MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-second Session
April 28, 2003
The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Monday, April 28, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4412, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Warren B. Hardy II, Vice Chairman
Senator Ann O'Connell
Senator Raymond C. Shaffer
Senator Joseph Neal
Senator Michael Schneider
Senator Maggie Carlton
GUEST LEGISLATORS PRESENT:
Assemblyman Bernard (Bernie) Anderson, Assembly District No. 31
Assemblywoman Peggy Pierce, Assembly District No. 3
Assemblyman Chad Christensen, Assembly District No. 13
STAFF MEMBERS PRESENT:
Scott Young, Committee Policy Analyst
Kevin Powers, Committee Counsel
Maryann Elorreaga, Committee Secretary
Lynn Hendricks, Committee Secretary
OTHERS PRESENT:
Jerry Hughes, Ed.D., Executive Director, Nevada Interscholastic Activities Association
Glenn L. Miers, Secretary, Football Chapter, Northern Nevada Officials Association
Karyn Wright, Lobbyist, Clark County School District
Ivan R. “Renny” Ashleman, Lobbyist
Robert A. Ostrovsky, Lobbyist, Employers Insurance Company of Nevada
Don Jayne, Lobbyist, Nevada Self Insured Association
Nancyann Leeder, Nevada Attorney for Injured Workers, Department of Business and Industry
Danny Thompson, Lobbyist, American Federation of Labor-Congress of Industrial Organizations
Raymond C. McAllister, Lobbyist, Professional Firefighters of Nevada
Gary H. Wolff, Lobbyist, Teamsters Local 14
Dan Musgrove, Lobbyist, Clark County
Rose McKinney-James, Lobbyist, Clark County School District
Chairman Townsend:
We will open the hearing on Assembly Bill (A.B.) 185.
ASSEMBLY BILL 185 (1st Reprint): Exempts certain sports officials from certain provisions governing compensation. (BDR 53-1110)
Assemblyman Bernard (Bernie) Anderson, Assembly District No. 31:
This bill exempts umpires, referees, judges, scorekeepers, timekeepers, and other neutral participants in interscholastic sporting events from the definition of employees in Nevada Revised Statutes (NRS). This answers the question of whether sports officials are employees of the school district or independent contractors. If they are independent contractors, the school districts need not supply them with workers’ compensation insurance, which is a significant cost.
Jerry Hughes, Ed.D., Executive Director, Nevada Interscholastic Activities Association:
I have provided a one-page synopsis of the bill (Exhibit C). In the past, the cost of workers’ compensation insurance for sports officials was 5 percent. In the last 3 years, it has soared. Some schools or school districts have been forced to pay rates as high as 47 percent for football and wrestling officials. We have been unable to discover how this rate is determined. Nevada is charged the most of any state in the United States. The law is unclear as to whether sports officials must be covered. We are here to clarify the law.
Glenn L. Miers, Secretary, Football Chapter, Northern Nevada Officials Association:
We brought a similar bill to the 70th Legislative Session but allowed it to die because we were told it was not necessary. In July 1999, the State Industrial Insurance System (SIIS) ceased to exist and the Employers Insurance Company of Nevada (EICON) defined sports officials as employees. Rates immediately rose. At the current rates, at the average football game with four officials receiving $50 each, the school must pay an additional $100 for workers’ compensation insurance. This is a big burden on schools. The bill would require the officials to insure themselves.
Senator O'Connell:
What is the average national rate?
Dr. Hughes:
The national average is around 4 to 5 percent. That is what we pay for all sports other than football and wrestling.
Senator O'Connell:
Do we have an extraordinary number of injuries in those sports?
Dr. Hughes:
Not that we can discover. We have asked the insurance company for records, and they refuse to provide them. Football and wrestling are combined with boxing, ice hockey, karate, and other contact sports. We have no idea why this rate is so high, and we have had great difficulty getting an answer.
Mr. Miers:
I have appealed to the National Council on Compensation Insurance Incorporated (NCCI) and EICON. We have gotten no response because they do not feel it is that important.
Senator Carlton:
My concern is that if you lay this burden on the referee, you will have a hard time finding people willing to serve.
Dr. Hughes:
We surveyed sports officials in Nevada. There is a very, very small percentage who are not covered by some sort of insurance. Also, the associations are searching out private policies officials could purchase if they so choose. We do not feel we will have difficulty getting people to officiate. Nevada is the only state in the country that provides workers’ compensation insurance for sports officials.
Senator Carlton:
My concern is that private insurance companies will deny claims, saying that the claimants were being compensated and the injuries should be covered by workers’ compensation.
Dr. Hughes:
One of the reasons we are here is that two of our associations have been denied coverage this year.
Assemblyman Anderson:
This bill would also have a beneficial effect on volunteer sports officials for organizations such as Little League.
Karyn Wright, Lobbyist, Clark County School District:
We support this bill. Clark County spent $60,000 in this area during the fall of 2002 alone.
Chairman Townsend:
Mr. Ashleman has an amendment to this bill (Exhibit D). It appears to be unrelated but not harmful.
Assemblyman Anderson:
He has not spoken to me about it.
Ivan R. “Renny” Ashleman, Lobbyist:
I am representing myself in this matter. The amendment corrects an anomaly in NRS 616B. If you are a sole proprietor, you can reject workers’ compensation coverage for yourself as an individual. However, if you are incorporated and work for yourself with no employees, you can only reject coverage if you work from your home exclusively. This is a problem if you lease office space as I do. Even if I wanted to have coverage, no one wants to provide it. I pay a substantial premium, nearly $1000 a year, for coverage I am very unlikely to use. I already carry very extensive health coverage for myself which covers far more than industrial accidents. I am paying for duplicate coverage. I am happy to talk to Assemblyman Anderson.
Chairman Townsend:
Mr. Ostrovsky, are you familiar with this amendment?
Robert A. Ostrovsky, Lobbyist, Employers Insurance Company of Nevada:
I have not talked with EICON about this. It is a simple matter of opting in or opting out. It reminds me of the discussion this committee had several years ago about whether real estate agents were independent contractors who could opt in or out of workers’ compensation coverage. If you try to buy a disability policy on yourself, you will pay a lot more money than if you get workers’ compensation coverage. I understand Mr. Ashleman’s position that he should be able to make that decision as an independent business person.
Don Jayne, Lobbyist, Nevada Self Insured Association:
As long as it is narrow in scope, confined to the single person who is sole owner of a small corporation to which Mr. Ashleman referred, we would have no objection. If I was in that situation, I would probably opt out.
Senator Carlton:
My concern is that when a health insurance company writes a policy for someone in this position, they think he is partially covered by workers’ compensation and therefore do not provide coverage for those situations.
Mr. Ashleman:
I have disability insurance, which covers far more than work-related injuries. The class being excluded here is extremely small.
Chairman Townsend:
We are always concerned about people who choose not to be covered by workers’ compensation coverage. Mr. Ashleman, if the committee chooses to adopt the amendment, it will be with the understanding that it will be withheld if Assemblyman Anderson objects.
Mr. Ashleman:
I understand.
Chairman Townsend:
We will close the hearing on A.B. 185 and open the hearing on A.B. 206.
ASSEMBLY BILL 206 (1st Reprint): Revises provisions relating to payment for permanent total disabilities. (BDR 53-1103)
Assemblywoman Peggy Pierce, Assembly District No. 3:
This bill deals with the workers’ compensation system. Under current law, an injured worker who is found to be partially disabled and paid a lump sum, then later found to be fully disabled, must return the lump sum in monthly payments. This bill would allow the worker to pay back the amount as a lump sum if desired. It would restrict repayment to the amount of the lump sum that was actually paid out.
This situation was brought to my attention by John Reda, a constituent who was injured on the job. He was found partially disabled and given a lump sum. Later he was found fully disabled and required to repay the lump sum. He had the funds to pay back the lump sum in full, but he was told he must use a payment plan. This payment plan included interest payments and inflated a lump sum of $30,000 to a repayment of $60,000.
Nancyann Leeder, Nevada Attorney for Injured Workers, Department of Business and Industry:
When Mr. Reda’s permanent partial disability was computed, he was told he was entitled to $64,117 if he took it over time. He chose to take a lump sum, which came to some $32,000. When he wanted to repay the lump sum so he would get a full permanent total disability (PTD) pension, he was told he needed to repay $64,000 rather than the $32,000 he actually received. Some insurers do not require the lump sum to be repaid at all, and many will only take the amount of money they actually paid out. This is not the policy of EICON. Mr. Reda tells me he has already repaid more than $20,000.
Section 1, subsection 1, paragraph (b), states regardless of the source of the repayment, any repayment of the lump sum will constitute the reimbursement to avoid double payment. This is because there have been cases in which repayment has been started again when the case is reclassified as PTD even though there was some repayment when the case was changed to temporary total disability (TTD). Section 1, subsection 4, changes the language to limit repayment to the amount actually paid out, rather than what would have been paid out if the repayment was taken in monthly installments. Paragraph (a) of subsection 4 restates that the employee may make this repayment in a lump sum. Section 2 requires the insurer to recalculate the amount of repayment to ensure the correct amounts are taken.
Chairman Townsend:
How common is Mr. Reda’s situation?
Ms. Leeder:
It is not common for an employee to be able to make repayment in a lump sum. Mr. Reda was able to do so because he had received a payment from the Veterans Administration. The situation with the schedule of payments is also uncommon.
Senator Hardy:
How often is a permanent partial disability reclassified as a PTD?
Ms. Leeder:
There are many cases, but my agency only represents those with contested issues. I do not know the total number.
Senator Hardy:
Is the change made because the person’s condition deteriorates or because there is a dispute over the definitions?
Ms. Leeder:
Usually it is because the injury deteriorates. A survey of all insurers could give you more complete statistics.
Senator Carlton:
How many companies are writing this type of insurance now, and which ones are having this problem?
Ms. Leeder:
There are roughly 280 licensed insurers. The Division of Insurance could give you those figures. Mr. Reda is with EICON. Another client of mine who had the same problem is with a different insurer.
Danny Thompson, Lobbyist, American Federation of Labor-Congress of Industrial Organizations:
We wholeheartedly support this bill. We thought the Legislature fixed this problem in the 70th Legislative Session, and this is apparently not the case.
Mr. Ostrovsky:
We have no problems with this bill. The statute was previously worded to require insurers to take repayment in monthly payments, as you can see in the language stricken on page 3 of the bill. We are happy to take repayment in a lump sum and to take only the amount actually paid.
Chairman Townsend:
We will close the hearing on A.B. 206 and open the hearing on A.B. 438.
ASSEMBLY BILL 438 (1st Reprint): Requires annual increase in amount of compensation that claimant or dependent of claimant is entitled to receive for permanent total disability under industrial insurance. (BDR 53-1162)
Assemblyman Chad Christensen, Assembly District No. 13:
This bill provides for an annual cost of living adjustment (COLA) on the pension given to an injured worker classified as PTD. Under the current statute, workers injured in the 1950s are still receiving pensions based on their wages when they were injured.
Chairman Townsend:
Do other states have such a provision?
Raymond C. McAllister, Lobbyist, Professional Firefighters of Nevada:
I have written testimony (Exhibit E). This is not a new problem; we have been dealing with it for years. The Legislature has increased pensions many times over the years, the last being done in 1991. This bill would provide that anyone injured on the job on or after January 1, 2004, would receive annual COLA of 2.3 percent. That figure was derived by averaging the annual increase in cost of living for the last 40 years and halving it. In the past the insurance industry has resisted legislation like this because the increases were not funded and benefits would have to be recalculated.
Insurance industry spokesmen have told me that as long as they have time to fund these increases ahead of time, they have no problem with the bill. This is why we set the implementation date at January 2004. Currently when a worker goes out on PTD, their pension is set at 66 2/3 percent of the average State employee salary, which is currently around $36,000 per year.
We would also like to increase the benefits of those with an existing PTD. This can only be done if we can find a funding source. One way to do this would be to make an assessment of all insurers. As the bill is written, these individuals will get the same 2.3 percent annual increase of their current pension. This is not much, but it is more than they are getting now. We would welcome the opportunity to work with representatives from the insurance industry to work on funding sources.
The federal government gives annual COLA increases to disabled veterans. The Social Security Administration does the same. Connecticut, Montana, Idaho, Oregon, Wyoming, Maryland, and Mississippi provide annual COLA increases for their PTD workers. Some states make an annual increase to the average state employee salary. Some provide a fixed increase every year. There are other states that do this.
The last page of the handout (Exhibit E) gives a comparison of a disabled worker’s pension over 15 years under various conditions. It shows what a nondisabled worker would get with 2.5 percent salary increases, what a disabled worker would get with no increase, and what a disabled worker would get with a 2.3 percent increase annually. There is also a line showing what a disabled worker would be paying for health insurance.
Senator Neal:
What would be the impact if you defined the pension as being 66 2/3 percent of the average State employee’s salary and let it rise with that salary?
Mr. McAllister:
My assumption is if you do that, it will be harder for the insurance industry to fund it because they will never know how much it will be next year.
Senator Neal:
Is there a chance that the pension might eventually be more than the salary?
Mr. McAllister:
It is highly unlikely.
Mr. Thompson:
We support this bill. Pensions for persons injured more than a few years ago are too small to live on. The current situation puts injured workers in a situation where they might see fraud as their only recourse. Desperate people do desperate things. I think it will be easy to find a funding source to update the oldest cases. It is the right thing to do.
Gary Wolff, Lobbyist, Teamsters Local 14:
We support this bill. I am reminded of the case of Trooper Pete Stillman who received horrendous injuries on the job about 35 years ago. Today he is blind, confined to a wheelchair, and totally incapacitated, and he lives on a poverty‑level wage.
Mr. Ostrovsky:
We have no problems with the way this bill is currently drafted. The fixed rate of 2.3 percent allows an actuary to calculate the cost to allow us to set aside funds to pay for the increases. If the increase was tied directly to State employees wages, it would not be possible to do this. It is remotely possible that pensions could eventually outstrip wages. We are happy to discuss funding sources.
I should point out that this bill will have a disproportionate impact on some industries with greater risk factors. For example, there are far more PTDs in law enforcement than in gaming.
Senator Neal:
How many people are we leaving out? How many people are there with current PTDs?
Mr. Ostrovsky:
At this point EICON has about 2400 PTDs on the records, which include the old SIIS cases. I do not know how many there might be total, but I would guess the current number is 3000 to 3500. The Division of Industrial Relations (DIR) could get you a more accurate number.
Senator Neal:
Is it not conceivable that the premium rate will be less for those brought on after this date?
Mr. Ostrovsky:
I would assume, because it is an added benefit, there would be a small premium increase across the board for all employers.
Senator O'Connell:
Do you know of any increases being projected in this area?
Mr. Ostrovsky:
There are a number of things on the horizon that will increase the rates employers pay. This committee has discussed moving from the fourth to the fifth edition of the American Medical Association's Guides to the Evaluation of Permanent Impairment. This would change the way disabilities are rated and increase the workers’ compensation premium rates by at least 3 or 4 percent. Also, the medical fee schedule which establishes the maximum rates that can be paid for medical services in workers’ compensation cases has not been substantially altered in 3 years. There are recommendations to increase these fees, which would raise rates about 3 percent. Legislation being considered at this session could raise the rates another 1 or 2 percent. I believe rates will be raised at least 10 percent across the board, probably starting in 2004.
Mr. Jayne:
Let me make a correction. The DIR did a survey on the medical fee schedule with Milliman USA. They recommended fees be increased by 15 percent, which would raise rates by 6 to 8 percent.
Mr. Ostrovsky:
Therefore the raise in rates would be well over 10 percent, depending on what the DIR does.
Dan Musgrove, Lobbyist, Clark County:
I agree with Mr. Ostrovsky. We have a total of 58 PTD claims at the moment. Of these, 52 are PTDs and 6 are death awards. This will have a fiscal impact on us. I have these statistics for the record (Exhibit F). If we can come up with a reasonable estimate of future claims, I will get this to you.
Senator Neal:
I would assume your risk manager did an actuarial study to estimate the amount of cases you will have in the future. Do you not know your probable liability?
Mr. Musgrove:
The fiscal note I have is $250,000. I am not sure if this is for 1 year or several years. I will get the details of this to you. However, since we are self-insured we cannot simply raise rates to pay for this the way EICON will.
Senator Carlton:
You said you had 52 PTDs. How many total employees do you cover?
Mr. Musgrove:
We have just under 10,000 employees. I will get you the breakdown.
Senator Neal:
Is it not fair to say that most insurance companies adjust premiums to take cost increases into account?
Mr. Jayne:
Insurance companies may. Self-insurers pay claims as they come along. We can plan for increases and build them into our reserve. Our risk management people probably have some idea what the incident rates will be in the future.
Senator O'Connell:
I see we have a representative of the Clark County School District in the room. Could you tell us if you are planning for this increase in your budget and how many PTDs you have currently?
Rose McKinney-James, Lobbyist, Clark County School District:
I do not have answers for you at the moment. I will find out this information and get back to you. We have been monitoring this bill. Based on the amendment, we estimate our fiscal impact at about $2500. The only recommendation from general counsel was that the committee consider tying increases to the consumer price index (CPI).
Chairman Townsend:
There are many ways to figure the appropriate amount of a COLA. Was there testimony on this in the Assembly?
Mr. McAllister:
The problem with tying it to the CPI is that some years it would be quite reasonable, but some years it would be very high. The CPI makes broad swings.
Mr. Jayne:
Our feeling was that it would be more accurate to tie it to wages because this is a benefit based on wages. Wages also fluctuate, but the movement is slower and easier to anticipate.
Mr. McAllister:
Jack Kim told me the insurance company he represents was not in the market before 1999. An industry-wide assessment to pay for increasing benefits for persons currently receiving pensions would require his company to pay for settlements in which they had no part. I have also been told that for some insurance companies, the cost of increasing existing PTD pensions by 2.3 percent would be small, perhaps as little as $75,000. This amount would be lower each year as these people die. They suggested this payment might be made in a lump sum once a year.
Chairman Townsend:
Did this bill go to the Assembly Committee on Ways and Means?
Mr. McAllister:
No. It was initially drafted using language from the Public Employees’ Retirement System (PERS) statutes on how they cover COLAs for retirees. In talking with Mr. Ostrovsky, we agreed to come up with our own numbers. The initial fiscal note was $965 over the biennium.
Chairman Townsend:
My concern is if we add in existing PTDs, this bill will be sent to the Senate Committee on Finance. This will play havoc with our deadlines.
Mr. Jayne:
Senate Bill (S.B.) 292 opened an interim study. The language might be broad enough to allow an interim study to evaluate ways to fund the retroactive increase.
SENATE BILL 292: Directs Legislative Commission to appoint subcommittee to study impacts of recent privatization of industrial insurance program. (BDR S-784)
Chairman Townsend:
The language was written in a generic fashion for this reason. This is an issue we need to revisit from time to time. As I recall, the last time we looked at these pensions we found a surviving spouse who had been receiving $56 a month since the 1930s.
Chairman Townsend:
We will close the hearing on A.B. 438.
SENATOR SHAFFER MOVED TO AMEND AND DO PASS AS AMENDED A.B. 185.
SENATOR NEAL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
SENATOR O’CONNELL MOVED TO DO PASS A.B. 206.
SENATOR HARDY SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR NEAL ABSTAINED FROM THE VOTE.)
*****
SENATOR NEAL MOVED TO DO PASS A.B. 438.
SENATOR CARLTON SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Chairman Townsend:
There being no further business, the meeting is adjourned at 9:54 a.m.
RESPECTFULLY SUBMITTED:
Lynn Hendricks,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE: