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Editorial: More protections needed on Pinnacol

Thursday, August 26 2010

The Aurora Sentinel
By The Voice of Aurora
August 25, 2010

The Pinnacol Assurance flap is far from over.

Pinnacol officials earlier this week tried to put a sense of finality on their recent spate of troubles by saying they’ve change their internal structure to avoid another case of overcharging policy holders.

Perhaps. The state’s largest workers’ compensation insurer was slapped Tuesday with an $80,000 fine and an agreement to pay some policyholders their share of $15 million in refunds. The Colorado Division of Insurance auditors found the quasi-governmental insurance giant had indeed overcharged some customers and didn’t follow rate-setting procedures for eight years.

In response to that, Pinnacol officials said they hired someone whose job it is to ensure they follow procedure, and that should be the end of that.

Not so fast. A state panel led last year by state Sen. Morgan Carroll pointed out a long list of irregularities and problems with the agency, which still have not been addressed or solved.

During weeks of hearings, it became clear that salaries, bonuses and perks in the company were out of control, despite a governor-appointed oversight board that clearly has little to do with any oversight.

The state hearings led to a spate of legislative bills aimed at reeling in the rogue agency, much of which Pinnacol was able to fend off.

It’s too bad, because the bills were aimed at protecting taxpayers, policy holders and those injured on the job.

These and other questionable incidents make it clear the state needs to ensure there is impartial oversight of Pinnacol dealings. Earlier this summer, a report released from the Colorado Office of the State Auditor shows just how urgently Colorado’s largest workers compensation fund needs effective, impartial oversight — now.

The report details in no uncertain terms that Pinnacol Assurance’s CEO and vice presidents have been handsomely compensated by any measure.

In that report, the state audit bureau showed that between 2006 and 2009 when most out-of-state public workers compensation funds salaries were on the decline, executive pay at Pinnacol increased. Similarly, compensation for CEOs at other statewide semi-public entities has not increased as dramatically as that of Pinnacol — and in some cases, compensation has decreased.

Indeed, Pinnacol’s executives have awarded themselves substantial bonuses over the past few years totaling more than $1.9 million in bonuses from 2007 to 2009.

A tip led Channel 7 reporters to follow Pinnacol officials on a wild junket to a swank southern California getaway earlier this year. Such opulent spending has continued to raise questions about the agency. When Channel 7 reporters tried to get information about how much the junkets cost, they were met with stonewalling and obstructionist ploys. Channel 7 recently won the backing of local courts to get that information and help shed some light on Pinnacol’s financial dealings.

There are still plenty of unanswered questions when it comes to Pinnacol’s operations.

State officials must  find a way protect taxpayers and protect the businesses that dump millions into Pinnacol’s coffers each year in workers compensation insurance premiums and open this agency to much-needed public scrutiny.