What's happening now with Pinnacol, is that the Colorado legislature wants to siphon off 500 million dollars in Pinnacol's reserves in order to fill gaps in that state's budget. This attempt to "raid" the reserves failed recently after Colorado Attorney General, John Suthers, questioned the legality of the move and Colorado Governor, Bill Ritter, indicated he would veto efforts to tap the reserves.

Well, in a similar but different way in California, the Governor, Arnold Schwarzeneggar, wanted to sell off 1 billion in assets from California's State Comp in order to fill gaps in the California State budget.  But, California Insurance Commissioner, Steve Poizner, vehemently opposed the action, feeling the move would weaken State Comp and drive up workers' comp rates, thus exacerbating unemployment in California.  Poizner felt so strongly in his opposition to the idea of selling State Comp's assets, that he actually sued the state of California in opposition to the intended action.  All this happened in the Summer from July 2009 through September 2009.

During July when Schwarzeneggar campaigned to sell off 1 billion in State Comp's assets, I thought it was a great idea.  I wondered why State Poizner was so hell bent against it. After all, I thought, he's a good Republican.  Why doesn't he want to give more business to the private sector and just let them compete for it? This would drive down the costs of work comp insurance, through competition. This is definitely a stalwart Republican attitude, so what's his bag? 

I have called Steve Poizner three times and written him three letters since the middle of the Summer, but I have not succeeded in talking to him or getting him to correspond with me in writing. I wish I could get my hands on his cell phone number.  Any body have it?  If so, please give it to me. 

Well, since I haven't succeeded in communicating with him directly, I can only understand him from what I read from other journalists who have written about him, and directly from the political actions he has taken.  Thus, I can only speculate.

I guess now that Steve might think selling off some State Comp assets would be a good move for the long term, but he's very worried about the short term, and that it might severely drive up work comp rates instantly short term and that this would exacerbate California's present unemployment problem.  With the unemployment rate now in California at higher than 12 percent, Poizner is very concerned about exacerbating unemployment in the here and now, yet he might feel that in a better economy, selling off State Comp would be a good idea. Even if work comp rates went up immediately, they would diminish over time through natural competition.

So, it's a timing issue. Since his role with the private sector is only advisory in disallowing workers' comp rate increases, he feels he can keep work comp rates down by having a larger CA State Compensation Insurance Fund for the moment, and forcing the industry to work on the problem of out-of-control medical costs. 

This is the problem Steve is insisting that insurance companies work on immediately: creating greater efficiency in their medical cost containment programs.

Poizner commented in recent articles published that all of the medical cost containment guidelines offered through SB899 have not been fully exploited yet, but that self-insureds have taken the lead in creating effective systems of medical cost containment.  He indicates that insurance companies have lagged behind. So, I am guessing, he doesn't want to give his blessing to insurance carriers to raise their work comp rates while they sit on dysfunctional medical utilization review processes and waste within their non-customized MPN networks.  For excellent details on the wastes within the work comp medical treatment system, see Maureen Kohl Bennington's article on www.adjustercom.com from September 2, 2009:  http://www.adjustercom.com/modules.php?mop=modload&name=News&func=article_view&adj_article_id=1214&wherefrom=archive

Now today in November 2009, Pinnacol Assurance's board has taken a position against legislative measures to:

• Limit Pinnacol’s reserve surplus.

• Change the composition of the insurer’s board to represent non-management workers and injured workers.

• Double penalties for insurers who wrongfully deny or delay claims.

• Limit surveillance techniques for workers’ comp insurers.

• Prohibit insurers’ employees from receiving bonuses for denying claims.

Gary Johnson, Pinnacol’s board chair, said, “These bills have the potential to drive up workers’ compensation costs in Colorado..."  Here's that fear of driving up work comp costs, just like Poizner has, as well as the implication of exacerbating unemployment.

Johnson went on, "...as well (it's) an inappropriate intrusion of the legislature into the operations of a company that, by statute, is directed to operate as a mutual insurance company.”

Johnson added the Pinnacol board was particularly concerned about the proposal to limit Pinnacol’s surplus. The bill, sponsored by Rep. Su Ryden, D-Aurora, limits the insurer’s surplus to 800 percent of risk-based capital and requires Pinnacol to issue dividends to policyholders.

“This bill is dangerous,” Johnson said. “The board, which is appointed by the governor and confirmed by the senate, is charged with making decisions regarding rates, surplus levels and dividends and this bill inappropriately limits our authority. It also limits our ability to be flexible in responding to market conditions. Pinnacol has issued a general dividend for the past five years, returning nearly $350 million to Colorado businesses.”

Johnson called the proposal to change Pinnacol’s board composition unnecessary, adding that the insurer is a multi-billion-dollar company that needs board members with experience and expertise to make critical business decisions.

But the board came out in favor of a proposed bill that would require workers’ compensation insurers to survey injured employees at the close of each claim and report results to the Colorado Department of Labor and Employment. It also supported a bill that would require employers to provide injured workers with a brochure describing the process for receiving workers’ compensation benefits.

Democratic lawmakers charge that Pinnacol spends too much on employee salaries, perks and entertainment while unfairly denying injured workers' claims. They also take issue with Pinnacol’s practice of spying on injured workers suspected of defrauding the system.

In my opinion, no legislature should limit or put a damp rag on insurer's right to "spy" on injured workers suspected of fraud.  Suspected fraud needs to be investigated, and Subrosa, which means "under the rose", a term which comes from an old tradition of hanging a rose up over a table when communications done at the table are to be highly secretive, needs to be allowed to get information about suspected malingerers.  For insurers to be denied the right to investigate through filming, for example, could serve to drive up the cost of workers' compensation, for without these investigative techniques, more liars, fakers, and malingerers would be able to collect work comp benefits fraudulently.

Pinnacol Assurance is chartered by the state of Colorado, yet in recent years has operated like a private business. The insurer covers 57 percent of Colorado businesses and roughly 1.5 million workers in the state.

Readers may write to writer Lonce LaMon at lonce@adjustercom.com