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UNDER THE GOLD DOME
Even while Coloradans root for the state’s economy to get back on its feet, some lawmakers just can’t control their hostility to business. They’re limbering up to throw punches at struggling employers. Whether they succeed depends on how effectively employers and others engage during the Legislature’s 2010 session.
A case in point is the interim committee that took aim this summer at Pinnacol Assurance, the state’s largest workers compensation carrier. The committee’s recommendations combine economic malpractice and unnecessary sausage-making at their worst.
The committee’s proposals will drive up workers compensation cost, hurt job growth, and slow Colorado’s recovery. In its final meeting the committee approved a slate of bills designed to push up the value of compensation payouts, tie the hands of employers and carriers in opposing fraudulent claims, change management practices at Pinnacol and other carriers, and tilt the process in favor of claimants against employers.
Among other changes, the bills alter Pinnacol’s board, creating reserved seats for non-management and injured employees; substitute a political formula for the Pinnacol board’s judgment on appropriate reserve levels; restrict the use of surveillance in investigating suspected claims fraud; require comp carriers to survey the satisfaction of all claimants at the end of their claim and tally and report the results to the state; and change employee compensation practices at comp carriers.
Space considerations bar full discussion, but each measure is problematic. The last item, about pay for employees of comp carriers, reflects a continuing obsession to demonize a wretched practice: paying adjusters bonuses to deny claims. Problem is, (the good news actually) it doesn’t happen in Colorado. But the accusation sounds so awful it’s a hard bill to oppose. Even so, the House last year killed a similar bill that would have covered all insurers, because there was no evidence of the practice in Colorado.
Undaunted, committee members advanced a new and perverse argument, reasoning that employee compensation tied in any way to company success rewards denying claims, because more denials means more profit. By such logic, Kelloggs couldn’t pay profit-sharing because it means workers must be skimping on two scoops of raisins in every package of raisin bran. This goes beyond harmless crusading symbolism and slams sound management.
Politicians overreaching to meddle with dynamism and incentives isn’t new, but the timing is bizarre. Why, in the deepest recession in modern times, unemployment nearing 10 percent and the state budget scraping bottom, is a legislative interim committee trying to jack up workers compensation costs?
The Pinnacol Committee’s work is best understood as accidental sausage: the result of a collision involving budget deficit politics, a large Pinnacol reserve, political embarrassment, and the trial bar agenda of the Pinnacol committee’s chair.
Readers of this newspaper are probably familiar with the flurry last session that spawned the Pinnacol Committee. Desperate to fill a gaping hole in the budget, lawmakers proposed to seize $500 million from Pinnacol’s robust reserve account. The fact that state law makes Pinnacol a self-governing company responsible for managing its assets to benefit policy holders was no obstacle. Lawmakers proposed to scrap the law and subject Pinnacol to total political control.
The scheme met unexpected resistance, however, from outraged employers whose premiums funded the reserve, and from Pinnacol management, which mounted a formidable defense. Still, lawmakers refused to let the bill die. Instead they amended it into an interim committee to study Pinnacol’s operations.
The original purpose of Senate Bill 281 quickly faded. Committee proceedings were distorted throughout by a chairman who, as an attorney that has represented claimants, saw her job less as chair and more as narrator-advocate. Her story was essentially Upton Sinclair meets Colorado workers compensation law.
To the committee’s chagrin, however, most the information that came out about Pinnacol confirmed it is very well run and serves Colorado fairly and well. The committee majority ignored these inconvenient facts: Pinnacol turned around a huge deficit it inherited from an earlier state-run entity. Workers compensation rates in Colorado have dropped over 45 percent in five years.
Pinnacol is respected in Colorado and nationally for its programs to control costs and educate employers to make workplaces safer. Insurance agents and attorneys for both employers and workers testified that Pinnacol is better than most at being open and transparent and handling claims fairly and efficiently.
The business community that values Pinnacol’s work turned out in significant numbers to praise the company and ask lawmakers not to interfere with a good thing. They were ignored too. Because in the end, the target isn’t Pinnacol. It’s employers and cost controls on workers compensation.
The effort to water down workers compensation reforms will resume in January. Those who care about protecting Colorado’s jobs and growth should be there, or make sure their values are represented.
Sen. Shawn Mitchell, R-Broomfield, is an attorney and member of the interim committee examining Pinnacol Assurance Corp. He can be reached at 303-866-4876 or via e-mail at mitchell@mitchellforColorado.com.
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