MINUTES OF THE
SENATE Committee on Judiciary
Seventy-second Session
May 7, 2003
The Senate Committee on Judiciary was called to order by Chairman Mark E. Amodei, at 8:00 a.m., on Wednesday, May 7, 2003, in Room 2149 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4406, 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 Mark Amodei, Chairman
Senator Maurice E. Washington, Vice Chairman
Senator Mike McGinness
Senator Dennis Nolan
Senator Dina Titus
Senator Valerie Wiener
Senator Terry Care
GUEST LEGISLATORS PRESENT:
Assemblywoman Barbara E. Buckley, Assembly District No. 8
Assemblyman R. Garn Mabey, Jr., M.D., Assembly District No. 2
Assemblyman John Oceguera, Assembly District No. 16
STAFF MEMBERS PRESENT:
Nicolas Anthony, Committee Policy Analyst
Bradley Wilkinson, Committee Counsel
Barbara Moss, Committee Secretary
OTHERS PRESENT:
Andy Spaulding, Student, William S. Boyd School of Law, University of Nevada, Las Vegas
John Ellerton, M.D.
Bobbie Gang, Lobbyist, Nevada Women’s Lobby, National Association of Social Workers-Nevada
Marie H. Soldo, Lobbyist, Nevada Association of Health Plans
Robert A. Ostrovsky, Lobbyist, Nevadans for Affordable Health Care
James L. Wadhams, Lobbyist, Nevada Mutual Insurance Company
Lynn Fulstone, Lobbyist, Physicians Insurance Company of Wisconsin
Bill Bradley, Lobbyist, Nevada Trial Lawyers Association
Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry
John R. Orr, Deputy Commissioner, Division of Insurance, Department of Business and Industry
Robin L. Keith, Lobbyist, President, Nevada Rural Hospital Partners Foundation, Liability Cooperative of Nevada
Janice C. Pine, Lobbyist, Saint Mary’s Health Network
Larry L. Spitler, Lobbyist, American Association of Retired Persons
Scott G. MacKenzie, Lobbyist, Executive Director, State of Nevada Employees Association #4041, American Federation of State, County and Municipal Employees
James Richardson, Lobbyist, Nevada Faculty Alliance
Treva J. Hearne, Attorney
Mark J. Nichols, Lobbyist, Executive Director, National Association of Social Workers-Nevada
Laura J. Mijanovich, Lobbyist, American Civil Liberties Union of Nevada
Gary H. Wolff, Lobbyist, Teamsters Local 14
Jeff Parker, Solicitor General, Office of the Attorney General
Stan Miller, Tort Claims Manager, Office of the Attorney General
Chairman Amodei:
The hearing is open on Senate Bill (S.B.) 494.
SENATE BILL 494: Revises provisions governing issuance of writs of prohibition to conform to Nevada Constitution. (BDR 3-1340)
Andy Spaulding, Student, William S. Boyd School of Law, University of Nevada, Las Vegas:
I am appearing on behalf of Joseph W. Brown, attorney. I am a law clerk at Jones Vargas and a third year student at the William S. Boyd School of Law, University of Nevada, Las Vegas.
In the course of my employment, I discovered Nevada Revised Statutes (NRS) 34.320, which is out of conformity with a constitutional amendment. In 1992, a constitutional amendment was ratified which, in effect, overturned the statute, but the statutory language was never changed. The statute concerns the writ of prohibition, which is an extraordinary writ issued only where a judicial tribunal exceeded its authority. The statute says only the Nevada Supreme Court can issue this writ.
The constitution was amended, however, to indicate district court, as well as the State Supreme Court, can issue the writ. Senate Bill 494 simply amends the statute to bring it into conformity with the constitutional amendment by providing that a district court, as well as the State Supreme Court, can issue the writ of prohibition.
Senator Care:
In your research, have you come across the case MPC Contractors v. Appeals Officer, 111 Nev. 606 (1995)?
Mr. Spaulding:
I have heard of the case.
Senator Care:
I think it points out the inconsistencies.
Mr. Spaulding:
There are several contemporary cases that refer to the constitutional amendment, and that is one of them.
Chairman Amodei:
The hearing is closed on S.B. 494. What is the pleasure of the committee?
SENATOR CARE MOVED TO AMEND AND DO PASS S.B. 494.
SENATOR NOLAN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS TITUS AND WASHINGTON WERE ABSENT FOR THE VOTE.)
*****
Chairman Amodei:
The hearing is open on Assembly Bill (A.B.) 320.
ASSEMBLY BILL 320 (1st Reprint): Makes various changes regarding malpractice. (BDR 57-868)
Assemblywoman Barbara E. Buckley, Assembly District No. 8:
It is not necessary to bore you with facts with which you are already familiar. You have spent much time on this issue, whether serving on the interim committee or examining the medical malpractice crisis during the special or present session. You are provided another copy of the brief history of the development of the medical malpractice crisis in Nevada (Exhibit C), but I will limit my comments to the fact that if we do not learn from history, we are bound to repeat it. It is time to look at the insurance side of the crisis and a level-playing field for physicians, and ultimately for patients, in the State of Nevada. Assembly Bill 320 will accomplish it.
Assembly Bill 320 is in two parts: one is first party health, and second is medical malpractice insurance. I will initially address first-party health. This Legislature passed the Patient Bill of Rights in 1997. Nevada was one of the first states to do so in an attempt to give patients and physicians an opportunity to question decisions, provide an outlet for filing grievances, and clear up when health care should, or should not, be denied. This bill continues work on first‑party health.
The committee has been provided an overview by topic of A.B. 320 (Exhibit D) to which I will refer during my presentation. The first part of the bill clarifies both health plans and hospitals cannot charge credentialing fees to physicians. Senate Bill No. 99 of the 71st Session, and a bill offered by Assemblywoman Giunchigliani during the 70th session, attempted to make clear panel fees are not to be charged. A physician cannot be charged a fee to get on a health plan. It appears to have been eliminated, however, some third-party administrators still claim a loophole and charge a panel fee. Hopefully, A.B. 320 will clarify these fees may not be charged. It also expands the prohibition of charging to hospitals. Some might say the fee is only $100, $200, or $300, which is not a lot, however, physicians have so many health plans the amount can quickly become overwhelming. Assembly Bill 320 makes it clear hospitals and health plans may not charge those fees.
The second part of the health care section has to do with contracts between insurers and providers of health care. It models the California Physician Bill of Rights passed late last year. One issue is changing terms of contracts midstream. Paragraph 5 of the proposed amendment to A.B. 320, including Attachment A, Credentialing Forms and Contract Provisions (Exhibit E), codifies the practice of Sierra Health Services, Incorporated. It clarifies a provider contract may be modified at any time by mutual agreement. An insurer proposing to change a contract must give 30-day notice. If there is no objection, the modification is not effective at the end of the notice period. If there is a written objection, the modification will take place until mutually agreed upon. This is standard contract law. When two people sign a contract, one party may not unilaterally change it during the term of the contract, however, that has not been the experience of physicians. This provision will change that status quo.
The next issue is in regard to credentialing. Currently, in southern Nevada, each time physicians sign with a health plan they are required to fill out a different credentialing form. The same is true with hospitals. Therefore, if we are attempting to minimize paperwork, time, and expense on things not bearing fruitful results, this area is ripe for legislative reform. It makes no sense for physicians to fill out a slightly varied form 100 different times. Northern Nevada created one form. Assembly Bill 320 requires the insurance commissioner to hold hearings to create a workable form. Paragraph 4, regarding Revisions to the Credentialing forms, in the amendment to A.B. 320 (Exhibit E), requires one form, but allows the insurance commissioner to vary it by geographic region. In short, it requires one form be used to eliminate unnecessary paperwork.
Paragraph 1 in the amendment to A.B. 320 (Exhibit E) pertains to revocation of license for failure to pay 95 percent of claims within 30 days after date of approval. The committee has dealt with this issue for a number of years and A.B. 320 furthers that reform. Currently, should a claim not be paid within 30 days, interest can be assessed. The provision addresses repeat offenders. In a meeting with all the insurance companies regarding A.B. 320, it was agreed to modify that section of the bill. Paragraph 1 of the amendment to A.B. 320 (Exhibit E) provides that repeated violations of section 3 of A.B. 320, on timely pay, would require the insurance commissioner to consider revocation or suspension of the insurance company’s license. This is another arrow in the quiver to confront insurance companies with repeated failures to pay on time.
Assemblywoman Buckley:
Section 4 of A.B. 320 is the unfair trade practices part of the bill. At the present time, the Patient Bill of Rights is codified in NRS 695G, pertaining to all managed-care organizations. The unfair trade practice applying to insurance plans is found in NRS 686A, which is the chapter that disallows misrepresentation or engaging in questionable behavior. Jim Wadhams and myself propose a provision at the end of NRS 695G that all the rights and remedies of NRS 686A would apply to violations of NRS 695G, in order to make those sections work well together.
That concludes the health care side of A.B. 320. I conferred with Jim Wadhams, Marie Soldo, and Jack Kim on those sections of the bill. I think it is fair to say they support all the provisions, with the exception of banning credentialing fees. They do not charge the fee, but do not like banning them. It causes me discomfort because it seems the fee might be charged in the future, which is the reason I wanted to retain the provision. The provisions were done in conjunction with those individuals and I greatly appreciate their help.
I will now address the medical malpractice portion of A.B. 320. The first portion of A.B. 320, regarding insurance practices relating to medical malpractice, is intervention in the rate-filing process. When the insurance commissioner wants to raise rates there is a hearing as to whether or not it is fair. At the present time, entities are seemingly prohibited from being a party to it. Let us imagine a proposed 70 percent rate increase and each individual doctor is unable to afford an attorney to participate in a rate-hearing process. However, a group, such as a medical society, would intervene on behalf of the members in an organizational standing. It is done all the time. The resources of the membership are pooled together to ensure their voices are heard in a rate-hearing process.
Assembly Bill 320, along with paragraph 2 of the amendment to A.B. 320 (Exhibit E), clarifies an organization, an entity, or an association of people whose interests are affected may intervene at a rate-hearing process. It is good common sense reform.
The second issue related to medical malpractice is contained in section 8 of A.B. 320. Currently, NRS 686B.110 requires the insurance commissioner consider each proposed increase or decrease in a line of insurance. The insurance commissioner must disapprove should it be found the rates would be excessive, inadequate, or unfairly discriminatory. That is the benchmark considered by the insurance commissioner in rate increases. Section 8 of A.B. 320 revises the provisions considered by the insurance commissioner. It allows the insurance commissioner to disapprove a rate increase should he or she find the rate increase is caused by imprudent investment of money, fraud, or willful misconduct, where the insurer has engaged in unreasonable or vexatious litigation after a reasonable offer to settle, and where the insurer has experienced losses as a result of providing insurance for whom the insurer has paid 10 judgments or settlements totaling $5 million.
Insurance companies bear a great burden for what has occurred in Nevada over the past couple of years. It was reckless to continue underwriting physicians who had so many lawsuits against them when any prudent insurance company would have dropped them years ago. The result of that reckless behavior caused all the physician community to pay. When new insurance companies enter Nevada, they rate the market based upon the activities of the current insurance company. The St. Paul Insurance Companies continued to insure doctors who physicians themselves named butchers. It was uncalled for behavior and needs to be corrected. Should it happen again, we will have no one to blame but ourselves for not taking steps to stop this reckless behavior.
Assemblywoman Buckley:
Before presenting A.B. 320, I met with representatives of medical malpractice insurers in an attempt to reach the same sort of consensus as on the first-party health issues. We were able to achieve consensus on a few items. I believe we are in agreement on the rate-filing. We are not in consensus on this section. I was told it would tip the market and cause good insurance companies to leave the State. My response was to take it off the table. I asked, “How do we approach a reckless insurance company? How do we not penalize the good guys and get at the bad guys? I am all ears, tell me how we can do it.” The return response was, “We are not willing to work on those sections.” However, this morning I received an indication of willingness to work on those sections. I am convinced we can retain good insurance companies and stop bad insurance practices and we need to do it this Legislative Session.
Page 5, of Exhibit D, has to do with continuing coverage for certain patients when a provider’s contract is terminated. Assembly Bill 320 requires policies of insurance allowing treatment for an insured’s medical condition continue when a health provider’s contract is terminated. The coverage would last 180 days past the termination date, or a pregnancy, 45 days after the date of delivery. This will allow continuity of care and time for a person to find another physician when doctors are dropped from a list. The provision is modeled after language developed by Assemblyman Mabey, was agreed to by all the insurance companies, and will be good consumer protection for both patients and physicians.
Sections 18 and 19 of A.B. 320 prohibit an insurer from canceling, refusing to renew, or increasing the premium where the following actions occur. A payment is made that exceeds the limit of the coverage of the policy when there was an opportunity to settle for an amount equal to, or less than, the limit, and they did not settle. Basically, it does not require the doctor to suffer the consequences of the insurance company taking a gamble at the trial. You heard the evidence during previous hearings vis-a-vis verdicts where the doctor wanted to settle, the judge advised settling, the plaintiff’s lawyer was willing to settle, but the insurance company refused, suffered a bad result, passed it onto the doctor, and then to all physicians in the form of increased rates.
Sections 20 and 21 of A.B. 320 require an insurer disclose to a practitioner the reasons the insurer declined to issue a policy, or the reasons its rate is higher than everyone else. The provision was agreed to by the medical malpractice insurers with whom I worked. It requires the insurance company to inform physicians the base rate, whether they will be required to pay more, and why. It is a simple disclosure. Some physicians do not understand why they are surcharged. This will inform them, allow them to be more informed consumers, and know when they need to intervene in rate hearings. It was agreed to and found in paragraph 6 of the amendment to A.B. 320 (Exhibit E) entitled, “Required Disclosure of Certain Underwriting Decisions.”
Section 22 of A.B. 320 has to do with notice of withdrawal from the market in Nevada. One of the problems with The St. Paul Insurance Companies withdrawal was due to the fact it had such a large market share. Nevada was stunned when it pulled out with so little notice. Doctors began to get other quotes. Because of the extent of the crisis at that point, surplus lines issued astronomical quotes fueling further fear. Section 22 of A.B. 320 is an attempt to set up a more orderly transition from our market.
Page 2, paragraph 7, of the amendment to A.B. 320 (Exhibit E), requires 120 days notice to both the insurance commissioner and the physician of a withdrawal from the market. It further allows additional time if the withdrawal involves a specialty practice and mirrors S.B. 122, on which Senator Titus worked, and echoes the language we thought gave the right balance. The insurance companies agreed to it.
SENATE BILL 122 (2nd Reprint): Makes various changes regarding malpractice insurance and actions. (BDR 57-265)
Assemblywoman Buckley:
Section 36 of A.B. 320 provides if the defendant receives a settlement demand equal to the limits of the policy, the insurer must inform the defendants their rights and obligations, including the right to obtain an outside opinion from another lawyer at the insurance company’s expense. When a policy limits offer is made to someone, at that point there is potential conflict between the insurance company and physician. It may be in the physician’s best interest to settle because then he or she is not personally liable for any higher verdicts. Therefore, this provision would let the physician know exactly what is going on at that particular time. This was not an area in which the insurance companies would agree. They expressed concern regarding two lawyers being involved for the doctor. I explained it would be a limited opinion to inform the doctor of his or her rights at that particular time. However, discussion was terminated and I was unable to get anywhere with the insurance companies. In my opinion, it makes common sense, will not cost that much money, and will save countless amounts of money on the back end.
Section 37 of A.B. 320 is the imposition of liability on an insurer for damages awarded in certain malpractice cases. It provides an insurer is liable for the entire amount of damages for which the doctor is liable if the plaintiff made a settlement offer within policy limits, the liability was reasonably clear, the insurer, against the doctor’s wishes, unreasonably rejected the offer in light of all the facts and circumstances, and then an excess verdict was issued. The court would then be authorized to determine the liability of the insurer in that proceeding. This has occurred time and time again. How do we convince bad insurance companies to settle when the doctor, the judge, and the plaintiff’s attorney, consider it prudent to do so? However, the insurance company refuses to settle, prefers to take the gamble, and causes insurance rates to spike as a result. The insurance companies were fearful of this section so I issued them a challenge; how do we get at the bad companies that are doing it, and perhaps give a carrot to the ones that are not? The insurance companies indicated they were not willing to discuss it any further, therefore, we were unable to explore any solutions to present to the committee.
That is an overview of the various sections of A.B. 320. This bill is a commonsense solution for Nevada’s patients and physicians. It will go a long way to ensure we do not repeat the mistakes made over the past decade in the area of patient’s rights, physician’s rights, and insurance.
Senator Care:
Section 5 of A.B. 320 makes reference to a doctor’s breach of professional duty toward a patient. Is it intended to be a definition of medical malpractice?
Assemblywoman Buckley:
The language came out of the Legislative Counsel Bureau (LCB) to preface when someone could intervene as a matter of right.
Senator Care:
Would you include a consumer advocate as an interested party?
Assemblywoman Buckley:
I do not think the consumer advocate has a jurisdiction. We thought an association of a group of physicians organized as a medical society or an umbrella group might make the process more effective.
Senator Care:
One of the factors to be considered in section 8, subsection 3, paragraph (b), of A.B. 320, is whether the insurance commissioner has the statutory duty to report any negative practices to the attorney general.
Assemblywoman Buckley:
I would assume, since the attorney general is the insurance commissioner’s legal counsel, they would seek legal advice, however, I do not know specifically.
John Ellerton, M.D.:
I am a cancer specialist practicing in Las Vegas. I support A.B. 320 and believe it is a beginning to provide relief for several problems faced in medical practice. Physicians providing medical care is an important public policy issue. It is important to have access to care and physicians to provide that care. Specifically, it would be nice to have relief from small things, such as credentialing and panel fees, which continue to plague us. As Assemblywoman Buckley said, from the insurance companies’ point of view, it looks simple because they charge one fee, however, it is not simple for those of us who continue to pay multiple fees in order to participate in plans.
I also believe it is important to make many things explicit, such as the manner in which contracts can be changed, how payments will be made, and how it will be enforced. It is nice to say insurance companies will behave in a certain manner, and based on the previous prompt-pay bill, most insurance companies have responded. However, I think it is important to have legislation that makes it explicit as to the penalty should they not participate. In addition, contractual relations with doctors should be made explicit. It would be comforting to have standard language stating the requirements in each contract because doctors have so many contracts to provide care, which include many different nuances and language. It would be helpful to reduce costs.
There is a section of A.B. 320 dealing with malpractice insurance. This continues to be a major issue and I assure you the crisis has not ended. It does not mean the work you have done will not be successful, however, we now face a situation where some doctors will lose their insurance in the next few months due to the timing of their renewals. They are seeking new insurance and are nervous. It continues to be a problem. I appreciate your efforts to provide physicians relief on that front.
We do not want to drive all insurance companies out of Nevada, but we would like to see explicit authority on exactly how to deal with the behavior of certain medical malpractice insurance companies. Perhaps strengthening the insurance division’s investigators and staff would be helpful. I have been assured several insurance practices were probably illegal, but they must be investigated and prosecuted in order to be stopped. Generally speaking, the issues in A.B. 320 relating to insurance are important. Some insurance companies have complained the provisions are so onerous they will be driven out of the market. However, there must be specifics why that would be the case. I discussed the issue with malpractice insurers to find out exactly what they could do to help this side of the problem. The issue of informing doctors the reason they are charged more than base rate is fundamental. It is difficult to believe they cannot obtain that information. I am curious how insurance companies arrive at the base rate, which is important in giving us explicit party status in the rate filings.
In the past, medical societies tried to intervene in the rate hearings and were told they did not have the status. Attorneys for the medical society did not agree. Every time we talk about these things, we are told somewhere in the law you have the right, however, it is not explicit in this particular situation. Therefore, it becomes an area of argument and rights can be temporarily lost. I appreciate the effort to make it explicit organizations of physicians can participate and have party status in rate filings. I think it is critical.
The other details of giving notice when insurance companies are going to pull out, and the details of the criteria the insurance commissioner can use to stop rate increases are all important. As you heard, insurance companies are not happy with those provisions. The inclusion of bad faith related to the Nevada Patient Protection Act is also extremely important. All of this has to do with access to care. As it becomes more difficult and expensive to practice medicine, a physician can raise his or her prices to any level desired, however, nobody will pay them. It is regulated on the income side, but virtually unregulated on the expense side. In a specialty such as mine, where drugs are phenomenally expensive and prices continue to increase, it is important we have relief in the places we can get relief. Therefore, it is all about providing access to patients, making sure physicians can practice in the State of Nevada, and fixing all parts of the puzzle important to providing that access.
Bobbie Gang, Lobbyist, Nevada Women’s Lobby, National Association of Social Workers-Nevada:
We appeared before you on this issue in the past. I would like to review the points I made at that time. My organizations are looking at medical malpractice from the consumer-patient point of view. We want to protect patients’ rights and hope the Legislature will do it in any legislation passed. Assembly Bill 320 is the piece of legislation that probably does this most completely. We want to see the Nevada health care system provide access to affordable and reliable health care. We believe the sections regarding expansion of the Patient Bill of Rights accommodate this. Many things needed are in there. We particularly agree with making sure doctors can continue treating their patients, have contracts they can understand, and insurance companies cannot terminate their contracts without cause and justification. This is a personal issue for me. My doctor of 14 years was discontinued by my State employee plan. I am extremely disappointed and have perused other plans to ascertain whether I could be accommodated. My doctor was not given an explanation for being terminated from the plan. I think an explanation of termination is an important part of a patient’s rights.
In regard to other parts of A.B. 320 which pertain to medical malpractice, we believe preventing medical errors is the key to controlling insurance rates. It seems logical fewer injuries result in fewer lawsuits, which result in keeping insurance rates low. We believe A.B. 320 has new and helpful elements that will help prevent medical errors.
Another point we made was business practices of medical malpractice insurance companies should be more thoroughly examined, especially the relationship between insurance rates and the number of claims paid out. Assembly Bill 320 seems to do that as well.
In conclusion, we think continued study of the issue is important, even beyond the bills considered. Hopefully many elements of those bills will be passed this Legislative Session. We think a study of the entire insurance industry would be helpful because we see the same problem appearing in other lines of insurance. It is obvious the problem of construction defects has reached a crisis situation. I attended a hearing at which nursing homes were asking for waivers from liability insurance because they could not obtain it. If the problem affects elderly and disabled people in homes without any liability coverage, we can see the problem infiltrating to other parts of the insurance industry. We hope it will be considered soon before it becomes a crisis.
Marie H. Soldo, Lobbyist, Nevada Association of Health Plans:
I am testifying on behalf of Nevada Health Services. I would like to thank Assemblywoman Buckley for allowing us to participate and provide input into A.B. 320. She has been kind enough to accept a number of our recommendations. I think there has been some improvement on prompt pay and it has become more effective as a result of what was passed last session. With respect to panel fees, we think there is a distinction between panel fees and credentialing fees. Our preference would be to have credentialing fees go forward. Currently, health plans are not charging credentialing fees, but that change will be in A.B. 320.
I just received the amendments to A.B. 320 and reserve the right to review the final amendments when they come out of the LCB. We had a good exchange with Assemblywoman Buckley and we appreciate her giving us time and allowing us to provide input.
Assemblyman R. Garn Mabey, Jr., M.D., Assembly District No. 2:
I support A.B. 320 and appreciate Assemblywoman Buckley’s work and efforts. In regard to the panel fee, I feel strongly it should be the way it is in the bill. If every managed care company, third-party administrator, and health maintenance organization (HMO), charges an administrative or credentialing fee, it can mount up to thousands of dollars. I appreciate it is a cost for them, but physicians agree to accept a discounted rate to be on the provider panel. It is part of business and they can pass it on to higher insurance rates, which is a problem as well. However, I feel strongly that panel fees, or any other fees, should not be charged physicians.
Senator Nolan:
Our intention is to improve the insurance market and availability of insurance for physicians. Unfortunately, we are in a tenuous situation and have little or no control over how insurance companies choose to write. If what we are hearing is correct, this problem is unusual, draconian, and may result in narrowing the market. We have implemented some very sound measures, but find ourselves with a Pyrrhic victory where we actually exacerbated the medical crisis, although there are those who disagree. I would like your comments.
Assemblyman Mabey:
I do not know the answer. I am not an expert on liability insurance companies. I have heard the same concerns.
Senator Nolan:
If our efforts result in further narrowing of available insurance markets, would you, as a physician, feel we should move forward with it?
Assemblyman Mabey:
I agree with Assemblywoman Buckley and support A.B. 320. She worked with insurance companies to come up with something acceptable. However, to my knowledge, it has not happened.
Robert A. Ostrovsky, Lobbyist, Nevadans for Affordable Health Care:
Nevadans for Affordable Health Care is a coalition of employer groups representing approximately 300 employers and over 100,000 employees in the State. We have not had an opportunity to fully review the new amendments. We are particularly concerned about sections of the bill that affect health insurance, however, we are not focused as much on medical malpractice. Our concern is how the amendments will impact the overall cost of purchasing health insurance. Nevada has a growing uninsured population and the best intentions can sometimes backfire if they result in a smaller market and inability to buy health insurance. We want an opportunity to comment at the work session or other places after we peruse the amendments.
James L. Wadhams, Lobbyist, Nevada Mutual Insurance Company:
At this point in time, I am pleased to tell you Nevada Mutual Insurance Company comprises over 680 southern Nevada physicians who formed their own Nevada insurance company to deal with medical malpractice. I think it is a credit to physicians they came together and addressed the problems of the crisis in a responsible manner. Through me, they participated in discussions with Assemblywoman Buckley, and we made some significant progress. The intent is to avoid upsetting our tenuous market. Quite frankly, some of the original provisions in the bill are designed to punish The St. Paul Insurance Companies. Unfortunately, The St. Paul Insurance Companies are gone, and that cow is out of the barn. It is critical we do not punish the responsible companies still in Nevada. That is the balance we are trying to achieve.
We have been working with Assemblywoman Buckley and will continue to find ways to focus these reforms positively and not exacerbate the problem. There is a process cycle in the insurance marketplace and medical malpractice. As the cycle begins to turn, we want to be in a position to take advantage of it, not hamstrung and suffering from it. Therefore, a critical component to the access to care, referenced by Dr. Ellerton, is for physicians to be able to purchase medical malpractice insurance. The physicians I represent at Nevada Mutual Insurance Company have concerns about the provisions referenced by Assemblywoman Buckley, however, we will continue dialogue on it. It will be helpful to see the amendment in order to work on an updated version.
Senator Care:
What is to stop another St. Paul insurance company, for example, from pulling out and ignoring what is contained in A.B. 320? Would we have any leverage over a company that might make that determination?
Mr. Wadhams:
My clients are local doctors, therefore, they would just cry and lose their money. They would have no place to go because they are in Nevada. To answer your question, we worked with Assemblywoman Buckley on an amendment, which she referenced, that puts a longer time frame on notice of withdrawal from the marketplace. Unfortunately, the simple answer is, we can make laws, but how do we make people obey them? If notice is not given, injunctive relief is clearly available in the courts and we have Nevada Supreme Court decisions that would provide a predicate for such relief. The insurance commissioner, in that period of time, could help physicians who would lose their insurance to find replacement coverage, or, as was done in the last interim, create an essential insurance program. Therefore, the longer time frame would give an opportunity to manage the problem much better than was the case with The St. Paul Insurance Companies’ departure.
Lynn Fulstone, Lobbyist, Physicians Insurance Company of Wisconsin:
We also had the pleasure of working with Assemblywoman Buckley on A.B. 320 and made wonderful progress. We have not agreed with everything, as Mr. Wadhams indicated, but certainly want to continue working with the committee and the bill. We have not had an opportunity to see the amendments.
In regard to Senator Care’s question regarding insurers leaving the marketplace, there are two bills in the Senate: S.B. 122, sponsored by Senator Titus, and S.B. 250, sponsored by Senator Townsend. My client and I also had the pleasure of working with those bills which contain some provisions similar to A.B. 320. Many of our comments to Assemblywoman Buckley advocated incorporating the language of S.B. 122 into those similar provisions, and this is one of the cases. In addition to the longer notice period, the insurance commissioner was required to identify certain high-risk specialties and was actually given the power to require the insurer to prolong the insurance for an additional 60 days, should the physicians not be able to find replacement coverage. We suggested some additional protections Assemblywoman Buckley included in A.B. 320.
SENATE BILL 250 (1st Reprint): Revises various provisions relating to regulated businesses and professions. (BDR 57-835)
Ms. Fulstone:
I want to echo the concern about the delicate balance of the marketplace. Physicians Insurance Company of Wisconsin (PIC) is also a physician-owned company and issues insurance in Clark County to over 100 physicians. Its concern is Nevada needs to maintain a vigorous marketplace to keep premiums affordable in order for patients to have access to their doctors and medical care. There are many regulations, including S.B. 122 and S.B. 250, and now A.B. 320, in addition to existing tort reform. However, we have not seen how they will all work together. If the balance is tipped beyond the point of chasing insurance companies out of Nevada, we could exacerbate an already existing problem. Therefore, we intend to work with Assemblywoman Buckley and the committee to create the best legislation, and PIC will do the same.
Senator Nolan:
Were there any real deal killers in the original bill that would prevent insurance companies from writing insurance in Nevada?
Ms. Fulstone:
Yes, there are several sections in A.B. 320 addressing the bad faith part of the issue. I would not necessarily characterize them as deal killers because we still want to continue working and talking through these sections. However, they were particularly troublesome from the viewpoint of PIC. They believe trying to change existing law on bad faith in the way it appears to be done in the statute as currently written, could cause problems for insurance companies because it creates a presumption of bad faith by an insurance company every time there is a verdict in excess of the policy limits. In some cases it is true, but often it is not. For instance, PIC indicates that out of 100 percent of all cases, 80 percent are closed without paying one penny. Out of the remaining 20 percent, they have never had a bad faith settlement. There may be legitimate reasons why an insurance company would not want to settle, for example, when a doctor was not negligent. It is problematic because doctors are concerned about their assets. Bad faith provisions are troublesome as written in A.B. 320 which could be a problem for insurers coming into the market or existing insurance companies.
Senator Nolan:
I would like to ask Mr. Wadhams if those areas concern him as well? Are there any other areas of concern of which we should be aware?
Mr. Wadhams:
The original language of the bill was troublesome, however, I think the concepts, particularly in discussions with the sponsor of the bill, can be worked through and the details can make a big difference.
Senator Nolan:
Do you agree the bad faith areas seem to be most problematic, or are there other areas we need to address as well?
Mr. Wadhams:
In general I agree, from the standpoint of Nevada Mutual Insurance Company, but we need to study the amendments. There has been significant refocusing of the issue to be productive, which is the intent, however, there are issues that must be watched very carefully.
Bill Bradley, Lobbyist, Nevada Trial Lawyers Association:
This is my 18th year fighting this fight. It is a pleasure to finally be in front of one committee that has heard the tort side, and now gets to hear the insurance side. Before we get into the substance of the bill, I want to review what has been done. Despite the incredible work of this committee, an amendment failed, resulting in regulation of what juries can do in Nevada and what people can contract with attorneys in Nevada. Now, Senator Nolan, you can fix the whole thing and take away all their rights. That will ultimately do it. However, if there is a concern for rights, and if we are truly looking at this problem as a three‑legged stool, you took care of the leg on people’s rights because the Governor’s lead man on insurance told you A.B. No. 1 of the 18th Special Session will lower rates, which has gone undisputed.
There are two legs left, one is medical malpractice reducing the incidence. Right now the only bill to come out of this body makes it tougher to discipline bad doctors, so the stool has become shorter. The other leg is insurance reform, which has been requested for 18 years. I agree wholeheartedly with Assemblywoman Buckley’s statement, if it happens again and we do not take reasonable steps to address the insurance problem in the State, we have no one to blame but ourselves.
I hope I do not hear about punishing St. Paul insurance company. I distributed a document to the committee entitled, “Plaintiff Medical Malpractice Verdicts (Clark County: 1996-2001)” (Exhibit F). There is no St. Paul insurance company problem with excess verdicts on that list. The people present today represent 700 doctors out of 4000, and they are the good insurers. When we talk about taking away people’s rights, I find it amazing how many insurers fly here from around the country and tell us how important it is to eliminate their rights. When asked to do reasonable reforms, I want to be sure we understand the meaning of reasonable. There is existing law in Nevada on bad faith and A.B. 320 is not an attempt to change existing law. It is trying to send a message the 4000 doctors in Nevada are precious to our citizens and economy, and we need to protect them the best way we can. We cannot afford “Rambo” decisions like The Doctors Company, who will continue to be the largest insurer in the State, but will not take time to work with Assemblywoman Buckley and the committee on reasonable insurance reform. The Doctors Company represents a large group and is responsible for a significant portion of these verdicts.
How do we reward PIC? We have offered ways to reward them. If an insurance company is doing a good job, not poorly underwriting and not making repeated “Rambo” decisions, we can find a way to get your rate considered more quickly. However, if an insurance company is doing those kinds of things, we, as the Legislature, will not appreciate it and make it more difficult, but not by changing the law. Sections 36 and 37 of A.B. 320 are the areas of bad faith. You all recall numerous cases in which excess verdicts occurred despite the recommendation of the judge, the willingness of the plaintiff, and every safeguard in the system; insurers made decisions that led to extraordinary verdicts, which were then routinely turned around and passed on to physicians. I find it incredible the Nevada State Medical Association does not support this bill and yet two doctors had the courage to stand up and say they were in support of A.B. 320.
When you think about what occurred in A.B. No. 1 of the 18th Special Session, and you are the only committee that heard evidence about the hard cap, there are not going to be any more verdicts in which anybody could consider significant pain and suffering awards. We boiled it down to economic awards. Assembly Bill 320 makes liability reasonably clear that a finding must be made before an insurer makes a decision to proceed, despite the request of the physician or reasonableness of the award, and before any decision is made regarding bad faith. We heard testimony about the difficulty of sending a message to insurers. The only message that needs to be sent is, if an insurance company does a good job, Nevada will embrace it. If an insurance company does a bad job, Nevada will hold it accountable under current law. That is what A.B. 320 does. There are no attempts to try to extend the law to make it more consumer-friendly. We are trying to take what the courts deem current law and put it into statute. Therefore, an insurer in Napa, California, location of The Doctors Company, can read the language and realize, should it not do its job, the Legislature will hold it accountable. I do not think that will chase insurers out of Nevada.
We are in full support of A.B. 320 and, despite a great deal of frustration, are trying to work with insurers. It will take all three legs of the stool to address the issue. Please do not limit people’s rights and consider it a good job because that will not do it. I agree with Mr. Wadhams, when this cycle turns around it will be very good for insurers. To ask for a little accountability from the State does not seem bad public policy.
Senator Care:
Would there be an impact on insurance rates or malpractice verdicts if there were an hourly cap on the billable rates of insurance defense attorneys?
Mr. Bradley:
No, it might chase insurers out of the State. I think most defense counsels must comply with certain rate standards. Perhaps the total number of attorney hours could be limited in significant cases. Senate Bill 97 creates incredible unfairness among the power of the defense and plaintiff’s bar.
SENATE BILL 97: Makes various changes relating to certain actions against providers of health care. (BDR 1-248)
Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry:
Nevada is in a very enviable position among the states in crisis because we have ten insurers providing medical malpractice insurance in the State. Meanwhile, other states in crisis are clamoring for just one or two single insurers. I am concerned about Senator Nolan’s comments in reference to draconian provisions that might keep insurers away. We are not known as an easy state insofar as irregular insurance activities. We have always taken a strong position against any violation of the insurance law, yet we have a reputation for being fair, and that reputation has brought insurers to this State. The insurers who remain in the State and are coming here look favorably, and with hope, on the effects of A.B. No. 1 of the 18th Special Session. Yesterday, I reviewed a filing by a new insurer for dental professional liability. Thus, they continue to come to Nevada.
I have some concern with provisions of A.B. 320 pertaining to rate reviews. It would make the process extremely difficult. First of all, I do not know of any insurance department in the United States with the expertise to determine when an investment is imprudent. I also suspect there has been a misconception that our last largest insurer, The St. Paul Insurance Companies, relied on losses in the stock market to file their last rate-filing, which occurred in 2001. Much has been said about The St. Paul Insurance Companies’ investments in Enron causing increased rates. The fact of the matter is, the Enron losses experienced by St. Paul were not in the stock market. Approximately $100 million occurred because St. Paul insured the directors and officers of Enron, the security bonds, and the fidelity bonds. That is where those losses occurred. It was not through so‑called imprudent investments in the stock market. I do not know how this false relationship became established. I believe it was brought about by certain stories in the press and it is not accurate.
I also have concerns about the provision regarding wrongdoing by any officer, director, or employee of an insurer. It would impose a tremendous burden on the insurance commissioner’s office to determine any kind of wrongdoing. Under the Violent Crime Act of 1994, which is a federal act, no insurer may employ any person, licensed or not, if that person has been convicted of a crime of deceit, including theft, embezzlement, and any financial wrongdoing. This legislation already exists. The federal act allows the insurer or anyone in the insurance business, including an insurance producer, managing general agent, third-party administrator, to apply to the domestic insurance commissioner for an exemption. However, those exemptions are not given freely by insurance commissioners in the United States.
Insofar as making false statements in the financial statement, there is already a provision in Nevada’s existing law prohibiting a false statement on a financial statement by anyone. It also provides it is a felony. These provisions in reviewing a rate-filing would transpose a rate review into an investigation. Insurance commissioners across the nation regularly examine every single insurance company for its financial transactions not less than every 5 years. We perform those examinations on our domestic insurers and we participate in national examinations of major insurers. That is true among all states and I believe it will remain the most appropriate way of determining financial soundness, credibility, and fidelity of insurance companies.
I also want to comment on the provision for intervention. I had an opportunity to look at the amendment, but still have concerns about turning rate hearings into complex litigation because I do not believe the term “persons whose interests are affected” is defined as well as it should be. It is true on one occasion we denied intervention of the Nevada Medical Association. Existing law, under NRS 686B, currently allows intervention by any person who has a direct, immediate, and pecuniary interest, which would include all policyholders. The reason the Nevada Medical Association was denied intervention was because it did not have a direct interest, even though its members did. That did not preclude the policyholders. I fear, with this provision, it would still allow any organization, entity, or kind of association. To what extent of interest do we wish to include someone’s ability to appear as a party in a hearing? Our rate filings are very dense. This poses a problem because should there be a number of parties in intervention, it means we must provide documents and exchange exhibits with every single person who is a party in those hearings.
Senator Washington:
How many man-hours, on average, does it take to go through a rate-filing in your office?
Ms. Molasky-Arman:
There is an actuary present who may be able to tell you. I know we have a period of 60 days, by statute, in which to review a filing if we deem it complete. Generally, it depends on the quality of that filing. Frequently, we will have questions and not consider a filing complete; in that event, the actuary pursues additional information.
Senator Washington:
Do you make it within the required statutorial limits?
Ms. Molasky-Arman:
Yes, we do.
Senator Washington:
So, from the date submitted to actual approval is within 60 days.
Ms. Molasky-Arman:
It is 60 days from the date on which the filing is deemed complete.
Senator Washington:
If this piece of legislation is passed, how much time would be added to the actual rate-filing?
Ms. Molasky-Arman:
First of all, the filing would have to be denied, and the decision would have to be made within that 60-day period.
Senator Washington:
Does the denial come from your office?
Ms. Molasky-Arman:
Yes, it does. The hearing may be called by the insurance commissioner or requested by the insurer who is affected.
Senator Washington:
What is the potential impact on the market for new insurers coming into the State?
Ms. Molasky-Arman:
There are nationwide standards for reviews conducted for rates. A rate review is based on loss experience, the actual cost of losses, and the cost of adjusting those losses. We do not allow insurance companies to increase rates simply because its investments have been lower than expected. We expect an insurance company to reduce a rate, indicated according to the loss data, by a factor of what they are expected to earn. In other words, the policyholder receives the advantage of investment income.
Senator Washington:
I understand. In approving the rates, the actuary will take into account the national norm or standard or form, based on your testimony, to compute what the rates should be, based on the experience and loss factors within the market itself.
Ms. Molasky-Arman:
That is correct. Much has been said about The St. Paul Insurance Companies and the infamous doctor with so many claims. As a matter of fact, the claims, judgments, or settlements, would not have been computed in the last St. Paul’s rate-filing because the judgments and settlement amounts had not yet occurred, therefore, they would not have been considered.
Senator Wiener:
What kind of errors and omissions insurance is carried by the current ten carriers? We need a sense of whether we may burdened again, should there be another corporate fallout and one of the companies hit with the same kind of policy payout.
Ms. Molasky-Arman:
I have no idea how to estimate that.
Senator Wiener:
When doing background checks, do you know how the insurance companies break out errors and omissions insurance coverage?
Ms. Molasky-Arman:
Insurers must report lines of insurance on their annual financial statements. I do not know whether errors and omissions would itself be a separate line. I know, for example, the statistics on medical malpractice data and other critical lines of insurance must be broken out on errors and omissions. Frankly, I doubt it. Surety insurance would be indicated as a separate line. I do not think surety insurance is provided to a developer or a corporate officer and director for fidelity coverage.
Senator Care:
The medical malpractice world has been thrust into the universe of public policy. It is not a simple matter of insurers, insurance commissioners, and doctors anymore. Our duty is to provide the resources to enforce the provisions rather than to tone down the bill to some degree. Given that, please elaborate on how A.B. 320 would impact your office?
Ms. Molasky-Arman:
My memory of the fiscal note does not include the elements and factors we would have to review in a rate filing. For example, it does not include the expertise of an economist, an expert in the stock exchange, or securities. Nor does it include the type of investigation to make certain no employee of an insurer had been convicted of any kind of wrongdoing, regardless of whether or not the crime was related to the business of insurance.
John R. Orr, Deputy Commissioner, Division of Insurance, Department of Business and Industry:
The primary impact of A.B. 320 would be on staff capacity. The additional elements to be considered in rate filings would be an additional workload on staff actuaries. However, rather than hiring additional actuaries, we suggest in the fiscal note the issue be addressed through overtime. I think we projected approximately 240 hours of overtime each year would provide staff capacity to apply the additional elements required in a rate review. The bill also requires a couple of comprehensive studies of the market that exceed our existing capacity. In the fiscal note, we suggest one additional actuary would be required to conduct the studies and report the results to the insurance commissioner and this body.
Critically, as Commissioner Molasky-Arman pointed out, if a rate-filing is denied and either the insurance commissioner or the insurance company requests a hearing, the length of the hearing would be significantly extended due to the contentiousness and depth of the hearings, the number of allowable interveners, plus the very possible effect on livelihood, which is proposed by the bill, with the revocation provisions. In order to conduct those longer and more complex hearings, we suggest one additional insurance counsel, one legal secretary to support that counsel, and associated costs.
Senator Washington:
Instead of adding additional staff to handle rate filings and implement the procedures of A.B. 320, you suggested additional overtime. I am concerned about accuracy in regard to additional overtime to handle rate filings. Would there be a possibility of errors should people be overworked with too many hours?
Mr. Orr:
The possibility always exists of burning out the capacity of the staff. I think insurance division staff should be commended, if not by this body, certainly by the public, for the amount of time they dedicated the last 2 years on medical malpractice issues, emerging construction defect issues, and other turbulent issues found in various insurance markets. To date, burnout has not resulted in errors; however, it has resulted in increased turnover, which is a major concern. There are two reasons why we attach a cost to overtime. Overtime hours can be compensated either in time-and-a-half cash or time-and-a-half compensatory time. We cannot afford compensatory time because we lose half-an-hour of productivity for every hour; therefore, from a management standpoint we much prefer to pay overtime work. Also, with caps on salaries, getting paid for extra work proves to be a motivating factor and, from a personnel-relations standpoint, it tends to mitigate the otherwise deleterious effect of the workload.
Senator Washington:
How many actuaries do you have currently?
Mr. Orr:
I think throughout the division we have six staff actuaries, one lead actuary, and we requested one additional lead actuary. The actuary title is a misnomer. We have been working with State personnel for years to address that title misnomer. The State of Nevada cannot afford to hire six certified actuaries at the salary cost it would require. What we call actuaries are jokingly referred to as “make believe actuaries” or “MBAs,” because they are not certified by the actuarial societies, although they are very talented people. Should they be certified by actuarial societies, they can demand $200,000, $300,000, or $400,000 salaries in the private sector, which the State cannot match.
Senator Washington:
I assume most rate cases must be reviewed by the lead actuary for competency and accuracy.
Mr. Orr:
That is certainly the case and one of the reasons for our request for an additional lead actuary. All rate work done by the “make believe actuaries” is reviewed by the lead actuary and the chief of the relevant section, depending on what line the rate filing falls into. Ultimately, the rate-filing is presented as a staff recommendation of the insurance commissioner who reviews it.
Senator Washington:
Since I have been on this committee, this is the first time there has been an opportunity to delve into the insurance division, although we danced around the periphery on a couple of issues. Chairman Amodei alluded earlier to the fact we looked at S.B. 97, I.P. 1, and A.B. No. 1 of the 18th Special Session, and dealt with medical malpractice, however, we have not taken a serious look at the insurance part of it, and the insurance division, in general. As we proceed with this issue, whether medical malpractice, construction defect, or workers’ compensation, the insurance division must be as efficient as possible in order to attract new carriers to enter our market. If it is difficult for carriers to do business in the State of Nevada, not only will we lose providers, we will also experience lost revenues, increased rates, increased costs in the housing market, and increases in workers’ compensation insurance. The insurance division is critical in keeping our doors open to good insurance companies to enter the market.
INITIATIVE PETITION 1: Makes various changes relating to certain actions against providers of health care.
Ms. Molasky-Arman:
I have not had an opportunity to completely review some of the proposed amendments, particularly those proposed by PIC. As I recall, when A.B. 320 was heard by the Assembly Committee on Judiciary, Ms. Fulstone presented a proposal to review reforms in the nature of how we establish rates. The proposal was, I believe, for the establishment of an interim committee to study the possibility of using the same kind of mechanism for medical malpractice rates as applied for workers’ compensation rates, which is a lost-cost system whereby our advisory organization establishes what the lost costs are through collected data and loss data. Then each insurer may file an additional cost to it, which would include profit, advertising, and everything above.
Although I have not previously spoken publicly about it, we requested staff to study establishment of an interim committee and put together an initial plan for presentation to the Governor’s Office to determine whether it would be something that might be proposed by the administration. Unfortunately, we never got to the point where we had sufficient data to determine whether it could be done. I would very much like to continue that study. I do not know whether the PIC proposal is in here, but I think it is an area that can be explored. We have had very good experience in workers’ compensation and have not experienced the same difficulties as California. Although we are affected by California’s insolvencies, our rates remain relatively stable. We certainly have affordable rates in comparison with other states.
Senator Washington:
Senate Bill 292 requests a study on the privatization of workers’ compensation insurance. There may be an opportunity to amend the resolution and expand it to accommodate your request in regard to rate cases and workers’ compensation procedures.
SENATE BILL 292 (1st Reprint): Directs Legislative Commission to appoint subcommittee to study impacts of recent privatization of industrial insurance program. (BDR S‑784)
Ms. Molasky-Arman:
It is certainly something we want to look at, however, first we must determine whether or not it would be feasible. It has not been done anywhere else.
Senator Washington:
The study would provide an opportunity to look at privatization and determine whether or not it is feasible. Should the study deem it feasible, recommendations could be made for the 73rd Legislative Session.
Senator Nolan:
I want to thank the employees of the insurance division for their hard work and dedication in helping to bring some light on this issue. Not too long ago, we were looking at two insurance carriers and now there are ten, which, in large part, can be attributed to your work and the work of your staff. I think it would be fitting to write a letter of commendation from the committee recognizing the work of the staff of the insurance division and their contribution to resolving this issue.
Chairman Amodei:
The staff will note that for the work session on A.B. 320.
Robin L. Keith, Lobbyist, President, Nevada Rural Hospital Partners Foundation, Liability Cooperative of Nevada:
Nevada Rural Hospital Partners is a consortium of 12 small, rural, frontier hospitals, and the Carson Valley Medical Center. I will confine my remarks to section 39.5 of A.B. 320, which deals with credentialing of physicians and hospitals and would, by virtue of the language, impose a prohibition on us for fees we charge to do the process. Credentialing is not an optional activity in hospitals, its roots are in the moral and legal responsibility of hospitals to ensure physicians are qualified to do what they do in the facilities. For hospitals, credentialing is not about a name on a list. On the contrary, credentialing is a very lengthy and expensive process requiring great diligence in terms of gathering information, verifying that information, and inquiring the national database. There is a long and involved process as part of the credentialing process that ultimately ends up with the board of trustees of the hospital.
The credentialing process enables a physician to access the facilities and services of a hospital for the well-being of patients. Hospitals do not charge physicians for the use of facilities and services. Credentialing is virtually a required process; a great deal of cost is associated with accomplishing that process, and the process leads to benefits for physicians in terms of their ability to take care of their patients. To the extent the beneficiaries of the process do not pay the cost, it is shifted elsewhere. Consequently, it is shifted to patients who use the facilities. If the cost is transferred from patients in a physician’s practice, in effect, it is transferred to patients who use the facility, and my ultimate hope is the cost has not been accidentally doubled. We need to achieve a balance, should it be the pleasure of the Legislature to retain the prohibition and pass A.B. 320.
Assemblyman Mabey pointed out an important distinction between panel fees, the credentialing process, and costs in hospitals. The distinction is, physicians pay panel fees to insurance companies on top of discounts insurance companies extract, if you will, from the physician’s practice. I see panel fees as a double whammy. It is not the case in hospitals. Hospitals do not charge physicians for the use of the facilities and services, however, physicians are charged a credentialing fee which, in our case, is approximately $250 to help offset the cost of a process we have a moral and legal obligation to follow. In conclusion, as the bill is amended, we request consideration be given to deleting section 39.5 of A.B. 320.
Janice C. Pine, Lobbyist, Saint Mary’s Health Network:
I concur with Ms. Keith. It costs hospitals a great deal to verify the credentials of a physician. Both hospitals in Reno charge a credentialing fee. The credentialing fee, in most instances, does not cover the expense of verifying the credentials. The fees are the costs to the hospitals and can be between $1000 to $2000, however, both hospitals presently charge $250. I find it ironic a bill discusses medical malpractice on one hand, and on the other hand says hospitals cannot charge a fee to verify the surgeons who provide and practice surgery in the facilities can do what they claim to do. We correspond with medical schools, specialty organizations, boards, and the national data bank. A great deal goes into it and entire departments are dedicated to credentialing. We also request section 39.5 of A.B. 320 be deleted. I will close with the thought the best protection is prevention.
Chairman Amodei:
The hearing is closed on A.B. 320. With respect to this measure, we have tried to stay strictly within the jurisdictional confines of the appropriate Senate rule. There has been some discussion that perhaps this bill should have been heard in the Senate Committee on Commerce and Labor. I spoke with the chairman of that committee and, in view of the work this committee has done earlier in the Legislative Session on medical malpractice, I think it appropriate we also look at this measure. In terms of whether or not the committee will take action, unless the majority of the committee feels strongly the other way, it is my intent to work session the bill Tuesday or Wednesday next week. Therefore, those who are continuing to work with Assemblywoman Buckley are asked to be prepared for that work session.
The hearing is open on A.B. 341.
ASSEMBLY BILL 341: Effectuates specific and limited waiver of immunity of State under Eleventh Amendment to the United States Constitution with regard to certain federal laws regulating employment practices. (BDR 3‑356)
Assemblyman John Oceguera, Assembly District No. 16:
I will read my written prepared testimony (Exhibit G).
Senator Care:
I assume the states that filed amicus briefs have already done what you are proposing.
Assemblyman Oceguera:
Several states have done different versions of what we are trying to do. This is a narrow version. Sovereign immunity could be waived completely. I cannot specifically speak to those states and say they did exactly as we did.
Senator Care:
Under the Family and Medical Leave Act of 1993 (FMLA), the employer must have 50 employees.
Assemblyman Oceguera:
That is correct. The privileges under FMLA and the other federal acts apply to workers in the private sector. It just happens state workers are not getting the same kind of consideration at this time.
Senator Care:
When Nevada adopts something contained in federal statute, sometimes language is added that the statute was written as read on a certain date. At some point Congress may amend the act, then the question would be whether Nevada amended its act as well. Have you any preferences on that?
Assemblyman Oceguera:
We looked at a number of ways to do this and one of the options would have been to adopt the federal acts, which would have made our statutes about 47 volumes thicker.
Larry L. Spitler, Lobbyist, American Association of Retired Persons:
I will read my written prepared testimony (Exhibit H).
Scott G. MacKenzie, Lobbyist, Executive Director, State of Nevada Employees Association #4041, American Federation of State, County and Municipal Employees:
I will read my written prepared testimony (Exhibit I).
Senator Washington:
Section 1, subsection 2 of A.B. 341, says, “A person may not bring a cause of action against the State and its officers and employees pursuant to a federal law expressly set forth in this section … .” Who would the cause of action be against?
Mr. MacKenzie:
The cause of action would be brought against the State and the individual who violated the law.
Senator Washington:
Would the State be defined as the agency, the Executive Branch, the Legislative Branch, or what?
Mr. MacKenzie:
The agency would be named.
Senator Washington:
In this case, it would be the Executive Branch because the agency represents the Governor.
Chairman Amodei:
It would be the agency that is the employer, therefore, if a person worked for the Department of Motor Vehicles (DMV), DMV would be named; if a person worked for the Nevada Department of Transportation (NDOT), NDOT would be named. Depending on the practitioner, they may name the division head, the department head, the Governor, or whoever.
Senator Care:
Is there a mechanism in place, the equivalent of a grievance hearing, where matters could be resolved to avoid filing suit?
Mr. MacKenzie:
Currently, a person can file a grievance before the Employee-Management Committee,but in this type of case that would be unusual. Actually, I do not think it would apply. I am unsure whether there are any options at all.
James Richardson, Lobbyist, Nevada Faculty Alliance:
There are significant procedures in the university and community college system to address difficulties of this nature and resolve them in-house. It is the position of the Nevada Faculty Alliance and the university to try to resolve these difficulties as they arise, short of legal action, which is the last resort.
The Nevada Faculty Alliance is the State affiliate of the American Association of University Professors (AAUP), which is the largest organization representing university and community college professors in the country. In fact, since 1915 when it was established, it has been the leading national organization to establish standards of various kinds, including standards for tenure and academic freedom. I will not address the history of why we were established in 1915 with John Dewey as our first national president, but it is an interesting history involving some of the issues being discussed here. I give you this background because the national AAUP has filed a series of amicus briefs in several cases that occurred in the last few years in the United States Supreme Court, involving the application of federal antidiscrimination laws to public employees and employers. Indeed, the national AAUP cosigned an amicus brief with 40 other organizations in the Hibbs v. Department of Human Resources case. I provided a list of 32 very prominent organizations that were cosignatories of the amicus brief (Exhibit I).
The reason the national AAUP has been so interested in this issue is the rather revolutionary series of decisions the United States Supreme Court started rendering in 1996 when it, in fact, said federal antidiscrimination laws and some other federal laws do not apply to state employers. This automatically defines state employees, including employees at public universities and community colleges, as second-rate citizens without the protections afforded other citizens in this country for some ten federal antidiscrimination laws the federal government has seen fit to pass over the last several decades. So, we became very concerned and filed the amicus briefs. Regrettably, we have been on the losing side in a series of 5 to 4 decisions and, indeed, the sovereign immunity defense has become an automatic defense offered by every university or community college sued in a discrimination case now, and regrettably, those motions are being accepted in a significant number of cases.
Federal courts are saying no in age discrimination cases, FMLA cases, although the Hibbs case is forcing a decision on that one, disability cases, federal disability law, and the Fair Labor Standards Act (FLSA). University and community college professors have developed lots of intellectual property that has some value associated with it. There was a case a few years ago involving an Internet-based outfit in Florida that used materials owned by a community college professor, not a university or community college. We were told illegal use of materials owned by a community college professor was not a suable offense under federal law, even though the materials were developed by the professor. The case was thrown out of court. Therefore, patent and trademark infringement is another area to be considered.
I went through the list to make several points. Of the university and community college faculty around the country, 75 to 80 percent work at state-affiliated public institutions and have lost these kinds of rights. Assemblyman Oceguera’s bill is conservative and he could have listed a number of applicable federal statutes. The national AAUP tried to amend the bill to include broader coverage. I would be extremely happy if you looked positively on this bill and would not be opposed to adding federal statutes. However, Assemblyman Oceguera could have reservations because he might want to keep it as narrow as it is. I note, for the record, there are some antidiscrimination statutes where there is some application having to do with areas of race and gender. There have been decisions in age discrimination and disabilities in the things I listed.
In conclusion, I urge you to look favorably on A.B. 341. State employees, including those in the university and community college system, need it very much.
Treva J. Hearne, Attorney:
I am a private practitioner in Reno and represented William Hibbs in Hibbs v. Department of Human Resources. Part of the argument against this particular bill is it opens the door to attorneys to file litigation against the State. Keep in mind, I had less than a 50-50 chance of prevailing in this particular case. I filed the case because I thought what had occurred was wrong. Most of us do not wish to sue the State in State court, for the same reason we do not like to sue Washoe County in Washoe County court. We look for the forum we believe will give us the most objective forum for hearing the particular position.
I did not start this case in an effort to do anything except prove State workers were not covered, but should be. I believed, at that point, it would bring attention to the fact State employees are deprived of rights allowed private employees. The fact is, until all ex-hippies are dead, there will still be those of us who will tilt at windmills. Yes, there will be times when the State will be sued, but because most of us have an economic bottom line, we will not sue the State if we do not believe we have a good case. I am not willing to invest $30,000 on a plaintiff’s case in federal court if I do not believe I will prevail. I think the statement all attorneys will file all kinds of litigation is wrong. We do not file lawsuits we do not believe we can win, and we believe if there has been wrongdoing, we should have the right to protect the person wronged.
Mr. Hibbs’ case was particularly poignant. When he lost his job with the State, he lost his medical insurance as well. His wife was very ill and the medical insurance was critical to their lives. I went ahead with the lawsuit even though I had to muster a great deal of force to go forward to the Nevada Supreme Court. You saw the list of organizations (Exhibit J) that joined as amicus. Mr. Hibbs tried to return to work as soon as he was told he would be fired. One of the elements of this cause is retaliation. When he asked for his rights under the FMLA, he was denied, and also denied the right to return to work. Keep in mind, there is more than just the FMLA at stake here; whether you can retaliate against people who ask for their rights is also an issue. In 1997, when we went before the federal magistrate, we were willing to settle for $5000 and the return of Mr. Hibbs’ job.
Senator Care:
Do you practice much employment law?
Ms. Hearne:
I practice environmental law and water rights.
Senator Care:
Is injunctive relief available under the FMLA? What about the immediacy of the leave request?
Ms. Hearne:
We asked for injunctive relief, which is available in the FMLA.
Senator Care:
What would be the proper forum for a State employee to bring suit against the State? Would it be in federal court?
Ms. Hearne:
It would be in federal court, therefore, we would not have to protect the employee’s rights in State court against the State of Nevada.
Ms. Gang:
Accompanying me is Mark Nichols, executive director, National Association of Social Workers-Nevada, who will also speak to A.B. 341. The Nevada Women’s Lobby strongly supports this bill. We believe the five federal laws listed are important and State employees should not be denied their rights under those laws. We would hope the Legislature would want to protect the rights of all its employees and pass A.B. 341.
Mark J. Nichols, Lobbyist, Executive Director, National Association of Social Workers- Nevada:
I am in support of A.B. 341. The United States Congress made a determination employees deserve certain protections under a number of laws. This applies to all employers in the State, with the exception of the State of Nevada. On behalf of social workers, I would like to say State employees deserve the same protection under the law the United States Congress saw as necessary and appropriate. I, personally, want to join the list of people extending their appreciation to Assemblyman Oceguera for bringing the bill forward. We urge you to pass A.B. 341.
Laura J. Mijanovich, Lobbyist, American Civil Liberties Union of Nevada:
I am here to support A.B. 341, a bill much needed. In this regard, I will not reiterate what has been said, other than the State of Nevada has the authority to waive its Eleventh Amendment immunities with respect to employees. These employees should enjoy the same rights and be entitled to the same remedies as employees in the private sector. The State should be a responsible employer and held accountable if it discriminates against its employees.
I would like to address the concern about increased caseloads should A.B. 341 be passed. That type of objection cannot justify continuing to keep approximately 20,000 employees without remedies to which other people are entitled. As a matter of fact, A.B. 341, if passed, should operate as an incentive for the State to comply with antidiscrimination laws.
Gary H. Wolff, Lobbyist, Teamsters Local 14:
I strongly support A.B. 341 and appreciate it coming forth. The Nevada Highway Patrol is currently down 62 positions. We have been engaged in human rights battles within the agency over the last 2 years. I could fill the room with people who would tell you why this bill is absolutely necessary. It stops dictatorial-type administrators because they would have to face the music should this bill pass. We have laws that protect everybody in the State except State employees. I encourage and ask for your support in passage of A.B. 341.
Jeff Parker, Solicitor General, Office of the Attorney General:
With me is Stan Miller, tort claims manager, Office of the Attorney General, who oversees management of the tort claims fund. I submitted my written testimony (Exhibit K) which is also on record in other committee hearings.
I will briefly summarize the position of the attorney general on A.B. 341. We do not oppose the bill. As attorney for the State of Nevada, however, it is our duty to point out potential consequences of the bill. After analyzing it with half‑a‑dozen attorneys in our office, we think there would be two consequences of the bill in its current form. First, it will encourage clients and attorneys, as a matter of strategy, to sue in federal court where it is unlikely Nevada’s tort claim cap of $50,000 would be applied. Second, based on our analysis of the bill and our experience with tort litigation, costs will be incurred by the State of Nevada, both in litigating matters and paying out settlements. Additionally, as previously mentioned, the caseload will increase as noted in the fiscal note. This is not a reason to oppose the bill, it is simply our advice to the committee and the Legislature that there will be ramifications.
With respect to prior testimony and in partial response to Senator Care’s questions, I want to clarify for the record that, currently, remedies exist for State employees. Nevada has what attorneys call “mini acts.” Nevada has its own discrimination law, NRS 613.330, which includes matters covered by Title VII in the federal act, Americans with Disabilities Act of 1990, as well as age discrimination. Mr. MacKenzie referenced the fact Nevada regulations also purport to incorporate the FMLA and the FLSA into Nevada law. Therefore, State employees are currently not without remedy and the immediate situation affects all other tort claimants against the State of Nevada. You are subject to the potential defense you cannot sue the sovereign and if you do sue the sovereign and it is allowed and immunity waived, you are subject to a tort claim cap of $50,000.
As to the procedure employees could follow, there are several short of full‑blown litigation. One is the personnel system where grievances are prosecuted. Also, Nevada’s Equal Employment Opportunity Commission board and Nevada’s Equal Rights Commission, short of litigation, investigate claims and attempt to resolve them. Mr. Miller will provide details about the situation in other states. For the record, based on our research and canvassing every attorney general’s office in the country, one other state waived sovereign immunity for these acts. Mr. Miller’s memorandum is attached to my testimony (Exhibit K).
A fiscal note is also attached to my testimony (Exhibit K) from the state of Maine. I attached it because there was some question about the attorney general’s fiscal note in the prior hearing before the Assembly Committee on Ways and Means. Maine, where similar legislation is pending, estimated the cost of this waiver at $1 million per occurrence. I think our fiscal note estimated cost based on civil rights settlements and verdicts of $40,000 per occurrence. Reality is somewhere in between.
Another state, doing exactly as Nevada, did not adopt a head-in-the-sand attitude and ignored the fact the state’s attorneys were telling them their experience suggested costs were going to be incurred. So, once again, we do not oppose A.B. 341, but there will be additional claims, cost, and work for the State of Nevada attorneys. I will let Mr. Miller address the specifics of his canvassing other states.
Senator Care:
Last Legislative Session there was a bill prohibiting confidentiality of the dollar amount in a settlement agreement where tax dollars are involved. Would that apply in these cases? I am very much against confidentiality when it comes to taxpayers’ dollars and I was a proponent of the legislation I think we passed last session.
Bradley Wilkinson, Committee Counsel:
It sounds vaguely familiar, but I do not remember which bill it was.
Stan Miller, Tort Claims Manager, Office of the Attorney General:
In response to Senator Care’s question, there was a bill passed last session that prevents the State from entering into confidential settlement agreements.
I contacted all the other 49 states and North Carolina is the only state that waived sovereign immunity for these acts. North Dakota waived its sovereign immunity for the Fair Labor Standards Act only, and Iowa has been deemed to waive sovereign immunity for the same act by one of its supreme court decisions.
There is a legal remedy for each of these acts in State court, however, it would be limited to the State court cap. Basically, A.B. 341 would do away with the cap to these acts. There will be a fiscal impact. There was a case last year in which we had the unpleasant experience of dealing in an environment where there is no cap. There was an automobile accident case in Arizona in which Nevada was one of four defendants. Nevada’s share of the settlement was $2.4 million. Currently, we budget approximately $3.5 million annually to pay claims costs. Therefore, the settlement had a dramatic impact on our tort claims fund.
There is one other minor fiscal impact. Nevada currently has an excess liability policy which covers up to $10 million, with a $1 million deductible. With the increased exposure, I am sure the premium will increase. Currently, we pay approximately $250,000 a year for coverage.
Chairman Amodei:
The hearing on A.B. 341 is closed. Since the issue is fairly cut-and-dry and there are no amendments, we will address it in work session tomorrow.
There being no further business to come before the committee, the hearing is adjourned at 10:50 a.m.
RESPECTFULLY SUBMITTED:
Barbara Moss,
Committee Secretary
APPROVED BY:
Senator Mark E. Amodei, Chairman
DATE: