Pinnacol gets back on the exam table

By Jason Kosena
THE COLORADO STATESMAN

The legislative debate that raged for weeks over the efforts of some Democrats to use Pinnacol Assurance’s large surplus to close the state’s budget gaps, revived Tuesday at the Capitol.

A 16-member panel created by Senate Bill 281, a piece of last-minute legislation, held the first of several meetings intended to explore future options for Pinnacol, a quasi-governmental agency that serves as a last-resort option for businesses in need of worker’s compensation insurance.

Pinnacol Assurance CEO Ken Ross testifies Tuesday before the legislative interim committee that is examining the proper role of the quasi-governmental insurance carrier.
Photo by Jason Kosena/The Colorado Statesman

The panel — which is composed of 10 state lawmakers from both parties and six civilians, including Pinnacol CEO Ken Ross — is charged with coming up with a list of recommendations for the 2010 legislative session. Possibilities include leaving Pinnacol alone, privatizing it or taking control of the firm and its $700 million surplus.

Although its agenda points the panel toward the future, Tuesday’s discussion tended to dwell on the past — specifically last spring’s attempt by the Legislature to gain access to $500 million of Pinnacol’s surplus.

The committee’s Republicans, led by Sens. Shawn Mitchell, of Broomfield, and Ted Harvey, of Highlands Ranch, dismissed the panel as another attempt by Democrats to confiscate Pinnacol’s surplus.

“It’s a study, not a legal proceeding,” said Harvey. “There’s not a hint of anything amiss at Pinnacol or any credible suggestion that anyone has done anything wrong.

“All Pinnacol is guilty of is providing one of the most well-managed, most affordable insurance systems that is available anywhere in the country for injured workers.... You can rest assured (this is) nothing more than drama intended to set the stage for the Democrats’ next attempt to raid Pinnacol.”

The committee’s chair, Sen. Morgan Carroll, D-Aurora, responded to the portrayal of the hearing as an attempt to take Pinnacol’s funds by reading the committee’s mission statement aloud to members of the panel and the audience.

“As I said at the beginning of our hearing today, our mission is study, make recommendations and report findings on all matters relating to the operation of Pinnacol Assurance, including, but not limited to, both the feasibility of the continued operation and the public policy implications of Pinnacol as a division of state government or the feasibility and public policy implications of selling Pinnacol Assurance to a willing third-party buyer,” she said.

Sen. Morgan Carroll, D-Aurora, left, listens as Rep. Sal Pace, D-Pueblo, asks a question of Pinnacol CEO Ken Ross on Tuesday.
Photo by Jason Kosena/The Colorado Statesman

Despite the sometimes theatrical back and forth, the first hearing focused mostly on explaining worker’s compensation insurance and Pinnacol’s structure.

In an interview with The Colorado Statesman Wednesday, Ross, Pinnacol’s CEO, said the first hearing was exactly what he expected it to be and reiterated his desire for the state to cut Pinnacol loose to operate as a private mutual assurance company. If that happened, Pinnacol would pay state taxes it isn’t required to pay today and would be beyond the reach of the money-starved state government.

“What I have been saying since March, when Pinnacol’s name was first brought up as a possibility to close the budget gap ... is that what I think is best for the state is the statute should be amended to say that Pinnacol is a mutual assurance company in Colorado,” Ross said. “That language needs to be changed. And my belief is that we can perform our role as good or even better if we had those changes in law.”

The Denver Post and other media outlets across the state reported that Pinnacol “might be willing to pay state taxes and a lump sum of cash in exchange for greater autonomy.” But Ross told The Statesman on Wednesday that he has not discussed that possibility with his board.

“I have not had any conversations about paying premium taxes or a lump sum,” Ross said. “In fact, I don’t have the authority to put that on the table. I am governed by a board of directors, and I have yet to have a conversation with the board about making a payment to the state, and I cannot say what their thoughts are on that.”

Some Democrats on the committee, including Rep. Sal Pace, D-Pueblo, spent part of Tuesday’s meeting asking Ross whether it’s appropriate for Pinnacol to have a $700 million surplus in its account. Pace said that amount is “more than recommended industry guidelines” and gives the impression the insurance company is overcharging its policyholders.

Ross disagreed, saying Pinnacol had reduced its rates by 42 percent since 2005 and returned $120 million to clients in 2009.

“It certainly is a healthy surplus for Pinnacol to have because of our unique responsibilities and our unique structure,” Ross said. “Our surplus levels and premiums are right in line with other companies that we compete with and other state programs. We are not out of line. That is something that has yet to come out, I think.”

Maybe it will in coming weeks, as the Pinnacol hearings continue. The next committee meeting is scheduled for Aug. 14.

Jason@coloradostatesman.com

Pinnacol CEO Ken Ross testifies before the interim committee on Tuesday.
Photo by Jason Kosena/The Colorado Statesman