Date: 09/04/2009
Final
PINNACOL PANEL
INTERIM COMMITTEE TO STUDY ISSUES RELATED TO PINNACOL ASSURANCE
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01:31 PM -- Pinnacol Assurance Panel
Senator Carroll explained that during the afternoon the committee would be hearing from a panel of Pinnacol Assurance representatives. She added that the panel would be available to answer committee members' questions.
01:33 PM
The Pinnacol Assurance panel included the following people: Dan O'Neil, Vice President of Claims and General Counsel for Pinnacol Assurance; Don M. Collins, Vice President of Underwriting and Chief Marketing Officer; Robert Norris, Vice President of Strategic Development and Chief Information Officer; and Mark Mulvaney, actuary, Milliman, Inc., a consulting actuary firm.
Mr. Mulvaney gave a PowerPoint presentation regarding the estimated reserves of Pinnacol Assurance as of December 31, 2008. He discussed the process of estimating reserves and talked about the amount of uncertainty involved. Mr. Mulvaney explained that once a reserve is set by Pinnacol Assurance, Milliman, Inc. comments on the reasonableness of that estimate. He stated that as of year end, Pinnacol's estimate was reasonable.
01:43 PM
Mr. Mulvaney discussed the factors that may cause material adverse deviation, including: unanticipated trends such as inflation being higher than anticipated; economic and social factors; and internal changes, such as changes to settlement practices. Mr. Mulvaney showed a slide that illustrated Pinnacol Assurance's surplus and policyholder dividends since 1990. He also showed Pinnacol Assurance's rate history since 1990. Mr. Mulvaney was asked to talk about Pinnacol Assurance's recovery following its deficit in the late 1990s and how Pinnacol was able to recover.
01:52 PM
Robert Norris, Vice President of Strategic Development and Chief Information Officer, explained that he supervises many departments within Pinnacol Assurance. He showed a PowerPoint presentation that illustrated Pinnacol Assurance's business strategies, including its vision and mission statement. Mr. Norris displayed some charts that showed policyholder and injured worker satisfaction with Pinnacol Assurance. He explained that Pinnacol Assurance has a different dynamic compared to other companies since it does not choose to do business with injured workers, they do business as a result of an accident. Mr. Norris suggested that the Division of Workers' Compensation conduct its own survey of injured workers across all workers' compensation companies.
02:07 PM
Mr. O'Neil discussed the structure of the various teams within Pinnacol Assurance. He walked the committee through the life of a claim. Mr. O'Neil explained that there are many different ways a claim can come to Pinnacol Assurance, including via fax and on-line. After receiving a claim, Pinnacol Assurance has 20 days to determine whether the claim is compensable by determining whether the injury happened at work and that it is work related. He explained that once Pinnacol Assurance determines an injured worker has reached Maximum Medical Improvement (MMI), the worker can appeal that determination. He talked about the various appeals processes an injured worker can use. Mr. O'Neil also talked about the fact that Pinnacol Assurance can settle claims, which is not always the case in other states. He explained that a judge signs the settlement and then discussed the appeals processes for those cases.
02:13 PM
Don M. Collins, Vice President of Underwriting and Chief Marketing Officer, talked about Pinnacol Assurance's relationship with its patients. He talked about the Pinnacol Foundation which awards college scholarships to the children of Colorado workers injured or killed on the job. Mr. Collins also talked about Pinnacol in Action, an employee-run volunteer program that supports Colorado nonprofits.
02:18 PM
The chair opened the panel up to questions and called on Senator Mitchell who suggested an industry-wide survey regarding workers' compensation in order to get a true picture of the market. He also asked Mr. Mulvaney some questions regarding reserves and talked about the danger of a company minimizing its reserves in order to show it has a profit. There was a discussion about the difference between reserves and a surplus. Mr. Mulvaney explained that a surplus is what is left over after liabilities are deducted from assets. There was a discussion about the management positions in the company and their various duties.
Senator Mitchell asked how executive compensation is determined at Pinnacol Assurance. Mr. Norris deferred to Mr. Johnson who explained that the board is responsible for the hiring, termination, and compensation of the Chief Executive Officer (CEO). He explained the salary determination process for the CEO and also talked about the problem with comparing the CEO of Pinnacol's salary with other state agencies since Pinnacol Assurance does not have any state money.
02:30 PM
Representative Ryden asked whether reserves are estimated for the following year. Mr. Mulvaney explained that the estimate is made to pay obligations to injured workers for as long as they are needed. A discussion ensued about how often reserves are used and how their accuracy can be determined.
02:33 PM
Senator Carroll asked some questions about the claims that are denied by Pinnacol Assurance. She also asked about claims that are neither denied nor admitted. Mr. O'Neil explained that the majority of claims, about 85 percent, run through the system, are medical only, do not include loss time claims, and do not have to be filed with the division. He then talked about general admission claims which do need to be filed with the division. Mr. O'Neil also talked about denial forms and reasons for denying a claim, such as the injury not being work-related, the employer's insurance lapsing, or Pinnacol Assurance needing more information.
Senator Carroll asked about incentives and Pinnacol Assurance's performance surveys. Mr. Norris talked about the surveys of injured workers and policyholders. Senator Carroll asked how the survey sample is determined. Mr. Norris explained that an independent surveyor takes a random sample and determines who receives the survey until an adequate sample is reached. Senator Carroll asked about incentives for closure rates. Mr. O'Neil talked about closing a case.
02:48 PM
Mr. Simon asked whether Pinnacol Assurance's policy states that it is operating as a mutual insurer. Mr. O'Neil explained that the policy incorporates the statutes and therefore that is included. Mr. O'Neil responded similarly to another question regarding how dividends are determined. Mr. Simon asked whether employers have any decision making control over the company, to which Mr. O'Neil explained they have no voting rights according to statute. Mr. Simon asked a number of questions relating to expenses, including who is allowed to take travel expenses, who oversees CEO expenses, and who is able to use the sky boxes and other perquisites. A discussion ensued regarding expenses. Mr. Collins explained that less than one percent of premiums is spent on entertaining and explained that other insurance companies typically spend about 6-8 percent on them.
03:09 PM
Mr. O'Neil talked about Pinnacol Assurance's expenses, including employee benefits: life, health, dental, vision, and long term disability, 401k match, workers compensation, employee education, company training, parking, coffee, and books.
03:11 PM
Representative Miklosi talked about the injured workers that testified at the August 31 meeting, and asked what Pinnacol Assurance is doing about those types of cases. He also read an e-mail from an injured worker. Mr. O'Neil explained that injured workers are given information on what they can do to appeal decisions. Mr. Ross said state law prohibits him and his colleagues from talking about any particular claim, but mentioned that there is a lot more to the case than what is provided in the e-mail Representative Miklosi read.
03:21 PM
Mr. Johnson responded to Mr. Simon's questions regarding expenses. He explained that the board is in charge of budgeting and that Pinnacol Assurance is in competition for business from all companies. Mr. Johnson added that Pinnacol Assurance is run like a competitive insurance company and has to compete for business and people. Senator Harvey asked about the one percent that is spent on entertainment as compared to the six percent most companies spend. He talked about the importance and the benefits of memberships to national organizations and compared it to the state paying for the National Conference of State Legislatures and the Council of State Governments that are paid for by taxpayers.
Mr. O'Neil was asked to explain the process an injured worker must take to file a complaint against Pinnacol Assurance. He also talked about the process of filing an appeal and holding a hearing. Senator Harvey asked when legal counsel typically gets involved. Mr. O'Neil said it can happen at any point. Mr. O'Neil continued to explain other appeals processes injured workers may use, including the Industrial Claims Appeals Office, the Colorado Court of Appeals, and the Colorado Supreme Court, noting the various time frames involved.
03:33 PM
Senator Mitchell talked about Mr. Collins' comments on the less than 1 percent that is spent on promotions versus other companies' 6 to 8 percent. He explained that the amount makes no material difference to policyholders and that if that were to be removed it would just make Pinnacol Assurance less competitive. Senator Mitchell pointed out the uniqueness of the transparency of Pinnacol Assurance. Mr. Ross asked the panel to explain why the residual market has rated Pinnacol Assurance so high above other carriers. Mr. Norris responded.
03:41 PM
Commissioner Morrison talked about alternate models for Pinnacol Assurance: a state agency, quasi-governmental, and private, and asked Mr. Mulvaney if he has ever dealt with any of those models and whether he has any comments on any of them. Dr. Parry asked some questions regarding the medical director's duties and about the conflicts insurance companies face when making medical decisions. Representative Ryden asked what the panel thinks Pinnacol Assurance should look like in 10 years.
04:06 PM
Senator Carroll asked about incentives that are given based on medical and indemnity. Mr. O'Neil responded and explained the various factors that go into the incentive program. Senator Carroll asked some questions about the incentive structure. Mr. O'Neil responded and gave an example of how they began faxing medical reports which has helped shorten time and allows for a quicker delivery of care. Mr. O'Neil said they look for efficiencies. He also talked about how Pinnacol Assurance is trying to begin bar coding forms with the division.
04:13 PM
Mr. Norris talked about reducing costs and its effect on net income. Senator Carroll asked how physicians are selected for SelectNet, Pinnacol Assurance's network of primary care physicians, specialists, rehabilitation service providers, ancillary medical providers and hospitals located throughout Colorado. Mr. O'Neil explained that Med Advantage does that for them and looks at whether there is a geographic need, enough providers to meet needs, and the provider's specialty. He explained that the quality control group audits members in SelectNet and the peer group reviews them and makes recommendations. Mr. O'Neil talked about providers who have been removed for various reasons. Senator Carroll asked whether anyone tracks physicians' days to MMI.
04:19 PM
Senator Carroll asked if Pinnacol Assurance's business plan can be expanded to include the injured worker satisfaction. Mr. Norris explained that all of their strategies support the injured worker since it is in Pinnacol Assurance's mission. Senator Mitchell commented on the injured worker element. There was a discussion about surveillance.
04:40 PM
Senator Carroll asked whether a process is in place for tracking denials. Mr. O'Neil responded and listed some statistics. Senator Carroll talked about pro se claimants and whether they are aware that they can appeal decisions about surgeries. Representative Gerou talked about the injured worker survey. There was a discussion about claims that are litigated and how to reduce litigation. The committee talked about providing better information to consumers.