Senate Bill No. 372-Committee on Commerce and Labor
May 7, 1997
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Referred to Committee on Commerce and Labor
SUMMARY--Revises provisions relating to rating experience of certain employers for purposes of industrial insurance. (BDR 53-115)
FISCAL NOTE: Effect on Local Government: No.
Effect on the State or on Industrial Insurance: Yes.
EXPLANATION - Matter in italics is new; matter in brackets [ ] is material to be omitted.
AN ACT relating to industrial insurance; requiring, under certain circumstances, the manager of the state industrial insurance system to apply to a newly formed corporation that was previously owned by one person the rating based on experience which was applied to that business before it was incorporated; and providing other matters properly relating thereto.
THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:
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Section 1 NRS 616B.206 is hereby amended to read as follows:
616B.206 1. In addition to the authority given the manager to determine and fix premium rates of employers as provided in NRS 616B.218 to 616B.230, inclusive, the manager:
(a) Shall apply that form of rating system which, in his judgment, is best calculated to rate each individual risk more equitably, predicated upon the basis of the employer's individual experience;
(b) Shall adopt equitable regulations controlling the rating of each risk, which must conserve to each risk the basic principles of industrial insurance; and
(c) May subscribe to a rating service of any rating organization for casualty, fidelity and surety insurance rating.
2. The rating system or any rating by a rating organization pursuant to this section is subject to the limitation that the amount of any increase or reduction of premium rate, additional charge of premiums or payment of dividends must be in the discretion of the manager.
3. The rating system provided by this section is subject to the following further limitations:
(a) All studies conducted by the manager to determine the adequacy of rate levels and the equity of rates among classifications must be conducted in the presence of an actuary designated by the commissioner.
(b) The manager shall file revised premium rates, revised classifications of employment and changes of the multiplier applied generally to classes of risk with the commissioner and give written public notice to the employers affected by the changes at least:
(1) Sixty days before the effective date of a projected change in premiums or projected change of multiplier; and
(2) Thirty days before the effective date of a change decided upon.
The commissioner shall review the revised rates and classifications and advise the manager of the changes which are not consistent with NRS 686B.050 and 686B.060.
(c) An employer affected by a change in a revised premium rate or a revised classification of employment may request the commissioner to hold a hearing before the effective date of the change. At the hearing, the commissioner shall consider the objections raised by any party appearing at the hearing. An employer may not appeal a decision of the commissioner concerning a revised premium rate or a revised classification of employment to the manager.
(d) Premium rates must not be fixed at a level higher than that required to:
(1) Pay the obligations created by chapters 616A to 616D, inclusive, of NRS and associated administrative expenses.
(2) Provide for a reasonable reserve for claims.
(3) Provide for contingencies such as a catastrophe, economic change, change in judicial interpretations of the law, legislative amendments of the law, deficiencies in the reserve and other events which cannot be predicted accurately and could endanger the solvency of the fund.
The commissioner may order the manager to make any adjustments necessary to meet the requirements of this paragraph.
(e) In determining and fixing the premium rates applicable to a newly formed corporation that was previously owned by one person, the manager shall use the experience which was incurred by the business before it was incorporated if:
(1) The prior owner conducted the business for at least 3 consecutive years immediately preceding its incorporation; and
(2) The prior owner or members of his immediate family, or the prior owner and members of his immediate family, own 50 percent or more of the issued stock of the newly formed corporation.
As used in this paragraph, "immediate family" means the parents, spouse, children, stepchildren and grandchildren of the prior owner, and the spouses of those children, stepchildren and grandchildren.
4. In determining and fixing premium rates, the manager may establish a varying schedule of rates for workers who are in the classification of employment designated as construction which reflects the varying hourly rates of wages paid to such workers.
5. Except as otherwise provided in this subsection, in determining and fixing the premium rates applicable to an employer who begins business in this state but has conducted business in another state for 3 years or longer, the manager shall take into account the employer's experience in the other state in the same manner as the manager takes into account an employer's experience in this state. The manager may adopt regulations to specify the manner in which the employer's experience may be applied in this state. The provisions of this subsection do not apply to a principal contractor, independent contractor or subcontractor who begins business in this state only to bid on projects of limited duration or otherwise does not manifest an intent to conduct business permanently in this state.
6. Subsections 2 and 3 do not apply to a rating plan made by voluntary agreement between the manager and an employer which increases or reduces premiums for the employer. The voluntary rating plan may be retrospective in nature. A voluntary rating plan must be in writing and signed by the manager and the employer.
7. The manager shall adopt by regulation a plan for reviewing employers insured by the system who have excessive losses, as defined by the plan, in order to encourage those employers to pay for their losses and correct their loss experience. The plan:
(a) Must identify an employer with excessive losses as an employer:
(1) Whose incurred losses exceeded his manual premium in:
(I) The two most recent fiscal years of his period of experience; or
(II) The most recent fiscal year of his period of experience and in 2 of the 3 fiscal years preceding that fiscal year; and
(2) Who paid a premium in a minimum amount to be established by the manager in each of the fiscal years in which his losses exceeded his manual premium pursuant to subparagraph (1).
(b) May include requirements for:
(1) The payment of surcharges by such an employer;
(2) Mandatory retrospective rating plans;
(3) An increase in the amount of the deductible required to be paid by such an employer pursuant to subsection 1 of NRS 616B.221;
(4) Changes in the limitations placed on the experience modification plan for such an employer; or
(5) Any combination of subparagraphs (1), (2), (3) and (4).
(c) Must exempt an employer from the provisions of the plan if the employer:
(1) Has not, for the most recent fiscal year of his period of experience, incurred any claims resulting in a temporary total disability;
(2) Has established and carried out a written safety program pursuant to NRS 618.383 and the regulations adopted pursuant thereto; and
(3) Has not been previously identified as an employer with excessive losses.
The plan must include procedures for the termination of an employer's participation in the plan when the employer has corrected his excessive loss experience. The commissioner shall review the plan adopted pursuant to this subsection.