October 2009 Legislative Newsletter
Wednesday, October 28th, 2009I wanted to give you an update on some policy issues that have a significant impact on our state. You are an important part of the policy conversations we need to have and I want to thank you for taking an active interest in state policy.
PRISON SPENDING & WAR ON DRUGS
I have added a running “clock” which tracks the total of how much we are spending on the “War on Drugs” on the front page of my website. You can find it at www.senmorgancarroll.com. As of the time of writing this we have spent over $16 Billion federally ($16,555,231,190) and $25 Billion at the state level ($25,412,302,688) on the War on Drugs. I say this because we as a society need to fundamentally decide whether we want a medical model or criminal model for how we approach addiction. I think the answer to this should be informed by the empirical research on what WORKS and what gives taxpayers the best “bang for their buck”.
I had the privilege in participating recently in an event in Grand Junction hosted by the Independence Institute, Club 20 and the Pew Foundation. We were joined by DOC Director Ari Zavares, Dept Public Safety Director Pete Weir, DA Pete Hautzinger, Mesa County Sheriff Stan Hilkey, and Community Corrections Board Member Steve Reynolds.
Here’s a recap of what we have discussed:
- 1 in 100 people nationally are now behind bars and 1 in 29 people in Colorado are under some form of correctional control.
- Colorado is incarcerating people at a rate higher than national average and the U.S. is incarcerating people at a much higher rate than the rest of the world.
- Colorado arbitrarily doubled prison sentences in 1985 and the growth rate is jeopardizing all other public programs in Colorado.
- Public Safety is the number #1 priority and our corrections policies and priorities should be based on what works and gets results.
- We are spending significant sums of money in ways that do not increase public safety.
- Colorado has a 50% recidivism rate. By focusing on data-based policies that work, we can reduce recidivism, reduce crimes, reduce future victims and save money.
- The Department of Corrections is the largest mental health care provider in the State of Colorado. 21% of people in CO prison have been diagnosed with a serious mental illness and nearly half of some kind of mental illness.
- 85% of women sent to CO prison last year were convicted of a non-violent offense and the US imprisons 10 times more women that Western European countries combined. 80% of these women have children.
- We appropriated $708 million in state funds to the Department of Corrections last year, making DOC the largest general-fund agency in Colorado.
- DOC appropriations is twice what it costs to fund the entire Judicial Department (an entire branch of government!) and twenty times what it costs to fund the entire Legislative Department (an entire branch of government!)
- DOC has grown from 2% to almost 10% of the state budget and because it has grown faster than the 6% allocation limit it has forced disproportionate cuts in other areas.
- Colorado is a Balanced Budget state so our state constitution requires that we balance our budget every year. As a result every $1 we spend on corrections is a $1 we cannot spend elsewhere.
- It costs $30,386 per inmate per year in operating expenses in DOC and $150,773 per inmate per year on prison construction costs — making the true cost per incarcerated individual $181,159 per inmate per year.
- Cost of 1 Inmate = Health Insurance for 15 Families of 4 for a Year;
- Cost of 1 Inmate = Medicaid Coverage for 40 People for a Year;
- Cost of 1 Inmate = Cost of Educating 23 K-12 Students per Year;
- Cost of 1 Inmate = Tuition for 50 Students in Higher Education;
- Cost of 1 Inmate = Lost Tourism Revenues of $1,086,954 ($1 invested in tourism = $6 dollars return)
As we have sentenced people in record volumes to Colorado prisons we have generated a prison population faster than we can build them (or afford them). Current estimates project the need for building 1 new prison per year to keep pace with the population.
This has increased Colorado reliance on the private prison industry to house our inmates. Prison for profit has driven perverse incentives that have nearly bankrupted the state. CCAs profits doubled between 2003 – 2008. CCA is also being sued in a national class action for not paying wages owed to build their profits.
All said, we could make an enormous dent in solving this problem by:
- restructuring drug sentences
- differentiating between technical v. substanstive probation / parole violations
- restoring discretion to judges in sentencing
and using the savings to invest reducing waitlists and expanded access in:
- juvenile intervention & diversion programs
- substance abuse and addition programs
- anger management programs
- pre-incarceration mental health treatment
- community corrections
HEALTH CARE SURVEY
Thank you to all of you who have completed my online health care survey. If you haven’t completed it and would like to share your input, please visit: http://www.senmorgancarroll.com/healthcaresurvey.
If you would like to see the results of the survey, visit click here.
PINNACOL COMMITTEE RECOMMENDATIONS
The interim committee on the state compensation workers comp carrier of last resort in Colorado has concluded its oversight hearings and made its final recommendations. We have a responsibility for oversight of all governmental and non-governmental entities. The hearings and all efforts for oversight were marked by deep resistance by Pinnacol and even characterized as a “witch hunt”. It is highly unusual, to say the least, for a quasi-governmental entity to spend large sums of money on PR and lobbying to oppose oversight.
Pinnacol Assurance was keeping 1,224% of Risk Based Capital which is both higher than other state comp funds ($555 Million, 929%) and higher than other workers compensation carriers in the state ($402 Million, 673%) and posting aggressive and record surplus growth, despite dividends issued.
Colorado’s non-profit state compensation insurance fund (Pinnacol) has amassed over $2 billion in assets, $1.2 billion in reserves, $773 million in surpluses and the surplus is growing at a rate of about $100 million per year. Our state workers compensation fund, Pinnacol, insures 57% of the market, 55,000 businesses and covers 1.5 million employees in the State of Colorado.
The extraordinary level of surpluses have raised questions about whether policyholders are being overcharged or whether injured workers are receiving the benefits they should.
The State of Colorado has oversight responsibility for all government and quasi-governmental entities in Colorado. Pinnacol is no different.
The committee heard testimony about several things that Pinnacol does well. Their employees generally find it a good place to work, their safety and injury prevention programs have earned the accolades of many, and their volunteer and foundation programs have left many grateful recipients. Likewise their “association marketing fees” and dividends are well-liked by those who receive the funds.
The input from injured workers, their advocates, from employers and from Pinnacol was not to privatize nor to return to a full state agency but to leave Pinnacol in its current structure as a quasi-governmental agency. Many employers were satisfied with having this public option for workers’ comp insurance. The committee listened and will not seek to change the structure of Pinnacol.
There are problems, however, that came to our attention, which would be irresponsible to ignore.
*Extravagent and Wasteful Spending, Perks, Junkets. (hundreds of thousands of dollars in Pinnacol expenses on golf outings, retreats at luxury hotels, trips and lavish meals that included a $2,500 dinner with $144- per-plate lobster and $115 bottles of wine, paying for CEO’s wife for retreats where CEO wasn’t present for business). (See Receipts).
*Executive compensation packages that are far in excess of those typical for state compensation insurance funds (2002 avg = $268,000, Pinnacol = $419,000), far exceeding the state’s usual pay scale and not in compliance with the 2003 audit. . The current CEO pay at Pinnacol is at $448,812.64. (See Pinnacol Annual Financial Statement and 2003 Audit Report).
*Inflated Premiums by NCCI: The rating entity by the insurance industry NCCI is regularly setting rates higher than those recommended by independent actuaries (by about 10%!). (2006 NCCI +5.9%, Independent Actuary -5.9%, (2007 No changes), 2008 NCCI – 0.6%, Independent Actuary -16%, 2009 NCCI – 9.7%, Independent Actuary -19.8%. (See Rate Chart).
*Medical providers reported difficulty in getting treatment approved, bills paid, and getting access to all of the necessary documentation to review claim. Providers are now reporting difficulty in getting approvals or payment even for care within the medical treatment guidelines (See Physician Testimony).
*Injured workers had difficulty with denied claims, denied medical treatment and prompt payment of reasonable and necessary medical care. Some workers testified that Pinnacol’s non-payment led to foreclosures, bankruptcy. We also heard evidence that Pinnacol’s non-payment led to cost-shifting (to private health insurance, Medicaid or in emergency room visits). We heard from workers who had been crush victims, amputees, fire victims some blinded or in wheel chairs who reporting having to fight Pinnacol at every step of the way. (See Worker Testimony, Letters)
*Pinnacol has a gainsharing and bonus structure that creates financial incentives to deny of claims and medical treatment. Some of the problematic bonus structures include basing bonuses or gainsharing on “net income” – total minus claims paid, the number of days prior to medical discharge (MMI), time for claim closure. These financial incentives exist for everyone but most problematically claims managers, nurse case managers and even the Medical Director. This is a direct financial conflict of interest with the statutory purpose of Pinnacol and workers compensation. (See Pinnacol MBOs, Gainsharing Reports)
*Injured workers also reported frequent harassment with spying and surveillance and while Pinnacol spent $4.7 million in surveillance on thousands of workers, only 10 workers (out of 50,000+ claims) were actually convicted of fraud (0.02%). The present system has virtually no checks-and-balances, approval process or limit. The current system doesn’t even require that a carrier have a reasonable basis to suspect fraud or any kind of material mis-statement at all. (See Witness Testimony, Pinnacol Document on Surveillance).
These issues are real and compelling and can be addressed with some simple, common sense solutions. Most of the proposals coming forward focus on a few common sense themes designed to help the current system work better:
- increased transparency & accountability
- improving enforcement of existing law
- giving workers plain language notice of their rights under current law
- removing conflicts of interest in the system
The committee is not looking to:
- sell or transfer any of Pinnacol’s current assets
- change the legal structure of Pinnacol or its function as carrier of last resort
- make any sweeping changes to Colorado workers comp laws
For copies of all materials provided to date you can visit:
PINNACOL PROPOSALS
Rate Reduction Act (Ryden – Tochtrop):
- Lower Premiums: Lower Rate of NCCI or Independent Actuary Unless Good Cause
- Transparent Rate Filing: – Open to Public for Review
- Increases Dividends: Dividend Trigger 800% RBC well above solvency requirements or other CO carriers.
Workers Bill of Rights (Miklosi – M. Carroll):
- Notice to Injured Workers Upon filing of Claim of their Rights Under WC
Pinnacol’s Board Transparency Act (Miklosi – Hodge):
- Balance the Board: Add injured worker, 2/3 employees non-management, Dir. DOL
- Public Notice, Publicly Posted, Opportunity for Public Comment
- Board Compensation X$ Amount –$250 per diem.
Injured Worker Privacy Act (Pace – M. Carroll):
- Requires reasonable basis to suspect fraud prior to triggering surveillance
- Gives injured worker right to expedited hearing to challenge
- Gives injured worker right to receive all materials
Transparency Act (Hodge – Ryden):
- Restore Annual Oversight Report
- Put Division of WC Complaint Process Online
- Survey Feedback from Injured Workers: Results Posted Publicly
Reduce Conflicts of Interest (M. Carroll – Miklosi):
- No Financial Incentives or Bonuses to Delay / Deny Claims / Medical Treatment
- Disclosure of Financial Interests in Division IME Panel:
- No Reversionary Interests to Self (Pinnacol / Carrier) upon death of injured worker
- No ex parte 3rd Party communications with physicians unless in writing or in presence of patient
Penalties (Tochtrop – Pace):
- Increases Penalties (unchanged in decades) to Better Enforce Current Law
- Changes Willfully to Knowingly regarding penalty for unpaid bills
It has been interesting, to say the least, to see a quasi-governmental entity resist and vilify its own oversight and to see entities that receive 6 figure checks from Pinnacol rally to their “defense” even at the expense of some of the rational interests of their own members (i.e. lower premiums, higher dividends, proper care for their workers).
These bills will be considered by the Legislative Council Committee on November 10, 2009. Bills passed from there will be considered as part of the regular 2010 Legislative Session.
There is no doubt that there are some things that Pinnacol does well (and even better than its predecessor CCIA), but the committee did find some troubling problems that we could not ignore.
LOCAL ELECTIONS
Please remember to vote and encourage everyone you know to vote in your local elections. The decisions made at the local level can be some of the most important ones to our daily lives and neighborhoods. Aurora is having an all-mail ballot. Please return your ballots ASAP and verify you have adequate postage.
NEXT TOWNHALL MEETINGS
Meetings with Su and Morgan
Thursday November 19, 2009
7:00 – 8:30 PM
Community College of Aurora
16000 E. Centretech Pkwy, Aurora
*IMPORTANT NOTICE: There will be no December evening townhall on the usual 3rd Thursday due to holidays.
Coffee with Carroll and Ryden
Monday December 7, 2009
7:00 – 8:30 AM
E. Steamers Coffee
360 S. Chambers Rd, Aurora
Hope you’re well!
