Colorado Gov. Bill Ritter is meeting with an investment banker to study the possible sale of the state’s interest in Pinnacol Assurance, a state-chartered workers compensation insurer, his chief counsel said.
Ritter hasn’t decided whether the state should sell its share but agreed to meet with J.P. Morgan to determine what the stake is worth, chief counsel Trey Rogers said.
Rogers said Pinnacol has agreed to pay J.P. Morgan’s fees, which haven’t been determined.
The Legislature would have to approve any sale of Pinnacol, which has more than $2 billion in assets.
Pinnacol is the state’s workers compensation insurer of last resort. The company came under fire last year following complaints that money that could have been used to help injured workers was instead spent on bonuses, employee perks and entertainment.
Rogers said Ritter had informal discussions previously about the sale but held off until a legislative committee could study the issue.
The committee recommended against a sale, citing concerns the state would lose control over Pinnacol, Colorado’s workers’ compensation insurer of last resort.
Rogers said Ritter hasn’t yet decided whether privatizing Pinnacol is the right thing to do.
“We have to consider the value of the state’s interest,” Rogers said. “The governor does not yet have a position on this, but in light of our budget situation, we thought it important to at least have a discussion about the value,” he said.
Colorado lawmakers are struggling with a projected $1.5 billion budget deficit for the current fiscal year and the fiscal year that begins in July, and they’re facing tough decisions next month on proposals to slash spending for public education, higher education, Medicaid and other programs.
A spokeswoman for Pinnacol did not immediately return phone messages seeking comment.
State Sen. Morgan Carroll, a D-Aurora, who chaired the committee that examined a possible sale, said it is “a bad idea for employers and employees.”
“We’ve already considered this and everyone on the committee agreed it should remain quasi-governmental,” she said.
Carroll said the money would provide only a one-year fix for the budget.
She also said it’s a conflict of interest for Pinnacol to pay for the state’s investment banker to study the sale.
Lawmakers have proposed revamping Pinnacol’s board for better oversight, increasing transparency and accountability, banning bonuses to Pinnacol employees based on their denials of claims and imposing stiff penalties for improper denials or delays in medical treatment.
State Sen. Shawn Mitchell, R-Broomfield, proposed a bill that would make the hybrid public-private company entirely private, but that proposal was rejected.
During the hearings last year, company officials acknowledged that claims adjusters and medical advisers received bonuses based on profit and other performance standards. But they said it would be counterproductive to deny claims to improve profit margins because customers would leave.
The company also said it spied last year on about 2,600 injured workers who have pending claims because they were instructed by the state to prevent fraud.
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