Having served on the Pinnacol Assurance Board of Directors (when it was still the Colorado Compensation Insurance Authority), I learned a great deal about insurance, actuaries and the difficulty of building reserves. When I was on the board, CCIA was still working hard to overcome the deep hole that was dug by the State Compensation Insurance Authority and subsequently handed to CCIA with instructions to “fix it.”
Well, they did. Pinnacol built a program of trust and effectiveness — one with adequate reserves to fund the tail of the risk from injuries. Finally, workers’ comp rates are becoming reasonable, and businesses are gaining confidence that their good efforts will result in reduced premiums and the hope of a dividend.
But now, that is all being put at risk.
As you know, the state wants to transfer $500 million of Pinnacol’s policyholders’ surplus to be used, for the most part, to fund higher education. I find this amazing! Aside from the money not belonging to the state or the taxpayers, but to the policyholders, the question becomes, “Is it more important to have viable employers for those students that graduate or larger numbers of higher educated students and no viable employers?”
The policyholders’ surplus is the portion of the premiums paid by policyholders that an insurance company sets aside to pay ongoing claims and future claims. What happens when those reserves are gone? Obviously, premiums MUST be increased to replenish them. It is irresponsible to once again expose injured workers to potentially inadequate long-term funding sufficient to take care of them! Importantly, dividends will go away as well. This is a double whammy for small businesses that they simply do not need right now.
I know you know this, but … importantly, all Pinnacol policyholders are taxpayers, but not all taxpayers are Pinnacol policyholders. And, since Pinnacol is a mutual insurance company, do not the stockholders have to approve giving the reserves over to the state? How does the Legislature simply decide one day to demutualize a mutual insurance company and raid its reserves? My goodness, folks! Does this action not give you serious pause? If it doesn’t, you do not understand the precedent you are establishing! The fundamental injustice of the proposed legislation cannot be ignored or passed off because “we have no other options.”
We can be certain of one thing. If the state is successful in transferring these monies from Pinnacol, all workers’ compensation rates will increase in order to replenish this lost policyholders’ surplus. It is anticipated (many years of business experience speaking), if Pinnacol raises its rates, its competition will take advantage of this market condition and will follow suit with their own rate increases. Call it a hidden tax, income redistribution or whatever you want, but the bottom line is that it will cause some Colorado businesses to lay off employees and others to close their doors.
Ironically, these political losers will be the very same businesses and individuals that built the very fund the Legislature wants to take! What does this say to businesses thinking about coming to Colorado? This precedent has far-reaching implications in terms of current as well as future jobs.
In closing, I was in the Legislature when Amendment 23 passed in 2000. I remember all too well that the higher education institutions refused to weigh in on that initiative, knowing full well that they would be the hardest hit if revenue ever went south. Make no mistake: they knew. I, personally, discussed this with them! Well, here we are — again. Higher education institutions are on the brink of devastation — again. Nothing has been done to remedy Amendment 23, and they still must kowtow to the state at every step.
Why don’t you simply cut them loose and let them do what you would expect the brain-trust of Colorado to do, which is manage themselves to the very best of their abilities? If they succeed — as I expect they would — they will be free of this fiscal morass and be able to self-direct their futures, albeit with some academic oversight. Are they not the educators of our future leaders? Are they not the ones who are teaching those who will soon be running the state? Cut them loose! Wish them the best, but let them determine their own futures. There is no doubt in my mind that they can do it. Taking onetime funds from an entity the state has no right to take those funds from is only a ONE YEAR solution. THEN who will you turn to? The definition of insanity is doing the same things over and over again but expecting different results. Cut them loose and, please, leave the Pinnacol reserves alone. It just is not ethical or responsible to do what the Joint Budget Committee is proposing to do.
Thank you very much for reading this. I know full well you are being bombarded right now on this issue. It is clearly the most difficult vote you cast this session in terms for jobs and business growth. If I can be of any assistance, please do not hesitate to give me a call. Thank you very much for the sacrifice I personally know that you are making for your state and your constituents. You are appreciated!
Business owner Mark Larson, a Republican, formerly represented southwestern Colorado in the House and served on the Pinnacol Board of Directors.