Monday, April 13, 2009

Pinnacol Part 2...Why the Politics?

Colorado legislators are seeking some $500,000,000.00 from Pinnacol (the state's largest workers comp insurer which is also a political subdivision of the state) to help the state with education and perhaps other worthy matters at a time when the state is economically hurting. This has triggered much political debate and cries of foul from Pinnacol. Given the amount involved it seems clear that it is becoming a major battle. Money talks so they say. I must admit that Pinnacol has rallied much support that its excess funds are not up for the taking. This is well organized. Look at the Denver Post article with a photo of Pinnacol supporters. From what I have researched it appears that Pinnacol has $2 billion in reserves much of which came from insurance premiums and reduced benefit payouts. Of this amount some 700 million is excess or essentially slush money. The legislators seek 500 million and Pinnacol says that is wrong. What is certain here is that Pinnacol is far from being a private company. It was set up by the state, has a board appointed by the governor, does not pay taxes and has accumulated a huge surplus. Here is a quote from State Senator Carroll:

"Pinnacol is now trying to claim that they are like a private company, even though the statute says they are a “political subdivision”. This solution is not easy and not popular either.

"Pinnacol has managed to mobilize the business community in its defense. The business community should be pondering how much they have been overcharged in premiums for the company to have $700 million in surpluses above and beyond the $1.3 billion they have in reserves for known and anticipated claims."

It also appears that another bill was introduced to force Pinnacol to disburse back 5% to its policyholders (businesses) who also seem to have contributed to this huge growth. Clearly Pinnacol has made huge "profits" so does that state have a right to control some of that for the well being of its residents? The important thing to realize here is that Pinnacol is a hybrid that operates as a public and private business. But once it made huge sums it was bound to be considered as a source for state budget money. It was just as likely that big money makes Pinnacol want to remain big and private.

For injured workers I doubt this will have much impact. This seems more like an argument as to who gets the extra money. But what does seem a big concern is why was there so much extra money that accumulated? Could it be that businesses were charged too much or injured workers received too little? Makes you wonder....but this political issue is all about money and who controls it.

No comments: