MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session May 2, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Tuesday, May 2, 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: Marsha Berkbigler, Lobbyist, American Consulting Engineers Council of Nevada Jan K. Needham, Principal Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau Nancyanne Leeder, Attorney, Nevada Attorney for Injured Workers (NAIW) Samuel P. McMullen, Lobbyist, Nevada Self Insurers Association Ron Swirczek, Administrator, Division of Industrial Relations (DIR) Bob Ostrovsky, Lobbyist, Nevada Resort Association Ray Bacon, Executive Director, Nevada Manufacturers Association, and Unified Business Coalition Jan Meyers, Northern District Manager, Division of Industrial Relations (DIR) Douglas Dirks, General Manager, State Industrial Insurance System (SIIS) Paul Aakervik, Senior Account Executive, W.R. Gibbens Inc. Danny Thompson, Political Director, American Federation of Labor/Congress of Industrial Organizations (AFL/CIO) Harvey Whittemore, Lobbyist, Nevada Resort Association Jack Jeffrey, Secretary/Treasurer, Southern Nevada Building and Construction Trades Council Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS) Lenard Ormsby, General Counsel, State Industrial Insurance System (SIIS) Marsha Berkbigler, Lobbyist, American Consulting Engineers Council of Nevada, spoke on behalf of Bill Draft Request (BDR) 1568. BILL DRAFT REQUEST (BDR) 1568: Provide protection for release of copyrighted material. SENATOR O'CONNELL MOVED TO INTRODUCE BDR 1568. SENATOR SHAFFER SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR LOWDEN WAS ABSENT FOR THE VOTE.) ***** Senator Townsend discussed Exhibit C. Jan K. Needham, Principal Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau, discussed Exhibit D. She pointed out section 1, subsection 6, page 2 and discussed it with the committee. Nancyanne Leeder, Attorney, Nevada Attorney for Injured Workers, discussed Exhibit E (Original is on file in the Research Library.) section 5, subsection 2. She stated the new language is broader than previously drafted and removes intentional actions from redress which harm injured workers. Senator Townsend discussed Exhibit E, subsection 3, section 80, page 58. Ms. Needham stated the pool was combined from last session. Senator Townsend stated the fund is solvent as it sits, now, and will stay at 1.5 percent until the insurance commissioner and the Division of Industrial Relations (DIR) determine that it needs to be changed, depending on the solvency needs. He stated adding a new group would put the group in jeopardy and the new group should stand on its own. Ms. Needham stated the new language came from old language in Senate Bill 316 of the Sixty- seventh Session. SENATE BILL 316 OF THE SIXTY-SEVENTH SESSION: Makes various changes to provisions governing industrial insurance. The committee referred to page 58 and agreed they did not want the money from the subsequent injury fund put into one fund. It was agreed they want two boards and two funds. Samuel P. McMullen, Lobbyist, Nevada Self Insurers Association, presented Exhibit F. Senator Neal asked Ron Swirczek, Administrator, Division of Industrial Relations (DIR), how the people who administer the subsequent injury fund are paid. Mr. Swirczek stated the staff is paid from the assets of the self-insured employers and the State Industrial Insurance System (SIIS). Bob Ostrovsky, Lobbyist, Nevada Resort Association, stated the subsequent injury fund is a mechanism for an insurer to look to another source to fund the claim. It is used after the claim has been resolved and the money has been paid out. The insurer then submits a request to the subsequent injury fund for refund of expenses. He stated the administrator does not look at the requests quickly enough and does not administer them equally. He stated the language does not accomplish its intent. Senator Townsend suggested the right language be used to address the issue. If this language does not work, fix it. Senator Regan stated he does not want to commingle the two funds and wants to be certain any new language specifies two funds. Mr. Swirczek stated there is no carryover into the subsequent injury fund for the following year. All extra money is returned to the companies. Senator Townsend specified there will be two subsequent injury funds, one for the currently self-insured and one for the new self-insurers. Ray Bacon, Executive Director, Nevada Manufacturers Association, and Unified Business Coalition, referred to a request made to him during the April 28 meeting to find if the new language in section 99, subsection (a) from Exhibit C of the April 28 Commerce and Labor Committee meeting, was from his organization. He indicated it is not. The language was deleted during the April 28 meeting. He indicated his organization is pleased with that decision. Senator Townsend discussed pages 30-31, subsection 5. He indicated the new language is too broad. Ms. Needham agreed it is very broad. Senator Townsend suggested having the last line of subsection 5 changed. Senator Neal suggested the line read, "...or disability." Ms. Needham stated there are some federal regulations which preempt state regulations. Senator Townsend read pages 14-15, section 34 of Exhibit E. It was his suggestion that the language is redundant and has been covered in Assembly Bill 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. Senator Neal stated the language in section 34 of Exhibit E seems to place an increased burden on the commissioner to suspend the certificate of a private carrier. He pointed out the language is too narrow. Senator Townsend said the intent of the section was if a business committed any violation there will be a fine. He stated the second time for any violation; the certificate will be canceled. The language states the violation must be intentional and repeated before action will be taken. The committee agreed to delete the entire section. Discussion was held on section 100, pages 84-85 of Exhibit E. Senator Townsend stated subsection 4, page 85, where the words are bracketed, should be left as it is written. Jan Meyers, Northern District Manager, Division of Industrial Relations (DIR), stated she had recommended removing that subsection. It was agreed to leave the brackets in and to delete that subsection from the law. She pointed out page 86, subsection (d) will read 0.6. Senator O'Connell asked if the state is going to stay with the American Medical Association (AMA) Second Edition Guides or adopt the new fourth edition. Ms. Needham commented the legislative authority cannot be delegated to adopt the guides. Senator Townsend discussed Exhibit G and read to the committee the paragraph on spinal injuries in the letter in Exhibit G. Ms. Meyers disagreed with some of the sections of Exhibit G. She stated there may be some minor increases in cost and some minor decreases. She pointed out there are some problems with staying with the second edition of the AMA guides. She stated the guide is no longer in print and is unavailable for distribution to any new ratings physicians. She stated the fourth edition deals with current medical procedures. She stated the second edition is 7 years old and there have been many changes in medical care since then. She explained the range-of-motion test is not the approved test used to diagnose injury to the back. Senator Lowden asked if the committee is still considering adopting their own guides as many other states have done. She pointed out, if the committee is considering adopting their own guides, it will be very confusing to adopt the fourth edition, train the ratings physicians, then adopt new guides and train them again. She suggested they keep the second edition if they are going to adopt their own guides. Senator Townsend referred to Exhibit G, the SILMO Disability Evaluation Services. He discussed the changes suggested by the report. Senator Shaffer asked who sponsors SILMO and suggested there could be some bias in the report. Senator Augustine suggested the language could be changed to "the division may consider the edition most recently published" instead of the current "shall" in section 38 of Exhibit E. Mr. Ostrovsky commented there is a doctor who is an expert who has studied the rating guides. He stated there is concern over the rating guides. He said there have been numerous letters sent to him which he forwarded to DIR concerning the issue. He suggested there are unresolved concerns in the fourth edition and it will be wise not to rush into adopting the new guides within the next 2 years. He stated there are risks in the fourth edition. Douglas Dirks, General Manager, State Industrial Insurance System (SIIS), stated there are difficulties in getting physicians trained on the second edition of the guides because it is old. He stated there is more need for training on the second edition and without that training there is disparity in the ratings given. He commented he does not want to see the state continue to use the second edition for an extended period of time. Senator Neal stated the fair rating for the injured worker is the most important aspect of the system. He stated if the fourth edition is more thorough, then it should be used. He suggested to use a less current edition is to deny the injured worker proper benefits. Mr. Dirks stated he is not experienced with the guides and cannot respond. Ms. Meyers stated the second edition is based on technology which was in place at the time of its publication. She stated the medical reports in a patient's file will have current medical technology indicated. She said the fourth edition will be more current. Senator Neal asked why the committee is discussing the differences between the two editions, if the fourth is the current standard. Senator Lowden commented it is because if the committee chooses to adopt their own set of guides, it will be a waste of time for those involved in training on those guides to change to the fourth edition now; then, change to a new one again in another 18 months. She commented she thinks it is a very good idea to have specialists do the ratings on special body parts. Mr. Ostrovsky stated it will be advisable to wait and then make the change once. Ms. Meyers suggested it will be wise to wait if there are going to be new guides adopted later. Paul Aakervik, Senior Account Executive, W.R. Gibbens Inc., stressed the training on the use of the guides is very important. There is a course held in Chicago and one held in Colorado. He explained the course is 40-hours long and must be taken during the week. He explained then SIIS must train all its examiners on how to check the ratings. He stated errors have been found in the ratings from the second edition from physicians who have been using the edition for several years. He suggested it will take at least 6 months for the doctors to learn the new edition. He stated there are major changes in the rating from the second edition to the fourth edition. He stated there is a large start-up cost in using the fourth edition guide. He stated the course is held once every 6 months. Ms. Meyers stated if the fourth edition is adopted the ratings physicians will be required to attend the class. Senator Neal asked if a person is rated on the second edition, could he sue the state because the fourth edition is considered the current standard. Ms. Meyers agreed that is possible. Mr. Ostrovsky stated the current language suggests adoption of the fourth edition. He stated if the state stays with the second edition, then the decisions made, based on the fourth edition, can be challenged in court, and the challenge will win. He stated if the committee makes a policy decision which states the second edition will be used, then a challenge in court will not succeed. Senator Lowden commented there was an earlier policy decision made not to accept the third edition of the guides. Ms. Meyers commented if the fourth edition is adopted, all ratings must be conducted under that edition. She stated it takes 4 to 6 months to fully implement the usage of the new guides. Senator Townsend asked if an interim committee has the authority to develop new guides or to adopt the fourth edition. Ms. Needham stated it is possible. Senator Neal stated he feels the injured workers in the state should be evaluated based on the most current information. He stated he thinks there will be too many lawsuits in federal court. Senator Townsend disagreed and commented if the fourth edition is not the best for the injured worker, and the committee chooses not to adopt the fourth edition, he does not feel there will be a problem. He suggested the idea to develop guidelines tailored to the needs of the injured worker might be better for the worker and for the state. Danny Thompson, Political Director, American Federation of Labor/Congress of Industrial Organizations (AFL/CIO), commented consistency with the ratings is important for the injured worker. He suggested training is the most important aspect to the ratings, and stated the only way to stop shopping for doctors is to train the ones who are doing the ratings. He suggested uniform training is the only way to achieve uniform ratings. Senator Lowden asked if specialists will rate for specific body parts under the fourth edition. Mr. Thompson stated he did not know. Ms. Meyers stated there are sections in the fourth edition for specific body areas. She stated the guide is broken down for ratings on specific body parts. Senator Lowden asked if specialists will take the training for specific areas. Ms. Meyers stated there are some specialists who serve as ratings doctors. She stated the second edition makes it difficult to get qualified specialists as ratings physicians, because there are no copies left on which to train them. Senator Regan suggested if the doctors will not take the training they should not be doing the ratings. Ms. Meyers explained using the second edition makes it very difficult to do any training. The fourth edition will allow for training of the physicians because the edition exists and the classes are being given. Senator Regan pointed out if a physician is not qualified to rate, he should not be doing ratings. Senator Lowden asked if chiropractors are allowed as ratings physicians under the fourth edition. Ms. Meyers stated the statute allows chiropractors to rate. She commented the AMA guide is developed by medical doctors for use by medical doctors. She stated there are some areas which may be difficult for a chiropractor to use. She stated osteopaths fall under the medical doctor guidelines in the statutes. Mr. Swirczek stated the training required is very specific. He stressed the goal is consistency. He commented the fourth edition eliminates much of the guesswork currently found under the second edition. Senator Townsend stressed there are many opinions about the rating guides. He stated there may be a direct, financial impact on SIIS. He explained since solvency of the system is a goal of the Governor, then Mr. Dirks must consider the impact on the system if the fourth edition is adopted. Mr. Dirks explained they have studied the guides. He stated there is an increase in the Permanent, Partial Disability (PPD) costs with the fourth edition. He stated it is not substantial. He explained he is concerned they are going to run out of ratings physicians on the second edition, because they cannot be trained on it any longer. Senator Townsend pointed out many states do not use the AMA guide, because they have developed their own. Senator Shaffer stated he would like to see enabling legislation to allow the interim committee to follow the issue. Mr. Ostrovsky stated he would like to take testimony on the fourth edition to make a determination as to whether it is good for the injured worker and for the state. Mr. Swirczek explained DIR will require whatever edition is adopted to be both medically and economically sound. He stressed they do not want to put the state under any extra financial burden. Senator O'Connell requested a survey be done on the surrounding states on PPD awards and the guides. Senator Townsend read Exhibit D. Mr. Dirks stated Exhibit D addresses the issue, but does not go as far as the Governor would like. He stated his concerns that there be the ability to collect the premiums. He cautioned against requiring the system to liquidate to determine insolvency. Senator Townsend suggested adding "with current cash flow" to the end of subsection 6 of Exhibit D. Senator Townsend explained the goal of the language. He stated: Insolvency only occurs when you have to dip into your asset pool to sell off to meet those obligations under a normal course of business. ...If you go from a positive cash flow to [a negative] one cent cash flow, you have triggered it in. Scott Young, Senior Research Analyst, stated the language as currently written says the SIIS will have to sell off all assets if it goes into a negative cash flow by $1. Mr. Dirks asked, "Is it the intent of the committee if an employer comes into the state and is never covered by SIIS, but is self-insured the day they come into the state, are they also subject to the assessment." Ms. Needham stated it becomes a condition of certification that a bond be filed for payment of the surcharge before certification of a self-insured employer. Harvey Whittemore, Lobbyist, Nevada Resort Association, stated the formula developed will determine that issue. Mr. Dirks explained if a company relocates to Nevada, is covered by private insurance, then that company is still subject to the solvency surcharge. Mr. Whittemore indicated he thinks the language can be clarified in subsection 2 to make it clear that those employers who come into the system after the effective date of the act will not be subject to a surcharge in any particular amount. He stated a new company should not have a surcharge based on prior history, but a company which renames itself should not be able to avoid the surcharge by calling itself a new company. Jack Jeffrey, Secretary/Treasurer, Southern Nevada Building and Construction Trades Council, expressed concern that a contractor coming into the state may get a more favorable rate than a contractor already here. That edge could cause difficulties for the established company during the bidding process for a contract. Mr. Whittemore stated flexibility in the formula should be considered. Mr. Swirczek stated DIR is willing to work on the details. Mr. Dirks stated according to the definition of insolvency, the surcharge is terminated when the system achieves solvency. Ms. Needham asked if there will be a reference added for employers covered by private carriers. Senator Townsend stated that reference will be added and for DIR to collect and enforce the fees. Senator Townsend referred to the new language in Exhibit D, section 2, subsection (b), and in section 3, subsection 2. He pointed out the bond is required of individual self-insureds as well as group self-insureds. Mr. Whittemore stated each bond will be different depending on the particular experience of each company supplying the bond. Ms. Needham explained why she cannot delete section 34 from the bill draft. (Exhibit E) Senator Townsend stressed he wanted the language to match Assembly Bill (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. Mr. Swirczek discussed the subsequent injury fund. Mr. McMullen explained Exhibit F and section 80 of Exhibit E. He stated the amendment is to make certain every matter relating to the fund is processed first, and recommended by the administrator and the DIR. He stated, secondly, the board has to consider the recommendations of the administrator. SENATOR NEAL MOVED TO ADOPT THE LANGUAGE IN EXHIBIT F. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Discussion was resumed on the fourth edition of the AMA guides. Ms. Meyers explained some Nevada doctors have taken classes on the fourth edition even though Nevada does not use it. Ms. Meyers mentioned that the panel of ratings doctors is appointed by the administrator of DIR. Mr. Whittemore commented there has been discussion about scheduled benefits, soft tissue injury, range-of-motion, and other issues. He suggested it may be best to have a fixed guide in place during the interim so that the study committee can determine whether to schedule the benefits in conjunction with the fourth edition or to come up with a mixed schedule. He suggested "may" be used instead of "shall" and to allow the committee to study the issue. Senator Augustine pointed out the language already gives that flexibility. Mr. Whittemore commented the language gives flexibility to the interim committee, but it does not give oversight to the committee. Senator Neal stated he feels they should put the fourth edition into law and if it needs changing in 1997, then they can change the law again. Mr. Whittemore stated he does not think the change is needed right away. He said they should wait, study the issue, and adopt the appropriate guides in 1997. Ms. Meyers stated it takes about 6 months to adopt the guides. SENATOR REGAN MOVED TO LEAVE SECTION 38 AS WRITTEN. SENATOR AUGUSTINE SECONDED THE MOTION. Ms. Meyers stated, "The division cannot adopt the second edition of the guides because it is no longer available. It goes against 233 (b)." SENATOR REGAN AMENDED HIS MOTION TO ADD "BY DECEMBER 31." Senator Regan stressed the need for consistency. Senator Townsend explained the section should read, "...the division shall adopt no earlier than December 1, 1995." Senator Lowden asked if a deadline should be imposed, if the goal is to have the new guides in place by July 1996, and if the committee should be limited to a deadline. Senator Townsend clarified his language states they cannot be adopted before the date indicated, but does not set a time limit on the adoption of new guides. It does not prohibit the interim committee from going forward with their analysis of individual body parts, soft tissue issues, etcetera. Senator Lowden questioned why they should adopt regulations which they will change in a couple of months. Ms. Meyers stated the way the law is written, DIR may adopt what they want, when they want without the approval of the committee. SENATOR AUGUSTINE WITHDREW HER SECOND OF THE MOTION. SENATOR NEAL SECONDED THE MOTION WITH THE DATE. Mr. Swirczek stated DIR wants common sense to prevail and emphasized they will not adopt guides just to adopt something. The new guides must be correct for the workers. Senator Townsend commented it concerns him that a change might be made which is premature. Senator Neal stated some form of guides must be used because people will always be getting injured. THE MOTION FAILED. (SENATORS AUGUSTINE, LOWDEN, O'CONNELL AND TOWNSEND VOTED NO.) ***** Senator O'Connell pointed out that Nevada pays more on Permanent Partial Disability (PPD) awards than any other surrounding state. She emphasized it is important to obtain a fiscal handle on what is trying to be accomplished. She commented SIIS is a bankrupt system and the situation needs to be addressed. Senator Neal asked if Senator O'Connell is suggesting that the rating of injured workers should be tied to the costs as they affect the state. Senator O'Connell stated since Nevada pays the highest rates in the region it is not an unreasonable request. Senator Neal stated: The cost is going to come from the person who is doing the rating. Are we saying then, we are not permitted to use a higher standard that will tend to give the injured worker the benefit and adopt the lesser standard because we feel it is going to cost too much. Senator O'Connell responded: I am saying we need to look at what the effect is of that fourth edition. I do not know how it will compare to the second edition and what is happening, I only know we are paying adequately, and above that, now. I want to take a look at it. Senator Neal stated: The testimony before this committee indicated that the fourth edition of the medical guide will give a higher standard in terms of evaluating injuries that workers might have. Are we to accept a lesser standard in doing that. Senator O'Connell stated: They can do that, already, from the testimony that we have heard. Senator Townsend commented it has been requested that the committee be given information to help them determine whether to adopt new guides or to leave them as they are. He indicated Mr. Young will have that information for them very soon. SENATOR LOWDEN MOVED TO HAVE THE INTERIM COMMITTEE STUDY THE FOURTH EDITION AND TO GIVE THEM THE AUTHORITY TO ADOPT. The was no second to the motion. Senator Townsend referred to page 87, section 101 of Exhibit E. He stated there is no intent for any of the provisions in section 101 to prohibit a client from obtaining counsel. He emphasized to Ms. Leeder there is no prohibition against counsel in the bill. Ms. Leeder discussed page 88, section 101, subsection 1 of Exhibit E. She suggested language should read, "If an insurer in good faith and a claimant with privately retained counsel or NAIW, or written waiver of counsel..." Senator Townsend objected to "in good faith" being added to the language. He explained that nothing in the section precludes a claimant from obtaining counsel. Senator Neal pointed out Nevada Revised Statutes (NRS) 616.605 allows payment to be made on that section of the law if there is no mutual agreement. Ms. Leeder stated that NAIW must be placed into the statute in order to represent a claimant. She stated she must be appointed by an appeals officer to represent a claimant. She stated NAIW does not negotiate for a claimant unless there is already a case at the appeals officer level. She stated there is nothing in the language to preclude private counsel, but NAIW does not participate under the proposed language. Senator Neal stated the new language eliminates lump sum payments. He pointed out if "lump sum" is eliminated, then counsel is not needed. Ms. Leeder stated NRS 607.101 allows for a minimum lump sum award to be negotiated between the parties based upon the needs. Senator Neal stated there is a mutual agreement standard in the law in order to receive the lump sum. Ms. Leeder asked for reconsideration of section 98 of Exhibit E. She stated the wording has changed in the bill draft version. Ms. Needham suggested working on the language after the hearing. Senator Townsend discussed pages 82-84, section 99, subsection 5. He suggested adding a comma after "employment," deleting the remainder of the subsection and subsection (b). He stated the Temporary Total Disability (TTD) stops when a person is released by the physician and when he says a person is physically capable of any gainful employment or the person is disabled to the level of Permanent Total Disability (PTD). He stressed this allows a person to come to a resolution about their status. Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS), pointed out when a person is considered for PTD they are evaluated as to how severely they are hurt. Their employability is considered in relationship to the disability. She stated the new language creates a potential for more people to be placed in the PTD category and less into the TTD category. She stated there could be more people forced into employment which is significantly lower than their previous employment and less than the TTD category. Senator Townsend asked for an example of employment which will offer less than the TTD award. Ms. Colling stated if an iron worker is injured and unable to physically do the work any longer, with vocational rehabilitation the goal is to try to find work equal in pay. Senator Townsend pointed out vocational rehabilitation does not work for the injured worker. Testimony has indicated they take rehabilitation several times, then go back to the identical job they had before because they cannot find a job which pays the same. Ms. Colling disagreed. Senator Townsend pointed out the success rate for vocational rehabilitation is abysmal. He pointed out the suggested change in PPD awards is substantially higher than previously awarded. Ms. Colling agreed. Senator Townsend stated if a worker does not qualify for employment in another field, the worker will receive PTD. Ms. Colling stated then the worker is locked into a permanent total situation for the remainder of their life. Lenard Ormsby, General Counsel, State Industrial Insurance System (SIIS), discussed page 72, sections 91 and 92. He stated NAIW has requested an appeals officer or hearings officer should have a 20-day time frame in which to decide a petition for "stay." He indicated Brian Nix, Senior Appeals Officer, Department of Administration, has requested 30 days for a decision on a petition for "stay." Senator Townsend referred to Exhibit G and Exhibit H which he requested for information for the committee. There being no further business the hearing closed at 11:50 a.m. RESPECTFULLY SUBMITTED: Molly Dondero, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor May 2, 1995 Page