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Workers' Compensation Department Director
Texas Association of School Boards
Austin, Texas

Herman Wilks tightens the lid on the pill bottle as the cost of medications increase.

As many parents and teachers know, students often live up, or down, to their expectations. So success is often determined by managing expectations. The revelation from Herman Wilks, workers' compensation department director for the Texas Association of School Boards (TASB), is that the same is true of getting injured workers back to work. His focus, say colleagues, is to keep workers, doctors, providers and staff focused on the goal of getting the worker back on the job. Wilks' program has been developed over more than a year, but it has been implemented in earnest this year and has already realized savings, mostly in reduced costs for prescription drugs.

"Herman's great realization was the balancing act," said Melissa Steger, manager of the University of Texas Systems. "When public entities were allowed to form combinations, Herman was careful to integrate treatment with cost-effectiveness. TASB handles bill review in-house and provides feedback to providers and suppliers. He really knows about providers and communicates that to workers."

Workers' comp is often tedious business, but colleagues remarked how passionate Wilks is about helping injured workers.

Wilks, for example, has conducted role-playing with his staff and physicians so they can better handle situations with doctors, adjusters, workers, and pharmaceutical providers. "He is not just concerned with cost-containment," said a manager for one provider.

Wilks himself espouses more of a Texas Rangers philosophy of doing his duty. "I saw the need where the cost of medications were taking more and more of the spending," he said. "If a drug is the latest and greatest, fine, but we had to take a hard look at overprescription and overuse, even potential dependency."

Members of the TASB Risk Management Services Division noticed that the organization's costs had soared over the past few years. The spending was alarming to the TASB, a self-insurer that employs more than 600,000 Texas workers. In 2008, the TASB, along with a seven-member team of pain management and pharmacy experts, legal counsel and risk managers, was charged with researching and implementing a solution that would contain future costs.

The approach was to prevent new problems, then to address remaining ones. "We opened a dialogue with the physicians that included peer reviews for courses of treatment, and also with patients to put them on notice that the goal was to get back to work," said Wilks. Colleagues say he has instilled a straight-forward approach that makes it easy for workers, doctors and providers to do the right thing and difficult to do the wrong thing.

The key change was when Wilks brought in a new pharmaceutical benefits manager. "We have seen savings of close to 39 percent overall," said Wilks, "mostly on medication spending. But we have also seen a significant reduction in the number of injured workers on Class II medications (narcotics). One of the most rewarding things has been the feedback from doctors. In many cases they were looking for help in dealing with aggressive patients. We have not only seen reductions in our new claims, but also in legacy claims. In some cases we have been able to get some of them into detox."

Such high-profile results come from careful preparation. Before they could deal with physicians effectively, Wilks and his staff created procedures and protocols that would communicate to doctors in terms they would understand. TASB also developed a series of template letters to send directly to physicians, alerting them that one of their patients had been red-flagged by the TASB as a potential case of excessive use of medication.

The letter served as a cornerstone to engage the physician and injured party in a peer-to-peer review.

Not surprisingly, TASB adjusters and medication managers underwent extensive training to prepare for communication with physicians.

The effectiveness of Wilks' program cannot be determined until full-year numbers come in, but an early indication comes from comparing his savings to national estimates. According to a recent study by the Workers' Compensation Research Institute, inappropriate use of prescription medications results in overspending of up to 15 percent per claim. TASB's cost-containment has been at least twice that number. That is a strong argument that Wilks' approach is achieving cost savings and effectiveness well beyond keeping the lid on the pill bottle.

--By Gregory DL Morris

CEO
Amerind Risk Management Corp.
Santa Ana, N.M.

Amerind CEO Kent Paul opens the property/casualty world to American-Indians. The question is not one of risk transfer so much as it is one of trust.

Sovereignty is the boon and the bane of all First Nations, but risk management brings those contradictions into focus. Kent Paul has won recognition from his constituents, as well as from the mainstream insurance sector, for finding resourceful and effective solutions.

Amerind Risk Management is a multitribal, multijurisdictional IRS, Section 17 federal corporation, owned by a vast majority of federally recognized tribes and based a few miles north of Albuquerque.

One initiative this year, initiated by CEO Paul, offers a good example of Amerind's unique challenges. The project assigns GPS coordinates to all of the structures that Amerind covers, which is important because with a hugely diverse and overwhelmingly rural base, few of the properties Amerind covers even have addresses.

As every property-casualty underwriter knows, a physical address is the point of departure for P/C coverage in the non-native world.

"We have a very diffuse base," Paul said. "We cover more than 55,000 structures worth more than $7.5 billion across 32 states, but most of that is so rural that they have Post Office boxes. Our risks include tornadoes and wildfires to hurricanes and floods. Hurricane Katrina and the wildfires in California had particularly traumatic impacts on Indian Country. We were among the first responders to get money to our policyholders in those cases."

The GPS initiative is "a massive undertaking," in the words of one insurance industry executive, noting that the project will take years to complete. Even so, the project's already yielded results. "The data that we got for this year's renewal was night-and-day different from the data we got when the policy was first issued," the executive said.

The enthusiastic response to the GPS program emboldened Paul to launch another program to help make tribal policyholders more visible: giving Amerind policyholders, many of whom are poor, live in rural areas and don't have checking accounts, access to debit cards. Paul is preparing to start a debit-card program later this year.

"People are issued the card when they get the policy," said Paul, "but it has no value at the time. If there is a claim, we can load it up easily. That is much better for getting money into people's hands than checks or wire transfers."

Those developments get Paul kudos from the community, but the major innovation that grabbed the interest of the mainstream insurance sector was the formation in January of an independent commission of national industry experts to advise and support the all-Indian board of directors at Amerind.

"We created our own regulations," said Paul. "We are unencumbered by many standard industry regulations, so we can be more responsive, but that also means that outside underwriters have not been comfortable doing business with us. We had also to be innovative to respond to the naysayers."

Once the advisory commission was in place and mainstream carriers and reinsurers took note, Paul helped create a captive reinsurance company and four segmented cells. "We needed something between the risk pool and people like Munich Re or Lloyd's," he said.

Mainstream insurers are most impressed by the fact that Paul lead the charge to create the first segregated-cell portfolio structure operating inside Indian Country, using the segregated-cell captive model. Each cell contains a homogenous group of similar type risks protecting tribes from a variety of exposures.

Prior to this time, the Indian tribes were primarily familiar with only the traditional insurance "risk transfer" model. By introducing this alternative risk financing mechanism, Paul is credited with expanding their knowledge of innovative risk management practices and providing them with an alternative risk solution.

Paul's other major accomplishment, as seen from outside Indian Country, was his ability to create a common cause among the proudly individualistic native community.

"For all of the history of the tribal nations, fortunately or unfortunately, they have found it tough to trust each other," said a carrier executive who has worked with Paul for several years. "Kent has been able to get 500 of the 560 or so federally recognized tribes to solve common problems and to enable each other to solve individual problems."

"Kent lives by his words and expectations," said one Amerind staff member. "He does not expect any more from us than he would from himself. He never wants the spotlight; instead, he shines the light on others. he makes us feel important and proud to be who we are. Kent shows sensitivity and respect to the native American Indian culture," while bringing to that culture the best practices in risk management.

--By Gregory DL Morris

Now here's a challenge: develop a comprehensive risk management program for more than 500 independent Indian tribes spread over 32 states involving sophisticated alternative risk options for a variety of different risks along with the challenge of insuring more than 55,000 structures from a range of potential catastrophic losses.

The solutions, though innovative and imaginative, were not the crux of the issues. It was the trust of the tribal communities in Kent Paul that made it all come together. For good reasons, over the decades, trust has been a tough issue to overcome when working with Native American tribes.

Because of his understanding of the cultural background of his Indian clients, Paul has been able to bring risk management techniques to the fore. "He shines the light on others," said one of his colleagues. "He makes us feel important and proud to be who we are."

Director of Risk Management
City and County of San Francisco
San Francisco

Matt Hansen burnishes San Francisco's risk management platform so that the city's public authorities look presentable to the debt markets.

Landmarks may belong to all, but someone has to be responsible for protecting them.

Matt Hansen, director of risk management for the city and the county of San Francisco, has the unique obligation of maintaining coverage for such iconic properties as the San Francisco cable cars, Fisherman's Wharf, San Francisco International Airport, and many of the city's museums, along with the less glamorous infrastructure of a major metropolis.

Hansen did not even inherit the position so he could pick up practices and policies in place.

Prior to the creation of his post last year, risk management across the city was handled at the departmental level or at the level of each individual institution.

Hansen's innovation was the creation, on the fly, of a comprehensive risk management operation for one of the nation's largest cities. Just for good measure, he had to do it while the state around him was sliding rapidly into insolvency.

"When he started his projects in earnest there was state money, but now that is drying up faster than he can implement things," said one broker. "And there is a huge fear that the state will continue to put more pressure on the city, county and schools."

The silver lining for landmarks like the Golden Gate Bridge is that "for the first time the port and the Public Utilities Commission (PUC) and other revenue-generating entities have to issue debt," said the broker. "The enterprise risk management (ERM) program is not yet required by bond underwriters, but it certainly provides them with strong assurances and a high comfort level. Matt's program is in full compliance with the new ERM standard, ISO 31000."

"I don't have a baseline budget, so I have to sing for my supper," said Hansen. "I have had to educate people about ERM and about ISO 31000. But as the port and the PUC and Municipal Transportation Agency (Muni) and San Francisco International Airport (SFO) go to the debt market, they are getting ahead of the curve in risk management. Even at this early stage, we are seeing operational benefits and people are saying that we should have implemented this type of thing long ago."

For just about any other risk manager, a streamlined program bringing underwriters and brokers down from more than two dozen to just four would merit consideration for the Risk Innovator ranks. For Hansen, it is almost an afterthought.

"We were all over the map when I took over," he recalled. "We had at least one renewal every month."

As Hansen consolidated to four providers, he also reset all the policy calendars to be renewed in July. "The timing was a bit of a coup in the market," he said. "We were able to compress and then extend the coverage periods, and that gave us about a 10 percent decrease in premiums."

Hansen's approach is a straightforward three-phase program. First he secured support for a uniform process to assess risk activities and rank priorities.

Next, he identified and installed inexpensive and flexible software that was designed specifically for public-sector operations. As a capstone, he created ways for individual departments, enterprises and the risk management department to track certificates and contracts for all the departments and divisions of the city and county.

"There is no other U.S. public entity engaged in such an extensive enterprisewide risk management process," according to one industry expert familiar with Hanson's program.

To study public-sector ERM operations, Hansen traveled to the United Kingdom to meet with authorities who had established ERM programs there. For the first time, San Francisco city and county will be able to implement standards across the whole enterprise for the acceptance of certificates of insurance.

--By Gregory DL Morris

Mayor
Pacific, Wash.

Local mayor draws up emergency plans, listens to outside advice, but gets out of the way when disaster strikes.

Pacific is a city of just 6,000 citizens south of Seattle and east of Tacoma. Nestled amid much larger municipalities and near one of the country's largest defense contractors, Boeing, it would be easy for Pacific to mail in emergency preparedness and rely on mutual aid from its neighbors.

Instead, led by Richard Hildreth, Pacific has blazed a trail in both strategic and tactical planning, training and certification for all staff. "I have worked in government for more than 20 years," said one Pacific municipal official, "and I have never seen a mayor make training such a priority for all of his managers and employees. He makes it a priority, and makes his staff available for it. There are no excuses, and he has shifted the focus of our work to make that possible. The training is really for all managers, staff, public-works employees, police, courts and to some degree the fire department."

Pacific is part of a regional fire authority, so Hildreth does not have direct control. But he does sit on the board for the authority and has been able to infuse it with the same focus on preparedness and training.

Many people know the hard-charger type who is good at getting the ball rolling on important programs but then bristles at any criticism or suggestion. Another type of leader wants to be at the center of everything all the time. Managers at Pacific, and Hildreth's colleagues in other regional civil service, note two rare qualities to his energy and involvement: he eagerly seeks outside review for his policies and practices, and he does not get under foot during actual emergencies.

"One of the things the mayor initiated along with his leadership was a 360-degree review for all of his plans, both in development and implementation," said one of the city's managers. "He put his plans out there for regional and county partners to give input. I have never seen that before. Too often we see plans made at high levels that never get implemented," or plans are put into effect without outside input or review.

In January, Pacific suffered some flooding as a swollen river overspread its banks. It was not a major catastrophe but was certainly a test both for the mayor's planning and for the mayor himself. "The city responded very well," said an emergency manager. "The mayor expected us to do our jobs, but he stayed out of the way."

Hildreth was pleased with the response to the flooding, but noted that Pacific must be prepared for a worse flood. With review procedures in place, the lessons of the first flood are already being incorporated.

"In writing the city's emergency plan, I noticed a disengagement among many groups, including fellow elected officials and city staff members," said Hildreth. "A city emergency management plan should not be thought of as a just a written document that outlines what to do in an emergency. I have encouraged staff to look at emergency management and our plan instead as a mind-set. The plan is not the written words, but the critical thinking that is behind those words."

Rising waters were hardly the only threat faced by Pacific already this year. Hildreth reported that during preparations for the initial wave of the H1N1 virus, each department was encouraged to look at how an outbreak might affect it.

For example, if schools had to close, that would also shut the nutrition programs that operate out of the cafeterias. Contingency planning is not just what to do with students, but also how to feed people dependent on public assistance.

By changing the plan from just a document into the critical thinking paths, Hildreth stressed, staff now understand not only the plan and how it is used, but also how they must respond. This same change in mind-set is also being encouraged in the city's business and residential community.

Hildreth's hustle turned the traditional relationship between small cities and their larger neighbors on its head: The governor appointed Hildreth to the state's Emergency Management Council representing all state municipalities.

Far from relying on his bigger neighbors, Hildreth is, in part, helping to protect them.

--By Gregory DL Morris