Pinnacol Privatization Still a Bad Idea

Early in the 2012 session of the Colorado Legislature, Governor John Hickenlooper and the board of Pinnacol made a major push to privatize the “insurer of last resort” for workers compensation. Pinnacol as now structured is a quasi-public state-charted organization with the state conferring special tax breaks. It was set up many years ago after the State of Colorado basically ran the program into the ground.

Since then, Pinnacol has provided stability to the workers compensation program. Private sector employers pay reasonable rates and injured workers are assured of having access to money in the event they need it. However, money hungry pols have been eying the Pinnacol surpluses and trying to figure out how to get their hands on them for things completely unrelated to workers compensation. They are proposing that to allow Pinnacol to go private, the state would take a 40 percent stake in the company.

The idea met stiff resistance from the business community and appeared to be tabled. But the Governor is once again trolling for support. The result as explained in this story in the Denver Business Journal: still stiff resistance from the business community.

The normally business-aware governor is out of step on this issue. It’s coming off as a money-grab that does not reflect well on him. One of the businesspeople in the article referred to it as a hidden tax increase.

The Chamber’s natural reflex is to support privatization based on the general belief that markets work better than government in the efficient delivery of most services. This proposal, however, is hardly privatization in the common sense of the word. It starts out with a 40 percent boat anchor tied to it then proceeds to annually give money to the state government for pet projects. In essence, insurance premiums paid by Colorado businesses would be used for something other than their intended purpose. Furthermore, having the state government as a strong minority partner gives Pinnacol a huge competitive advantage. It’s hard to see how that will translate into a competitive environment that will keep workers comp premiums in check.

At a base level you can see how this type of arrangement benefits the Pinnacol board of directors and state politicians. What is really, really hard to see is how this benefits the people paying the bill:Colorado businesses.