Pinnacol Stops Administering Colorado State Claims

By | August 8, 2011

A Colorado-chartered workers’ compensation insurer will no longer administer the claims of state employees following disagreements with state officials over lavish trips, compensation and golden parachutes for key executives.

Pinnacol Assurance’s decision to bail forced Colorado to scramble to hire an independent contractor to administer claims for state workers. State Rep. Sal Pace, D-Pueblo, said about 42,000 employees were affected, including about 1,000 who have claims pending.

Pinnacol spokeswoman Suzi Stolte said Friday that the decision had nothing to do with state lawmakers’ criticism after it was revealed that the company spent more than $318,000 on a five-day golf trip to Pebble Beach, Calif., and questions over its compensation and severance packages.

The company insures about 55,000 policy holders with more than a million clients. The state is self-insured, Pinnacol only administered the program. Stolte said the state contract was only a small portion of the company’s business.

“We just decided this is not the core of what our business is,” Stolte said.

The story was first reported by the Pueblo Chieftain (

Pinnacol has had a rocky relationship with the state after it was challenged last year over reports of lavish spending and excess profits, which lawmakers said the company racked up by denying claims from injured workers. The company has denied those allegations.

In response to the company’s Pebble Beach trip, Gov. John Hickenlooper signed a bill in May that limits travel expenditures by state employees and state-chartered entities. He has also questioned a new $4.3 million severance package for its top 12 executives.

Pinnacol defended its executive pay and incentive trips, saying it was modest compared to competitors. President Ken Ross said the incentives for himself and his employees, such as $1,500 for one night at the Mirage in Las Vegas, helped him recruit top talent.

The governor appoints Pinnacol’s board but it operates like a private insurer. It is required to cover employers that private insurers won’t cover and is exempt from paying state taxes.

In 2009, lawmakers toyed with a plan to use $500 million of the insurer’s then-$700 million surplus to balance Colorado’s budget but abandoned that and instead formed a special committee to examine the insurer’s business practices. A state audit last year determined the company’s practices could result in excessive rates.

The state later reached an undisclosed settlement on rates.

In 2010, then-Gov. Bill Ritter canceled a proposal to allow Pinnacol to go private after lawmakers said it had no chance of passing the Colorado Legislature. Hickenlooper is considering a similar proposal.

Ross has offered $330 million to the state so it can go private, about $130 million more than it offered earlier for a buyout of the company, which had assets of $2 billion.

Stolte said Pinnacol informed the state in January of its intent to discontinue offering administrative services and is no longer bound to handle state claims. The company had one year remaining on its contract when it terminated its services, Pace said.

Pace has asked legislative lawyers to see if the contract cancellation was legal because of the state law that gave the company tax breaks.

Topics Legislation Claims Colorado

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