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Pinnacol Assurance had recently offered the state $330 million to terminate the insurer's status as a political subdivision of the state and become a private mutual insurance company owned by its policyholders -- upping its original bid of $200 million. Gov. Bill Ritter Jr. had examined selling off Pinnacol as a solution in addressing Colorado's estimated $1.3 billion shortfall for the fiscal year that begins in July.

Talks broke down after it became apparent that there was a lack of support for the proposal among state lawmakers, many of whom said the insurer's worth was far greater than what Pinnacol was offering. No legislation aimed at privatizing the insurer was ever introduced.

"Of course, we will remain open to further discussions with our elected officials to attain these goals," Ross said.

Bills on the table. Other legislation to reform the workers' comp system is still under consideration. Kelly Campbell, vice president of the Property Casualty Insurers Association of America, recently testified before the Senate Judiciary Committee. She urged lawmakers to vote against S.B. 11, which would open additional avenues for litigation based on a provision that addresses paying additional compensation for delaying or denying claims.

"First and foremost, insurers do not provide compensation for delaying or denying claims," Campbell said. "That practice simply does not happen, and there are already laws on the books to prevent such practices. S.B. 11 would simply drive up workers' compensation and litigation costs."

Campbell also criticized three other pieces of legislation, including S.B. 12, which she said would change standards and increase penalties related to violating workers' comp statutes. The bill would add greater potential penalties for an insurer to pursue additional documentation on claims.

"S.B. 12 goes too far," she said. "Even in legitimate claims, there are times when additional documentation may be necessary to fully support a claim and to ensure that charges billed are consistent with treatment provided. This bill is outside the norm in claims adjudication practices."

Another proposal -- S.B. 13 -- would require a survey of injured workers, with the findings reported to the Colorado Division of Labor. Campbell pointed out that the benefit of such a survey is unclear.

"What constitutes claims satisfaction is in the eye of the beholder, and since this is third-party coverage, the injured worker is not the one who purchases the policy," she said. "Compiling and posting this data would add cost without a clear benefit."

Lastly, Campbell said PCIAA is opposed to H.B. 1012, which would limit the use of surveillance of injured workers. Surveillance, she said, is an important antifraud tool that is used only in very specific circumstances. Numerous other groups, including business and claims investigators, have come out against the bill.

"Fraud will find the path of least resistance," Campbell said. "H.B. 1012 could make Colorado a magnet for workers' compensation fraud, especially since no other state in the country limits surveillance in the way this bill proposes."

Ross also spoke out against the legislation, saying that it would impede the ability of all insurance companies to conduct legitimate investigations and scrutinize fraudulent claims, "benefitting those who engage in fraudulent activities while increasing the costs of workers' compensation insurance for everyone."

Read more at the WORKERSCOMP Forum^TM homepage.

May 24, 2010

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