Pinnacol Chief Blasts Colorado State Legislators’ Hearings

By | October 20, 2009

The chief executive of Pinnacol Assurance contends that the interim committee hearings investigating the state workers’ compensation insurer were biased in favor of injured workers.

The committee, which was comprised of 10 state lawmakers, voted in its final meeting last week to send seven bills to the state legislature. The bills are intended to give the state greater control and oversight of the quasi-governmental company.

The meeting last week was raucous. Two committee members stormed out while the hearing was still going on. The vote on whether to send the proposed bills to the legislature followed strict party lines, with the Democrats voting in favor of the bills and the Republicans voting no.

The executive, Ken Ross, also says that six of the seven bills “are clearly beyond the scope of their charge.”

“Some have called these proceedings the ‘Pinnacol Follies’ and a witch hunt,” Ross said in a statement released after the hearings. “At a time when Colorado faces serious budget shortfalls and hard decisions regarding educational spending, infrastructure improvements and health care spending, the legislature decided to spend taxpayer dollars to study something that didn’t need to be studied.”

In his statement, Ross said that Pinnacol cooperated fully with the lawmakers’ committee and that during the hearings the company showed it was performing well, spending within line with other insurance companies, and providing good service to its 57,000 policyholders.

“But many more hours were devoted to testimony from injured workers compared to the business community and policyholders,” Ross said.

The company should perhaps have refuted some of the testimony, but could not because of legal requirements and worker privacy issues, he added.

At the meeting last week, Rep. Sal Pace, D-Pueblo, said Pinnacol is clearly too aggressive in pursuing fraud, and violating workers’ privacy. He said that Pinnacol spends $5 million annually chasing fraud, but only uncovered 11 cases in 2007 and 10 cases in 2008.

One of the bills proposed for referral to the entire state Legislature when its next session begins in January would limit Pinnacol’s reserve surplus, requiring the insurer to pay out dividends when surplus grew to 800 percent of its fund to pay claims.

Another would limit the use of surveillance by workers’ compensation insurers. One would double the penalties for insurers who wrongly deny claims. One would prohibit insurers from giving out bonuses for employees’ performance denying claims.

Ross’s statement said the committee’s charge was to investigate the operations of Pinnacol, not to author new laws impacting the entire industry.

He said he and Pinnacol’s Board of Directors need to review the proposed bills before commenting and taking a position. But “Pinnacol is not broken and does not need to be fixed,” he added.

The committee hearings on Pinnacol were initiated by the state Legislature after it was noted during the recent state budget crisis that Pinnacol had $500 million in reserves. Some state legislators proposed tapping the reserve for the budget, and during the discussions it came out that Pinnacol executives were paid a lot by government standards and that Pinnacol sometimes spent large amounts on entertainment.

Pinnacol has maintained that the salaries and entertainment spending are in line with industry standards.

“Our policyholders, and Colorado taxpayers, should be concerned with how this process unfolded,” Ross said. “Pinnacol is an asset to Colorado’s recovering economy. We have reduced rates by 42 percent, returned nearly $350 million in general dividends to policyholders in the past five years, and have been recognized locally and nationally as a leader in workers’ compensation reform. This committee was a misuse of scarce public funds as well as an attack on a company that has helped create an efficient, stable and competitive workers’ compensation market.”

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