AB332 - Revises provisions relating to industrial insurance. (BDR 53-325)

A.B. 332 - *AB332* ASSEMBLY BILL NO. 332–ASSEMBLYMEMBER O’NEILL MARCH 3, 2025 ____________ Referred to Committee on Commerce and Labor SUMMARY—Revises provisions relating to industrial insurance. (BDR 53-325) FISCAL NOTE: Effect on Local Government: No. Effect on the State: Yes. ~ EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. AN ACT relating to industrial insurance; revising provisions relating to certain administrators employed by an association of self-insured employers; eliminating assessments relating to a subsequent injury account; prohibiting certain claims against a subsequent injury account; repealing certain provisions relating to the calculation of premium costs and certain audits; and providing other matters properly relating thereto. Legislative Counsel’s Digest: Existing law governs industrial insurers in this State that provide benefits to 1 employees who are injured in the course of employment. (Chapter 616B of NRS) 2 Existing law authorizes certain groups of public or private employers to act as an 3 association of self-insured employers if the group and each employer within the 4 group meet certain requirements. (NRS 616B.350-616B.446) Existing law requires 5 a board of trustees to operate any such association and to employ: (1) an 6 administrator of the association to carry out the policies of the board and perform 7 such duties as the board delegates; and (2) a third-party administrator to administer 8 the plan of insurance of the association. Existing law prohibits the administrator of 9 an association from performing any of the duties assigned to the third-party 10 administrator. (NRS 616B.365) Section 3 of this bill specifies that the administrator 11 of an association is prohibited from directly administering claims. Existing law also 12 prohibits the administrator of the association and the third-party administrator from 13 having a direct or indirect financial interest in each other. (NRS 616B.371) Section 14 4 of this bill removes the prohibition on the administrator of the association and the 15 third-party administrator having a financial interest in each other. Section 1 of this 16 bill revises a definition of the term “association’s administrator” to specify that the 17 responsibilities of the administrator of the association to carry out the daily 18 operations of the association are at the direction of the board of trustees. 19 – 2 – - *AB332* Existing law requires a third-party administrator for an association of self- 20 insured employers to obtain a certificate as an administrator from the 21 Commissioner of Insurance and to file with the Commissioner a surety bond for 22 the benefit of any person damaged by any fraudulent act or conduct of the 23 administrator. (NRS 616B.503, 683A.08524, 683A.0857) Existing law also 24 requires the third-party administrator to file with the Commissioner an additional 25 surety bond conditioned upon the faithful performance of its duties relative to a 26 particular association of self-insured employers. Existing law requires the 27 administrator of the association to file a similar surety bond relative to the 28 association. (NRS 616B.353) Section 2 of this bill eliminates the requirement for 29 the third-party administrator to file an additional surety bond relative to its duties to 30 a particular association. Section 5 of this bill makes a conforming change to 31 remove the procedure for terminating liability on the bond eliminated by section 2. 32 Existing law establishes the Fund for Workers’ Compensation and Safety 33 within the State Treasury. (NRS 616A.425) Within the Fund, existing law creates a 34 Subsequent Injury Account for each of the following insurers: (1) self-insured 35 employers; (2) associations of self-insured public or private employers; and (3) 36 private carriers. (NRS 616B.554, 616B.575, 616B.584) Existing law requires that 37 money in the Accounts be used to provide compensation or reimbursement in 38 situations where an employee who has a preexisting permanent physical 39 impairment incurs a subsequent disability by injury arising out of and in the course 40 of employment which entitles the employee to compensation for the combined 41 disability that is substantially greater than that which would have resulted from the 42 subsequent injury alone. (NRS 616B.545-616B.590) Existing law requires a board 43 for administration or the Administrator of the Division of Industrial Relations of the 44 Department of Business and Industry to administer each Account. (NRS 616B.548, 45 616B.554, 616B.569, 616B.575, 616B.584) Existing law and regulations require 46 self-insured employers, associations of self-insured public or private employers and 47 private carriers to pay an annual assessment which funds the Accounts. (NRS 48 616B.554, 616B.575, 616B.584; chapter 616B of NAC) 49 Sections 6, 9 and 12 of this bill remove the authority to adopt regulations 50 which impose such assessments from each board for administration and the 51 Administrator of the Division, and section 16 of this bill voids the provisions of 52 existing regulations relating to such assessments, thus eliminating the requirement 53 for assessments to be paid for each Account. Sections 7, 8, 10, 11, 13 and 14 of 54 this bill require an employee to have incurred a subsequent injury and disability on 55 or before September 30, 2025, in order for the compensation or reimbursement 56 provisions to apply, thus prohibiting any claims against the Accounts due to a 57 subsequent injury and disability which is incurred on or after October 1, 2025. 58 For purposes of calculating the amount of a premium which is due pursuant to 59 the terms of a policy of industrial insurance, existing law provides that the 60 maximum amount paid to any one employee for services performed during the 12- 61 month period during which a policy is effective shall be deemed to be $36,000. 62 (NRS 616B.222) Existing law also deems as $36,000 to be the maximum amount 63 paid in a policy year to an officer or manager of a quasi-public or private 64 corporation or limited-liability company who receives pay for services performed 65 as an officer, manager or employee of the corporation or company. (NRS 66 616B.624) Sections 15 and 18 of this bill eliminate the $36,000 maximum amount 67 of pay for employees for purposes of calculating the amount of a premium which is 68 due pursuant to the terms of a policy of industrial insurance. 69 Existing law requires the Administrator of the Division, at least every 5 years, 70 to audit all insurers who provide benefits to injured employees, including 71 associations of self-insured employers. (NRS 616A.270, 616B.003) Existing law 72 also requires the Commissioner of Insurance, at least annually, to audit each 73 association of self-insured employers to verify certain information. 74 – 3 – - *AB332* (NRS 616B.410) Section 18 repeals the requirement that the Commissioner 75 examine each association of self-insured employers annually. 76 THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS: Section 1. NRS 616A.060 is hereby amended to read as 1 follows: 2 616A.060 “Association’s administrator” means a person who is 3 [employed] : 4 1. Employed by or has contracted with the board of trustees of 5 an association of self-insured public or private employers to carry 6 out the policies of the board of trustees ; and [to be] 7 2. At the direction of the board of trustees, responsible [for] to 8 carry out the daily [operation] operations of the association [.] , 9 including, without limitation, to meet the obligations of the 10 association pursuant to NRS 616B.362. 11 Sec. 2. NRS 616B.353 is hereby amended to read as follows: 12 616B.353 1. An association of self-insured public or private 13 employers shall: 14 (a) Execute an indemnity agreement jointly and severally 15 binding the association and each member of the association to 16 secure the payment of all compensation due pursuant to chapters 17 616A to 617, inclusive, of NRS. The indemnity agreement must be 18 in a form prescribed by the Commissioner. An association may add 19 provisions to the indemnity agreement if they are first approved by 20 the Commissioner. 21 (b) Except as otherwise provided in this subsection, maintain a 22 policy of specific and aggregate excess insurance in a form and 23 amount required by the Commissioner. The excess insurance must 24 be written by an insurer approved by the Commissioner. To 25 determine the amount of excess insurance required, the 26 Commissioner shall consider: 27 (1) The number of members in the association; 28 (2) If the association is an association of self-insured public 29 employers, the types of governmental services provided by the 30 members of the association; 31 (3) If the association is an association of self-insured private 32 employers, the classifications of employment of the members of the 33 association; 34 (4) The number of years the association has been in 35 existence; and 36 (5) Such other information as the Commissioner deems 37 necessary. 38 – 4 – - *AB332*  Nothing in this paragraph prohibits an association from 1 purchasing secondary excess insurance in addition to the excess 2 insurance required by this paragraph. 3 (c) Collect an annual assessment from each member of the 4 association in an aggregate amount of at least $250,000 or in an 5 aggregate amount which the Commissioner determines is 6 satisfactory based on an annual review conducted by the 7 Commissioner of the actuarial solvency of the association. 8 (d) Except as otherwise provided in paragraph (e), deposit as 9 security with the Commissioner a bond executed by the association 10 as principal, and by a licensed surety, payable to the State of 11 Nevada, and conditioned upon the payment of compensation for 12 injuries and occupational diseases to their employees. The bond 13 must be in an amount determined by the Commissioner to be 14 reasonably sufficient to ensure payment of such compensation, but 15 in no event may it be less than $100,000. 16 (e) In lieu of a bond, deposit with the Commissioner a like 17 amount of lawful money of the United States or any other form of 18 security authorized by NRS 100.065. If security is provided in the 19 form of a savings certificate, certificate of deposit or investment 20 certificate, the certificate must state that the amount is unavailable 21 for withdrawal except upon order of the Commissioner. 22 2. Except as otherwise provided in subsection 3, in addition to 23 complying with the requirements of subsection 1, an association of 24 self-insured private employers shall: 25 (a) At the time of initial qualification and until the association 26 has operated successfully as a qualified association of self-insured 27 private employers for 3 years, as determined by the Commissioner, 28 have a combined tangible net worth of all members in the 29 association of at least $2,500,000, as evidenced by a statement of 30 tangible net worth provided to the Division of Insurance of the 31 Department of Business and Industry by an independent certified 32 public accountant; or 33 (b) After 3 years of successful operation as a qualified 34 association of self-insured private employers, as determined by the 35 Commissioner, have combined net cash flows from operating 36 activities plus net cash flows from financing activities of all 37 members in the association of five times the average of claims paid 38 for each of the last 3 years or $7,500,000, whichever is less. 39 3. In lieu of complying with the requirements of subsection 2, 40 the association’s administrator shall ensure that a solvency bond, in 41 a form prescribed by the Commissioner and in an aggregate amount 42 of at least $2,500,000, is deposited with the Commissioner by the 43 association or members of the association on behalf of the 44 association. 45 – 5 – - *AB332* 4. The association’s administrator shall deposit with the 1 Commissioner a bond executed by the association’s administrator as 2 principal, and by a licensed surety, payable to the State of Nevada, 3 and conditioned upon the faithful performance of his or her duties. 4 The bond must be in an amount determined by the Commissioner. 5 5. [Any third-party administrator providing claims services for 6 the association shall deposit with the Commissioner a bond executed 7 by the third-party administrator as principal, and by a licensed 8 surety, payable to the State of Nevada, and conditioned upon the 9 faithful performance of its duties. The bond must be in an amount 10 determined by the Commissioner. 11 6.] The Commissioner may increase or decrease the amount of 12 any bond or money required to be deposited by this section in 13 accordance with chapter 681B of NRS and the Commissioner’s 14 regulations for loss reserves in casualty insurance. If the 15 Commissioner requires an association [,] or association’s 16 administrator [or third-party administrator] to increase its deposit, 17 the Commissioner may specify the form of the additional security. 18 The association [,] or association’s administrator [or third-party 19 administrator] shall comply with such a requirement within 60 days 20 after receiving notice from the Commissioner. 21 [7.] 6. The Account for Associations of Self-Insured Public and 22 Private Employers is hereby created in the State Agency Fund for 23 Bonds. All money received by the Commissioner pursuant to this 24 section must be deposited with the State Treasurer to the credit of 25 the Account. All claims against this Account must be paid as other 26 claims against the State are paid. 27 Sec. 3. NRS 616B.365 is hereby amended to read as follows: 28 616B.365 1. An association of self-insured public or private 29 employers must be operated by a board of trustees consisting of at 30 least five members whom the members of the association elect for 31 terms set forth in the bylaws of the association. If the association is 32 an association of self-insured: 33 (a) Public employers, the members of the board of trustees must 34 be officers or employees of the public employers who are members 35 of the association. 36 (b) Private employers, at least two-thirds of the members of the 37 board of trustees must be employees, officers or [Text truncated for display. Full text available on LegiScan.]