Privatization of Pinnacol stalls: Group that heard testimony says state oversight necessary. [The Pueblo Chieftain, Colo.]

Feb. 24--DENVER -- A group of lawmakers that heard six days of testimony about the practices of Pinnacol Assurance before this legislative session began oppose privatization of the workers' compensation insurer.

A letter to Gov. Bill Ritter from members of the joint committee obtained Tuesday by The Pueblo Chieftain cites testimony that spotlighted the company's executive spending habits, reluctance to pay claimants and "lack of accountability and oversight" as reasons to abandon abandon ongoing discussions about privatizing the quasi-governmental insurer, presently under auspices of the state.

Democratic Reps. Sal Pace, of Pueblo, Joe Mikloski, of Denver, and Su Ryden, of Aurora, and Sens. Morgan Carroll, of Aurora, Lois Tochtrop, of Thornton signed the letter.

Pinnacol has offered $200 million to break its link with the state, which presently exempts it from state taxes and seats its board by appointment. Ritter's office is entertaining the proposal as a way of cutting into the $1.3 billion deficit that awaits lawmakers during the 2010-11 fiscal year and more deficits forecast beyond that.

Pace, who chaired the interim committee, said the $200 million figure is absurdly low, given the company's assets of $2 billion. Pinnacol's proposal to privatize seeks to terminate pending bills in the Legislature that, among other things, would limit circumstances under which it could conduct surveillance on claimants.

"I don't know if this falls under the bribery laws, but it definitely stinks," Pace said. "I think the bills aimed at keeping Pinnacol in line, including my surveillance bill, become even more important to pass if it's privatized."

Moreover, Pace said less oversight of the company would be a misstep, given what he characterized as Pinnacol's less than stellar track record.

"Under state supervision Pinnacol's overcharging customers and underpaying injured workers," Pace said. "How's that going to change if they privatize?

"During this recession one thing we've learned is that the market doesn't police itself. There's no way Pinnacol will get better at the things that worry us about them if they're privatized."

Investment banking firm Morgan Stanley is reviewing the possible switch for the state. Senate President Brandon Shaffer, D-Longmont, was quoted in The Denver Post on Tuesday as opposing the privatization proposal, and said he would reject attempts to add it to the Senate calendar as a late-status bill.

On Tuesday, Shaffer affirmed his position during an interview with The Chieftain, and declined to elaborate on why he opposed privatizing Pinnacol.

Speaker of the House Terrance Carroll, D-Denver, is more open to allowing a late bill in the House, where passage would obligate the Senate to hear it. However, assigning the bill to multiple committees of the Senate could essentially filibuster it for this session.

A prepared press statement from Pinnacol said: "Although many details remain to be worked out, Pinnacol's overriding obligation is to its policyholders and to Colorado's injured workers and their families. Any continuing discussions on all the relevant issues will be conducted in a framework of candor and careful consideration. As a result, Pinnacol will limit its public comments while discussions proceed."

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