Pinnacol panel drafts 7 proposals

By Jason Kosena

The interim panel that spent all summer examining Pinnacol Assurance, the quasi-governmental agency that offers last-resort workers’ compensation insurance, finished its work Friday by proposing legislation that would change the way the insurance company operates. The proposed bills will be brought before the full General Assembly next year.

Pinnacol CEO Ken Ross, left, and Pinnacol Board of Directors chair Gary Johnson, right, talk to reporters outside the Capitol on Friday evening following the last day of hearings of the interim committee designed to examine the workers’ compensation insurance company.
Photo by Jason Kosena/The Colorado Statesman

The Interim Committee to Study Issues Related to Pinnacol Assurance approved seven proposed bills, which, if passed, would change the way the company passes out bonuses to workers, overhaul the investigation of claims, and determine when Pinnacol’s board of directors must pay dividends to clients, among others proposals.

“I’m really proud of this committee’s work,” said Sen. Morgan Carroll, D-Aurora, who chaired the committee. “We had some long days and some heated discussions, but I truly believe that we came up with some good ideas which will help Colorado’s workers, improve Colorado’s businesses and make sure our workers’ compensation insurer of last resort is stable, successful and solvent.”

The panel — which is composed of 10 state lawmakers from both parties and six civilians, including Pinnacol CEO Ken Ross — 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.

At times, the hearings grew emotional. During the committee’s second session, witnesses decried the firm’s high salaries and extravagant lobster dinners for associates. During the third session, injured workers lined up to accuse Pinnacol of actively finding ways to deny them coverage for injuries that required costly treatment. Executives of the insurance firm got the chance to respond at the panel’s fourth meeting, held last month. That session included frustrated exchanges between committee members and Pinnacol execs eager to defend themselves against charges that they had squandered the money that should have gone to claimants on lavish salaries and extravagant perks.

After the panel concluded its work last week, Pinnacol CEO Ross said he believed the meetings amounted to a “witch hunt” and were unfairly designed to make the company look bad.

“Some have called these proceedings the ‘Pinnacol Follies’ and a witch hunt,” Ross said. “At a time when Colorado faces serious budget shortfalls and hard decisions regarding educational spending, infrastructure improvements and health care spending, the Legislature decided to spend taxpayer dollars to study something that didn’t need to be studied.”

Ross said he was unable to comment specifically on any of the seven bills that were passed Friday, saying he hasn’t had a chance to talk with his board of directors about the possible ramifications. But he did say he believed the committee went beyond what SB 281 established it should do.

“The committee has produced seven bills, six of which are clearly beyond the scope of their charge,” Ross said. “The law establishing the committee was clear in its mandate: Study Pinnacol operations, not the entire industry. Moreover, there was neither testimony heard nor evidence presented to support a number of the bills that were approved today.”

Ross called the hearings blatantly biased.

Pinnacol CEO Ken Ross speaks during a press conference outside of the Capitol Friday afternoon.
Photo by Jason Kosena/The Colorado Statesman

“What I can give you is my overall impression of the interim committee process,” Ross said. “There appeared to be a clear bias in favor of injured workers during the entire course of the hearings. Many of the witnesses testified to issues that were not within the committee’s charge. Committee members did not have a proper perspective on what they were asked to study. Very little consideration and time were given to try to understand Pinnacol’s business operations. The proceedings were not balanced.”

Some Republican lawmakers who sat on the panel agreed that the measures proposed by committee go beyond the panel’s mandated responsibilities.

“Many of these bills proposed today, I believe, are out of the scope of this committee,” said Rep. Bob Gardner, R-Colorado Springs. “Maybe it doesn’t matter to some, and maybe it won’t matter at all. But I am of the view that every time we disregard the scope of a committee and are not careful about the role of committee, then we are just giving license... to future committees to do the same thing.”

During the committee’s final hearing, the constant verbal arguments between Sens. Carroll and Shawn Mitchell, R-Broomfield, which had become a staple of the proceedings, hit a climactic end. Mitchell became aggravated when Carroll, the chair, answered a question he had addressed to another panel member.

“Will you stop injecting yourself into every conversation!” Mitchell heatedly demanded. “I didn’t ask you the question!”

Carroll replied that, as chair, she could insert herself into the conversation at any point she pleased and informed Mitchell that he did not have the floor and was not recognized to speak.

A visibly angry Mitchell shot back that he was going to continue to speak and, if Carroll didn’t like it, she should order the sergeants-at-arms to eject him from the meeting.

Banging her gavel on the table repeatedly, Carroll glared at Mitchell.

“Behave yourself like an adult!” Carroll demanded. “You have been around (here) for too long to be acting like this. Good God!”

Included among the seven measures forwarded to the General Assembly on Friday is proposed legislation that would:

• Lower rates for small businesses by directing the insurance commissioner to use the lower of the two rates when comparing recommendations of NCCI (National Council on Compensation Insurance) and an independent actuary, unless there is good cause not to. The measure also would trigger a surplus dividend to policyholders.

• Require that Pinnacol’s board of directors includes an injured worker and a designee from the Colorado Department of Labor. The legislation also would require notification of board meetings to be published seven days in advance, and for meetings to allow time for public comments.

• Require an “Injured Workers’ Bill of Rights” to ensure that all workers are notified of their rights under Colorado law.

• Require Pinnacol to file an annual report, post the workers’ compensation complaint system online and ask all injured workers to complete an exit survey to determine their level of satisfaction.

• Eliminate the practice of paying bonuses to employees who deny claims or medical care. This measure also would require disclosure of any conflicts of interests and would require that benefits that are unpaid at a claimant’s death go to his or her family, not to Pinnacol.

• Increase the penalty Pinnacol would pay for violating Colorado’s Workers’ Compensation Act from $500 a day to $1,000 a day. It also changes the mental state of that violation from “willingly” to “knowingly.”

• Demand that Pinnacol limit surveillance of claimants to instances when reasonable cause is present while offering workers the right to an expedited hearing if they would like to challenge accusations of fraud.