Re: “Deferring action on Pinnacol OK,” Feb. 11 guest commentary.
We agree with commentary by the American Insurance Association: The job of restructuring Pinnacol Assurance into a mutual insurance company needs to be done right.
The Pinnacol board of directors and Gov. John Hickenlooper agree that restructuring Pinnacol has many long-term benefits for all stakeholders. Our focus is to create a stable and financially sound workers’ compensation system for Colorado employers and their injured workers.
The board and Gov. Hickenlooper have decided additional time is required to thoroughly investigate and address these concerns. Pinnacol’s current business model — selling one product in one state — constrains its ability to respond to rapidly evolving business conditions. The conflicting mandates that govern Pinnacol operations — political subdivision and mutual insurance company — along with the ambiguity regarding ownership rights put the company at risk. By settling these questions, the primary risks of the current structure are eliminated.
The proposal to restructure Pinnacol offered solutions for addressing the residual market and the liabilities resulting from Pinnacol joining the Colorado Guaranty Insurance Association. Pinnacol acknowledges there are other options, and is open to discussion. We are committed to doing what is fair and cost-effective in order to ensure that premiums do not rise for the residual market.
Pinnacol is also committed to ensuring service does not decline for employers or injured workers and that the stable workers’ compensation system that has made Colorado a business-friendly environment remains secure.
Other state-sponsored workers’ compensation funds — Utah, Missouri, Kentucky and Texas — have transitioned to mutual insurance carriers and maintained some ties to the state. The restructuring, as envisioned in the Pinnacol proposal, would have the current board replaced and the majority of the new board of directors — six — elected by policyholders. The governor would appoint the other three until such time as the preferred stock is no longer outstanding.
As part of restructuring, it is reasonable for the state of Colorado to receive consideration for providing Pinnacol with its original capitalization, the exemption from payment of premium taxes, and support in the years when the company had an insufficient surplus. Such consideration supports a public purpose and follows the precedent set in 1998 when Blue Cross Blue Shield of Colorado was sold to Anthem and a portion of the proceeds were used to establish the Caring for Colorado Foundation.
The idea of Pinnacol’s consideration to the state supporting the Colorado Futures Fund is prudent. Changes need to be thoughtful and made in the best interest of all stakeholders. We look forward to further discussions and a solution that ensures Colorado employers, injured workers and the people of Colorado have a strong and stable workers’ compensation system.
Blair E. Richardson is chair of the Pinnacol board of directors. Ken Ross is president and CEO.
