Colorado Questions Whether Pinnacol’s Rates Are Excessive, Unfair

August 12, 2010

Colorado’s Division of Insurance has scheduled a public hearing on Wednesday, August 25, to consider rates submitted by Pinnacol Assurance, the state’s quasi-governmental workers’ compensation insurer, to determine if they are excessive, inadequate, or unfairly discriminatory.

According to the DOI, Pinnacol failed to demonstrate that its December 2009 filing of the Schedule Rating Eligibility Rule of $10,000 does not result in rates that are excessive or unfairly discriminatory. In 2000, the DOI said Pinnacol increased its minimum premium from $4,000 to $10,000 for an insured to qualify for schedule rating. “This change resulted in a number of small employers being ineligible for schedule rating,” the DOI said.

Furthermore, the company has not yet demonstrated that its use of the standard tier loss cost multiplier used to determine Schedule Rating Eligibility does not result in rates that are excessive, inadequate or unfairly discriminatory. The use of a standard tier LCM to determine schedule rating eligibility inflates the premiums of certain employers paying lower rates, thus making those employers eligible for schedule rating. Simultaneously, the use of a standard tier LCM to determine schedule rating eligibility lowers the premiums of other employers paying higher rates, making those employers ineligible for schedule rating, the DOI said.

The state also questioned whether Pinnacol’s use of “loss history” as one of its factors in its schedule rating is duplicative of the company’s experience rating plan. The company’s use of “financial history” as a factor in its schedule rating plan “has not been demonstrated to be an appropriate rating factor,” the Division said.

The hearing, which will start at 9 a.m., will be held at the Division of Insurance, 1560 Broadway, Denver. If necessary, the hearing will continue on August 26, 2010. The public is invited to attend.

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