CCW

The Pinnacol Committee hearings have veered sharply away from the company’s $698 million surplus to whether it treats its policyholders and claimants fairly.  One point of debate is whether the company is too zealous in pursuit of worker fraud.

Insurance company advocates state fraud is “substantial.”  State Senator Morgan Carroll (D-Aurora) states that fraud represents less than1 percent of all workers’ comp claims in Colorado.

A Pinnacol interim committee report shows the company takes worker fraud seriously. Pinnacol typically deals with 55,000 cases annually.  In 2008 the company spent $4,763,885 on fraud surveillance involving 3609 referral cases and 2589 claims, or roughly 4 percent of claims.  The surveillance cost averaged $1840 per claim.  In 2007, the company spent $4,169,322 on 3650 referrals and 2626 claims, averaging $1587 per claim. http://www.colorado.gov/cs/Satellite?c=Page&cid=1242822336368&pagename=CGA-LegislativeCouncil%2FCLCLayout

Pinnacol refers fraud cases to the state’s Attorney General’s office.  In 2007 Pinnacol referred 19 cases for prosecution, and the AG’s office turned down two, according to Mike Saccone of the AG’s office.  In 2008, Pinnacol referred 17 cases for prosecution and the AG’s office declined five.  The state collected an estimated $255,000 in restitution in 2007 and $263,612 in restitution in 2008.

Based on the number of actual prosecutions, workers’ compensation fraud at Pinnacol represented .0003 percent of the 55,000 claims in 2007 and 2008.

Fraud can involve any number of people in the workers’ compensation cycle:  the worker, the employer, or the provider. www.infoglide.com/.../WP%20-%20Workman’s%20Compensation%20Fraud%20(US).pdf

Sharra Lee Leonard, former assistant attorney general and current leader of the fraud surveillance division at Pinnacol, says the company uses 12 identifiers of worker fraud, such as multiple claims by the same employee in a short period of time; longer absences than anticipated for minor injuries; an unwillingness to come back to work on partial duty or other jobs within the company; or missed medical appointments.

Industry analysts say that premium, or employer, fraud is the most difficult to find and the most costly to insurance companies because of undercollected premiums potentially in the millions of dollars.  This fraud involves employers reducing their coverage costs by underreporting the number of employees on a payroll, misclassifying employees (electricians as file clerks), underreporting claims, or assigning employees as contract employees rather than payroll employees.  Premium fraud increases policy costs for honest employers. http://www.californiaprogressreport.com/2006/12/work_comp_fraud.html

Provider fraud involves the medical practices that falsify the nature of an employee’s injury to prolong treatment.  This can include billing for services not rendered, prescribing unnecessary treatment, extending disability without justification, and falsifying a diagnosis.  

Premium, or employer, fraud charges were brought against eight employers in 2007 and five employers in 2008.  The Attorney General’s office has brought one charge so far in 2009, according to Saccone.

In general, worker’s compensation fraud is a tough charge because the Workers’ Compensation Act provides for only one fraud offense:  making false statements, in Section 8-43-402.  Leonard at Pinnacol says that the Attorney General will prosecute under other offenses, such as theft, perjury, or conspiracy. http://www.coworkforce.com/dwc/wc_act/Pages/Workers_Compensation_Act_By_Article.asp#8-43-402.%C2%A0%C2%A0False_statem

When individuals convicted of workers’ comp fraud have to pay restitution, they pay during the time of their sentence, including probation, so restitution numbers will vary by year.  Industry analysts report that workers’ comp fraud is up slightly in 2009, as is fraud in most insurance categories.

As for the rate of fraud, the statistics depend on cases referred internally at Pinnacol or to the Attorney General. Everyone in the industry asserts that significant fraud goes undetected, especially premium fraud that requires policyholder audits or the complicated unraveling of a claim on a forged subcontractor policy that eventually works its way to the general contractor and on to Pinnacol.

Many are skeptical about whether government gives what it promises, or whether the money in provides value out.

Senators Evie Hudak (D-Arvada) and Keith King (R-ColoSpgs) along with Representatives Tom Massey (R-Poncha Springs) and Karen Middleton (D-Aurora) sponsored SB09-163. http://www.coloradocapitolwatch.com/search/bill_detail.php?bnn=SB09-163&ca=1&yy=2009&cu=  The bill requires the Colorado Department of Education (CDE) to implement the Colorado Growth Model, tracking school districts, schools, and kids by academic and readiness growth and achievement.

The new law has resulted in School View, a website at the CDE making it easy to see how schools are doing compared within districts, across districts and across the state http://www.schoolview.org/. 

Grandparents can see how their grandkids’ schools compare to each other and to the state median.  Parents can check out growth trends.  Home buyers can use School View  to see where individual schools stand on a four quadrant growth grid by math, reading, and writing. https://cdeapps.cde.state.co.us/growth_model_public/ 

The growth grid is important because it offers a more nuanced view of schools, a big improvement over the old grading system.  A school that used to be graded poorly may be making great strides in helping its kids succeed academically. 

The website also shows school performance reports including CSAP scores, giving anyone interested a more detailed view of school performance by grade level.

The state added 2.7 positions to build the School View website and manage the data at a cost of $185,132 in 2009, growing to 3 positions and $205,701 in 2010.  But it saves $252,445 in postage and mailing the former School Achievement Report to parents. http://www.leg.state.co.us/clics/clics2009a/csl.nsf/BillFoldersSenate?OpenFrameSet

This project provides an outstanding product and lowers cost; it’s government that’s working.

Paula Noonan, Colorado Capitol Watch  

Colorado is running a full court press to compete for the Obama administration’s Race to the Top money for education reform.  Lt. Governor Barbara O’Brien says that Colorado is “well positioned” for a win.

At the same time, the Colorado legislature, through its interim School Finance Committee, is trying to figure out a long term funding strategy for public schools.  The current school finance formula focuses on equity and adequacy. The state provides extra money to low property tax districts to “equalize” funding with high property tax districts. http://www.state.co.us/gov_dir/leg_dir/lcsstaff/2009/comsched/09SchoolFinanceSched.html

The question remains:  is any of the funding adequate to achieve a “world class” public education system?

Race to Top gives short term grants

Race to the Top money will provide short term grants for teacher professional development, teacher pay, assessment, standards, and struggling schools. http://www.colorado.gov/cs/Satellite/LeftLtGov/LLG/1240228831801

State uses “categoricals” for special needs funds

State funding struggles with long term issues, such as “categorical grants” for special ed, vocational ed, gifted and talented programs, transportation, expelled and at-risk students, and English Language proficiency.  The current School Finance bill, SB09-256, provides $230million+ in categorical funding for 2009-2010. http://www.coloradocapitolwatch.com/search/bill_detail.php?bnn=SB09-256&ca=1&yy=2009&cu=1

The interim School Finance Committee wants to know whether funding through “categoricals” meets the learning needs of kids.

Colorado just gets by “on the cheap”

According to Senator Chris Romer (D-Denver), Colorado gets by “on the cheap” for education funding because of its large middle to upper middle class population.  Middle class kids are more likely to be “prepared for school” and have lots of learning resources at home.  This advantage helps kids learn, despite Colorado’s bottom of the nation funding for public schools.  It allows the state to rank “average” in school performance across the nation.

But this demographic hurts poor kids who don’t have that middle class learning edge.

Poor kids struggle, unprepared for school

Right now, more than 65,000 Colorado kids under five live in extreme poverty, according to the Colorado Children’s Campaign.  This number is growing faster than the national average.  Eventually these kids, and many other poor kids, end up in the state’s drop out statistics. 

Many public school districts use free and reduced lunch as a “proxy” or predictor for at-risk kids.  Alex Medler, Ph.D., of the Children’s Campaign acknowledges that poverty is the largest umbrella indicator for at-risk kids. But more precise indicators exist that should affect school funding and education reform.

One or more F’s in 9^th grade leads to 90% drop out rate

If any 9^th grade student has one or more F’s on a semester report card, there’s a 9 in 10 chance the child will drop out.  Similarly, if a high school kid has twenty or more absences in a quarter, the child is 60%+ more likely to drop out.  Fifty percent of dropouts have had at least one suspension in four years.

The School Finance Committee, concerned about drop out levels and struggling or underperforming schools, is looking at a student-centered funding system as a possible replacement for the current method. 

Student-centered funding offers flexibility

Student-centered funding “drives funds to schools, with additional weights for school-based decisions.”  (See CEPA paper on Student Based Funding) http://www.state.co.us/gov_dir/leg_dir/lcsstaff/2009/comsched/09SchoolFinanceSched.html

A goal of student-centered funding is to give local schools more flexibility in dealing with their diverse student populations.  The system can also more closely connect budgeting with standards and assessment, providing more accountability. 

Of course, any school finance change begs the question of reform if it ends up that not enough money is in the system to begin with.