September 29, 2009
Colorado's non-profit state compensation insurance fund (Pinnacol) has amassed over $2 billion in assets, $1.2 billion in reserves, $700 million in surpluses and the surplus is growing at a rate of about $100 million per year. Our state workers compensation fund, Pinnacol, insures 57% of the market, 55,000 businesses and covers 1.5 million employees in the State of Colorado.
The extraordinary level of surpluses have raised questions about whether policyholders are being overcharged or whether injured workers are receiving the benefits they should.
The State of Colorado has oversight responsibility for all government and quasi-governmental entities in Colorado. Pinnacol is no different.
The committee heard testimony about several things that Pinnacol does well. Their employees generally find it a good place to work, their safety and injury prevention programs have earned the accolades of many, and their volunteer and foundation programs have left many grateful recipients. Likewise their "association marketing fees" and dividends are well-liked by those who receive the funds.
The input from injured workers, their advocates, from employers and from Pinnacol was not to privatize nor to return to a full state agency but to leave Pinnacol in its current structure as a quasi-governmental agency. Many employers were satisfied with having this public option for workers' comp insurance. The committee listened and will not seek to change the structure of Pinnacol.
There are problems, however, that came to our attention, which would be irresponsible to ignore.
*Extravagent Spending, Perks, Junkets. (hundreds of thousands of dollars in Pinnacol expenses on golf outings, retreats at luxury hotels, trips and lavish meals that included a $2,500 dinner with $144- per-plate lobster and $115 bottles of wine, paying for CEO's wife for retreats where CEO wasn't present for business). (See Receipts).
*Executive compensation packages that are far in excess of those typical for state compensation insurance funds (2002 avg = $268,000, Pinnacol = $419,000), far exceeding the state's usual pay scale and not in compliance with the 2003 audit. . The current CEO pay at Pinnacol is at $448,812.64. (See Pinnacol Annual Financial Statement and 2003 Audit Report).
*Inflated Premiums by NCCI: The rating entity by the insurance industry NCCI is regularly setting rates higher than those recommended by independent actuaries (by ~ 10%!). (2006 NCCI +5.9%, Independent Actuary -5.9%, (2007 No changes), 2008 NCCI – 0.6%, Independent Actuary -16%, 2009 NCCI – 9.7%, Independent Actuary -19.8%. (See Rate Chart).
*Medical providers reported difficulty in getting treatment approved, bills paid, and getting access to all of the necessary documentation to review claim. Providers are now reporting difficulty in getting approvals or payment even for care within the medical treatment guidelines (See Physician Testimony).
*Injured workers had difficulty with denied claims, denied medical treatment and prompt payment of reasonable and necessary medical care. Some workers testified that Pinnacol's non-payment led to foreclosures, bankruptcy. We also heard evidence that Pinnacol's non-payment led to cost-shifting (to private health insurance, Medicaid or in emergency room visits). We heard from workers who had been crush victims, amputees, fire victims some blinded or in wheel chairs who reporting having to fight Pinnacol at every step of the way. (See Worker Testimony, Letters)
*Pinnacol has financial incentives to deny of claims and medical treatment. Some of the problematic bonus structures include basing bonuses or gainsharing on "net income" – total minus claims paid, the number of days prior to medical discharge (MMI), time for claim closure. These financial incentives exist for everyone but most problematically claims managers, nurse case managers and even the Medical Director. This is a direct financial conflict of interest with the statutory purpose of Pinnacol and workers compensation. (See Pinnacol MBOs, Gainsharing Reports)
*Injured workers also reported frequent harassment with surveillance and while Pinnacol spent $4.7 million in surveillance on thousands of workers, only 10 workers (out of 50,000+ claims) were actually convicted of fraud (0.02%). (See Witness Testimony, Pinnacol Document on Surveillance).
These issues are real and compelling and can be addressed with some simple, common sense solutions. Most of the proposals coming forward focus on a few common sense themes designed to help the current system work better:
- increased transparency & accountability
- improving enforcement of existing law
- giving workers plain language notice of their rights under current law
- removing conflicts of interest in the system
The committee is not looking to:
- sell or transfer any of Pinnacol's current assets
- change the legal structure of Pinnacol or its function as carrier of last resort
- make any sweeping changes to Colorado workers comp laws
For copies of all materials provided to date you can visit:
The following recommendations were passed out of committee for modest, but essential improvements:
Rate Reduction Act (Ryden – Tochtrop):
- Lower Premiums: Lower Rate of NCCI or Independent Actuary Unless Good Cause
- Transparent Rate Filing: – Open to Public for Review
- Increases Dividends: Dividend Trigger 800% RBC well above solvency requirements or other CO carriers.
Workers Bill of Rights (Miklosi – M. Carroll):
- Notice to Injured Workers Upon filing of Claim of their Rights Under WC
Pinnacol's Board Transparency Act (Miklosi – Hodge):
- Balance the Board: Add injured worker, 2/3 employees non-management, Dir. DOL
- Public Notice, Publicly Posted, Opportunity for Public Comment
- Board Compensation X$ Amount –$250 per diem.
Injured Worker Privacy Act (Pace – M. Carroll):
- Requires reasonable basis to suspect fraud prior to triggering surveillance
- Gives injured worker right to expedited hearing to challenge
- Gives injured worker right to receive all materials
Transparency Act (Hodge – Ryden):
- Restore Annual Oversight Report
- Put Division of WC Complaint Process Online
- Survey Feedback from Injured Workers: Results Posted Publicly
Conflicts of Interest (M. Carroll – Miklosi):
- No Financial Incentives or Bonuses to Delay / Deny Claims / Medical Treatment
- Disclosure of Financial Interests in Division IME Panel:
- No Reversionary Interests to Self (Pinnacol / Carrier) upon death of injured worker
- No ex parte 3rd Party communications with physicians unless in writing or in presence of patient
Penalties (Tochtrop – Pace):
- Increases Penalties (unchanged in decades) to Better Enforce Current Law
- Changes Willfully to Knowingly regarding penalty for unpaid bills
These bills will be considered by the Legislative Council Committee on November 10, 2009. Bills passed from there will be considered as part of the regular 2010 Legislative Session.
September 29, 2009
CollegeInvest is an "enterprise" within the Colorado Department of Education that was created to increase access to higher education by (1) issuing bonds (to go for originating / purchasing student loans); (2) administer state's "529″ college savings plans; and (3) administer various scholarship and loan forgiveness programs.
Yesterday in audit committee we heard the results of the recent audit and there are finding we should all be concerned about:
- The Early Achievers Scholarship Trust Fund should have been disbursing 5% of fund's value in scholarships or $3.8 million in scholarships. The fund actually disbursed only $91,000 to 76 students, or 0.1%.
- CollegeInvest has spent almost $10 in administrative costs for every $1 that has been disbursed in scholarships.
- The Trust fund investments averaged -4.8% annually which was below its peers at -1.3%.
- The Service and Opportunity Scholarship failed to give out 330 out of 565 Service Scholarships and Opportunity Scholarships (58% of available scholarships NOT given out).
- CollegeInvest failed to give out $860,000 of $1.8 million available in scholarship funds under the Service/Opportunity Scholarship.
- The loan forgiveness program for nursing teachers has only served 11 participants since 2007 and CollegeInvest is requiring that it be one of their loans to participate.
- Administrative expenses are high and the program has 37 FTE. The proportion of FTE to students served is pretty seriously out of whack.
- Review of 40 sample administrative expenses revealed 7 that were questionable (18%) either due to donations which are prohibited in the state constitution, due to meals not documented with an official function, payment for family members, insufficient document, prohibited spending for contract lobbyist, or lack of cost allocation and conflict of interest.
- The Auditor found inadequate documentation for approvals or authorizations for 53% of the expenses reviewed.
- The Board of CollegeInvest approved a $10,000 "sponsorship" or donation of funds to a non-profit who is headed by a member of the CollegeInvest Board.
- The Board also chose to invest 60% of its portfolio into itself in the form of student loans. This is not typical for other state portfolios.
Folks the funding for these programs comes in no small part from the profit they are making on student loans. Failure to provide the required scholarships means not only are students paying for it in the terms of their student loans, but they are paying for it again in the form of lost scholarship opportunities.
To read the full audit and the recommendations go to:
September 23, 2009
I have endorsed Andrew Romanoff in his bid for U.S. My statement is reproduced below.
"The ultimate measure of a man is not where he stands in moments of comfort, but where he stands at times of challenge and controversy." – Martin Luther King, Jr.
I am writing to you today to let you know that I am proud to endorse Andrew Romanoff in the race for United States Senate. Some of you know that I had the honor of serving with Speaker Andrew Romanoff for 4 years in the Colorado House.
Andrew has worked tirelessly to deliver our state from the brink of bankruptcy (Ref C), to repair and replace aging school buildings in Colorado (BEST), to give remedy to patients who have had health care claims wrongly delayed or denied. He has been firm on the side of civil, constitutional and human rights at every turn.
Even in some of the hardest and most controversial times, Andrew insisted on human decency and courtesy and could diffuse even the most explosive situations with his wit and focus on substance.
Andrew is a dedicated public servant who has an exceptional grasp of a wide range of public policy issues and an unparalleled ability to work with others to get important problems solved. I think he has the right vision for the future of Colorado and the right leadership skills to get us there.
Primaries can be difficult. Sen. Michael Bennet is also a very smart and committed public servant. Colorado would be well represented with either of these men in the Senate.
To serve with Andrew is to see him in action. I feel honored to have served with someone who is so capable of putting the public interest above all else. We need those skills now more than ever.
If you feel as I do, please consider donating to or volunteering for Andrew by visiting:
September 19, 2009
This morning there was a forum for immigration reform and the Queen of Peace Church in Aurora. The common theme was different angles on how the current system for immigration is broken and that we need comprehensive immigration reform now.
Father Lally opened with comments about how our current laws are outdated and do not match the reality of people's lives and that our failure to act actually undermines the security of our borders. He noted that the Conference of Bishops have called for reform that includes:
- a path to citizenship
- protection for all workers in the US
- a family-based immigration system and reduction in backlogs
- restoring some due process rights, and
- acknowledging need for economic development in other countries.
Jenny then spoke about how she and her family came to the U.S. for a better life, lived in Colorado for 13 years, paid taxes, worked and never had any trouble with the authorities. Her 2 young children are U.S. citizens. When her husband was diagnosed with Cancer and became too ill to work, she picked up 3 jobs, and even then was falling further behind on her mortgage. When her car failed emissions she didn't have the money for the necessary repairs and couldn't afford to renew her driver's license. She was pulled over by police asked if she was "legal" or "illegal", taken to jail and put on an immigration hold while her sick husband stayed home and cared for the kids. She was transferred to an immigration facility where further humiliated, left in cold conditions, got sick and wasn't given care for over a week. While she was eventually released, she incurred a $2,700 impound fee, lost her jobs, and owes money to the attorney that helped with her release. Jenny urged that families should not be separated and the need to address immigration reform.
Jesus is a 12 year old community organizer who goes to Cesar Chaves Academy. He is a U.S. citizen who is the son of parents who originally immigrated from Mexico. He asked us what kind of community do we want to live in? Do we want a community of divided families? A community where education opportunity is cut short? A community where we fear police? Or do we want a community with a strong family foundation, where we can achieve our educational and career goals and dreams and partner with the police and law enforcement for a safe, thriving community?
U.S. Senator Michael Bennet attended and said that it is unacceptable to have 12 million people living in the shadows of our laws and that we need comprehensive immigration reform. He highlighted the appointment of Justice Sonya Sotomayer to the U.S. Supreme Court as something we can celebrate that if we get a good education and work hard, that we can achieve anything. He also mentioned that his mother immigrated from Poland escaping World War II at the age of 12 to the U.S. and did not speak English at the time. She learned, found housing for the family and figured out when, where and how to get herself enrolled in school. He said he was a proud co-sponsor of the Dream Act, Agriculture Act and a Small Business Act. He opposed the building of the wall and the mandate to use e-verify. In calling for comprehensive human reform he concluded that "we are all God's children."
Reverend Larry Brown next spoke and reminded us that in the 1st 100 years of this country's history, immigration was virtually unregulated. People arrived, got off the ship, and tried to realize their American Dream. While he talked about the great promise and ideals of this country, he reminded us that the author of the Declaration (Thomas Jefferson) was a slave owner and that we have always been a land contradictions. Not long after, we saw some of the first waves of immigrants express backlash against the new immigrants. By 1798 the U.S. had passed the "Alien & Sedition Act" severely restricting free speech rights and other political rights of French and Irish immigrants. By 1882 some prior generations of immigrants began to feel threatened by Chinese immigrants that were competing for jobs and passed the Chinese Exclusion Act, which wasn't repealed until 1943. He called for respect for the law, but also the need for dignity for all human beings. He called for:
- a pathway to citizenship,
- rights for all workers,
- no wall, described as a Medieval practice.
He said that our national security requires gaining the goodwill of our neighbors and passing laws that support the humanity of all, and challenged us to ask ourselves,
- who is my brother?
- who is my neighbor?
Reverend Mario Mencos then joined us to point out lessons and analogies in Israel and Egypt. He told the group that God has bigger plans.
Alicia talked about working for a company with extreme deadline pressures that failed to pay overtime, failed to provide paychecks in a timely or regular manner, had unsafe working conditions, where workers were yelled at and even had things thrown at them. She held up her scar from where they threw a pair of scissors at her. The employer would threaten workers and call them "wetback" and talk about deporting them. Alicia, who is a U.S. citizen, fought back and sued the employer. After no-showing several times in Court, they filed for bankruptcy to avoid paying the salaries they owed to their workers and simply reorganized under a new name.
Samuel spoke on behalf of workers and that while some people blame workers for low wages, the real reason for low wages is that most our state and federal laws are written to favor large corporations, rather than workers or consumers.
The event was moderated by Alma Mendoza who concluded with a call for all people doing something to ensure that Congress takes up comprehensive national immigration reform as soon as possible.