Two years ago the Colorado Senate voted to loot $500 million in assets from Pinnacol Assurance in order to balance the state budget. It was a lawless raid on money that belonged to the businesses that paid workers’ compensation premiums to Pinnacol, and legislators eventually thought better of becoming pirates.
But it was also a wakeup call for the company, which by law is the insurer of last resort for workers’ comp and as a result enjoys a generous tax exemption. Today Pinnacol’s board is scheduled to consider a restructuring plan more to its liking — one that would largely liberate it from state meddling, eliminate its tax exemption, free it to compete in other markets, and provide the state with a significant “heritage fund” for economic development and scholarships for disadvantaged students.
Meanwhile, Pinnacol would still be required to insure all comers and to maintain its headquarters here.
You may wonder why policy holders would be any more eager today to see some of their past premiums siphoned off for use by the state — and the reality is that they may not be.
“If I were asked today,” says Anthony Gagliardi of the National Federation of Independent Business, “I’d have to say: It’s not broke, so why are we trying to fix it?” But Gagliardi also told me he’s keeping an open mind until he hears all of the details. As well he should. After all, this plan is designed not to punish Pinnacol but to allow it to flourish. And a flourishing Pinnacol might well benefit policy holders.
Moreover, unlike the plan two years ago, this one won’t be shoved down anyone’s throat. “If the policy holders don’t like this … we won’t do it,” Gov. John Hickenlooper told me. Hickenlooper says “we” because the state would have to approve the changes — and also because he’s been deeply involved in the discussions and is sympathetic to the goals.
He sees this as an opportunity to “create value” by letting Pinnacol move aggressively into other markets and compete in other states. If its management team knows what they’re doing — and they seem to — and are able, say, to double the company’s size, it could be a boon both to the state and to policy holders who receive stock in the privatized company when it is set free.
“Money for economic development is hard to come by,” the governor points out, and yet a Pinnacol deal could provide the means to help attract another “20 Arrow Electronics,” referring to the recent decision of the Fortune 500 company to move its headquarters from New York to Arapahoe County.
Even so, attracting the support of both policy holders and lawmakers will involve a lot of heavy lifting. It isn’t only Gagliardi who is waiting for specifics, after all. It’s the leaders of nearly every major business interest in the state, from the various contractor associations to the homebuilders, ski and hotel industries, restaurants, and Denver metro chamber.
Fourteen such groups signed a letter to Pinnacol CEO Ken Ross last month that outlined a number of concerns and questions, including perhaps the most basic: “Pinnacol has run the numbers to be convinced that this proposal is positive to stakeholders. When can we expect to receive those details.”
The irony is that if the deal ultimately founders, it may well be because arguments that Pinnacol itself deployed two years ago are thrown in its face. Aren’t its workers’ comp rates already among the lowest in the nation? Hasn’t it reduced premiums and refunded hundreds of millions of dollars through dividends?
Hickenlooper says every stakeholder he’s been able to explain the concept to thinks it’s a good idea — but then he’s a stellar salesman. The question is whether proponents can bring on board the majority of customers who will never enjoy face time with the governor.
E-mail Vincent Carroll at vcarroll@denverpost.com.
