Pinnacol execs defend practices

By Jason Kosena
THE COLORADO STATESMAN

Executives of Pinnacol Assurance stood by and listened to public criticism and accusations of unethical practices during the first three meetings of the Interim Committee on Issues Related to Pinnacol Assurance.

During the committee’s second session earlier this month, witnesses decried the firm’s high salaries and extravagant lobster dinners for associates. During the third session last week, injured workers lined up to accuse Pinnacol of actively finding ways to deny them coverage for injuries that demanded costly treatment.

Executives of the quasi-governmental worker compensation insurance firm got the chance to respond at the panel’s fourth meeting on Friday, Sept. 4.

At times, the discussion in the hearing room in the Capitol’s basement grew heated with frustrated exchanges between committee members and Pinnacol execs eager to defend themselves against charges that they had squandered money that should have gone to claimants on lavish salaries and extravagant perks.

“We have a very viable, stable system in Colorado, and we like to think we played a part in that success,” said Ken Ross, Pinnacol’s CEO. “We’re proud of the delivery of care to injured workers that we have provided.”

The 16-member panel was created by Senate Bill 281, a piece of last-minute legislation, and was charged with the task of exploring future options for Pinnacol, a quasi-governmental agency with a large cash surplus. Some lawmakers had hoped to use that cash to bridge the state’s massive budget gap. The attempt to use $500 million of Pinnacol’s reserves eventually died after Gov. Bill Ritter said he would not support the
measure.

The panel — which is composed of 10 state lawmakers from both parties and six civilians, including Ross — is charged this summer 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.

During Friday’s hearing, Pinnacol took more than three hours to answer questions from committee members and to defend its practices, saying that, regardless of the criticism it has endured during the previous hearings, the company pays out more than 90 percent of its 55,000 annual claims and has a good reputation among its policyholders.

“Overall satisfaction (with) Pinnacol services, as rated by our policyholders on a 10-point scale, is, on average, an 8.8,” said Pinnacol Vice President Rob Norris. “I have heard it suggested that we are overcharging our policyholders. But (what we have heard) from our customers would indicate otherwise.

“Our policyholders feel they are getting a very good deal from Pinnacol.”

Pinnacol defended high expenditures on salaries and business expenses by noting that, even though it is tied to Colorado state government, the firm must compete with private insurance companies in the free market. The execs said Pinnacol spends much less on such recruitment expenses than its competitors do.

Mark Simon, a disabled injured worker who sits on the committee, pointedly questioned the Pinnacol execs about a $1,500 hotel stay at the Mirage Hotel in Las Vegas that Ross charged to the company.

“Our normal percentage of entertainment (costs) is 1 percent of policy premiums,” said Gary Johnson, chairman of Pinnacol’s board of directors. “Other (private) insurance companies are spending six to eight percent of policy premiums on entertainment (for staff).”

When Simon asked if Pinnacol deliberately denies high-priced claims while paying out less costly claims, things got tense.

“That’s an offensive statement,” said Dan O’Neil, Pinnacol’s vice president of claims. “That is not something we do.”

Most of the committee’s Democratic members, including chairwoman Sen. Morgan Carroll, D-Aurora, have pursued the hearings with legislative zeal. Republican members, including Sen. Sean Mitchell, R-Broomfield, on the other hand, have tended to dismiss the hearings as a witch hunt.

Mitchell made a comment during the third hearing about Carroll in her underwear that many — including Senate Minority Leader Josh Penry — found inappropriate.

On Friday, he suggested that the hearings themselves are inappropriate.

Mitchxell was responding to Pinnacol executives who said the insurance industry as whole should follow their lead in surveying policyholders to determine their level of satisfaction.

“I think your idea of an industrywide (customer service survey) is a good one. (It) proves you’re not into the spirit of this (committee) by suggesting something so sensical,” Mitchell said.

Jason@coloradostatesman.com