DENVER, CO – Pinnacol Assurance seemed destined to become a privatized entity last year, and Governor John Hickenlooper issued a press release on Jan. 26, saying the initiative is a high priority that would be expedited in this legislative session.
But efforts to fast-track the measure were slowed in early February after Hickenlooper received a letter from Pinnacol Assurance Vice Chair John Plotkin.
“Thank you for the time and consideration you have given to the proposal to restructure Pinnacol Assurance and for the thoughtful conversation that we have had regarding the next steps in the process. The Pinnacol Board of Directors joins you in agreeing that any steps to restructure Pinnacol into a mutual insurance company require additional time to review,” said Plotkin. “We do not want to rush this process.”
On the heels of Plotkin’s message, Hickenlooper issued a public statement, “Clearly, there is more work to do. We look forward to continuing the conversation about restructuring in the coming weeks and months.”
Hickenlooper’s “expedite” media release has since vanished from his website. But, what happened?
It seems some in the business community also had weighed in on the fate of Pinnacol, the state-authorized workers’ compensation insurance provider of last resort, which is funded by the more than 55,000 small and large businesses across the state.
In 2010, those payers weren’t thrilled to learn that Pinnacol spent more than $318,717 to reward executives at a weekend golf getaway inPebbleBeach– revealed by KMGH TV.
But, when talk of privatization arose last year, the group wrote a letter to Pinnacol Assurance President Ken Ross and asked what that would mean.
“During the last decade we have worked side by side with Pinnacol to ensure theColoradoworkers’ compensation system is the best in its class, and we have tirelessly endeavored to protect this crown jewel.”
“From our meeting, it is our understanding the state is interested in considering the privatization of Pinnacol Assurance because it may be an opportunity to establish a fund designated for economic development and education.”
The economic development and education fund would be derived from an estimated $13.6 million annually in dividends under privatization.
“We feel strongly that policyholder reserves and surplus dollars belong to those who paid into Pinnacol with their premium dollars. We must better understand why major structural changes, such as the proposed separation from state control, will benefit the system, policyholders, injured workers, and Colorado’s ability to attract and retain companies,” they wrote.
The consortium posed several questions to Pinnacol; some regarding the state versus private shares in the company.
Under the original proposed privatization plan, the state would have 40 percent ownership in Pinnacol, valued at approximately $340 million. Hickenlooper upped the interest to reflect about $350 million – and that has been a sticking point in the deal.
The consortium of businesses asked Pinnacol about what type of stock would be issued to shareholders, whether or not the stock would be publicly traded, and whether or not the interests of shareholders would be in “first position” or “behind the state’s security interest”.
The group also pressed Hickenlooper on whether or not the Governor would retain the ability to appoint members of Pinnacol’s board of directors after it was privatized.
Another key concern raised by the group is Pinnacol Assurance’s liability to PERA, the public employee retirement program which has struggled financially in recent years, and was subjected to some reforms imposed by the legislature in 2010.
“How many of Pinnacol’s 600 employees are covered under PERA? In dollars, how much is Pinnacol’s share of the unfunded liability? Will this be paid in one-time dollars, or amortized over the 20 years as is allowed under certain pension regulations/laws? What is the process and timeline for separation from PERA?” they wrote.
Additionally, the business entities asked questions about rate increases if Pinnacol is privatized, assurances of profits to stockholders, and what would happen to existing reserves or surpluses.
The letter was signed by representatives of the Denver Metro Chamber of Commerce, Colorado Chapter of National Federation of Independent Businesses, Colorado Hotel and Lodging Association, Colorado Restaurant Association, Colorado Ski Country, Colorado Concern, Colorado Association of Home Builders, Colorado Contractors Association, Associated General Contractors of Colorado, National Electrical Contractors Association, Associated Landscape Contractors of Colorado & Green Industries of Colorado, Colorado Association of Mechanical and Plumbing Contractors, Colorado Competitive Council, and NAIOP Colorado.
The Denver Post reported Thursday that policymakers are continuing to discuss the matter, although it remains unclear as to whether or not a deal can be reached before the legislature adjourns in May.