Pinnacol hearing canceled; insurer set to vote on settlement deal

Denver Business Journal
by Ed Sealover
Monday, August 23, 2010
http://denver.bizjournals.com/denver/stories/2010/08/23/daily18.html

Colorado officials have canceled a rare public hearing planned for Wednesday on Pinnacol Assurance's rates, saying that the workers' compensation insurer has reached a tentative agreement to address alleged discrepancies in the way it calculates its premiums and to pay penalties associated with that.

The Colorado Department of Regulatory Agencies (DORA) said Pinnacol, a quasi-governmental agency that provides workers-comp insurance to 57 percent of Colorado businesses, did not satisfactorily demonstrate that its rates complied with state insurance law in at least four different areas. State and Pinnacol officials were set to present their cases to a hearing officer Wednesday.

But DORA canceled the hearing late Monday afternoon, saying that Pinnacol's board of directors is expected to vote on a settlement agreement Tuesday.

Cameron Lewis, director of consumer education for the Colorado Division of Insurance, said that she could not comment on the details of the proposed settlement until it is finalized and released to the public. But division officials wanted to cancel the meeting to stop any employer who may have been considering traveling to Denver for it from making the unnecessary trip, she said.

"It appears that we've agreed on what was wrong and what will be done about it and what the penalties will be," Lewis said.

Pinnacol officials did not immediately comment on the proposed settlement.

If the board agrees to the terms laid out, however, it could bring at least a temporary measure of calm to the stormy relationship of the past year between the state and its insurer of last resort. The governor appoints the members of Pinnacol's board and the state grants the company tax advantages, but Pinnacol does not receive state funding.

An interim legislative committee held contentious hearings on Pinnacol's finances and claims history in 2009, leading to some minor changes on regulation of the insurer that were passed in the 2010 session. Then in June, a state audit raised questions about whether Pinnacol paid excessive salaries and bonuses and whether its rate-setting policies were consistent with state law.

The hearing was set to address four specific DORA contentions with Pinnacol:

* Whether its Schedule Rating Eligibility Rule discriminates against small employers because the insured business has to buy a minimum premium of $10,000 to qualify for a schedule rating;

* Whether Pinnacol's use of its standard tier-loss-cost multiplier inflates the premiums of some employers paying lower rates and lowers the premiums of other employers paying higher rates;

* Whether Pinnacol's use of "loss history" as a factor in determining business ratings duplicates factors already considered in a company's rating methodology, and whether its use of financial history as a factor is appropriate; and,

* Whether Pinnacol must refund premium increases made from 2002-09 that were based on unfiled rating factors, which is a violation of state law.

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