Polis wants to privatize state's last-resort insurer
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Photo Illustration: Brendan Lynch/Axios. Photo: Aaron Ontiveroz/MediaNews Group/The Denver Post via Getty Images
Gov. Jared Polis is pushing a controversial and long-debated plan to privatize the state-affiliated Pinnacol Assurance.
Why it matters: The insurer of last resort provides workers' compensation coverage to more than 50,000 businesses in Colorado and privatization would raise the possibility of higher costs.
- The idea is a potential political landmine that will pit the Democratic governor against the state's labor unions and other members of his party.
State of play: Polis pitched privatization to state lawmakers Wednesday to generate $500 million and plug holes in the state's budget, but he received a tepid response from concerned Democrats and Republicans on the powerful budget committee.
- Under this plan, the state would take $100 million a year from the tax-exempt insurer for five years to cover the state's work in creating the entity, which dates to 1915.
What he's saying: "Pinnacol has been struggling with regard to how they can engage with employers in a changing world," Polis recently told reporters. "We want to make sure that we can future-proof and reform Pinnacol."
Flashback: In 2009, a legislative committee studied the idea but declined to recommend privatization. The concept resurfaced as an option in 2012 but drew opposition from groups representing workers.
- A Republican-drafted bill in 2021 revived the conversation, but the Democratic majority quickly rejected it given the opposition from labor unions.
How it works: If privatized, Pinnacol could offer insurance plans across state lines and sell coverage plans on the open market — two avenues for additional revenue to remain solvent as more employees work remotely.
- The insurer once held more than 60% of the market share, but it's slipped below 50% as employers look elsewhere for coverage.
- If business shrinks too much, it will jeopardize Pinnacol's ability to pay workers' compensation claims.
The intrigue: The 2021 legislation valued the exchange at $305 million, but Polis said new market conditions warrant the $500 million he hoped to derive from the spin-off.
- Without the money, Polis' budget proposal is not balanced.
The other side: Pinnacol's leadership is not asking to go private but would like more leeway in writing policies.
- Spokesperson Liz Johnson said it's too early to comment on the governor's proposal but added in a statement that Pinnacol's priority is "capital adequacy, long-term solvency, price stability and ability to adapt to meet the needs of those we serve."