes the criteria for the injury, then SIIS's stand is that the person falls within the new statute. Unless they meet the new criteria, they will not be entitled to a compensation. He stated the Nevada Attorney for Injured Workers (NAIW) claims that everything stems from the date of injury. He stated it is impossible for SIIS to administer claims based on the old laws. If a person is injured in 1979, then all laws current in 1979 are to be applied to the injury. He stated there needs to be claims teams for each calendar year. He explained retroactivity by example and discussed procedural changes. Senator Neal stated the testimony seems to indicate there is a clear-cut difference between procedural and substantive rights. He asked if there is a case where a procedural right might have an impact upon a substantive right. Mr. Ormsby commented he could not think of an instance. Senator Neal discussed contractual rights. Mr. Ormsby stated the Legislature may change the procedural criteria for qualifying for a compensation. He stated the Legislature cannot pass a law which affects someone's procedural rights because they do not like the person. But, he explained, the Legislature can make the hurdles to those procedural rights higher, thus making them harder to attain. He stated the amounts are set, how the person qualifies is not set. He stated SIIS's position is that a person does not have a vested right from the date of injury. He stated the right stems from the date of qualification for compensation. Senator Neal stated: That the time that the person is not receiving benefits, until the time that he reapplies, that period of time eliminates any substantive right that that person might have to receive those benefits. Mr. Ormsby commented: You use the term reapplies, I am using the term, `until he qualifies,' that is not a substantive right. You can change that, but I think from a constitutional standpoint, if a person is qualified for TTD, and [the] reopening criteria is changed... qualifications [change] for PPDs. The percentage of disability [changes]...those are procedural guidelines which can be altered if the person has not already qualified and met the prior qualifications. Senator Neal pointed out there is a point in establishing procedures, which cannot be crossed. Mr. Ormsby agreed. Mr. Ormsby commented a person always has the right to go to court over a judgement. Senator Neal asked if exclusive remedy is applicable. Mr. Ormsby stated exclusive remedy prevents the injured worker from suing the employer under Falline for a negligent bad-faith action. He stated it does not have any application in this situation. He stated there is an administrative process through the hearings and appeals levels and through the courts. Senator Townsend stated a narrow procedural interpretation is being presented on how to apply certain provisions of a past bill in regard to managed care in a reopening. He asked how some of the older claims can be closed and managed. He questioned how the Legislature may, through statute, help SIIS handle some of the older claims. He said: ...how big do we make this, or do we simply say, you are already doing this because you believe it is a procedure and do we codify that. That is the issue... Senator Neal is saying, do we put into the law a different right for a claimant to challenge that hurdle, you are saying we do not have to write that in, if you are general enough in your language. Your language in proposal 61 is very narrow. It applies only to one thing... reopening of claims and having them applied to the managed care statute. Senator Townsend asked who determines if an injured worker receives a higher PPD award, or the current PPD, under which he was injured, and vocational rehabilitation. Mr. Ormsby stated SIIS initially makes that determination based upon whatever the rules were at the time. He stated if the claimant does not agree, he has the right to go through the appeals process. Senator Townsend stated it is the insurer's determination as to whether they will accept the claim or not. He said SIIS is currently applying old claims to the new statute if it is a procedural matter, in SIIS's determination. Senator Townsend stated: If you use the terms procedural and substantive you will not be challenged, anyway. Does that mean that during this debate we must determine what is outside this and what is inside this potential, if we choose to look at something other than what is being proposed in number 61. Do we have to say these are outside any procedural applicability, and these are not. Mr. Ormsby agreed. He stated under the statutes, compensation is defined, accident benefits are defined. He said, "If it does not fall clearly within those definitions, it would not be a benefit or compensation that was set at the date of injury." He continued: You have the right, as a body, to change the law as long as you are not affecting a right to which I am already entitled...I would rather have a clear declaration of the intent of the committee and the Legislature that we are declaring this is what you get, and it is frozen at the date of injury, subject to invocation of the police power for the general welfare, and everything other than that, whenever you qualify, or seek to receive, it is the law at the time that you do so. It is clean, there is no question of intent of this committee, there is no question as to the intent of the Legislature, which we have seen in litigation during the last 2 years... Senator Neal asked if he is using the SIIS injured workers as the "general welfare" referred to. Mr. Ormsby stated it is the general welfare of the workers of the state of Nevada. Senator Townsend stated: By the mere fact we have had this discussion, which is on record, that any other things you try to apply in a procedural matter, will be barred. Because we have had the discussion, and chose not to address it. Mr. Ormsby said no. He said it would be ripe for litigation. Senator Townsend stated: The committee needs exact language which will say the insurer has the discretion to determine any procedural matters and their applicability to cases whose date of injury occurred before the passage and signing of this act. The date of injury is going to be the date in which all of your compensation will vest. Whether it is your potential for PPD, TTD, PTD [Permanent Total Disability]...that is the way it is going to be applied, from that date of injury. Douglas Dirks, General Manager, State Industrial Insurance System (SIIS), commented they can study the language in proposal 61 of Exhibit C. Senator Townsend emphasized they do not want to pass something which will increase litigation. Mr. Ormsby said he will have new language in 24 hours to present to the committee. Senator Shaffer commented the word "procedural" seems to allow for litigation. Senator Regan suggested too much may be being put into proposal 61 of Exhibit C. Senator Regan stated the concern of the committee is: ...not so much the care that he is receiving [from the managed care organization {MCO}] that is guaranteed as an injured worker under exclusive remedy which is the basic law of this state, our concern is to say that is how do you want to handle the actual quality of that care as opposed to the quantity. Are we changing it to, "you cannot be treated for `x' amount, only for `y' amount...as long as he gets the care..." have we deprived him of a right? Harvey Whittemore, Lobbyist, Nevada Resort Association, stated: The discussion will create a legislative history that will allow people to come in and say, unless you make it very clear in the legislation, `that there is legislative intent not to act with respect to retroactivity or that there was legislative history that says you need to act.' Whatever you do with respect to this arena I would offer the following suggestion. That the last clause in this bill be a severability provision which says, `that if any portion of the act is found unconstitutional, it does not render the entire act unconstitutional, only that portion or application which is unconstitutional.' The reason we are concerned about this retroactivity issue...if you look at 61...if you make the policy decision which says that with respect to claims that are reopened, we are going to allow the insurer to process that claim under an MCO situation, you simply add those claims which are reopened or those claims which remain open and you have resolved the issue as to the language that this committee needs. If you make that policy decision that the method by which the claims and the quality of medical care delivered, is appropriate for the new claimants, then clearly it is appropriate for those claims which are still open. Therefore the question as to the procedural right versus substantive right...only that piece will be litigated and you will have made a policy decision which says, we think it is appropriate that it be handled by an MCO, but if someone thinks that is a substantive right, the court will decide, that one issue only. Senator Townsend discussed Exhibit D, a report on soft-tissue injury. He asked Mr. Dirks to compile a listing on what percentage of an award is for only soft tissue injury. Mr. Dirks stated the American Medical Association guidelines (AMA) provide for the analysis in the rating for soft-tissue injury. He stated it will not be feasible to pull each claim to examine it for soft-tissue injury award by the end of this session. He stated for future claims, it will be possible to track the necessary data. Senator Neal asked if they should continue to use the AMA guidelines. Mr. Dirks stated there are several alternatives. The AMA guidelines can still be used, but the committee could carve out certain portions of the AMA guidelines, or they can be discarded and a Nevada schedule of ratings can be adopted. Senator Neal questioned if this will cure the problem with ratings. He commented the state still runs the risk of not curing the problems even with new guidelines. Mr. Dirks commented there is always the risk of drafting a guideline which does not address a particular problem. Senator Neal asked Mr. Dirks if he is satisfied with the AMA guidelines. Mr. Dirks responded there are areas which could be changed to make them better. He stated everyone cannot be satisfied on every point. He pointed out soft tissue injury ratings generate potential for more litigation. They are subjective ratings, and there will always be a difference of opinion on loss of strength, loss of motion, and loss of sensation. Cecilia Colling, Assistant General Manager, Northern Region, State Industrial Insurance System (SIIS), stated a body has different degrees of flexibility and it will vary from day to day. There can be legitimately different ratings based on previous activities. Senator Neal stated a difference of opinion between doctors is not a new occurrence. He commented it is something we should accept as a matter of course. Ms. Colling stated there are legitimate soft-tissue injuries that are permanent. Senator Townsend questioned how to remove the subjectivity from the guidelines. Ms. Colling stated it is complicated. Senator Lowden suggested she has received a great deal of complaint about the AMA guidelines and the opportunity of creating new guidelines should be looked into by the committee. Jan Meyers, Northern District Manager, Industrial Insurance Regulation Section (IIRS), Division of Industrial Relations (DIR), Department of Business and Industry, stated the fourth edition of the AMA guidelines is a schedule of disability ratings, and the new edition takes much of the subjectivity out of the range-of-motion rating for back injuries. She stated the recommended way of rating a back in the fourth edition is based on the diagnostic-related injuries. Senator Shaffer asked how soon the fourth edition will be adopted. Ron Swirczek, Administrator, Division of Industrial Relations (DIR), said an informal meeting was held last week to examine the fourth edition for flaws. The information from that meeting is being compiled. Public hearings will follow. Ms. Meyers stated if the fourth edition is adopted there is a phrase in NRS 616.605 which will need to be changed. The reference to range-of-motion may be in conflict with the diagnostic-related method of rating. Senator Regan stated he wants to see a decision made on soft-tissue injury during this session. Senator Lowden agreed. She expressed her interest in a Nevada guideline being developed. She stated she would be pleased to serve on a subcommittee dealing with the issue. Senator Townsend asked Alice Molasky, Commissioner, Division of Insurance, Department of Business and Industry, when the regulations affecting self-insureds will be heard. He stated she had said they would have the meeting by April 10. He questioned when the meeting will be held. Ms. Molasky stated the notice of hearing will be sent out by this Friday. She stated room 119 in the Legislative Building is reserved for May 24 and May 25. Senator Townsend asked if there are changes made to the regulations during the hearing, does another hearing need to be posted. Ms. Molasky stated that is not necessary. Senator Townsend asked if an emergency measure is requested, can the meeting be held sooner. Ms. Molasky did not know. Senator Townsend asked her to find out. He stated he did not want this to be continued longer than necessary because of scheduling problems for the meeting. He stated he wanted the regulations in place before the session comes to an end. Mr. Swirczek commented the language should be ready for a bill in 2 weeks. Senator Townsend responded the language will be ready sooner. Senator Townsend asked Ms. Molasky if she is comfortable with the mechanism to overcome the potential legal challenges to a dual jurisdictional fining process. Ms. Molasky stated yes. She requested a chance to review the final bill draft to study the fiscal impact on her agency. Mr. Swirczek commented he will want to know if the bill will increase the number of hearings. Mr. Swirczek suggested the proposed language removes many of the minor violations from the hearing process, and he hoped the language will be strong to prevent many hearings. Senator Townsend stressed a strong fine and a loss of certificate will be a strong deterrent. He stated the goal is to provide due process, but there had better be a very good reason needed for that hearing. He commented the language will be placed into A.B. 61. ASSEMBLY BILL 61: Expands authority of division of industrial relations of department of business and industry to impose administrative fine for violation of certain provisions relating to control of asbestos. Nancyanne Leeder, Nevada Attorney for Injured Workers, Department of Business and Industry, expressed her concern for the fiscal impact of the bill. She estimated 50 cases a year will be affected. Ms. Molasky commented that there is an error in Chapter 616 of NRS in respect to the service companies as it applies to the associations. She stated the definition of the service company is incorrect. She pointed out the administrator under the model act is not a third party administrator. There being no further business, the meeting was adjourned at 10:15 a.m. RESPECTFULLY SUBMITTED: Molly Dondero, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor April 19, 1995 Page