MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session June 15, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Thursday, June 15, 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 Molly Dondero, Committee Secretary OTHERS PRESENT: Pat Coward, Lobbyist, Nevada Association of Realtors Greg Ferraro, Lobbyist, Blue Cross Blue Shield of Nevada Norman Becker, Vice President, Blue Cross Blue Shield of Nevada Jim Wadhams, Legal Counsel, Blue Cross Blue Shield of Nevada Sharen Weaver, Supervisor, Life and Health, Division of Insurance Punam Mathur, Senior Vice President, Government Affairs, Las Vegas Chamber of Commerce Marie Saldo, Vice President, Government Affairs, Sierra Health Services Fred Hillerby, Lobbyist, Hospital Health Plan, Coordinated Care Options, Ins. Don Springmeyer, Lobbyist, Nevada Trial Lawyers Association Ann Fleck, Insurance Counsel, Division of Insurance Margi Grien, Lobbyist, State Contractors' Board I.R. Ashleman, Lobbyist, Southern Nevada Home Builders Association Debra Sheltra, Board Member, State Contractors' Board The hearing was opened on Assembly Bill (A.B.) 472. ASSEMBLY BILL 472: Requires instruction for original real estate salesman's license to include subject of disclosure of information in real estate transactions. Pat Coward, Lobbyist, Nevada Association of Realtors, discussed the bill. He explained there will be 3-course hours added to cover the information needed. Senator Neal asked why the credits required in section 4 cannot be applied against the requirements in subsection 2 for the 18 classroom hours. Mr. Coward stated the increase is from 15 credits to 18 credits and the three requested credits are added in. Senator Neal expressed his confusion over the number of credits required and what is applicable and what is not. Mr. Coward explained the credits should be applicable to the requirement. He suggested it is the experience level of the person applying for the license which is considered. Senator Regan pointed out the credits listed refer back to subsection 2 which applies to the original real estate brokers. He stated the 3 new required hours may not be applied to the original license. He stated subsection 4 refers back to subsection 2. Mr. Coward pointed out the requirements are in continuing education. Senator Townsend pointed out credit is given for every 16 semester-hours of college-level courses for each 2 years of active experience. He stated that credit may not be applied toward continuing education credits. Mr. Coward stated continuing education is an ongoing process. SENATOR REGAN MOVED TO DO PASS A.B. 472. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR NEAL VOTED NO. SENATORS LOWDEN AND SHAFFER WERE ABSENT FOR THE VOTE.) ***** The hearing was closed on A.B. 472 and opened on A.B. 299. ASSEMBLY BILL 299: Regulates provision of health insurance for small enterprises. Greg Ferraro, Lobbyist, Blue Cross Blue Shield of Nevada, spoke in support of the bill. He stated the health management organization (HMO) industry in Nevada has worked together to amend this bill to include interests in specific areas of concern to each HMO. He commented the bill represents unity within the industry. He stated the bill is a step toward market reform, and though there is still much to do, this bill is a step forward. He stated the bill brings insurance to small employers with as few as two employees up to 25. The insurance will be affordable to those businesses. Senator Townsend discussed the issue of mandated benefits. He asked for a description of price range and affordability of the product being suggested for the small businesses. Mr. Ferraro commented the previous legislation which had addressed this issue, was not well received in the marketplace, because it did not allow insurance companies to make a profit. Norman Becker, Vice President, Blue Cross Blue Shield of Nevada, read Exhibit C. He commented that 59 percent of all employers who do not offer coverage for their employees stated that excessive cost was the reason for not offering insurance. He stated 36 percent of businesses surveyed stated they have no need for insurance because they are covered elsewhere. He cautioned that too much reform can, actually, lead to less coverage, because costs increase. He stated the bill requires insurers to set premiums for small businesses in a consistent manner. Mr. Becker stated the bill is based on the national commissioner of insurance model program. He stated the bill will give a break to small businesses, which have experienced high medical expenses, allowing a certain amount of rate increase to the business. It will create a new rate setting requirement designed to equalize premiums for small business, prohibit insurers from posing preexisting condition waiting periods on employees of small businesses if they are currently covered by another insurer or if they have had coverage within the last 90 days, and will encourage the insurance industry to adopt managed care strategies to help small businesses continue to obtain affordable health care plans. Mr. Becker presented Exhibit D and Exhibit E. Senator Augustine discussed section 11.5 of A.B. 299 and requested removing those provisions as mandated coverage and making them optional coverage. Mr. Becker commented that any cost in coverage is passed through to the consumer. He stated including section 11.5, subsections 1, paragraphs (a)-(d) is a policy decision. If those are included as mandates, they will add to the cost of insurance. He stated the addition of those four paragraphs adds 10 percent to the cost of the basic core of benefits. Senator Augustine suggested those four paragraphs be offered as options. Mr. Ferraro referred to section 11.5, subsection 2. Mr. Becker discussed Exhibit D. Jim Wadhams, Legal Counsel, Blue Cross Blue Shield of Nevada, stated Nevada has a 30 percent higher level of uninsured people than the national average. He suggested that may be because Nevada has mandated what must be in an insurance policy. He stated A.B. 299 will allow the people who buy the policies to determine what they want in those policies. He stated this will be an advantage to the people of Nevada. He discussed Senate Bill (S.B.) 503 of the Sixty-sixth Session's "bare bones" coverage which was designed with a flaw. It kept insurance companies from making any profit on the policy they sold. He stated the commission was limited for the people who sold the insurance so they made only 2 percent on the sale of the policy, whereas the normal commission rate is 4 to 6 percent. He stated the policies were, also, limited to $50,000 which is too low in today's medical market. The policies had little benefit and there was little incentive to sell it. SENATE BILL 503 OF THE SIXTY-SIXTH SESSION: Authorizes establishment of plan of health insurance for small employers. Mr. Wadhams discussed Exhibit E. He stressed key points of A.B. 299 prevent a policy for a group from being canceled if an employee in the group has high medical bills and mandate renewability of the policy. He stated consideration of a preexisting condition will only be used once for an employee and may not be transferred to a subsequent insurance policy. He stated "self-insured" is left out of the definition of "carrier" because the bill was not to be construed as an employer mandate to provide insurance. He stated, "Twenty-eight percent of the employers in Nevada are under insurance contracts that we have control over." He indicated another 28 percent are with the Employers Retirement Income Security Act of 1974 (ERISA) and the balance of 44 percent are under Medicaid, are indigent and are under another government program. Senator Neal referred to Exhibit D and asked if page 5 and 8 may be read together. Mr. Wadhams stated they may. He indicated they are hypothetical rates. Senator Neal asked if the employer is to pay the entire premium or is it to be shared with the employee. Mr. Becker stated it is the choice of the employer as to how he wishes to offer the policy, but he must pay at least 50 percent of the cost of the premium. Senator Lowden discussed the list of mandates in A.B. 299 in section 11.5. She pointed out Nevada has 26 mandates for insurance policies. This is the largest number of mandates in the country and something which drives the costs up for the consumer. Mr. Wadhams suggested these mandates have given Nevada the largest percentage of uninsured population in the country. Senator Lowden stated there are more mandates in this bill than what is necessary. Discussion was held on section 11.5. Mr. Ferraro stated the 26 mandates in Nevada law have been changed to nine. Senator Regan pointed out section 11.5, subsection 1, paragraphs (a)-(d) are preventative care. Senator Lowden agreed, but she stipulated those should be options, not mandates, to keep the costs down so that more people may obtain insurance. Senator O'Connell pointed out extra taxes are being asked for to cover indigent care in the hospitals. She indicated it is not "if" the bill will be paid, it is "when." Mr. Wadhams stated section 11.5, subsection 1, paragraphs (a)- (d) are different conceptually than the benefits (e)-(j). Senator Lowden asked if (a)-(d) are amended out of the bill, will the bill be in jeopardy? Mr. Ferraro commented he does not think it will jeopardize the bill. Senator Townsend commented some of the provisions in section 11.5 should be offered as options in a plan. Mr. Becker stated the market is going to tell the insurance company what must be in the policy. He stated the spirit of the bill is to give the market what it wants in a product. Sharen Weaver, Supervisor, Life and Health, Division of Insurance, stated the division supports the bill. Senator Regan commented if a franchise, which offers its employees insurance, offers 24 hours hospital coverage, how does the company incorporate workers' compensation coverage into their plan. He asked if there is a way to incorporate a workers' compensation premium into the same insurance policy. Mr. Wadhams stated that is possible, but not in Nevada at this time. He stated it is working in other states. He explained a company buys workers' compensation coverage from a private insurance company and the workers' compensation carrier coordinates with the health carrier. He stated many states use common networks of providers. He stated the difference in the two types of policies is that workers' compensation is first dollar, no fault liability insurance whereas health insurance is not usually first dollar coverage. There is a deductible applied before the company begins paying the bills. He stated coordination of care may be used for both types of service. Senator Lowden pointed out small-group self-insurance will allow this. Punam Mathur, Senior Vice President, Government Affairs, Las Vegas Chamber of Commerce, discussed A.B. 299. presented Exhibit F and read Exhibit G. Mr. Becker commented on the statement in Exhibit G, page 6 pointing out there is not a 50 percent requirement in the bill for premium payments by employers. That decision is left up to the individual carrier. Ms. Mathur expressed her concern that there are too many core mandates in the bill and it will drive up the cost of a policy, making it unaffordable to many employers. Senator Lowden suggested Ms. Mathur discuss her concerns with members of the Assembly so that they may be aware of the reasoning behind her objection to the core mandates. Senator Neal asked why the division is in support of the bill. Ms. Weaver explained the Division of Insurance is in support of the bill. She stated the commissioner of insurance expressed her support of the bill. Senator Neal commented he would like to know why the division supports the bill. Ms. Weaver stated there is nothing in A.B. 299 which will cause harm to the state. She stated the bill is a gentle, incremental step into health care reform. She stated "guaranteed issue" is a difficult issue which needs discussion. She pointed out allowing groups as small as two into the group plans will add to the costs, but the costs will be on the shoulders of the insurance industry and they have expressed their willingness to support it. She stated the bill does not have "pure community rating." She said there are caps on preexisting conditions which is of a benefit to the employer. She stated portability is a new concept. She pointed out the bill addresses guaranteed renewal of a policy and it makes it very clear as to what qualifies for cancellation of a policy. She stated that is a good point in the bill and pointed out Nevada will still collect a premium tax. She discussed mandated core coverage and pointed out the most expensive coverages in a policy. She stated they are; drug and alcohol, neonatal, and complications of pregnancy. She stated home health care and hospice are benefits which must be included and may or may not add to the cost of a policy. She stated their costs are usually minimal. She pointed out some of the other mandated coverage in the bill such as the requirement for mammogram coverage and pap smear testing, can be covered through the deductible which must be met. She stressed these do not impose first dollar coverage. Senator Lowden asked which is more cost effective, "Using the 10 percent less as a premium, or using the pap smear test as a deductible?" Ms. Weaver responded it will be 10 percent less in the premium. Marie Saldo, Vice President, Government Affairs, Sierra Health Services, endorsed A.B. 299. She stated she believes the bill will offer more protection for consumers. It will allow portability and guaranteed renewability. She stated the federal government requires maternity coverage be offered and it is the only mandated core coverage for group insurance sizes of 15 or more. Fred Hillerby, Lobbyist, Hospital Health Plan, Coordinated Care Options, Ins., expressed support for the bill. He stated it is important to note A.B. 299 guarantees that the employer who offers insurance to his employees will now have limits as to how much his premiums can rise, regardless of what happens to his employees. He expressed his confidence in the bill. Senator Regan requested leaving in section 11.5, subsection 2. Ms. Weaver stated subsection 2 is a basic requirement and differentiates the insurance policy from a limited care policy which offers little basic coverage. She suggested the language should be left in the bill. Ms. Saldo encouraged the committee to leave in subsection 2 which will provide basic medical benefits. Ms. Weaver stated section 11.5, subsection 1, paragraphs (e)-(j) define the elements of basic health care. She stated those are the key elements of health care coverage. Senator Lowden asked for clarification from the Division of Insurance that basic coverage will be offered if section 11.5, subsection 1 is removed. Ms. Weaver stated by leaving in paragraphs (e)-(j) the requirement will be clearer, but removing them will not remove the coverage. She stated she is very aggressive in making certain basic coverage covers those conditions listed in paragraphs (e)-(j). Senator Townsend commented the entire subsection 1 may be removed if those other coverages are considered to be basic health care, which is what is listed in subsection 2 and in the first two sentences in subsection 1 of section 11.5. Ms. Mathus stated she does like the fact that the core elements are listed in the bill because many employers are not astute in understanding what is included in insurance programs. Senator Townsend stated Ms. Weaver will send her a letter explaining why the list does not need to be in the bill. SENATOR LOWDEN MOVED TO AMEND AND DO PASS A.B. 299 BY REMOVING SECTION 11.5 LEAVING IN SUBSECTION 2. SENATOR AUGUSTINE SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** The hearing was closed on A.B. 299 and opened on Senate Bill (S.B.) 491. SENATE BILL 491: Authorizes inclusion of provision for mandatory arbitration in certain contracts of insurance. Ms. Saldo discussed the provisions in Exhibit H. Don Springmeyer, Lobbyist, Nevada Trial Lawyers Association, stated he has been through the amendment, which is Exhibit H. Ms. Saldo explained she has one additional concern which is not in the amendment which is a "full and fair disclosure" regulation to the member. She stated the member should be given the opportunity to decline binding arbitration. She requested the addition of "the member or a dependent of the member, shall have the opportunity to decline participation in arbitration" be added at the end of line 6 of page 1 of Exhibit H. Ann Fleck, Insurance Counsel, Division of Insurance, expressed her support for the bill. SENATOR NEAL MOVED TO AMEND AND DO PASS S.B.491 WITH AMENDMENT NO. 734 AND THE ADDITIONAL LANGUAGE. SENATOR O'CONNELL SECONDED THE MOTION. Margi Grien, Lobbyist, State Contractors' Board, stated she is not in support of the bill because she does not know how this bill will affect the State Contractors' Board and how it investigates disputes. She presented Exhibit I. She stated she does not believe it is necessary to add a new section to Nevada Revised Statutes (NRS) 624. She stated a contractor has a right to put in an arbitration clause in his contract if he so desires. She requested clarification as to why section 6 was written into Exhibit H and requested it be deleted. I.R. Ashleman, Lobbyist, Southern Nevada Builders Association, stated he explained this section to the State Contractors' Board attorney the day before, and he seemed satisfied with the regulation. Mr. Ashelman explained the bill does not address the State Contractors' Board other than there needs to be a place to put these regulations in the statutes. He clarified they are not asking the State Contractors' Board to do anything. He stated the bill drafters chose to place the information in chapter 624 of NRS. Ms. Grien stated the contractor already has the ability to put this information in their contract and she does not understand why the information needs to be put into the statute again. Mr. Ashelman stated he did not want to take up the committee's time explaining the bill to Ms. Grien. Ms. Grien stated she was not aware the regulation, which was for an insurance bill, was going to be amended to include regulations for the State Contractors' Board. She commented if she had, she would have been at the earlier hearings on the bill. Debra Sheltra, Board Member, State Contractors' Board, stated they were never notified of this bill and of its impact on the State Contractors' Board. She agreed with Ms. Grien. She stated the regulation is not practical and should not be in chapter 624 of NRS. She stated it will restrict the ability of the board to act. Due to the differing opinions on the this bill, no vote was taken. With instructions to the testifiers to discuss this issue, iron out the problems, and to return the next morning with a solution, Senator Townsend concluded the hearing on S.B. 491 and adjourned the meeting at 10:30 a.m. RESPECTFULLY SUBMITTED: Molly Dondero, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor June 15, 1995 Page