Talks are underway between Pinnacol Assurance and Colorado state government to consider privatizing the quasi-public insurance provider.
The move could provide a windfall of much-needed cash for empty state coffers, but state officials should proceed cautiously. The long-term implications of such a move need to be fully investigated.
The company, which is charged with providing workers’ compensation insurance to the most dangerous of professions, became the target of an ill-advised, and failed, government raid last spring. It then floated an idea to give the state a one-time infusion of cash going forward in exchange for more autonomy, but never officially submitted such a plan.
Finally, Pinnacol became the focus of a special legislative committee that proposed new regulations that would alter Pinnacol’s makeup and practices. All of the proposals and rancor swirling around what we have called the Pinnacol Follies ought to give any serious negotiator pause.
But before negotiations go too far, the governor’s office needs to contact state Insurance Commissioner Marcy Morrison, who tells us she’s comfortable with the current system because it provides her office with “a nice balance” in its oversight role.
“We have just enough influence … to make sure rates are appropriate,” Morrison said, adding that some employers are concerned that privatizing Pinnacol would increase premiums. Pinnacol says those concerns are unfounded.
“(W)e believe a separation could free us to be even more creative and innovative in . . . serving our Colorado policyholders,” Ken Ross, Pinnacol’s president and chief executive, said.
Last summer the insurer had said it was interested in providing the state a lump sum of the value of 20 years’ worth of back taxes. As a semi-governmental agency, Pinnacol is exempt from paying taxes on premiums worth about $5.3 million a year.
Pinnacol never put a price tag on the offer, but it appeared to be worth more than $100 million, which would remain helpful as the state budget continues to suffer.
But state officials must weigh what’s best for Colorado workers in the long term.
A big Pinnacol payment would come from assets largely derived from policyholders. Officials will need to weigh whether such a deal adversely affects those employers.
Ross says rates wouldn’t rise, and that Pinnacol will refund some premiums again this year — for the sixth year running. If he is correct, and the state could see a continuation of the successful workers’ comp model and a significant cash payment at a time of budgetary crises, that’s clearly an appealing offer.
But given the tumult, and the fact the state insurance commissioner appears more comfortable with the present system in place, lawmakers ought to be wary.
