MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session May 4, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Thursday, May 4, 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 Kathy M. Augustine Senator Raymond C. Shaffer Senator John B. (Jack) Regan Senator Joseph M. Neal, Jr. COMMITTEE MEMBERS ABSENT: Senator Sue Lowden (Excused) STAFF MEMBERS PRESENT: Scott Young, Senior Research Analyst Vance Hughey, Senior Research Analyst Molly Dondero, Committee Secretary OTHERS PRESENT: Randall Lea, M.D., FAADEP Jan K. Needham, Principal Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau Ron Swirczek, Administrator, Division of Industrial Relations J. Randy Stephenson, Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau Eloise Koenig, Self-Insurance Coordinator, Workers' Compensation Section, Division of Insurance, Department of Business and Industry Douglas Dirks, General Manager, State Industrial Insurance System (SIIS) Jan Meyers, Northern District Manager, Industrial Insurance Regulation Section Division of Industrial Relations Bob Ostrovsky, Lobbyist, Nevada Resort Association Harvey Whittemore, Lobbyist, Nevada Resort Association Kevin Higgins, Director, Fraud Control Unit for Industrial Insurance, Supervising Deputy Attorney General, Office of the Attorney General Pam Miller, Government Affairs Director, Associated General Contractors Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS) John Madole, Executive Director, Associated General Contractors, Nevada Chapter Two bill drafts requests (BDRs) were introduced. BILL DRAFT REQUEST 54-1161: Makes various changes regarding practice of psychology. SENATOR SHAFFER MOVED TO INTRODUCE BDR 54-1161. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR LOWDEN WAS ABSENT FOR THE VOTE.) ***** BILL DRAFT REQUEST 54-2023 : Provide for confidentiality of certain records or information obtained by board of homeopathic medical examiners during investigation. SENATOR REGAN MOVED TO INTRODUCE BDR 54-2023. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR LOWDEN WAS ABSENT FOR THE VOTE.) ***** Senator Townsend discussed Exhibit C and Exhibit D. Exhibit E is biographical data of Randall D. Lea, MD, FAADEP. Ron Swirczek, Administrator, Division of Industrial Relations (DIR), introduced Dr. Lea who testified via telephone from Las Vegas. Dr. Lea spoke from Las Vegas and discussed the American Medical Association (AMA) Guides, second and fourth editions. He stated the fourth edition is more scientifically sound than previous editions. He stated using the specified equipment in the second edition of the AMA guides, there is a 30 to 50 percent error in the reproducibility of data for range-of-motion determination. He stated the ratings will be less for spinal impairment using the fourth edition than they have been using the second edition. He stated the fourth edition has been compiled by committees of orthopedists, physical medicine groups, and occupational medicine groups. He emphasized the fourth edition is the most scientifically sound and updated. He suggested the guides can be modified by consensus groups to fit the needs of an individual state. He pointed out that training is extremely important. He said doctors must be adequately trained to do ratings. Senator Townsend asked Dr. Lea if the AMA guides are used as a supplement when schedules are designed by an individual state. Dr. Lea explained many states have taken parts of the guides and expanded them for their own use. He indicated the ratings are very high in the guides for a simple sprain of the back. He explained there are many variables which affect the range-of- motion of the back. He stated some states have "age-normed" the affliction to stabilize the rating. He stated range-of-motion is subjective because it depends somewhat on the patient's effort. The Texas Impairment Schedule puts validity checks into the rating to produce a statistical average for the loss of flexibility of the patient. He stated it is plus or minus 5 degrees, or 10 percent from median. Florida and Minnesota have adapted the fourth edition for their needs. Senator Shaffer commented consistency in diagnosis is a concern of the committee. Dr. Lea stated the only way to achieve consistency is to require more training. Senator O'Connell asked which state has had the most success in giving the best care to the injured worker and reducing the cost. Dr. Lea stated he is not certain which state gives the best care to the injured worker. He stated there are many factors to consider. He stated if an injured person, insured by an insurance company comes to him for help, his goal is to make that person well and to feel better. He commented when an injured worker, insured by the State of Louisiana, where he practices, comes to him for help, he has two goals. One is to have the patient feel better and to be well; the other is the requirement placed upon him to return that patient to work as soon as possible. J. Randy Stephenson, Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau, explained Exhibit C, the definition of insolvency. Senator O'Connell asked if the language will cover a situation where there may be 3 bad months for SIIS, would the insolvency formula take over? Mr. Stephenson stated it is the discretion of the commissioner of insurance to declare insolvency. Senator Townsend pointed out the commissioner of insurance can allow a leeway, or can activate the insolvency formula right away, depending on the decision she makes. He stated the new language does not preclude the commissioner from activating and deactivating the formula. Senator Neal stated if a person cannot pay a bill, they are insolvent. He commented: We have an obligation to see that injured workers are taken care of. Any type of agency arrangement we might have which is supposed to deliver those particular services, and we allow that entity to become insolvent, as a state agency, we have to accept that responsibility. Mr. Stephenson agreed. Jan K. Needham, Principal Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau, stated that issue is what the insolvency surcharge addresses. Eloise Koenig, Self-Insurance Coordinator, Workers' Compensation Section, Division of Insurance, Department of Business and Industry, stated she wanted more time to review Exhibit C and to discuss the issue with her staff. Douglas Dirks, General Manager, State Industrial Insurance System (SIIS), commented he has a concern about the language, and stressed the need for caution because efficient, cash-flow management might trigger the insolvency formula, which is not the goal. He stated he would only want to see it invoked after an examination conducted by the commissioner of insurance. He requested more time to study the issue. Senator Townsend requested that "public utilities, labor relations, and" be removed from line 1 of Exhibit C. SENATOR NEAL MOVED TO ADOPT EXHIBIT C INTO THE NEW BILL. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR LOWDEN WAS ABSENT FOR THE VOTE.) ***** A discussion was held on Exhibit D. Ms. Needham explained the collocation method. Jan Meyers, Northern District Manager, Industrial Insurance Regulation Section, Division of Industrial Relations, explained the average monthly wage figures. Ms. Meyers explained the figures listed in Exhibit D are incorrect and she will supply the committee with the correct figures. Bob Ostrovsky, Lobbyist, Nevada Resort Association, explained the businesses in Nevada have lived with the listed figures for years. If they are changed now, everyone will have to change all their computer programs and all their forms. He stated the changes will cause many administrative changes. Senator Neal stated the programs will not have to be changed, just the numbers in those programs. Senator Townsend suggested instead of changing the figures, change the heading of the column to accurately reflect what the column represents. Senator Neal disagreed. He claimed the figures will reduce the Total Temporary Disabled (TTD) benefits to injured workers. Ms. Meyers stressed benefits have been paid at the proper amount. Harvey Whittemore, Lobbyist, Nevada Resort Association, indicated the calculations under subsection 3, are not impacted by the schedule in subsection 4. He stated the injuries being discussed go back to the formula which is reflected in subsection 1 not the schedule of benefits in subsection 4. It was emphasized by Ms. Meyers the TTD is not being decreased and pointed out the schedule in subsection 4 has no reflection on subsection 3. Mr. Whittemore stated schedule 4 is already in the statute. Senator Neal asked how subsection 3 will affect the deemed average wage. Mr. Whittemore stated under subsection 3, the date which is used for computation is 1 year prior to the injury. The average weekly wage computation from the fiscal year prior to the injury is used to determine payment. This is an unfreezing of the wage. He stated it is a rolling average. By using this computation there will be no "notch-baby effect." Ms. Needham indicated this is the intent of the subsection which was requested by the committee prior to drafting of the language. Senator Neal pointed out this is not a decrease. Ms. Needham stated the wage will start where it was previously frozen, but it will not be brought forward to July 1, 1995. She stressed the worker will not lose any money from what they are currently receiving. She stated they will not be gaining anything, just moving ahead from where they were. Mr. Dirks stated SIIS interprets subsection 3 to mean if a person is injured on July 1, 1995, the calculation will deem a person injured on July 1, 1994. The average monthly wage will be the wage which is in effect the prior fiscal year. Mr. Whittemore explained: You directed the bill drafter, as I understand the motion, to lift the freeze and going forward to make sure that those individuals who are injured on or after July 1, 1995, to not be subject to the existing freeze. That is what this language does. If you would like to direct the bill drafter to draft a bill that says we will pick up 50 percent of the freeze going forward, or 100 percent, you can certainly do that. Or you can raise benefits. But the motion you made was to lift the freeze and rolling forward make sure that there is a system in place that all individuals who are injured are not subjected to the freeze. Senator Neal asked how long the freeze has been in place. Mr. Dirks responded 2 years by statute. Senator Neal expressed his confusion about the wording of the bill. Senator Townsend explained the SIIS business plan refers to this situation. Mr. Dirks explained the 1993 rate will be used effective July 1, 1995 if the 1994 rate is not used. He stated it is a policy issue. Mr. Whittemore explained this is what the committee had directed. He stated the new language gives a rolling increase in the future. If it is simply lifted, there will be a group of people who will be discriminated against. SENATOR REGAN MOVED TO NOT INCLUDE THE LANGUAGE. There was no second to the motion. Senator Townsend referred to Exhibit F which is Exhibit E of the May 2 meeting. (Original is on file in the Research Library.) Kevin Higgins, Director, Fraud Control Unit for Industrial Insuran ce, Supervi sing Deputy Attorne y General , Office of the Attorne y General , stated page 106, subsect ion (d), clarifi es the current languag e. He stated the languag e states a person with no employe es does not have to have SIIS coverag e. Senator Townsend complimented Mr. Swirczek and his staff for their effort on behalf of the Johnsons whose lives have been directly affected by the legislation. He referred to the people, who acted as owner-builders with a general contractor's license, hired a subcontractor who said he had SIIS, that subcontractor was injured, did not have SIIS, and now the Johnsons will lose their home to pay his bills. Mr. Higgins presented Exhibit G. Pam Miller, Government Affairs Director, Associated General Contractors, expressed her concern about the language in section 123 of Exhibit F. She stated an affidavit, which may not hold up in court, will create a situation where someone who would otherwise need a contractor's license, will not need one, and it will create inequities in the system. She requested a deemed wage of $500 be added to the language for all general contractors. Mr. Higgins stated it is their intent that everyone is covered. Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS), explained there have been incidences where there are contractors who have not covered their employees. This language affects people who do not have employees. Ms. Needham suggested leaving out (1), (2), and (3) of subsection d. John Madole, Executive Director, Associated General Contractors, Nevada Chapter, stated the responsibility falls back to the homeowner to have a policy on a contractor who does not have a SIIS policy. He stated if there is a deemed wage for a contractor who has no employees, that individual will always have a SIIS policy. He expressed his concern that the language allows a person without an employee to sign an affidavit stating he does not need SIIS. But if that person should hire a helper for a short period, that contractor does not have any SIIS coverage. He suggested the $500 deemed wage will solve this problem. Senator O'Connell referred to page 106, subsection 3, paragraph d, line (1) and suggested adding "...and he must then have a deemed wage of $500." Ms. Needham stated this section does not change whether a person needs SIIS. It says if a person does not have to have SIIS, then it must be proved to the board. She stated the person will be covered under sections of chapter 616 of Nevada Revised Statutes (NRS) which covers the deemed wage. Senator Townsend asked Mr. Higgins if he has discussed the proposed language on page 107, subsection 2. He stated the office is aware of the concept. Mr. Higgins discussed page 108 and stated the language clarifies previous language allowing the fraud unit to make copies of requested information. Currently, they can look at the information, but there is nothing in the law to allow them to make copies. Senator Neal discussed page 21, section 46. SENATOR NEAL MOVED TO REMOVE THE BRACKETS AND NEW LANGUAGE OF SECTION 46, SUBSECTION 3. SENATOR AUGUSTINE SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS TOWNSEND AND O'CONNELL VOTED NO. SENATOR LOWDEN WAS ABSENT FOR THE VOTE.) ***** Senator Neal explained the vote will leave SIIS employees classified. Exhibit H was offered for information by Mr. Swirczek. There being no further business, the hearing closed at 10:25 a.m. RESPECTFULLY SUBMITTED: Molly Dondero, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor May 4, 1995 Page