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In the midst of pushback from industry groups and competitors, Colorado's state-chartered workers compensation insurer has decided against introducing a bill that would allow the company to provide coverage in other states.
Denver-based Pinnacol Assurance, which was established a century ago as the workers comp insurer of last resort for Colorado, proposed legislative language late last year that would have enabled the company to form a for-profit subsidiary to sell workers comp policies in other states. The company clearly stated it was not seeking to privatize, which is something it tried and failed to do in 2012.
But despite an “enthusiastic sponsor” in Rep. Angela Williams, a democrat, and “support from important business organizations,” Pinnacol board members voted on March 22 not to introduce the bill this year, the company said in a statement.
“Not surprisingly, our competitors pushed back hard (and) other groups requested changes to Colorado's workers compensation benefits schedule that had nothing to do with this proposal,” according to the statement. “We will continue to work on our proposal with key stakeholders over the coming months and plan to introduce it in a future session.”
American Insurance Association is among the detractors.
“When a residual market insurer is created by statute, it's created with certain competitive advantages,” said AIA's Fred Bosse, Austin, Texas-based vice president for state affairs in the Southwest region. “For instance, the company is not subject to paying premium tax; they don't have to pay federal income taxes … Any residual market insurer that has managed to get close to 60% of market, which they have, you have to wonder – they must have some advantages over the private market to be able to acquire that level of market share.”
However, Mr. Bosse said AIA would support Pinnacol's expansion and help them through the process if the company decided to privatize and give up its “statutory advantages.”
He noted that state funds in Arizona and Nevada, for example, have privatized, enabling them to sell workers comp policies in other states, including Colorado.
While privatizing might make competitors and industry groups happy, it's not something the company's policyholders are comfortable with, a Pinnacol spokeswoman said. Creating a for-profit subsidiary, on the other hand, would allow Pinnacol to operate on a more level playing field, as several state funds that have not privatized are licensed to sell workers comp policies in Colorado and other states, she added.
“We're not only competing against the big national carriers, but we're competing against counterparts that are either current or former state funds,” the spokeswoman said, adding that “the amount of out-of-state payroll that we are covering has decreased at annualized rate of 11% over last decade or so.”
Pinnacol currently works with Zurich American Insurance Co. to provide Zurich workers comp coverage to Colorado employers doing business outside of the state.
Regarding the company's “statutory advantages,” the spokeswoman said “the burden of being that carrier of last resort outweighs the benefit we get from our tax exemption.”
The U.S. Occupational Safety and Health Administration has published its final rule to revise its eye and face protection standards.