MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session June 6, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Tuesday, June 6, 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. GUEST LEGISLATORS PRESENT: Lt. Governor Lonnie Hammargren STAFF MEMBERS PRESENT: Beverly Willis, Committee Secretary Scott Young, Senior Research Analyst OTHERS PRESENT: Michael Hatch, Former Commissioner of Commerce, State of Minnesota Alice Molalsky, Commissioner, Division of Insurance, Department of Business and Industry Charles Knaus, Actuary, Division of Insurance, Department of Business and Industry David Hall, Deputy Commissioner, Division of Insurance, Department of Business and Industry William Prezant, Lobbyist, The Doctors' Company Richard Anderson, M.D., Chairman, The Doctors' Company Bill Bradley, Lawyer, Nevada Trial Lawyers Association Anne Liebermann, Concerned Citizen Bob Martin, Lobbyist, Association of Homeopathic Physicians Michael Gerber, Secretary/Treasurer, Nevada Association of Homeopathic Physicians Frank Shallenberger, M.D., Homeopathic Physician, Concerned Citizen Dr. Chester Chin, President, Nevada Homeopathic Association The meeting opened with a discussion by Michael Hatch, Former Commissioner of Commerce, State of Minnesota, on a medical malpractice closed-claim study. Mr. Hatch presented Exhibit C and delivered his testimony. Mr. Hatch's field of expertise is medical malpractice and closed-claims of workers' compensation. He noted the most important part of his study is to be sure he has the right data. Senator Regan and Mr. Hatch held conversation on the number of insurance companies writing malpractice insurance. Mr. Hatch continued with a detailed examination of insurance companies who sell medical malpractice insurance. Senator Townsend and Mr. Hatch discussed the number of open malpractice claims and those that have closed. Mr. Hatch noted he feels it is very important to look at the open claims. Senator Townsend inquired if the insurance commissioner might have any authority to compel insurance companies to cooperate with any studies, to which Mr. Hatch replied in the affirmative. Senator Townsend and Mr. Hatch continued with a lengthy, detailed discussion. Senator Townsend noted this presentation was offered in order to give the committee the insight needed to consider decisions. Alice Molalsky, Commissioner, Division of Insurance, Department of Business and Industry, came forward to testify and presented Exhibit D, which, in part, explains the cost involved for conduct of a closed-claims study by the Division of Insurance. Ms. Molasky interpreted Exhibit D. Charles Knaus, Actuary, Division of Insurance, Department of Business and Industry, stated his opinion concerning the future of medical care is there will be large national groups providing medical care, with the possibility of some groups being headquartered in Nevada. Mr. Knaus noted territorial rating is becoming a characteristic of the Nevada marketplace, with the rates in southern Nevada becoming significantly higher than in northern Nevada. David Hall, Deputy Commissioner, Division of Insurance, Department of Business and Industry, referring to Exhibit D, continued with an explanation, concentrating on a proposed cost analysis. Senator Neal, Mr. Knaus and Mr. Hall continued with discussion and explanation of Exhibit D, with Ms. Molasky joining. Senator Neal and Ms. Molasky reviewed more inner workings of the Division of Insurance, in particular as it concerns medical malpractice and closed-claims study. At this time Mr. Knaus and Mr. Hatch continued with an examination of Exhibit C. William Prezant, Lobbyist, The Doctors' Company, introduced Richard Anderson, M.D., Chairman, The Doctors' Company. Mr. Prezant noted the Doctors' Company is one of three medical malpractice insurers, in Nevada. At this time Dr. Anderson presented Exhibit E, noting The Doctors' Company would be pleased to participate in a closed-claim study. He went on to note any such study should not be controversial and especially the study should be relevant to problems in the state of Nevada. Dr. Anderson continued: Physician-owned company means the policyholders, each and every policyholder, individually and equally is an owner of the company. ...A successful mutual medical malpractice insurance company provides appropriate legal defense for its physicians; it provides appropriate indemnity to injured patients; and stabilizes insurance availability and insurance rates, rebating to its member physicians, in the form of dividends, all funds not necessary for the growth of the company and the adjustment of claims. Dr. Anderson continued, stating The Hatch Study is not particularly pertinent to the needs of Nevada and gave his reasons. Dr. Anderson went on with his comments. He concluded by noting his organization will be happy to participate in a claims study and enthusiastically endorsed a claims study in the state of Nevada. He went on to note he feels the study presented by Mr. Hatch has little bearing on the needs faced by Nevada. Dr. Anderson, in answer to questions posed by Senator Neal, touched particularly on facts pertaining to an over reserve for claims. He noted it is better to over reserve than under reserve, asserting when an over reserve occurs, as claims are settled, it is required by law (the Internal Revenue Service) they must be lowered. When lowered, they must be recognized by law in the report year of an insurance company. Dialogue continued between Senator Shaffer and Dr. Anderson, in particular concerning screening panels which review medical malpractice cases. Next to comment, Bill Bradley, Lawyer, Nevada Trial Lawyers Association, noted his organization has been pushing for many years for a fair, honest claims study. Mr. Bradley, however, noted his organization is not necessarily in favor of screening panels as they function at this time. Mr. Hatch, answering questions posed regarding open claims replied, "The reason for including open claims is, to test the issue of frequency. The big issues of a claim study are frequency and severity." At this time the hearing opened on Senate Bill (S.B.) 537. SENATE BILL 537: Makes various changes to provisions relating to physicians. Anne Liebermann, Concerned Citizen, presented her testimony, (Exhibit F). Bob Martin, Lobbyist, Nevada Association of Homeopathic Physicians, testified next in support of S.B. 537. Mr. Martin noted certain changes requested. Next to testify was Michael Gerber, Secretary/Treasurer, Nevada Association of Homeopathic Physicians. Mr. Gerber explained advantages concerning the adoption of the legislation. At this time, Frank Shallenberger, M.D., Homeopathic Physician, Concerned Citizen, came forward to testify in favor of S.B. 537. Next to testify, Dr. Chester Chin, President, Nevada Homeopathic Association, testified in favor of S.B. 537. Dr. Chin gave his reasons for supporting this legislation. There being no further business, the meeting was adjourned at 10:20 a.m. RESPECTFULLY SUBMITTED: Beverly Willis, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor June 6, 1995 Page