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At 53, Bill Zachry, vice president of risk management for Safeway Inc., is in his prime. In California alone, notes an adviser who is close to Safeway, "Zachry has lopped off $100 million in costs just by basically camping out in Sacramento and changing how workers' comp is viewed."

In the seven years Zachry has been with Pleasanton, Calif.-based Safeway, 55th among Fortune 500 companies, he has driven a great deal of change--both internally and externally--at the company.

In addition, Zachry--known to colleagues and persons throughout the workers' comp community as a "real personality" who is without peer when it comes to being passionate about what he does--is an active lobbyist and member of a variety of important trade groups in Illinois, Oregon and other states, as well as within the state where he is a well-known legislative player.

"Bill is a self-proclaimed workers' comp geek," says Shelley Yim, senior vice president for Aon in San Francisco, who has worked with Zachry ever since he joined the supermarket chain. "He has picked up other responsibilities, but it's the workers' comp area that has distinguished him. He's in Sacramento a couple of times a month to make sure there's no backsliding."

Says an analyst who has worked with Zachry for several years: "When it comes to California workers' comp, Bill is stronger than an acre of garlic."

Dale Banda, deputy commissioner in the enforcement branch of the California Department of Insurance, echoes that sentiment about Zachry's commitment to holding firm on legislative and regulatory initiatives.

"The other day, Bill drove to Sacramento from the Bay Area for a lengthy meeting with no lunch, then drove back to San Francisco and on to London on business. What does that tell you? It tells you he's committed," he says.

On another important front, Zachry is chairman of the California Fraud Assessment Commission, which distributes more than $30 million annually to county district attorneys in the state to prosecute workers' comp fraud, an effort which last year led to 2,565 convictions.

Further, Zachry is chairman of the workers' comp committee of the California Grocers Association and chairman of the workers' comp amicus committee of the California Chamber of Commerce Legislative Committee.

For a look at how Zachry puts all these connections in action, we can turn back to last year when a "pharmacy repackaging" issue was brought before the Fraud Assessment Commission.

Physicians and repackaging companies were repackaging pharmacy products and then selling them out of physicians' offices. In one case, for common antacid tablets that cost a penny a piece at Safeway, the schemers were taking a bottle with just four or five tables in it and charging $249 a bottle.

"This wasn't outright illegal, but it was abuse," says Zachry. "Through regulations, we stopped that little bit of mischief."

Zachry believes regulations are greatly underrated as an enforcement tool.

"I think regulations are undervalued by most employers and organizations," he says. "Yet they are the most important piece once you have legislation that will determine the effectiveness of that regulation."

Zachry's greatest legislative triumph since joining Safeway in 2001 was in playing a seminal role in driving S.B. 899 through the California legislature and then deep down into the regulatory process.

The goal of S.B. 899 was to reform the California workers' comp program, an effort that started with various initiatives in 2002. The chief target of reform was to bring down the number of chiropractic visits, which had been running at an exorbitantly high rate.

In the end, the bill brought the number down to a hard cap of 24 visits annually. That and other reforms--in the physical therapy area, for example--led to a reduction of workers' comp costs for all of California from $30 billion in 2004 to $15 billion at present.

"Bill was the leader through the general business population," says Bill Newburg, vice president, risk, of Ross Stores, a Pleasanton, Calif.-based operator of two chains of off-price retail apparel and home accessories stores in the United States. "In terms of drafting the work, he worked the political connections with Gov. Schwarzenegger's staff and with the department of insurance staff to actually develop and enhance the bill to rally support to get the bill passed.

"And it's a fair bill," adds Newburg. "It provides well for the injured worker and it helps to remove a lot of inefficiency in the system--or as Bill would put it, 'It eliminated a lot of mischief.' "

As part of a major follow-up, Zachry created and led that amicus committee of the California Chamber of Commerce to make sure the bill was not undone through bad case law.

In one case, involving one Jose Facundo-Guerrero, an amicus brief filed by Zachry's group successfully defended a constitutional limit of 24 chiropractic visits in an instance where Facundo-Guerrero had received 76 chiropractic treatments.

In another case--Welcher/Brodie, a case that went all the way to the California Supreme Court--the California Chamber of Commerce amicus committee supported how apportionment of permanent disability is calculated under S.B. 899.

The new law declared that the employer would only be responsible for permanent disability directly resulting from the injury. In the case, the employer asserted that the new method of calculating the percentage of permanent disability was correct. Welcher/Brodie unsuccessfully attempted to undermine the apportionment laws. In a single case, the difference could involve amounts of more than $100,000.

The amicus committee was involved in obtaining successful appeals in state courts and later participated in briefing and preparation for oral argument before the California Supreme Court, obtaining a huge victory that will, in the long run, save California employers hundreds of millions of dollars, according to supporters of S.B. 899.

"Through the amicus committee, we can monitor cases of substance that could influence interpretation of the bill and can file briefs in support of maintaining the intent of the legislation," says Newburg. "Bill was instrumental in mobilizing the employer community in that effort. He burned up a lot of sets of tires between San Francisco and Sacramento."

Another statewide initiative that Zachry has become closely identified with is the Board of Self-Insured Security Fund, of which he is a board member serving as the chairman of the claims committee.

By law, self-insureds in California are required to set aside a certain amount of money to cover their outstanding liability to workers. They post bonds to cover those outstanding liabilities so that, should the company become insolvent, the bond will be triggered and meet all of the company's obligations.

"One of the nuances," says Zachry, "is that because so many California self-insureds have become insolvent, the Self Insurance Security Fund created a new system to create protection for workers."

That system is based on a surety bond and reinsurance combination that brought the Security Fund from $55 million or so in the red five years ago to a value of between $150 million and $200 million at present.

Another important area in which Zachry took the lead on the California stage was to push for the revamping of the state fee schedule for physicians doing frontline work in workers' comp cases. The schedules had not been increased for many years.

"You want to make sure that you get the best kinds of physicians within the network, particularly the ones who are up front doing the initial treatment for the injured workers," says Zachry.

"And so when it came time for public hearings on that, I got up and said, 'You know, I think this is a very good idea in terms of, instead of cutting the fees, let's make sure we give these physicians some of an increase because it's appropriate--it's been 15, 20 years since they've had any increases on the front lines. So you want to be paying the right amount,'" adds Zachry.

"My personal criterion was that I wanted to make sure that, if my children were injured, they could go to any doctor in our network and I would feel comfortable they were getting the right kind of care," Zachry notes.

"It's a simple criterion for me because, if I know that I'm comfortable with these doctors, then I'm comfortable saying we can send our injured workers to them," he says.

STOCKED WITH INNOVATION

Right from the start of joining Safeway, Zachry has been innovative across a broad front.

"When I came to Safeway, one of the first conversations I had with people here was the importance of making sure the benefits were timely and accurate, that this was money these people are living on," recalls Zachry. "It's not what they're used to living on, because it's only two-thirds of a salary to a certain maximum. So it's not easy to live on that, and it's very, very important that we do it right and that we make sure these people are treated fairly."

On another front, instead of charging a store $25,000 for a lost-time claim, Zachry said, "We will charge you for a claim that lasts 90 days, and we'll charge $10,000 for that. And then if it lasts 180 days, we'll charge another $10,000, and if it goes beyond that, we'll charge another $5,000. And the reason we set it up as a tiered system is that we wanted to have financial incentives for the store managers to be engaged in working toward bringing the employees back to work as quickly as possible."

Another innovative program is a primary captive out of Bermuda known as Common Area of Maintenance, which predated Zachry's arrival. CAM applies to situations in which Safeway is the anchor store in a case in which the company will own a whole block of stores, including, say, a Starbuck's franchise.

"For a few pennies extra," explains Zachry, "these businesses will end up with insurance coverage for their business. It's been a very nice program."

When it comes to handling its insurance, Safeway is one of the largest self-insured, self-administered companies in the nation. The company has 1,746 stores, 17 distribution centers and 35 manufacturing plants throughout the country; it has 200,000 employees, 80 percent of whom are unionized.

In the self-insurance realm, Safeway takes the original risk. "We take a very large up-front share of the exposure," says Zachry--$5 million on casualty, $2 million on workers' comp and $5 million on property.

Then, of course, there are as Zachry puts it, "significant" towers of insurance on top of that.

When it comes to self-insuring, sometimes market conditions change the equation. "For example," says Zachry, "even when you have the capacity to handle a higher level of self-insurance, sometimes the market is so inexpensive it wouldn't make sense for you to change that."

"The market is very soft so it makes it less economically imperative for us to take risk at this stage," he says.

Safeway's captive provides the base of its insurance structure.

"It provides us with the language for the various coverages we get because we start by using the captive wording for the primary levels of insurance and then we go up above that using 'me-too' language," says Zachry. "So we establish the wording for our programs based on the captive."

Their primary carrier for workers' comp is Zurich, the primary carrier on property is ACE and the primary carrier on casualty is Zurich.

"We take what we think is a prudent level of risk ourselves, but obviously you want to be prepared if a very severe situation does happen," says Zachry.

Nevertheless, why is Safeway confident enough to take on such a significant corporate risk?

For one, history is on its side. The company has had an excellent safety record over time. "We literally in the past 10 years have had only one incident in which the losses went into the excess carrier," Zachry says.

Secondly, the company has strong safety programs in place for customers and employees.

Thirdly, the company is exceptionally well managed from a financial standpoint and in terms of the work done by Zachry and his staff.

"Because of the size of the organization, we can take the risk up front," says Zachry. "More importantly, though, because of our approach to safety, because of our approach to providing a safe work environment, to providing the right kind of equipment, we can take the risk because it's effective for us to take the risk. We would essentially be throwing money away to insurance companies that we don't need to be throwing away because we know we have an exceptionally safe program."

Zachry is also credited with helping Safeway maneuver through the largest grocery strike in U.S. history. In the fall of 2003 through the spring of 2004, Los Angeles-area workers with Safeway, Kroger and Albertson's were all striking over wages, hours and benefits--especially benefits.

"This was very interesting, especially on the workers' comp side," says Zachry. "What we did, and we did this at the end of any large contract, if things are looking like they're not going to be easily settled, we put in some claims administration protocols to assist with handling of these workers' comp-type issues," he adds.

In these situations, Safeway claims adjusters would go out prior to a strike and put in place a process whereby the company would do on-site investigations of every incident that occurred regardless of whether or not Zachry and his staff thought it was compensable.

"We wanted to make sure we were out in the field, at the stores, taking statements from witnesses and getting all the facts," he says. "And that sent a message saying, 'We're here, we're interested and we're very, very aggressive about doing the right things for our legitimately injured workers." Adds Zachry: "In doing so, we did not see an uptick of claims prior to the strike, which was very important because I've had situations in other places where failure to do that resulted in a significant number of claims filed."

In the end, the companies prevailed on many of the issues.

ADRENALINE AMBASSADOR

What type of person is Bill Zachry? "He is very loyal," says Aon's Yim without hesitation. "I went through some changes transitioning from Marsh to Aon, taking some time off. Bill went out of his way to stay in touch with me to make sure I was doing all right, which he didn't have to do. That's just how he's built."

Yim, like others, stressed what a dedicated family man Zachry is. He remains happily married to his college sweetheart, Lisa, a school administrator. The couple has two mirror-image, 27-year-old twins, Lauren and Elizabeth. "Busy as they all are, they try to vacation together in some way," says Yim.

On the professional front, Zachry is a major league information sharer. "He provides information to several hundred people almost on a daily basis regarding things he knows or has found or wants to pass on about workers' comp, safety, OSHA, anything like that," says Theresa Muir, vice president at Southern California Edison, who has been working with Zachry for five years. "From a professional standpoint, he's brilliant at what he does. And he always amazes me with his ability to learn what he doesn't know."

For Dale Banda at the state department of insurance, who has known Zachry since the mid-1990s, one the most positive attributes that Zachry has is that he shows up. "Unlike a lot of people, Bill actually shows up for meetings and hearings," says Banda. "He regularly drives to Sacramento from the Bay Area or flies to Los Angeles. You can count on him being there."

Also says Banda, "Bill has taken the time to learn workers' comp case law, which is a very complex area. And he's willing to express his feelings in a public forum. I respect a man who doesn't mince words. He'll compliment as well as say you need to get better.

"Bill and I have agreed to disagree. He and I manage to talk together, to have coffee, to disagree. But if we disagree, we move on, we have coffee the next morning," Banda adds. "The other thing he does is take the time to meet with legislators. I think he's kind of an ambassador for the antifraud commission."

But the best judge of Bill Zachry--dedicated husband and father, golfer, fly fisherman and hiker--may be the man himself.

Listen to him describe the kick he gets from working Sacramento as a lobbyist: "It's hard to adequately describe the energy at work at the state capital, but there is a sense of adrenalin, a sense of purpose that comes to people who work within the state legislature. I won't call it a euphoria, but there certainly is a high level of energy that comes from being able to walk into a legislator's office and sit down with them or their staff and try to explain what goes on."

September 1, 2008

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