Major Restructuring of Colorado’s Biggest Workers’ Comp Insurer Being Considered

According to workers’ comp laws in Colorado, the vast majority of businesses must purchase insurance for their employees to cover on-the-job injuries.

Pinnacol Assurance is not only the state’s workers’ comp insurer of last resort, it also covers a majority of workers in our fair state – 57% according to most recent estimates in fact.

Pinnacol traces its beginnings way back to 1915 when it was formed shortly after passage of the state’s workers’ compensation act. Since, it has been an insurer of last resort – assuming policies regardless of risk or size of organization.

In or around 1987, Pinnacol transitioned from a state-agency to a quasi-public authority to allow more flexibility in operations. This opened the door to Pinnacol being run more like a business rather than a government agency.

Since ’87, Pinnacol has been structured as a political subdivision of the State of Colorado and operated as a mutual insurance company, with policyholders having a major stake in the company.

Last year though, Colorado Governor John Hickenlooper convened a task-force to examine Pinnacol’s proposal to turn itself into a privately-held mutual insurance company owned by its policyholders. In the proposal, the state would get a 40% stake in the new company worth about $340 million.

The governor supports this proposal since it is slated to net $13.6 million in dividends each year, monies that will be committed to education and economic development in the state.

If the restructuring proposal is passed by the General Assembly, other changes to Pinnacol could include:

  • Allow the company to offer additional lines of insurance (i.e. property, casualty)
  • Allow the company to write policies in neighboring states
  • Require the company to pay state and federal taxes. Under its current structure, Pinnacol is tax-exempt.
  • Company joins Colorado Insurance Guaranty Association and receives rating from A.M. Best
  • Rather than all 9-board members being appointed by the governor, 7 will be appointed by policyholders and the remaining two by the governor.

According to company documents, customer service, benefit payouts and other factors important to injured workers will remain the same. Membership in the Guaranty Association will provide an additional layer of protection to injured workers.

Business leaders in the state though have some reservations about the re-structuring. Many contend the move could result in increased premium costs for them.

“Colorado has had the lowest workers’ compensation rates in the nation, anything that would add to the rising cost of workers’ compensation rates we have great concerns about,” comments John Brackney, president of the South Denver Metro Chamber of Commerce.

Many individual businesses and organizations like the Chamber of Commerce are awaiting the Task Force’s recommendations before either endorsing or opposing the measure. State-director of the National Federation of Independent Businesses, Tony Gagliardi, cautions legislators to take their time in reviewing Pinnacol’s proposal.

The governor’s task force, which is comprised of all stakeholders in the company (…including injured workers), is set to issue its recommendations in early February.

We’ll stay on top of this developing story and report back on how the General Assembly decides to move forward. And of course, we’ll detail how this will affect our #1 priority, injured workers.