Colorado: Lawmakers to examine state WC insurer, consider privatization
In early June, Gov. Bill Ritter signed S. 281 into law, which included provisions for performance and financial audits and created an interim committee to study Pinnacol -- the Colorado-chartered but independently run and funded insurer. The committee was charged with examining workplace safety, workers' comp laws and recommend changes to Pinnacol, including the possible sale of the company. The bill was passed after lawmakers withdrew a plan that would have taken $500 million from Pinnacol's reserves to balance the state's projected budget shortfall for the coming year.
The 16-member committee began meeting in August. Sen. Morgan Carroll, D-Aurora, said the committee will be deciding if the current structure of Pinnacol has sufficient clarity, and will evaluate models used by the 50 states for their residual workers' comp markets. The group, she said, will also evaluate the pros and cons for injured workers, policyholders and Colorado taxpayers.
"Questions began to emerge as people questioned why a nonprofit political subdivision of the state could amass over $2 billion in assets, $1.2 billion in reserves, and $700 million in surpluses -- four-to-six times more than levels recommended by the Division of Insurance," she said. "Because surpluses have been generally growing at a rate of $100 million per year, some people began wondering if policyholders were being overcharged or if injured workers were being wrongly denied treatment and benefits. Of course, there are some people who don't think there is any role for oversight here at all."
Ken Ross, CEO of Pinnacol, opposed the idea of using the company's surplus to fund the state's budget shortfall but would be open to privatizing the insurer. At the initial hearing, Ross said he was pleased that the division was able to verify the impact on reducing premiums that Pinnacol has had over the past four years.
"In fact, Pinnacol has reduced rates by over 42 percent in that time period, which represents cost savings to Colorado businesses in the amount of $205 million," he said.
Ross hopes in future committee hearings the company will have the opportunity to share more details about Pinnacol's successful business practices.
The committee has scheduled five more meetings through the end of October.
NCCI seeking cut. In addition to the examination of Pinnacol Assurance, state officials will hold a hearing in September on the National Council on Compensation Insurance's recent request to cut workers' comp rates in the state. According to the filing, NCCI officials are asking the Colorado Division of Insurance to slash rates by an average of 9.3 percent in 2010. The division will host a public hearing Sept. 17 in Denver.
A recent DOI actuarial study noted a savings of $152 million in the past year as a result of the division's 2008 order to reduce workers' comp loss costs by 16 percent.
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August 21, 2009
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