Interim Committee to Study Issues Related to Pinnacol Assurance (09/18/2009)

Final
STAFF SUMMARY OF MEETING

INTERIM COMMITTEE TO STUDY ISSUES RELATED TO PINNACOL ASSURANCE

Date:	09/18/2009	ATTENDANCE

Time:	09:03 AM to 10:22 AM	Gardner B.	X
		Gerou	E
Place:	HCR 0112	Harvey	A
		Hodge	X
This Meeting was called to order by		Miklosi	X
	Senator Carroll M.	Mitchell	X
		Ryden	X
This Report was prepared by		Tochtrop	X
	Clare Pramuk	Johnson	X
		Meersman	E
		Morrison	X
		Parry	X
		Ross	X
		Simon	X
		Pace	X
		Carroll M.	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
Discussion Public Testimony		- -

09:04 AM -- Discussion

Senator Carroll called the meeting to order and explained that the committee will discuss proposals for bills. The bill drafts would be discussed, debated, and voted upon at the next meeting, on October 16.

Senator Mitchell apologized for a comment he made at an earlier meeting.

Bart Miller and Kristen Forrestal of the Office of Legislative Legal Services (OLLS) appeared before the committee to take bill requests.

Senator Hodge proposed the Accuracy and Transparency Act for all of workers' compensation. The bill would require Pinnacol to provide an annual report to the General Assembly. It would require surveys of injured workers and create a complaint department in the Department of Labor and Employment.

Representative Miklosi asked for drafting of the Pinnacol Board Transparency Act. The bill would require that two employee members on the board be from non-management positions. It would add two new members to include an injured worker and a representative of the Department of Labor and Employment. Pinnacol board meetings would be posted on the Pinnacol website at least one week in advance. Compensation for Pinnacol Board members would increase to $1,000 per month.

Senator Mitchell asked about changing the makeup of the board and how that relates to increasing transparency. Senator Carroll suggested that the committee wait to question bill content until after drafting.

Senator Tochtrop asked for a bill with penalties for violations of the Workers' Compensation Act of up to $1,000 per day where an injured worker's claim has been fraudulently delayed or denied.

Representative Pace asked for drafting of the Injured Workers Privacy Act regarding when an insurance company can conduct surveillance and requiring the company to return surveillance materials if no fraud is found. The bill would give injured workers the right to expedited hearings. A separate bill would establish a worker's advocate office to assist injured workers in navigating through the workers compensation process without the need for litigation.

Representative Gardner noted that many of the bills are focused on the workers' compensation system generally rather than on Pinnacol which is not part of the committee's charter. He requested that OLLS determine whether this is appropriate. Representative Pace responded that his bill ideas came from the past four committee meetings.

09:17 AM

Representative Ryden noted that Pinnacol's rates are low but could be lower. She requested drafting a rate payer relief bill. It would require the insurance commissioner to choose the lower of the two rate percentages presented by the National Council on Compensation Insurance and the independent actuary. It would also require prior approval of loss cost multipliers to make sure Colorado has the lowest possible rates.

Senator Tochtrop asked if pharmaceutical issues regarding pharmacy benefits managers could be included in Representative Ryden's bill. Senator Carroll suggested a separate bill with the possibility of combining the bills later.

Representative Miklosi requested drafting of the Injured Worker Bill of Rights and Disclosure Act that would require insurance companies to notify an injured worker of his or her rights once a claim is filed.

Senator Carroll requested drafting of a bill to prohibit financial incentives for employees of workers' compensation insurers or authorized medical providers to deny or delay a claim. She also requested a bill requiring doctors performing independent medical examinations to disclose their financial relationships with the insurer to the injured worker.

09:24 AM

Mr. Ross asked for clarification on Representative Miklosi's board proposal. Representative Miklosi responded that there would be two new board members, an injured worker and a representative of the Department of Labor and Employment. Mr. Ross recommended adding the CEO of Pinnacol to be an ex officio member of the board. Senator Carroll suggested that this be discussed after the bills are drafted. Representative Miklosi agreed to discuss this with Mr. Ross later.

Representative Gardner requested a bill to make the CEO of Pinnacol an ex officio member of the board.

Mr. Simon proposed several ideas. He would like injured workers to be a majority of the Pinnacol board. He recommended that the hearing process be more like a small claims court than a district court. With regard to notices of denial, he stated that those should also include the applicable statute and reasons for denials. He said there needs to be penalties for cost shifting to public programs. He stated that workers' compensation carriers need to be liable if denials cause secondary injuries and that there is a need for a peer review process for independent medical examinations. Finally, he recommended eliminating the existing statutory schedule for injury compensation and putting vocational rehabilitation back into the system.

09:31 AM

Senator Mitchell requested three bills. The first was for Pinnacol to charge less, pay more and don't ask injured workers hard questions. Second, he proposed creating a trigger for allowing bills from this committee going into effect. The bill would require certifications by the Division of Workers' Compensation, the Division of Insurance and the Office of Economic Development that the bills would not create upward pressure on rates, create competitive disadvantages for Colorado companies, or have downward pressure on employment. The third bill would require disclosure of a conflict of interest any time a member sponsors, co-sponsors or votes on a workers' compensation bill and would require a statement of what the impact would be on the member's class.

Representative Ryden asked for a bill to reinstitute vocational rehabilitation.

09:36 AM

Representative Gardner requested a bill for Pinnacol's organization and operations that he would discuss with drafters later.

Senator Mitchell asked for a bill to make Pinnacol a private, self-governing, mutual insurance company.

09:38 AM

Drafters were dismissed.

09:40 AM -- Public Testimony

David Cosson, Special Prosecutions Unit in Attorney General's Office testified. His unit is under contract with Pinnacol to provide investigative services in instances of fraud by employers and injured workers. He noted that if Pinnacol is a private entity, the unit will no longer be able to investigate fraud issues as Pinnacol would take the investigation in-house. Cases will be referred to local district attorneys who are not likely to take the cases so the state will see a reduction in workers' compensation fraud cases being dealt with.

Senator Mitchell asked about policy changes that could help fight fraud and Mr. Cosson recommended guidelines and penalties for employers who are classifying employees as independent contractors so that they don't have to provide workers' compensation coverage for them.

09:50 AM

Mr. Cosson noted that the Division of Workers' Compensation does some investigation into insurance fraud for companies other than Pinnacol.

Senator Mitchell asked about the cost of fraud on the system. Mr. Cosson didn't have specific dollar numbers but noted that there are a large number of cases. Senator Carroll noted that the committee had been provided with information related to fraud.

Mr. Simon asked about prosecuting insurance companies which Mr. Cosson has not. They discussed provisions in statute regarding what constitutes an independent contractor. Mr. Cosson clarified that another unit does fraud investigation. His unit is funded directly by Pinnacol.

Representative Gardner asked for information about workers' compensation fraud. Mr. Cosson talked about issues related to workers' compensation that make fraud easier than some other kinds of insurance fraud. Pain is subjective. Workers may continue working while receiving benefits. Employers can easily misclassify employees to pay lower premiums.

10:02 AM

Senator Tochtrop discussed a bill from last session (HB09-1310) about the misclassification of employees and suggested that may help the situation.

Commissioner Morrison explained that the Attorney General's Office has a section specifically for insurance issues.

Mr. Simon asked about prosecution of employers who don't have coverage. Mr. Cosson explained that would be a civil matter for the Division of Workers' Compensation. He would prosecute an employer for a forged certificate of insurance.

10:06 AM

Paula Rhodes testified about her experiences with a workplace injury.

10:14 AM

A member of the public addressed the committee and asked what issue is being discussed. He suggested that markets be opened up before he was removed by the sergeant.

10:17 AM

Senator Carroll reopened the bill draft request portion of the agenda and Kristen Forrestal came to the table. The committee discussed the process for committee bills.

Senator Mitchell requested a bill about misclassification of employees and increasing enforcement authority.

Representative Pace requested a bill changing the process for hiring Pinnacol's CEO and president.

10:22 AM

Attachment A provides a list of bill requests. The committee adjourned.