MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session June 27, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:00 a.m., on Tuesday, June 27, 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 Beverly Willis, Committee Secretary OTHERS PRESENT: Kevin Higgins, Senior Deputy Attorney General, Fraud Control Unit for Industrial Insurance, Office of the Attorney General Lenard Ormsby, General Counsel, State Industrial Insurance System (SIIS) Douglas Dirks, General Manager, State Industrial Insurance System (SIIS) Alice Molasky, Commissioner of Insurance, Division of Insurance, Department of Business and Industry Pam Miller, Lobbyist, Associated General Contractors Nevada Chapter Scott Craigie, Lobbyist, Nevada Resort Association Bob Ostrovsky, Lobbyist, Nevada Resort Association Ross Whitacre, Assistant Chief of Benefits, Employment Security Division, Department of Employment, Training and Rehabilitation Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS) Jim Wadhams, Lobbyist, American Insurance Association/Western Regional Office, Nevada Independent Insurance Agents Daryl Capurro, Lobbyist, Nevada Motor Transport Association Ray Bacon, Lobbyist, Nevada Manufacturers Association Mary Santina-Lau, Lobbyist, Retail Association of Nevada Dallas Coonrod, Executive Vice President, Las Vegas Associated General Contractors Rose McKinney-James, Director, Department of Business and Industry John Sande III, Lobbyist, Nevada Bankers Association Len Nevin, Lobbyist, Baker Drake Yellow Cab, Whitlesea Bell Lonna Burress, Executive Director, State Board of Nursing Sam McMullen, Lobbyist, State Board of Nursing Danny Evans, Assistant Administrator, Occupational Safety and Health Enforcement Section, Division of Industrial Relations, Department of Business and Industry Ron Swirczek, Administrator, Division of Industrial Relations (DIR), Department of Business and Industry Stephanie Tyler, Lobbyist, Nevada Nurses Association Jim Smith, Deputy Attorney General, Insurance Division, Office of the Attorney General Bob Ostrovsky, Lobbyist, Nevada Resort Association Kevin Higgins, Senior Deputy Attorney General, Fraud Control Unit for Industrial Insurance, Office of the Attorney General, compared Assembly Bill (A.B.) 587 and Senate Bill (S.B.) 458. ASSEMBLY BILL 587: Revises provisions regarding workers' compensation fraud. SENATE BILL 458: Makes various changes to provisions relating to industrial insurance. Mr. Higgins discussed Exhibit C. He presented the comparisons of the two bills and discussed the provisions line-by-line. He added that page 1, line 8, A.B. 587 changed the language to a fine of no more than $10,000 for each willful act. He stated this allows discretion to the person levying the fines. It makes the language permissive in the event that a fine is deemed not necessary. Senator O'Connell discussed the provisions in section 4.5 of A.B. 587. She pointed out the prisoners' medical care is covered in the prison system. Mr. Higgins stated when inmates are in prison work camps they are employees of the Division of Forestry. He stated they are technically employees and the medical care is paid for, but incidences have arisen where the prisoners have sued the Division of Forestry for failure to train, and having inadequate equipment. He stated the Division of Forestry is not covered by exclusive remedy. Senator O'Connell commented it is amazing that a prisoner, who is covered under the prison system, can sue the Division of Forestry for care. Mr. Higgins pointed out this is a legal loophole which attorneys have found and it needs to be filled. Mr. Higgins continued his discussion of Exhibit C. He discussed section 6 and explained that in some cases, it can take up to 2 years for a case to go to trial. The lump sum benefit will be held until a determination of fraud is made, but medical benefits will be paid. Lenard Ormsby, General Counsel, State Industrial Insurance System (SIIS), explained that the discussion which had to do with this session covered several options. SIIS will not terminate benefits, but they may suspend a recipient's benefits if SIIS believes fraud has occurred. He stated SIIS has agreed to the compromise proposed by the Assembly. Mr. Higgins discussed section 7, section 8, and section 9. Section 9 is a new section. He continued to discuss sections 10-12. He explained section 13 is a new provision and that sections 14-18 are the same as sections in S.B. 458. He explained that section 19 and section 20 are new sections which the Assembly feels need to be included in SIIS reforms. He explained section 20 is a bill drafter's decision. Senator Townsend pointed out that the work the committee did has been returned by the Assembly under their own bill number with the addition of 2 substantive sections. Douglas Dirks, General Manager, State Industrial Insurance System (SIIS) discussed A.B. 498. ASSEMBLY BILL 498: Makes various changes related to industrial insurance. Mr. Dirks explained that A.B. 498 has not been finalized, but it does contain a few provisions which were not included in S.B. 458. Alice Molasky, Commissioner of Insurance, Division of Insurance, Department of Business and Industry, explained there are amendments being prepared for this bill. Senator Townsend asked if the committee will be seeing the amendments. He indicated the committee would like to see a comparison of the bills. Pam Miller, Lobbyist, Associated General Contractors Nevada Chapter, explained she will make a copy of the required information for the committee. The hearing was postponed on A.B. 498 and opened on A.B. 552. ASSEMBLY BILL 552: Makes various changes to provisions governing industrial insurance. Scott Craigie, Lobbyist, Nevada Resort Association, presented Exhibit D. He discussed the exhibit stating it addresses issues in both S.B. 458 and A.B. 552. He stated the first item on page 1 of Exhibit D and the last page of Exhibit D go together. He stated the State Industrial Insurance System (SIIS) agrees with the suggestions. Bob Ostrovsky, Lobbyist, Nevada Resort Association, discussed Exhibit D. Senator Townsend explained that Marie Saldo has concerns about domestic tax credits. He stated the committee will address the issue in the bill and Ms. Molasky will have an amendment drafted by Mr. Young which will fix the problem. He stated it has to do with three-way insurance and the 3.5 percent premium tax which will be applied to the debt once three-way insurance is implemented. Mr. Craigie stated that issue is addressed in the third reprint of S.B. 458 on page 42-43. He explained as three-way insurance becomes an option, a part of the premium tax which is collected from workers' compensation insurance will be put into a fund to help improve the solvency of the system. He explained the language in the bill, as it came through bill drafting, states: If you write any workers' compensation insurance, you, now, cannot take advantage of the home office credit for any of the lines of insurance that you do. We attempted on our write-up on page 2, at the bottom, to write language out that will do half of the problem Ms. Saldo brought up. That is to make it possible for the home office credit to be exempted only from the premium tax collected on workers' compensation insurance. But that is only half of the problem she articulated to us, yesterday, as we were putting this together. Mr. Ostrovsky commented the other half of the problem is that the insurance company which Ms. Saldo represents believes that the home office credit should apply in the cases of workmen's compensation insurance. He stated that is a policy decision which needs to be addressed. Mr. Craigie commented some people believe that the committee could wait until 1997 to make a final decision on this issue, because the area concerned does not become a law until 1999. He stated: To put Marie Saldo's argument on the table for her, she believes that people will be designing their lines of insurance and preparing for the kind of work that they will be doing to sell that insurance prior to the time the 1997 session meets. Really, there should be a final decision on this one way or another. There are competitors, for example, that may come in from out-of-state who may want to make a decision whether they are at such a competitive disadvantage, or whatever, that they want to take an advantage of this incentive and set up a home office here as well. Senator Townsend stated the policy put together by the Legislature regarding home office credit is quite clear. He stated the state taxes all insurance which is sold in Nevada at a specific rate. He stated the new premium tax will go to offset the debt. He stated he feels it is an issue which can be resolved. Ms. Molasky explained differences between A.B. 552 and S.B. 458. She stated A.B. 552 expands on introduction of three-way insurance into Nevada, and has very specific provisions which will require the commissioner of insurance to certify the insurers, to review the rates, and to investigate if there is insolvency of a private carrier. She commented she has discussed the provisions in A.B. 552 with many insurance companies and they are in favor of the bill. Ross Whitacre, Assistant Chief of Benefits, Employment Security Division, Department of Employment, Training and Rehabilitation, presented Exhibit E. He discussed concerns expressed by the United States Department of Labor about sharing of unemployment insurance claimant information with private insurance carriers. He stated the United States Department of Labor funds his division. He discussed pages 2-3 of section 1 of A.B. 552. He requested the phrase "private carrier" be deleted from the bill. Senator Townsend stated to do so will eliminate three-way coverage in Nevada. Mr. Whitacre stated information is shared with SIIS as to whether people are drawing unemployment insurance and disability payments at the same time. He stated the United States Department of Labor does not wish to share that information with private insurance companies. Senator Townsend stated that will create an unequal situation and instructed Mr. Whitacre to write to the United States Department of Labor stating the committee will study their concerns. Mr. Dirks explained the questioned provision will not be applicable until 1999 and there will be opportunities to evaluate its effect on the Employment Security Divison program. Senator Neal asked Mr. Dirks how SIIS is affected by A.B. 552. Mr. Dirks explained that A.B. 552 has less to do with SIIS, but more to do with workers' compensation in general. He stated it has a significant impact on SIIS, but A.B. 552 establishes a marketplace for private carriers and for a state fund to sell workers' compensation insurance. He stated some of SIIS's regulatory abilities will go to the Division of Insurance (DI) and to the Division of Industrial Relations (DIR). He stated this will allow the system to look and to operate like a private insurance carrier instead of a regulator. He stated DIR will be the department which will levy fines to employers who fail to maintain coverage. Senator Neal pointed out there seems to be language missing from the newly printed version of S.B. 458. Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS), explained that the Assembly tried to remove duplications in the two bills. She stated some previously included provisions have been removed from S.B. 458 and placed into A.B. 552. Senator Townsend commented that the committee had chosen to give a skeleton provision for three-way insurance into S.B. 458 to give the insurance commissioner, the Governor, and the interim committee time to appropriately flesh out the provisions for three-way insurance. He commented the Assembly has decided in A.B. 552 to put all the provisions into their bill at this time, rather than giving the interim committee time to work on the issue. He commented that on pages 66-67 of A.B. 552 the Assembly has taken out language from S.B. 458 and placed a legislative committee into A.B. 552. He indicated the changes are unacceptable. He pointed out section 190, page 67, leaves out DIR, the Division of Insurance, self-insureds, and third- party administrators. He stated it leaves out the schedule of benefits and the solvency fund formula. He commented it leaves out important issues which the committee has addressed during the 4 months it has worked on S.B. 458. He suggested replacing the language in regard to the interim committee which had originally been in S.B. 458. Mr. Craigie discussed Exhibit D in detail. He explained: What was in the original drafting of S.B. 458, which is the language we have included here, again, is the better way to go at this. If you look at section 68 of A.B. 552, this leaves it with the administrator who was once removed. Mr. Ormsby concurred with the original language which was adopted by the Senate Committee on Commerce and Labor months ago. Mr. Craigie discussed section 51.5 of A.B. 552. Mr. Dirks stated under the new language the state is out from under the State Purchasing Act. He stated section 6 of S.B. 458 requires reasonable competitive bidding procedures. Mr. Ostrovsky addressed section 105 of S.B. 458. He referred to Exhibit D. He explained he does not feel section 105 and section 6.5 of A.B. 552 are incompatible and feels they can exist in each bill. Mr. Ormsby stated: Following what the Assembly did by deleting paragraph 3, does make a situation which really is going to be unworkable given the number of changes which has been made in S.B. 316 of the Sixty-seventh Session as well as the proposed changes in S.B. 458. There are procedures dealing with offenders who no longer can receive their benefits that will be a change in 1995. If the person had an injury pre-1995, it will not apply. There was great discussion in this committee as well as on the Assembly side with the American Medical Association (AMA) guides, third edition, fourth edition, whatever it is going to be. My reading [of] the deleting of paragraph 3 means, if I am injured in 1964, and I do not know if the AMA guides first edition was there at the time, but let us assume they were, that would be the volume that would apply to me . . . We drafted the language which was paragraph 3. There was substantial debate, but from the system's stand point, it clarified the rules. It does not alter the benefits or compensation. It simply says that when the person is eligible, the rules that are in effect at that time are the ones that will apply. SENATE BILL 316 OF THE SIXTY-SEVENTH SESSION: Makes various changes to provisions governing industrial insurance. Senator Townsend stated the committee debated the policy for 4 days in the hearings and the committee ruled on the issue as a policy statement. He asked if the language in section 6.5 of S.B. 458, as it has been reprinted, is a narrowing, or dealing only with pre-S.B. 316 of the Sixty-seventh Session medical claims coming under the jurisdictions of managed care organizations (MCOs). Mr. Dirks stated that is correct. He stated the Assembly language deals specifically with transitioning pre-S.B. 316 of the Sixty-seventh Session claims into managed care and the rules for transitioning those claims. He pointed out section 105 of S.B. 458 is a much broader application. He stated the Assembly language gives SIIS the ability to put the pre-316 of the Sixty- seventh Session into managed care, but under a different format than SIIS's original business plan. He stated the language needs to be replaced into the bill. Mr. Craigie stated section 105 and section 6.5 of S.B. 458 are not mutually exclusive of one another. He stated there are points of value in section 6.5. He stated it spells out a protocol for a transitioning the pre-1993 claims which are still receiving medical treatment. Senator Townsend asked can the language be in regulation instead of in statute? Mr. Craigie stated this is a sensitive issue and it will better be served in statute. Mr. Ostrovsky stated: [Section] 105 is a policy issue to make. Section 6.5, I would recommend that it is an issue when I worked on the consensus group 3.5 years ago. It was a problem for organized labor. I think that they have come a long way in this issue in agreeing to this language. I think it not there would probably make them uncomfortable for reasons which are not really necessary. Mr. Ostrovsky discussed section 116 and referred to Exhibit D. Mr. Dirks stated his agreement for the recommendations in Exhibit D for section 116. Section 129.5 was discussed by Mr. Ostrovsky. Mr. Dirks stated the system will give quarterly, unaudited financial statements. He explained the 3.5 percent tax will be given to the insurance fund, not to the General Fund. He stated when the commissioner of insurance makes the determination the SIIS fund is insolvent, the commissioner will direct the state treasurer to divert money to the General Fund. He suggested the standard be annual, audited, actuarially reviewed financial statements. Senator Neal stated section 129.5 gives a mandate for the commissioner of insurance to examine the solvency of SIIS. He asked if by having the state industrial insurance commissioner do this, does it absolve SIIS of any responsibility for solvency. Mr. Dirks stated the statute provides that SIIS must be actuarially funded. He stated it is SIIS's responsibility to identify its needs in terms of appropriate rates. He said it requires the commissioner to rule on those rates. Senator Neal asked if anyone in the government can blame just the commissioner if there are problems. Mr. Dirks stated a certified auditor will review the solvency fund. He stated an independent actuary reviews the reserve liabilities in the fund. Senator Neal asked if the insurance fund is funded by premiums. Mr. Dirks stated it consists of premiums and any revenues SIIS earns must go to the insurance fund. He pointed out that the 3.5 percent tax will go to the fund until solvency is achieved. Mr. Craigie stated the premium tax language is designed only to take the language in section 134.4 (4) of S.B. 458 to the point that the drafter had intended, which is to make certain the home office credit may be used for lines of insurance other than workers' compensation. Jim Wadhams, Lobbyist, American Insurance Association/Western Regional Office, Nevada Independent Insurance Agents, presented Exhibit F. Mr. Wadhams discussed section 130.4 of S.B. 458. He stated lines 24-27 are overly broad. He said they convey the implication that should the commissioner find that the insurance fund is not sufficient, then an insurer which otherwise might qualify for the tax credit will lose it. He expressed his doubt that this is an intention of the bill drafters. He stated it is important to understand how the application of the credit occurs. He said for a company to qualify for the credit, an insurance company must buy a piece of real property, must build a building on it, and must staff it with key, decision-making elements of the insurance mechanism. He stated this includes, executive, underwriting, claims, marketing, medical, and legal functions of the company. Senator Townsend commented the Legislature has made a policy regarding the home office credit. He emphasized it is independent of this debate. He stated the solvency issue is on top of the independent policy. He stated the state will charge a premium tax, independent of the solvency issue. He stated any company which qualifies under state law and policy will receive the home office credit. Mr. Wadhams explained the narrow aspects of the home office credit. He stated very few companies qualify for the credit. He stated that in order for a company to qualify for a credit in 1999, the company must qualify prior to January 1, 1999 by having the building, staff, and functions in place. He pointed out that a company will want to have a substantial premium base before it will want to establish a home office in Nevada. Mr. Wadhams pointed out: We have a recent, 3-year-old, United States Supreme Court case taking a state that had a differential tax for domestic and foreign companies, [which] ruled it is unconstitutional because there was not a sufficient, rational relationship between the lower differential for the domestics as opposed to the foreigns. We have spent a great deal of time with the attorney general, the executive branch, to make sure that this nexus maintains for Nevada as one of our few business development, economic diversification tools to bring business here. If this section were to stay in, which creates the opportunity for an argument to the courts that the Legislature does not view the business development, salary, property tax-payroll tax tradeoff, as being the rational nexus. We make one exception for industrial insurance, we have put a chink in our armor and may have jeopardized this substantially for reasons which will generate very few dollars for the insurance fund. The premium tax is a given. I think it is a rational approach. Mr. Dirks explained he proposed the language which excluded the home office tax credit from the 3.5 percent tax on workers' compensation. He stated it is his goal to make SIIS as competitive as possible by resolving the unfunded liability. He commented he is opposed to anything that will decrease the amount of money that would be received by SIIS through the dedicated premium tax. Senator Townsend asked how much is the home office credit. Mr. Wadhams stated the domestic companies pay a 3.5 percent premium tax, the same as the foreign companies. He stated the home office credit is 50 percent of the 3.5 percent the company pays. He commented regional home offices do not generate enough business in Nevada to make them economically a good investment for the companies. He expressed his doubt that three-way insurance will quickly deplete the market for SIIS. Senator Townsend commented to Mr. Dirks that the current policy has been in existence for some time, and he feels the committee should not change the policy at this time. He pointed out the dollar effect of the credit on SIIS is not known at this time. Mr. Dirks expressed his concern for the unfunded liability which currently exists for SIIS. Senator Townsend pointed out that insurance is an industry which should be encouraged to come to Nevada to establish home offices. He pointed out it is a clean industry which provides high-paying jobs and generates property taxes for its offices. Senator Neal asked if Exhibit F allows companies to enter the state and receive a tax credit. Mr. Wadhams stated it will. He explained those credits will not be used until after the year 2000 and it is not automatic. He stated: The most important issue at this moment, is not what this does in the future, but what enacting this language, today, on a challenge on a foreign company that does not have a regional office. They could challenge the tax differential and say, the Legislature does not see a rational nexus, this tax credit is only used for whatever purpose that the Legislature sees fit, in this case for rescuing SIIS . . . so that there is no direct linkage between the investment in the state, they would then strike the tax down and it would be lost to all domestic companies for all purposes, rather than just industrial insurance. Mr. Dirks agreed that the language that is currently written deprives the tax credit to anyone who is licensed to write workers' compensation insurance, even if they are not doing so. He explained it deprives the companies of home office credit on all other lines of business. Daryl Capurro, Lobbyist, Nevada Motor Transport Association, discussed A.B. 498. He presented Exhibit G. He asked for the word "thereafter" be added to subsection 2, line 1 after the word "annually." He explained the intent of section 9 is to provide a standard under which "people who would join these groups would have to meet before they would qualify." He explained this will deter the smaller, underfunded groups from participating in the system. Senator Townsend asked why the original language was changed. Mr. Capurro explained the commissioner's office held hearings and adopted temporary regulations to implement S.B. 316 of the Sixty-seventh Session. He stated there are significant regulatory deviations from the provisions of the bill, one regulation being the requirement of certified, audited financial statements. Senator O'Connell pointed out that the committee made it very clear that certified, audited financial statements are not to be in statute. Ms. Molasky stated the requirement is in the existing regulations. She said if A.B. 498 is enacted, that regulation will be reduced to a "reviewed standard." Senator O'Connell stressed the Legislature gives different agencies the ability to adopt regulations, but the agencies are supposed to carry out the intent of the Legislature and not be a separate governing, lawmaking body on their own. She asked why that requirement is still in the regulations. Ms. Molasky commented it was still in regulation because the division could not see any prohibitions, or restrictions in the existing statutes on its ability to describe the type of financial statement which will be required. Mr. Capurro expressed his concerns as to why the language of a bill which has only passed one house was used as the standard for establishing regulations. He commented that the passage of A.B. 498 will require the need to change several regulations already established by the insurance commissioner. Senator Townsend commented the language on page 3 of Exhibit G, (h) can be added to regulation instead of statute. Ms. Molasky stated the language for an "audited financial statement" is in A.B. 498. Senator Townsend pointed out the bill has not been passed yet. He suggested replacing the language and place it into regulation. Ms. Molasky expressed her confusion with the suggestion. She stated the existing law allows her to place standards she chooses into regulation. She chose "certified, audited financial statement." Senator Townsend asked if she can change the language to what is listed in the proposed amended section (h) of Exhibit G. She stated she has the authority to do that. Ray Bacon, Lobbyist, Nevada Manufacturers Association, discussed "tangible net worth" which is listed in S.B. 316 of the Sixty- seventh Session. Mr. Capurro discussed page 6, line 16 of A.B. 498. Ms. Molasky stated A.B. 498 is necessary for proper regulation of the associations and to establish proper safeguards over associations to ascertain that they meet the needs of the public and the workers. Mr. Capurro and Ms. Molasky disagreed as to whether the language in section 11 requires sharing of financial information between members of an association. Mr. Capurro urged the adoption of A.B. 498 with the recommended amendments in Exhibit G. He explained each group he represents has spent $50,000 on developing group-self insurance associations. Ms. Miller stated the Associated General Contractors have spent $50,000. Mr. Bacon stated the Nevada Manufacturers Association has spent about $20,000, but anticipates spending more. Mary Santina-Lau, Lobbyist, Retail Association of Nevada, stated they have allocated $50,000 and have spent $20,000 so far. Dallas Coonrod, Executive Vice President, Las Vegas Associated General Contractors, stated they have not expended very much money, but they have spent a great deal of time preparing for this issue giving the issue a value of about $40,000. The testifiers indicated their support of associations. Senator Townsend instructed Ms. Molasky to meet with the testifiers and resolve their differences in regarding the regulation and what is being included in A.B. 498. He stated there are three areas of contention in this bill. He stated: [They are] what you are required to provide and whether it is a proforma financial statement or it's an audited financial statement. It is quiet clear from this committee, Ms. Molasky, that it will be this language, whether it is in statute or whether it is in regulation. It will not be an audited financial statement. Type that up today and send it to that office, so there is no misunderstanding. Number two, the sharing of information between competitive groups never has been contemplated, is inappropriate and will never happen. That means any association that comes forward that presents a financial statement, you are allowed to look at them, no one else gets to look at them. They are not to be shared between competitors or anybody else. The third issue is what is considered a group and who may join it. Have you made a determination on this with the system? Is that in one of these handouts? Ms. Molasky indicated that question was intended to be satisfied by the language which was presented this morning in Exhibit G. She expressed her concern about the definitions. Senator Townsend asked what has been agreed to about the definitions. Ms. Molasky indicated the trade association is a homogeneous group. She stated she feels they still need language which allows an either/or situation. She said there was confusion between the definition of "heterogeneous" and "homogeneous" in S.B. 316 of the Sixty-seventh Session. She stated she spoke with experts at the National Association of Insurance Commissioners and they indicated if the terms were not defined more clearly, Nevada could be on the road to disaster without the presence of three-way insurance. Mr. Capurro stated S.B. 316 of the Sixty-seventh Session is heterogeneous in nature now. He said A.B. 498 has modified homogeneous language regarding trade associations which allows suppliers and others which are not completely heterogeneous. He expressed his support of the restrictions. He stated: Section 30 in the newly adopted temporary regulations refers to `material information concerning the financial condition of any member must be provided to other members of the association.' So we are sitting here with a regulation, now, which commands us to do that and we cannot live with that. Ms. Molasky stated: The language is intended to mean not that the information in the financial statements will be exchanged, what is the intent of that particular language is so that if there is a member who is financially impaired, that the other members and the trustees are fully aware of that situation. So that they can guard against their own situation. Senator Townsend pointed out that the language does not say that. Mr. Capurro stated it says that the board of trustees is prohibited from withholding material loss information or material information concerning the financial condition of any member of the association from other members in the association. Senator Townsend emphasized the sharing of information with a competitor will be devastating to companies. Ms. Molasky stated: This was raised during the regulation hearings and we did seriously consider it and that is why we changed the regulation to what we believed would be effective language in the event of impairment. Ms. Molasky suggested redrafting the language to make it more precise so there is no confusion as to the intent of the language. Rose McKinney-James, Director, Department of Business and Industry, commented her recollection of the discussion on homogenous and heterogeneous is different from that which has been placed into the record during this hearing. She expressed her need for clarification on this issue. She commented her understanding of the decision was it would be left to the insurance commissioner based on actuarial analysis. Senator Townsend agreed. Ms. McKinney-James commented her agency is placed into an awkward position when drafting regulations and taking directions from the committee versus interpreting the intent of legislation that is in statute. Senator Townsend commented the committee will try to give her agency direction. He pointed out "the bottom line is always as it has been, whatever is printed and signed by the Governor and becomes law is what you have to follow." Ms. Colling commented SIIS is very comfortable with the bill as written without amendments. She stated it protects the public as well as the people who are involved in the associations. She stated SIIS has tried to compromise on various occasions and each time the strengths in the bill are eroded. She expressed her objections with the information presented during the hearing. She stated the forming members of a group will have to follow standards. She pointed out the amendment states unless that group is found to be insolvent no other member must meet any standards. She stated this puts SIIS in a difficult position. She stated she is unhappy with the amendments. She said they are willing to discuss ways to make the requirements better, but she stated at some point the line must be drawn. She stated definition must be in the bill for risk factors and how many people are in a group. Mr. Capurro disagreed and commented he thinks Exhibit G tightens the language in the bill. Senator Townsend stated the committee will recess further discussion on the workers' compensation bills until this evening and suggested each concern be addressed by those interested in the bill. He asked the testifiers to submit clean amendments to the committee and to come to some agreement on the language in the bills or risk the future of the bills. He closed the hearing on A.B. 552, A.B. 498, A.B. 587, and S.B. 458 and opened the hearing on S.B. 561. SENATE BILL 561: Provides for interstate and international banking. Senator Townsend discussed the conflict notice which was received by the committee between S.B. 561 and S.B. 404. SENATE BILL 404: Provides for organization of banks as limited-liability companies. John Sande III, Lobbyist, Nevada Bankers Association, stated S.B. 404 which has been passed and signed by the Governor allows banks to do business as limited-liability companies. He commented there were a few areas which needed clarification to prevent conflict. He said there were no substantive changes in S.B. 561. SENATOR REGAN MOVED TO CONCUR ON THE CONFLICT AMENDMENT FOR S.B. 561. SENATOR AUGUSTINE SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS LOWDEN, SHAFFER AND O'CONNELL WERE ABSENT FOR THE VOTE.) ***** The hearing was closed on S.B. 561 and opened on S.B. 384. SENATE BILL 384: Revises provisions governing unemployment compensation and industrial insurance for certain subcontractors and independent contractors. Len Nevin, Lobbyist, Baker Drake Yellow Cab, Whitlesea Bell, discussed Exhibit H. He explained they removed section 2 from the bill to please the Employment Security Division. Senator Neal pointed out sections 1, 4, 6, 8, and 10 were previously removed from the bill. He stated the bill now consists of sections 3, 5, 7, and 9. Mr. Nevin commented references to trucking have also been removed by deleting the word "goods" from the bill. He pointed out that Exhibit H is now the bill. He stated the bill only applies to Washoe County. Mr. Ormsby stated the position of SIIS has not altered. He stated the danger to SIIS and the danger to the public is the "deemed wage." He stated it is not a good bill for the public and SIIS. He objected to section 3 of the bill. The hearing was closed on S.B. 384 and was opened on A.B. 545. ASSEMBLY BILL 545: Makes various changes concerning state board of nursing and practice of nursing. Lonna Burress, Executive Director, State Board of Nursing, explained the need for this bill. She stated the State Board of Nursing has not updated its disciplinary sections since 1947. She explained the board did not have authority to order a "cease and desist" against a nurse or to govern licensing. She stated the board had no clear authority for any of its actions. Senator Augustine expressed her support for the original language in the bill without the suggested amendment in Exhibit I. Sam McMullen, Lobbyist, State Board of Nursing, stated the language of the bill creates two other remedies which will be very effective. He commented the original language was added in the Assembly before the additional remedies were added. Senator Augustine questioned whether the board will be able to collect an administrative fine. Mr. McMullen pointed out the "cease and desist" order is strong and gives the board the authority it needs to punish a nurse who is acting illegally. Senator Regan asked if the nurse-practitioners are covered under the jurisdiction of this bill. He noted they are not listed on pages 3-4. Ms. Burress stated they are certified nurses and are covered under the "registered" category. Mr. McMullen explained the need for section 2 in Exhibit I. He commented the words were left out by mistake and must be in the bill. Ms. Burress emphasized the need for the words "or courses." She explained without the wording nurses will not be able to work until their certificates arrive. She referred to the letter contained in Exhibit I and explained why she sent the letter. Mr. McMullen commented the bill was requested last September and assured the committee it was never his intention to have it heard on the last day of session. The hearing was recessed until 5:00 p.m. The hearing was reconvened at 5:40 p.m. with a proposal to suspend Rule 92. SENATOR SHAFFER MOVED TO SUSPEND RULE 92. SENATOR REGAN SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR LOWDEN WAS ABSENT FOR THE VOTE.) ***** The hearing was opened on the SIIS bills. Mr. Higgins referred to Exhibit C and discussed A.B. 587. He stated the bill is clean and requires no further changes. SENATOR REGAN MOVED TO DO PASS A.B. 587. SENATOR SHAFFER SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS O'CONNELL AND LOWDEN WERE ABSENT FOR THE VOTE.) ***** The hearing was closed on A.B. 587 and opened on A.B. 710. ASSEMBLY BILL 710: Limits applicability of certain federal occupational safety and health standards and requires establishment of standards and procedures for operation of cranes. Danny Evans, Assistant Administrator, Occupational Safety and Health Enforcement Section, Division of Industrial Relations, Department of Business and Industry, discussed the need for the bill. He pointed out there have been nine fatalities in Nevada in recent years indicating a need for stronger regulations. Senator Townsend asked if the regulations requested in this bill are standard language. Ms. McKinney-James stated the regulations in the bill provide adequate safety for the public and for those who operate the large cranes. Ms. Miller stated her agreement with the language in the bill. She stated it is a compromise position which was reached by the concerned parties. She stated they wish to have regulations which will give them parameters for the different types of cranes being operated. Mr. Bacon expressed his support for the bill stating, though they would like to be exempt, they can work with the regulations in the bill. Mr. Craigie stated Sprint/Central Telephone-Nevada has agreed to sign off on the provisions in the bill. Mr. Coonrod commented the regulations are an industry problem and that no one should be excluded from the regulations. He stated all members of the industry should be involved with the resolutions of the problems which have occurred with cranes. He expressed his support for being a part of the drafting of regulations. Senator Townsend asked who originated the language in section 2, page 2, lines 19-24. Ms. McKinney-James stated the language is to clarify a situation which the Department of Business and Industry has experienced in the past. She explained the Office of Safety and Health Administration (OSHA) statutory language precludes Nevada from developing standards which are consistent with the federal standards. She stated the new statute will give the department the flexibility it needs. Ron Swirczek, Administrator, Division of Industrial Relations (DIR), Department of Business and Industry, presented Exhibit J and read it into the record. He stated the department has been working on regulations which will equal the federal standard. Senator Regan asked what are the OSHA standards established for the high-lift crane. Mr. Swirczek stated the OSHA standards for cranes apply to general operational aspects. He commented he would like to make the regulations specific to the types of safety problems encountered in Nevada. Senator Regan questioned the need for the regulations. He commented he wishes to be certain there is a need for more regulation and that the bill is not just being drawn to make more work for DIR. Mr. Swirczek explained Nevada has a safety problem. He stated the bill is a preventative measure. He stated that there have been 510 violations. He stated competency should be demonstrated by the crane operators before they get into the cab of a crane. Senator Regan asked how a crane operator is hired by someone who is doing a high-rise building. Mr. Evans commented the law allows a person to hire anyone they wish without certification or training. He explained a person must have a commercial license to transport a crane down the street, but not to operate it. He stated there is no age requirement for operation of a crane. He pointed out a 12-year-old child can legally operate a crane. SENATOR NEAL MOVED TO DO PASS A.B. 710. SENATOR AUGUSTINE SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS O'CONNELL AND LOWDEN WERE ABSENT FOR THE VOTE.) ***** The hearing was closed on A.B. 710 and opened on A.B. 545. Ms. Burress discussed Exhibit I. She asked: You just let us [the Nevada State Board of Nursing] out of the letter we gave you of intent and we will let them do acts that they are otherwise authorized to do, like licensure for phlebotomy. Senator Townsend clarified Ms. Burress' request to disregard a letter which was sent 2 years ago so that they may accommodate the concerns of various hospitals in the state. Stephanie Tyler, Lobbyist, Nevada Nurses Association, expressed her support for the bill. SENATOR REGAN MOVED TO AMEND AND DO PASS A.B. 545. SENATOR SHAFFER SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR LOWDEN WAS ABSENT FOR THE VOTE.) ***** The hearing was closed on A.B. 545 and opened on A.B. 475. ASSEMBLY BILL 475: Makes various changes to provisions governing insurance. Ms. McKinney-James discussed the need for the bill stating though there had been problems with the drafting of the bill, the language is, now, correct. Senator Townsend questioned the provisions in section 12 on page 2 of the bill. He asked why the commissioner needs 7 years to begin proceedings to collect the premium tax and penalties imposed. Ms. Molasky explained the requirement affects the statue of limitations. She stated the Division of Insurance examines insurers every 3 years. She stated by the time an insurer is examined it may have been 4 years since the problem occurred. She stated by the existing statute of limitations, the division cannot enforce or collect the tax. She explained if the tax problem is not discovered for 7 years, this bill will allow the division to collect the tax. Mr. Wadhams agreed with the language in the bill. Ms. Molasky commented there are unauthorized activities which take time to discover. Senator Townsend expressed his dismay that it might take 7 years to find an error. He stated if a private business takes 7 years to find out that someone owes money, that business will be out of business quickly. He expressed outrage that the division needs 7 years to find an error. Senator Townsend questioned Ms. Molasky on the new language in each provision and she pointed out the need for language clarification throughout the bill. She stated the new language will give statutory authority to the division to act on regulations. She discussed the new language in each provision of the bill and explained the needed language is to establish consistency between regulation and statute. A line-by-line discussion was held of all new language. It was agreed that the clarifying language is necessary for the division to do its job properly. Senator Regan asked why the fines listed in section 54, subsection 5 (a) cannot continue beyond the 30 days. Ms. Molasky stated this is existing language in statute. She stated the organizations affected by subsection 5, are not usually large organizations. She explained she does not know why the original language was adopted. Senator Augustine commented the fine, if continued indefinitely, will bankrupt a business. Ms. Molasky stated the language is consistent with the language used for health management organizations (HMOs). Senator Townsend asked Ms. Molasky if the Governor is aware the bill eliminates the advisory committee. He referred to the repealed sections listed on page 28 of the bill. Ms. McKinney-James commented no one knows why the repealed sections are in the bill. Jim Smith, Deputy Attorney General, Insurance Division, Office of the Attorney General, explained the language in the repealed sections is old language left over from the days when alcohol and drug abuse treatment was required under Nevada statute. He explained research was done by the attorney general's office which showed the language was no longer necessary. He stated the committee referred to in the repealer is no longer an active committee. Senator Townsend commented he has no problem with voting on the bill as it stands, but he pointed out if the Governor has concerns about the repealed language, he will have the committee remove that section from the bill. Mr. Smith stated he will verify that the section is no longer necessary. Senator Regan commented he has no recollection that the advisory committee referred to in the bill is still organized. Mr. Wadhams stated the advisory committee has been displaced by the Governor's commission on drugs and alcohol. He stated the panel which has a drug czar is active. He noted the advisory committee has been dormant for several years. Exhibit K was submitted without testimony. SENATOR REGAN MOVED TO DO PASS A.B. 475. SENATOR NEAL SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS REGAN, LOWDEN, AND O'CONNELL WERE ABSENT FOR THE VOTE.) ***** The hearing was closed on A.B. 475 and reopened on A.B. 552. Mr. Wadhams discussed three-way insurance and said A.B. 552 properly presents the requirements for the change to three-way insurance. He stated the bill delays the beginning of three-way insurance which was done to accommodate Mr. Dirk's resurrection of SIIS. He expressed his support for the improvement of the system. Ms. McKinney-James expressed her understanding that there will be a large fiscal impact on her department and its various divisions. She stated the needs will be greatest for the Division of Industrial Relations. She said she is comfortable with the provisions in the bill. She emphasized the divisions will all work together. Senator Townsend instructed Scott Young, Senior Research Analyst, to send letters to interested parties within the Legislature to explain the necessity that they be prepared and to look to the future in regard to the fiscal impact of this bill. Ms. McKinney-James commented the budget for the Division of Insurance closed without an ability for the divison to debate the fiscal note. She stated it is her intention to approach the interim finance committee to present to them the resource needs for the division. Ms. Molasky stated A.B. 552 is a sound bill which gives the division a period of time in which to implement three-way insurance. She stated the bill allows the insurance commissioner to begin certifying insurance companies. She stated there is a great deal of education of the public which will be required to ready them for three-way insurance. She stated there are many insurance companies already in the state who will be marketing workers' compensation when three-way insurance comes into effect. She stated it is a line of casualty insurance. Mr. Dirks commented he has a few technical changes for the bill. He referred to page 3 of Exhibit D. Senator Townsend commented he wished to amend A.B. 552 with the recommendations from page 3 of Exhibit D and include the deleting of sections 189-192. He asked to deal with those sections in S.B. 458. SENATOR O'CONNELL MOVED TO AMEND AND DO PASS A.B. 552 WITH THE DELETION OF SECTIONS 57, 68, 108, 58, THE PROVISIONS LISTED UNDER SECTION 197 OF EXHIBIT D AND SECTIONS 189-192. SENATOR AUGUSTINE SECONDED THE MOTION. Mr. Wadhams asked the committee to study section 14 of the bill and to compare it with section 186, subsection (b). He commented the Assembly neglected to correct a change between the two. He commented section 186 contains language which permits dual certifications. He asked to delete section 186 subsection (b). SENATOR O'CONNELL INCLUDED DELETION OF SECTION 186, SUBSECTION (B) IN THE MOTION. Bob Ostrovsky, Lobbyist, Nevada Resort Association, commented there is a conflict between section 109 and A.B. 61. ASSEMBLY BILL 61: Revises administrative penalties for violations of provisions governing industrial injuries, occupational diseases and control of asbestos. SENATOR O'CONNELL INCLUDED DELETION OF SECTION 109 IN THE MOTION. Mr. Whitacre presented Exhibit L. Senator Townsend commented the language is not needed if the secretary of the labor sends a letter which allows Mr. Whitacre to release information to private carriers. Senator Townsend instructed Mr. Whitacre to send a letter to the secretary of labor which explains the need for sharing of information with SIIS. Mr. Dirks commented the situation is not unique because there are 44 states with three-way insurance. THE MOTION CARRIED. (SENATOR LOWDEN WAS ABSENT FOR THE VOTE.) ***** The hearing was closed on A.B. 552 and reopened on A.B. 498. Exhibit M was submitted requesting changes to A.B. 498. Exhibit M is an organized presentation of information discussed during the morning segment of this hearing. Ms. Molasky commented section 9, subsection 2 will allow the Division of Insurance to adjust the underlying financial stability of the members of the association based on the actuarial solvency and the nature of the group. Senator Neal asked what is "manual premium rate." Mr. Dirks stated it is the rate which is published and adopted by the insurance commissioner before an experience modification factor is applied. Mr. Capurro commented there may be members who have a large net worth, but not very many employees. He stated the system is protected in respect to joint and several liability. Senator Regan questioned what is the difference between a reviewed statement and a certified statement. Mr. Dirks explained there are three levels of financial statements; certified, reviewed, and compiled. Mr. Dirks explained the new language in Exhibit M, page 4, lines 1-4. He stated the purpose of the provision is to prevent SIIS from having an adverse selection. This will require the groups to maintain the members of the group. Senator Townsend commented the final provision in Exhibit M is an important provision. Ms. Molasky stated the Divison of Insurance requested this language because it had received a copy of a solicitation which was "frightening." She commented there were many misrepresentations in the literature and she realized the need for legislation to protect the consumer. She stated this literature contained solicitation of a nonrefundable $1000 per person fee for information on self-insurance. She stated the language in the amendment allows for the requirement of a solicitation permit. Mr. Dirks asked that there be a change to Exhibit M on the last page. It should read "Amend section 19 by deleting lines 26 through 29." Mr. Capurro asked to delete "Amend section 19 by inserting on line 26 a closed bracket after `act'" on the last page of Exhibit M. He stated: With respect to the issue that came up this morning on financial information in the regulation, we have after conferring with the insurance commissioner and others, we are satisfied that the provisions for guarding the sharing, if you will, of financial information is not only in the best interest of the system, but in the best interest of our own organizations and handled in the manner in which they intend to, we are in full support. SENATOR AUGUSTINE MOVED TO AMEND AND DO PASS A.B. 498. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR LOWDEN WAS ABSENT FOR THE VOTE.) ***** With no further business, the hearing was concluded at 7:55 p.m. RESPECTFULLY SUBMITTED: Molly Dondero, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor June 27, 1995 Page