When legislative budget staffers were looking into ways to balance the state’s budget during the 2009 session, they happened onto the fact that Pinnacol Assurance, the quasi-public agency that serves as the insurer of last resort for workers’ compensation, had reserves in excess of half a billion dollars more than appeared to be necessary. When legislative leaders suggested taking some of the money to address budget issues, the reaction from Pinnacol, business interests and Pinnacol customers was swift. They said the state should keep its hands off.
The episode led to a number of things, including a legislative study that suggested a slew of changes to workers’ compensation laws and conversations between Pinnacol and the governor’s office about Pinnacol buying its freedom from the state.
The reaction I expected, which never materialized, was anger from employers who purchased insurance from Pinnacol. Based on the size of the reserves, it is likely their workers’ compensation rates far exceeded what was necessary to provide the insurance.
Pinnacol now finds itself in the news again because its CEO, Ken Ross, and three members of its board recently took an extravagant trip to Pebble Beach with insurance agents who had sold lots of policies for them. They found themselves on a Channel 7 investigative report in which Ross had to be physically constrained when he tried to attack reporter Tony Kovaleski. It was the stuff reporters usually can only fantasize about.
Channel 7 has requested records from the trip. Pinnacol has said no and asked the Denver District Court to conclude that these expenses fall under an exemption to the Open Records Act that the trip’s cost is related to its “business records relating to the determination of rates that are not required to be disclosed by any other insurance company.” Pinnacol complied with a request for similar information last year.
The question for Pinnacol to answer now is, “What planet do they live on?” We’re in the middle of a terrible recession where people are losing their jobs every day. Congress is in the process of passing legislation concerning abuses in financial industries that have left the country outraged. Excesses such as the ones illustrated by the Channel 7 report would always be questionable, but are crazy in this environment. Pinnacol’s CEO threatened a television reporter and photographer on camera and had to be physically constrained. Maybe the $495 it cost for him to play golf would have been better spent on anger management or media training!
Shortly after returning from the Pebble Beach trip, Pinnacol announced that it was returning $47.5 million to its policyholders in the form of dividends. According to Pinnacol’s news release, the dividends averaged $900 per customer. It cost more for the board’s chair and his wife to play golf at Pebble Beach than the average policyholder received. And while Pinnacol seems quite proud of the dividends it makes each year, it still seems odd to me that its policyholders are not outraged about the costs of their premiums. Wouldn’t they be better off paying less for their workers’ compensation insurance than paying it and getting a partial refund later?
Pinnacol is not a state agency, but it is not a typical private company either. It is obligated to sell insurance to any Colorado business and enjoys the benefit of not paying premium taxes. Its board members are appointed by the governor and confirmed by the state Senate. Its board and policyholders should be outraged by this latest episode and the arrogance it illustrated. Changes should be significant and implemented swiftly.
Greg Romberg is president of Romberg and Associates, a government relations and public affairs firm. He lives in Evergreen with his wife, Laurie, and three daughters.