Published by the Public Risk Management Association
www.primacentral.org
MAY/JUNE 2012
MEET PRIMA’S 2012–2013 PRESIDENT, DAN HURLEY, CSP, ARM-P, MS
VIRGINIA RISK MANAGER
TAKES THE REINS RISK MANAGEMENT AND MEDICARE SET-ASIDES WALKING THE LINE OF RISK PRIMA’s 2012 Annual Conference Preview
CYBERBULLYING: When Bullying Leaves School Grounds
PUBLIC RISK 101: Understanding the Uniqueness of Public Entity Risk
A COMMONWEALTH TAKES AN UNCOMMON PATH
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Volume 28, No. 5 | May/June 2012 | www.primacentral.org
The Public Risk Management Association promotes effective risk management in the public interest as an essential component of public administration.
PRESIDENT Cindy B. Mallett, AIC, CWCP, ARM-P Risk Manager City of Gainesville Gainesville, GA
CONTENTS
PAST PRESIDENT Laura Peterson, JD, MPA Director of Risk and Insurance University of Wyoming Laramie, WY
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6 Meet PRIMA’s 2012–2013 President, Dan Hurley, CSP, ARM-P, MS VIRGINIA RISK MANAGER TAKES THE REINS By Jennifer Ackerman, CAE
11 RISK MANAGEMENT AND MEDICARE SET-ASIDES By Jennifer C. Jordan, Esq., MSCC, CMSP
16 WALKING THE LINE OF RISK PRIMA’s 2012 Annual Conference Preview By Jennifer Ackerman, CAE
18 CYBERBULLYING: When Bullying Leaves School Grounds By Sharon Holt and Michael Otworth, CPCU, ASLI
23 PUBLIC RISK 101: Understanding the Uniqueness of Public Entity Risk By Michael G. Fann, ARM-P, MBA
28 A COMMONWEALTH TAKES AN UNCOMMON PATH How the Virginia School Boards Association Became a National Model for Improving School Safety and Risk Management While Reducing Claims By Mark Drury
PRESIDENT-ELECT Dan Hurley, CSP, ARM-P, MS Senior Director, Risk Management & Safety Norfolk Public Schools Norfolk, VA DIRECTORS Ed Beecher Risk Manager City of Pompano Beach Pompano Beach, FL Betty Coulter Director of Risk Management and Insurance University of North Carolina at Charlotte Charlotte, NC Matt Hansen, MPA Director, Risk Management Division City & County of San Francisco San Francisco, CA Marilyn Rivers, CPCU, ARM, AIC Director of Risk and Safety City of Saratoga Springs Saratoga Springs, NY Regan Rychetsky, ABCP Director, HHS Enterprise Risk Management and Safety Texas Health and Human Services Commission Austin, TX Linda Spacek, CPM, CGBA Interim Director, Human Resources City of San Marcos San Marcos, TX EXECUTIVE DIRECTOR Marshall W. Davies, Ph.D. EDITOR Jennifer Ackerman, CAE Deputy Executive Director 703.253.1267 • jackerman@primacentral.org ADVERTISING Donna Stigler 888.814.0022 • donna@ahi-services.com
Public Risk is published 10 times per year by the Public Risk Management Association, 700 S. Washington St., #218, Alexandria, VA 22314 tel: 703.528.7701 • fax: 703.739.0200 email: info@primacentral.org • Web site: www.primacentral.org Opinions and ideas expressed are not necessarily representative of the policies of PRIMA. Subscription rate: $140 per year. Back issue copies for members available for $7 each ($13 each for non-PRIMA members). All back issues are subject to availability. Apply to the editor for permission to reprint any part of the magazine. POSTMASTER: Send address changes to PRIMA, 700 S. Washington St., #218, Alexandria, VA 22314.
IN EVERY ISSUE
Copyright 2012 Public Risk Management Association Reprints: Contact the Reprint Outsource at 717.394.7350.
4 News Briefs | 31 Advertiser Index | 32 Member Spotlight
MAY/JUNE 2012 | PUBLIC RISK
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Message from PRIMA President Cindy B. Mallett
SO LONG, BUT NOT GOODBYE
T
hose of us who remember the Carol Burnett show, popular in the 1970s, will remember that she always closed the show with the song, “I’m So Glad We Had This Time Together.” The song ended with a tug of the earlobe and the words, “Seems we just get started and before you know it comes the time we have to say, ‘So Long’.”
willingness to do the sometimes challenging work of the association. I owe a special thanks to the three individuals whose board terms will end in June. Laura Peterson, Marilyn Rivers and Linda Spacek have, in their individual ways, given all that was asked of them and more, and PRIMA is better because they served.
For maybe the first time in my life, I can identify with those lyrics. It’s dizzying to realize that an entire year has passed since I became PRIMA president, and that this will be my last letter to you, our valued membership. I want to take this opportunity to thank you for supporting me and, more importantly, your professional association. We all win when our membership is engaged, and I encourage your involvement in any way that meets your talents and interests. Submit a session proposal, contribute to PRIMAtalk or volunteer for a committee. We need you!
PRIMA is continually reviewing and upgrading its products and services to meet the ever-changing needs of our members. PRIMA Institute has been updated to reflect the newest trends in government risk management, Public Risk magazine recently published a special edition focused on enterprise risk management and our newly introduced conference mobile application will allow PRIMA Annual Conference attendees to experience the event like never before possible. I encourage you to take advantage of these new offerings and, more importantly, to give your feedback about these and other PRIMA benefits. The board and staff are always available to you.
PRIMA also needs the expertise and enthusiasm of our incoming president, Dan Hurley (Norfolk Public Schools). I’m so excited to be passing the gavel to Dan at our upcoming conference, and I know you’ll agree that PRIMA will benefit tremendously from his leadership. I am also thrilled to welcome three incoming board members, who will be sworn in during our Nashville conference. Amy Larson (City of Bloomington, MN) and Dean Coughenour (City of Goodyear, AZ) were elected by the membership, and Michael Fann (TML Risk Management Pool, TN) was appointed to fill a one-year unexpired term. I offer each of them my best wishes and support. PRIMA is blessed with a dedicated and professional staff and a passionate and committed board, and I want to thank every member of these two groups for their energy and their
I want to take this opportunity to thank you for supporting me and, more importantly, your professional association. We all win when our membership is engaged, and I encourage your involvement in any
As my time as PRIMA president draws to a close, I, like Carol Burnett, am so glad we had this time together. So long! Sincerely,
way that meets your talents and interests. Submit a session proposal, contribute to PRIMAtalk or volunteer for a
Cindy B. Mallett, AIC, CWCP, ARM-P 2011–2012 PRIMA President Risk Manager City of Gainesville, Ga.
committee. We need you!
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News Briefs
NEWS
BRIEFS CHILD IDENTITY THEFT BILL CLEARS MARYLAND LEGISLATURE As more and more children are having their credit ratings damaged by identity theft before they think of borrowing a dime, Maryland lawmakers have approved a first-of-its-kind measure to enable parents to take steps to protect their kids, reports the Associated Press. The Maryland Child Identity Lock bill, which a spokeswoman for Gov. Martin O’Malley said he is likely to sign, will allow parents to take the step of freezing their child’s credit at any time. Supporters hope it will be a model for other states to protect not only children, but also disabled and elderly people who can be particularly vulnerable to identity theft. “This just freezes the information to ensure that it’s not used for ill purposes,” said Delegate Craig Zucker, a Democrat who sponsored the bill in the House of Delegates. Credit agencies do not knowingly create credit reports for minors under the age of 18. When credit bureaus collect data for people applying for credit from lending partners, they get a name and Social Security number, but they don’t have data to double check someone’s actual age due to a lack of information sharing between credit reporting agencies and the Social Security Administration. A study released last year by ID Analytics, a California-based consumer risk management firm, found that about 140,000 identity frauds against minors occur each year. The study was based on a review of more than 172,000 children whose identities were protected through ID Analytics Consumer Notification Service from April 1, 2010, to March 31, 2011.
Protect your volunteers
Overall, children are more likely than adults to be targeted for identity theft, according to researchers at Carnegie Mellon University. The researchers worked with an identity theft protection company to comb through records of 42,000 children and found more than 10 percent showed signs of identity theft. Under current Maryland law, credit agencies must place a security freeze on the credit of anyone who requests it. However, they can refuse to lock the credit of those who do not have a pre-existing credit report. That’s a problem for children. If they have a credit report, it likely means they’re already a victim of fraud. The problem of identity theft is compounded for children, because they usually don’t become aware they are victims until they are older, when they apply for a credit card or a loan to buy a car.
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PUBLIC RISK | MAY/JUNE 2012
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CUOMO ACTS TO ADVANCE HEALTH LAW IN NEW YORK Gov. Andrew M. Cuomo, stepping into the national debate over President Obama’s health care law, used his executive power to carry out one of its critical features in New York after the state’s Republican lawmakers blocked legislation to do so, reports The New York Times. Cuomo, a Democrat who has generally avoided national politics even as he is often mentioned as a potential candidate for president, offered an enthusiastic endorsement of the benefits of the health care measure, which is currently being litigated before the Supreme Court and contested in this year’s presidential campaign.
EX-MISSOURI GOV. WILSON PLEADS GUILTY OF MISUSING POLITICAL DONATIONS Former Missouri Gov. Roger Wilson pleaded guilty to misusing money involved in an illegal political donation made years after he left office, and the longtime Democratic stalwart apologized for his misdeed, reports the Associated Press. Wilson’s guilty plea to a misdemeanor charge came on the same day federal prosecutors announced an indictment against him and St. Louis lawyer Edward Griesedieck III, 53. The indictment alleged that Griesedieck had his law firm donate $5,000 to the Missouri Democratic Party and hid the cost in legal bills submitted to Missouri Employers Mutual in October 2009, when Wilson was interim chief executive.
As he issued an executive order to establish a health insurance exchange, an online marketplace where individuals and small businesses can choose among competing health insurance plans, Cuomo said it would drive down the cost of insurance while helping the 2.7 million uninsured New Yorkers get affordable coverage. “The bottom line,” Cuomo said in a statement, “is that creating this health exchange will lower the cost of health insurance for small businesses, local governments and individual New Yorkers across the state.” For nearly a year, Cuomo asked the Legislature to set up the exchange. But the Republican majority in the State Senate refused to consider the measure, arguing that approving the exchange would amount to condoning the law, the Affordable Care Act, which they deride as Obamacare. The Senate Republicans also cited the uncertainty surrounding the health care law, given the Supreme Court challenge, and in March, they blocked Cuomo from including the exchange in the state budget for the fiscal year that began April 1. The health care law requires each state to put an insurance exchange in place by 2014, and gives the federal government the power to do so in states that do not act on their own.
Wilson, 63, admitted in his plea that he approved payment of the legal bill even though he knew the $5,000 was not for legal work but was to reimburse Griesedieck for the contribution to the Democratic Party. Sentencing is scheduled for July 9, and Wilson is free on his own recognizance. Assistant U.S. Attorney Hal Goldsmith said the sentencing guidelines suggest a sentence ranging up to six months in prison. “I take public responsibility for the mistake,” Wilson said following a brief hearing in downtown St. Louis, with his wife, Pat, at his side. “I apologize to everyone. I’m going to bear the consequences of my mistake.” Wilson’s attorney, Robert Haar, said Wilson’s mistake “doesn’t change all the good things he has done for the state of Missouri.”
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MEET PRIMA’S 2012–2013 PRESIDENT, DAN HURLEY, CSP, ARM-P, MS
VIRGINIA RISK MANAGER
TAKES THE REINS By Jennifer Ackerman, CAE
In June, PRIMA will welcome its newest president, Dan Hurley, CSP, ARM-P, MS. Hurley hails from Norfolk, Va., where he is the senior director of risk management and safety for Norfolk Public Schools. He brings with him more than 25 years of risk management experience, as well as a number of years serving in various capacities on PRIMA’s board and committees. “I have worked with Dan for the last three years on the PRIMA board,” said 2011-2012 President Cindy Mallett, AIC, CWCP, ARM-P. “Dan has an enthusiasm for risk management that is unmatched. I am certain that his contagious excitement, along with his experience and expertise, will help take PRIMA to the next level of service for its members.” Hurley will be sworn in as PRIMA’s president at the 2012 Membership Luncheon on June 6 at the Annual Conference in Nashville. Prior to him taking office, Public Risk sat down with Hurley to discuss his experience and plans for the next 12 months of his presidency.
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Public Risk: How long have you been a risk manager?
we have many extremely qualified members, and I feel very fortunate to have had the opportunity to serve.
Dan Hurley: I am in my eighth year as a risk manager with Norfolk Public Schools. Prior to that, I worked in the City of Norfolk’s risk management division starting in 1986 as the workers’ compensation specialist, and later as the city’s safety officer. I retired early from the city and walked right across the street to start with Norfolk Public Schools on December 1, 2004.
Another benefit is the friendships that you make within the profession. As a lover of history, I enjoy exploring historic sites. I have always had a fascination with the Lewis and Clark expedition. Two years ago, prior to a board meeting in Nashville, I planned on arriving a day early to rent a car and drive 70 miles southwest on the Natchez Trace to see the death and burial site of Meriwether Lewis. Not only did two board members arrive early to join me, but Michael Fann, current president of the Tennessee Chapter, picked us up and drove us out there himself, with great stops along the way. It was a day I will always remember fondly.
said that the more
PR: What are your goals for the term of your presidency?
and the board of
DH: First, I would like to recognize the efforts of our current board, under the leadership of Cindy Mallett. In particular, this board has brought back PRIMA Institute (PI) after a year sabbatical. PI is not only back on for November 5–7, 2012, but it has been revitalized with updates in standard topics and also features the latest management tools in the field, such as enterprise risk management (ERM) and how ISO 31000 can help you implement it. Not only is PI a great learning experience for relatively new risk managers, it is a great opportunity for experienced managers to retool their skills and gain insight into current management techniques. It is also an opportunity for continuity for an organization; an assistant risk manager will get a wonderful professional boost by attending. Board Member Marilyn Rivers really deserves great credit for making extraordinary efforts to make PI a reality for 2012.
had the opportunity
PR: In addition to the board, what PRIMA committees have you served on? DH: I have served on the Chapter Relations Committee and the Conference Planning Committee. I currently serve on the Finance Committee. I am also filling in for former Board Member Dave Parker as the Conference Planning Chair this year after he retired from the public sector to pursue other opportunities. PR: How long have you been involved with PRIMA? DH: I attended my first PRIMA conference in 1988, and I was very impressed with the networking that took place and the excellent sessions. I was fortunate to be able to attend in place of our city’s risk manager at that time. I still remember a session on fleet safety headed by Alan Hyman at that first conference, and many of his points stick with me today. I was able to join PRIMA as a primary member in 2003. I have only missed one conference since that time. I also have been very active in our Virginia chapter as a board member, and I am currently serving as the Virginia chapter president. In 2009, I became a member of the PRIMA Board of Directors. PR: What is the biggest benefit of being involved with PRIMA committees and board? DH: It is frequently said that the more involved you are in an organization, the more you get out of it. By being involved with PRIMA committees and the board of directors, I have had the opportunity to interact with professionals who have tremendous experience in the field and who make contributions that improve our profession. The interaction between members creates a wealth of experience and knowledge. You are also able to interact with individuals from all over the country and gain a broad perspective. I would encourage members to strongly consider getting involved, either by volunteering for a committee or by applying for the board. If you are not selected for a position, I encourage you to try again. It is a competitive process;
It is frequently
involved you are in an organization, the more you get out of it. By being involved with PRIMA committees
directors, I have
to interact with professionals who have tremendous experience in the field and who make contributions that improve our profession.
My primary goal, and the board’s as a whole, is to continue to provide educational opportunities for our members in the field of public risk management. A giant step in that direction was making the PRIMA Webinar series free to members. With the guidance of the education committee and our sponsor, PRIMA will continue this program. This month, PRIMA will also be rolling out streaming Webinars. This way, if you miss a Webinar event, you can listen to it later through content streaming, at no cost. Another goal is to produce an exciting and successful Annual Conference in Tampa, Fla., in 2013. Our conference planning committee chair for 2013 is home-stater Eddie Beecher. Eddie has a lot of experience with conferences in his home state, and he has the ability and motivation to continue the excellent momentum and efficiency our committee established during the 2012 planning session.
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Meet PRIMA’s 2012–2013 President, Dan Hurley, CSP, ARM-P, MS
The greatest challenge facing all of us in the future is the same as in the last few years: working with public entities under financial stress… I have been very fortunate to work in an organization with leaders who are very conscious of making the health and safety of our students and staff the priority it needs to be.
And of course, a continuous goal is to grow our membership. We have all been saddled with the great economic difficulties over the past four years, and many associations have struggled to survive, but PRIMA continues to be a viable, healthy organization. My goal, along with all our members, is to continue to recruit new members and re-engage those that may have left due to budget issues. We all should be mentors to those coming up behind us and show them the value of PRIMA. The more PRIMA grows, the greater our network and exposure to new ideas.
PRIMA also offers unique diversity. We all are public risk managers, but we represent municipalities, counties, schools, pools, transit authorities, sanitation districts and more. Our world is much more dynamic; there are always organizational changes creating career changes, and younger professionals tend to be more mobile and able to change jobs more frequently. Through diversity, PRIMA membership offers a broad breath of exposure that can be a tremendous asset for those seeking a job change in the future or, regrettably, when a change is forced upon us.
PR: What are some of the best things PRIMA offers its members?
PR: What is the one thing PRIMA offers that its members do not take enough advantage of?
DH: The best thing PRIMA has to offer is the interaction with a very wide network of public risk managers. The more exposure we have to people in the profession, the greater our collective intellectual capital will be. For example, at the Annual Conference in Boston in 2007, I was mulling over purchasing a basic school accident insurance policy at our school district’s expense that would particularly aid uninsured students. I attended a session conducted by Matt Hansen, who was then with the San Francisco School District. He explained that subject very well. I was able to talk with him about his district’s positive experience. We obtained a good rate quote, and my district’s leadership embraced the idea. We have had a very successful experience to-date. We believe the side benefit is that the policy may have reduced otherwise difficult claims made by the uninsured.
DH: Our Webinars have been well-attended, but I think that participation could be even higher. The subject matter has been outstanding, and I regret whenever I miss one. As I said before, now they will be available through streaming content, so I, and all PRIMA members, can catch up on any Webinars that are missed.
We all network through our chapters, and being a PRIMA member offers an even greater expansion of contacts and intellect. And through our interaction with ALARM, the United Kingdom’s risk management association, we can network internationally.
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PR: What skills does a risk manager need today that they did not need in the past? DH: I think the risk manager of today has to have an even broader knowledge base, because the world of risk management continues to expand. Years ago, a background in insurance, safety and workers’ compensation would suffice in most cases, but now we need be knowledgeable of environmental regulations, disability management issues (ADAA), health laws (HIPPA), disaster planning, business continuity and human resources. Changes in the executive role we play in our organizations is exemplified by ERM, or as some refer to it, Strategic Management. There always seems to be expanding responsibilities and a continuation of professional development in our profession.
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PR: What can PRIMA do to support the new challenges risk managers face? DH: PRIMA can continue to provide and promote education for these dynamic changes through its conferences, Webinars, Public Risk magazine, PRIMAtalk and by utilizing contributions by its members and other professionals in the field, such as our corporate sponsors, who offer a wealth of resources. PR: What PRIMA benefits have you taken advantage of? What has been most helpful? DH: Networking with other public risk managers on a national scale has been one of the greatest benefits for me through PRIMA. The broader the network, the greater exposure we have to new ideas and tested approaches to effective risk management programs. It reminds me of human geography, exemplified by the book, Borderless Economics, where the author makes the point: “the greater the isolation of a people, the less intellect and development.� With greater diversity in global contacts, there is a compounded expansion of human and economic development. PR: What are the biggest challenges risk managers face in the next year? DH: The greatest challenge facing all of us in the future is the same as in the last few years: working with public entities under financial stress. Public entities are making hard choices with budget cuts, and hopefully all risk managers contribute to decision making to limit potential exposure and maintain safe public and employee work environments. I have been very fortunate to work in an organization with leaders who are very conscious of making the health and safety of our students and staff the priority it needs to be.
PR: What is the biggest challenge your own entity has faced in the last five years? How did you deal with it? Did being a member of PRIMA help you? DH: The biggest challenge we have faced has been in dealing with dramatic budget cuts and reductions in staff. After a staff member retired, we initially faced a freeze, and then after the position was eventually filled, another position was deleted from our budget. After the loss of that position, everyone in the office took on more responsibilities. Then we had a staff member go on medical leave (FMLA) and, sadly, after a valiant battle, she died three months later. Fortunately, our human resources department was supportive and was able to set up a sharing of administrative support between our office and the budget office. We dealt with the problem by doing extra work ourselves, and we were fortunate to receive part-time help until the position was finally filled. In this case, PRIMA was helpful because I knew from discussions that many of my peers were going through similar job cuts, and we gave each other mutual support. PR: What can PRIMA members do to get the most out of their PRIMA membership? DH: To get the most out of a membership, members need to utilize the many resources that PRIMA has to offer, particularly networking. The Annual Conference provides a tremendous opportunity to get face-to-face time with colleagues and sponsors who are experts in the industry. I always feel a particular satisfaction being among our peers as we all have similar work issues to relate to and discuss. Dan Hurley can be contacted at dhurley@nps.k12.va.us.
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RISK MANAGEMENT AND MEDICARE
SET-ASIDES By Jennifer C. Jordan, Esq., MSCC, CMSP
One overlooked area of risk management in the property casualty industry today is the Medicare Set-Aside Arrangement (MSA). MSAs are commonly viewed as a statutory obligation, when in reality they are nothing more than a means to avoid future reimbursement obligations to the Medicare program, making an MSA little more than a form of insurance. Unfortunately, few truly understand the scope and purpose of MSAs and operate under fear of the unknown, paying any amount sanctioned by the federal government in exchange for some assurances of finality in their settlements. But allowing the federal government to determine MSA amounts is akin to allowing it to set insurance rates. For those not familiar, an MSA is an allocation from an insurance settlement specifically earmarked as compensation to pay for future medical expenses that would have otherwise been covered by Medicare but for a statutory exclusion under the Medicare Secondary Payer Act (MSP). If the MSP is triggered by an insurance payment releasing the primary payer from responsibility for medical expenses, Medicare is prohibited from making related payments; therefore MSAs are established to provide funds to pay for treatment. MSAs have become routine in workers’ compensation settlements involving Medicare beneficiaries since the Patel Memo was published by the Centers for Medicare and Medicaid Services (CMS) in 2001. However, application to other forms of insurance remains unclear. The MSP applies to all forms of insurance, however CMS’ enforcement effort specifically targeted only a subset of workers’ compensation settlements, thus creating confusion throughout the nation as to how the MSP applies to other claims. Compounded by decades of little enforcement and a lack of statutory language directly addressing post-settlement obligations, there remains considerable confusion as to what the government’s MSP rights are once an insurance claim is terminated.
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Risk Management and Medicare Set-Asides
There is no legal cause of action for claiming an MSA inadequate; Medicare actually has to make a reimbursable payment before the government has any rights. Therefore to appreciate what you are protecting against, you must understand the process through which that reimbursement is sought.
As the understanding of the MSP has evolved over the years, CMS policies are finally being called into question, particularly those involving MSAs. The aforementioned enforcement effort implemented by CMS is a voluntary program through which parties to a workers’ compensation settlement meeting certain thresholds can obtain its opinion as to whether a future medical allocation is a sufficient consideration of Medicare’s future unknown interest. The calculation method used by CMS pushes the boundaries of workers’ compensation coverage and essentially accelerates an entire potential lifetime exposure at the state mandated rate, requiring funding well beyond that which Medicare would ever pay. And although voluntary, CMS originally fostered the belief that any case meeting its program criteria was required to obtain its approval, creating fear that continues to linger today. Until CMS published a policy memo in May 2011 expressly stating that the review process is voluntary, recommendations to forego CMS approval were frequently disregarded as heresy and CMS submission, whenever available, remained the standard. So with CMS’ recent affirmation that the process is not mandatory, many are starting to explore alternatives. Although it may seem counterintuitive to intentionally forego the government’s input when available, once the costs associated with the process are fully recognized, they are frequently found to outstrip the value of the unknown, possibly never to occur, future government actions being avoided, making the decision of whether to submit an MSA to CMS for approval one of risk management as opposed to MSP compliance. The reasonable allocation of settlement funds for future medical expenses to prevent Medicare from absorbing
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them serves as compliance, whereas getting CMS approval is merely the act of obtaining the agency’s assurances that the allocation is adequate in its opinion. There is no statutory or regulatory requirement to involve CMS in the MSA process, just as there is nothing that regulates the manner in which CMS reviews and approves an MSA. With a little risk tolerance and a better understanding of the MSP and in particular, the conditional payment recovery process, other options are available that potentially bear better, more cost-effective solutions than those assurances offered by CMS.
THE VALUE OF CMS APPROVAL OF MSAs In deciding whether or not to obtain CMS approval of an MSA, it is important to recognize the value of the approval and the risk of not obtaining it. In its earliest memos, CMS stated that its written opinion could be reasonably relied upon and that once it agrees to an MSA amount, parties to the settlement can be certain that Medicare’s interests have been appropriately considered. So the benefit of CMS approval is that the future potential liability is essentially capped at the approved amount. Because CMS had an opportunity to review the pertinent claim records and make an independent assessment, it accepts the risk of providing treatment in the event the allocation falls short. And by seeking that approval, you accept the manner in which CMS calculates that future exposure, which exceeds Medicare’s exposure in the lifetime needs of the beneficiary and frequently the carrier’s exposure under state workers’ compensation law. By not obtaining approval, it is possible that the MSA may need to be defended someday to prove that at the time of settlement, it was a reasonable allocation for future medical expenses; however, it does not necessarily mean that anyone will be obligated to pay more. And let us not forget that CMS approval is not available for all types of insurance settlements, so penal-
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izing anyone for electing to not participate in a voluntary process unavailable to many others could have some very serious constitutional implications. And what if CMS approval doesn’t end your exposure to post-settlement Medicare reimbursement claims? What if you fully fund a CMS-approved, self-administered MSA and claimant uses the funds for something else then turns to Medicare and receives treatment? While you can terminate your obligations under the state law, there is nothing in the MSP that terminates a primary payer’s responsibilities once triggered by the underlying insurance payment, technically leaving you exposed as a potential recovery source indefinitely. Or how about CMS receives a request from a claimant to make a post-settlement change to an already approved MSA and CMS issues a revised approval letter without so much as notice to the carrier prior to that mailing? The approval is of limited value if it does not terminate your exposure to Medicare and this true scenario is being reported throughout the country. If CMS’ opinion is not reliable, then that seriously brings into question any perceived value of its approval.
THE MEDICARE REIMBURSEMENT PROCESS
issued in May 2011 by the U.S. District Court for the District of Arizona in Haro v. Sebelius (currently pending appeal before the 9th Circuit Court of Appeals). This administrative remedy has five steps, the first being a letter to CMS stating that the demand is believed to be in error. Should CMS maintain that its determination stands, a request for reconsideration may be filed. Should CMS refuse to waive or compromise its reimbursement claim, review of that determination by an administrative law judge (ALJ) may be requested. If dissatisfied with the judge’s decision, a request for review by the Department of Health & Human Services Appeals Board is available pursuant to 42 C.F.R. §§ 405.720, 405.724. At this stage, constitutional violations may be raised in addition to the underlying arguments supporting waiver or compromise. If still dissatisfied, administrative remedies are exhausted at this point and a claim may be filed in federal court for judicial review under 42 U.S.C. 1395ff (b)(1) and appealed all the way to the Supreme Court, if necessary. If still unsuccessful in reversing CMS’ position and the debt remains outstanding, the matter then returns to where it left off in the collection process. If at any point the debt is satisfied, the proceedings end because Medicare is only looking to be reimbursed, and you only owe more than what Medicare paid for the service if interest attaches after day 60.
But whether approved or not, you will only have issues with CMS if Medicare makes a payment for which it shouldn’t have and is entitled reimbursement. There is no legal cause of action for claiming an MSA inadequate; Medicare actually has to make a reimbursable payment before the government has any rights. Therefore to appreciate what you are protecting against, you must understand the process through which that reimbursement is sought. Reimbursement for any payment made where CMS determines Medicare should have been the secondary payer can be sought from anyone originally responsible for primary payment or anyone in receipt of funds from an associated insurance settlement. It will be irrelevant why the payment was made because the federal government only has to view it as an overpayment for which it is entitled to reimbursement. That is not to say that a reimbursement demand cannot be successfully defended, only that it is likely that the government could seek reimbursement regardless. If reimbursement is not made within 60 days, interest begins to accrue dating back to the date of demand. If the debt remains unpaid after 120 days, it must be referred to Treasury for collection. If still unresolved, the debt may be referred to the Department of Justice to file a claim in federal court for double damages. If at any point during these collection proceedings, an appeal or request for compromise or waiver is filed, collection efforts are stayed pursuant to the injunction
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Risk Management and Medicare Set-Asides
WHAT DOES IT ALL MEAN? MSA – Medicare Set-Aside Arrangement MSP – Medicare Secondary Payer Act CMS – Centers for Medicare and Medicaid Services ALJ - Administrative Law Judge FCCA - Federal Claims Collection Act FCA - Federal False Claims Act DEFINITIONS: Medicare set-aside arrangement is an allocation from an insurance settlement specifically earmarked as compensation for future medical expenses that would have otherwise been covered by Medicare but for its statutory exclusion triggered by the settlement. Medicare Secondary Payer Statute, codified at 42 U.S.C. § 1395y(b) (2), statutorily excludes Medicare from making payments in situations where group health, liability, auto, no-fault, workers’ compensation, or any form of self-insurance has a legal obligation to pay for medical expenses, and should it do so to ensure timely treatment received, is entitled to priority reimbursement from any related insurance payment. The Federal Claims Collection Act, codified at 31 U.S.C. §§ 951-953, authorizes federal agencies to collect, compromise, terminate or suspend collection action on claims for money or property arising from their activities. The False Claims Act, codified at 31 U.S.C. §§ 3729–3733, is a federal law that imposes liability on persons and companies who defraud governmental programs.
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OTHER CONSIDERATIONS In addition to the MSP, the Federal Claims Collection Act (FCCA) and the Federal False Claims Act (FCA) may also need to be considered when determining your Medicare exposures. The FCCA allows the federal government to off-set any money it owes an individual determined to owe the government, so may be relevant to a beneficiary receiving Social Security benefits or if a provider who is also a payer, such as a hospital. Concerns about the FCA have also been raised, as anyone who causes the federal government to make an overpayment, even absent fraud, is susceptible to a civil money penalty and treble damages. This could apply if an MSA was not funded, underfunded or misappropriated, causing Medicare to make conditional payments to ensure treatment received. And if an MSA is nothing more than a means to avoid future conditional payments and exposure to these various government recovery efforts, allowing self-administration seems counterproductive. Medicare beneficiaries are given unfettered access to the MSA funds and are bound to maintain them in accordance with CMS unregulated mandates by nothing more than an honor system and a remote fear of possibly being excluded from Medicare benefits someday. Even if it is believed that everything possible has been done to protect Medicare’s interests, potential liabilities still exist, with or without CMS approval, so long as MSA funds are not guaranteed to be used only for related Medicare covered medical expenses that can only be accomplished through professional administration.
THE SOLUTION So what is the solution? Absent a crystal ball, it is impossible to accurately fund an unknown future medical expense but if you get CMS’ approval, it absorbs the burden of being wrong so you pay a premium for that. The inherent cost of the approval is not recognized by most voluntarily submitting to the program, but it exists in the way some of the future medical expenses are calculated, such as pricing drugs in excess of prices available to the general public, funding unwanted non-life-threatening procedures, coding to the highest cost option, or using the general population life expectancy table that exceeds predictions for men of all races by at least two years. On average, an approved MSA can be 20 percent more than a reasonable and defensible medical cost projection. Can you buy more protection with a reasonable unapproved MSA that is professionally administered and costs less than that 20 percent spread? Do you have a potential for the condition to worsen to the point of costing more than that 20 percent? There is a time and place for CMS approval, but if you don’t understand all the components that go into the decision, then you can’t make it appropriately.
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The only real solution to the MSA dilemma is to assess it like any other organizational risk. Determine the range of compliance options available and the associated risks, and then decide where the tolerance lies. Are you willing to accept downstream costs to avoid a large uncertain outlay at the time of settlement? The costs involved in obtaining CMS approval, inclusive of the cost of the evaluation, the inherent costs in the CMS calculations and the wait time involved has to be weighted against the possibility of the claimant never treating again or dying prematurely. Accelerating the extreme possibility of a lifetime exposure under state workers’ compensation law at a rate in excess of what the entity being protected would pay to avoid future collection efforts on essentially a per-occurrence basis cannot make sense to an industry whose entire existence is based upon assessing risk. Yet for over a decade, that is exactly what has been happening and should be evaluated more closely. Concerns over removing CMS from the equation can be met with other tools available in the industry that ensure better protection from post-settlement conditional payments occurring. Structured settlements can provide periodic payments on a schedule nearer the time medical expenses are anticipated and avoid the temptation of a lifetime of medical expenses sitting in a bank account to which the claimant has unfettered access when another financial need arises. Professional custodial administration ensures that only allowable expenses are paid at the proper rate with cost containment features available to stretch allocations even further. While administration can be costly, if it’s used in combination with a structured settlement, it will cost less than funding an MSA as a lump sum. MSA funds can also be surrendered to certain irrevocable special needs trusts that will provide professional administration at no annual cost while preserving access to means-tested government programs such as Medicaid. There are so many ways to tackle this problem more cost effectively than CMS’ recommended method and in many instances, better protects Medicare and everyone involved. Jennifer C. Jordan, Esq., MSCC, CMSP is general counsel for MEDVAL, LLC.
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PRIMA’S 2012 ANNUAL CONFERENCE PREVIEW By Jennifer Ackerman, CAE
In June, risk managers from across the country will gather in Nashville, Tenn., for PRIMA’s Annual Conference. This year, attendees will be “walking the line of risk” at the only conference dedicated to risk management in the public sector. THERE’S AN APP FOR THAT… Every year, PRIMA works to enhance attendees’ conference experience with past innovations including the Cyber Café and online handout Web site. This year, PRIMA is excited to announce the launch of a new Annual Conference mobile application. The PRIMA Annual Conference app will give attendees access to all of the Annual Conference handouts, right from their mobile device. They can see maps of the exhibit hall, plan which educational sessions to attend and get up-to-the-minute updates and reminders about conference happenings. The app is available for free download. Attendees without a smartphone will still be able to access all of the app’s features from their desktop computer. For more details, visit http://conference.primacentral.org.
LEARNING AND NETWORKING, NASHVILLE STYLE PRIMA’s 2012 Annual Conference kicks off Sunday, June 3, with a welcome reception where attendees can network with old friends and make new ones. Monday morning starts two-and-a-half days of learning with PRIMA’s top-notch educational sessions broken up into eight tracks, including employee benefits/human resources, enterprise risk management, pooling, risk control, risk financing/ insurance/self-insurance, risk management administration, schools and workers’ compensation. Each day opens with a general session showcasing keynote speakers with messages that will speak to the challenges that all risk managers face today. On Monday, Bill Bott will present the Extreme Government Makeover, an exciting hour of learning about the problems that plague government today and the tools entities need in order to oversee their own extreme makeover. On Tuesday, Anthony Huey will share his ideas on how to communicate in a crisis. His presentation will provide risk managers with invaluable information on how to deal with the media during a crisis. The media plays an important role during any crisis. Huey will teach attendees what the media needs, and how the media can help them get information to the public quickly and efficiently.
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NEW FOR 2012! Learn more about PRIMA’s Annual Conference App!
THANKS TO THE 2012 ANNUAL CONFERENCE SPONSORS! PLATINUM SPONSORS
On Wednesday, attendees will start the day with a bit of comic relief from Nashville’s own Music City Improv. The cast will combine games and audience participation to create a one-of-a-kind show that will have conference attendees laughing, relaxing and letting loose in no time! The scenes will be presented in 3-to-5 minute increments and they will be fast-paced and comedy-driven. Attendees are invited to join PRIMA leadership in congratulating the winners of its yearly awards program, including the Public Risk Manager of the Year, Gary Eastes, risk and benefits manager for the City of Knoxville. Other award winners scheduled to be announced during the awards luncheon on Monday are: • Outstanding achievement for a public risk management program; • Outstanding achievement for a public risk management product; • Outstanding achievement for a public risk management intergovernmental risk pool program or product; • Author of the year for Public Risk magazine; • Article of the year for Public Risk magazine, and; • Chapter recognition awards.
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At this event, PRIMA will also present the coveted Distinguished Service Award to Abbie Hudgens, MPA, ARM, AIC, workers’ compensation division administrator for the Tennessee Department of Labor and Workforce Development.
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On Wednesday, PRIMA will hold its annual membership luncheon. During the luncheon, members will welcome PRIMA’s new president, Dan Hurley, CSP, ARM-P, MS, senior director of risk management and safety for Norfolk, Va., Public Schools, as he is sworn-in by 2011-2012 PRIMA President Cindy Mallett, AIC, CWCP, ARM-P. Mallett also will swear-in new directors Dean Coughenour, ARM, risk manager for the City of Goodyear, Ariz., and Amy J. Larson, Esq., risk and litigation manager for the City of Bloomington, Minn., as well as 2012-2013 president-elect, Betty Coulter, director of risk management and insurance for the University of North Carolina at Charlotte. Each day-long educational program is capped with an exciting peer-networking event. On Monday, join other risk managers for an afternoon reception in the exhibit hall. Tuesday brings PRIMA’s Tuesday Night Two Step. This annual event is always a highlight of the conference and this year promises to be no different. Attendees will head to the Wildhorse Saloon for a night of kicking up their heels, Music City-style! On Wednesday morning, attendees can start their day off right with PRIMA’s Fun Run/Walk, to benefit the Second Harvest Food Bank of Middle Tennessee. It’s not too late to register for public sector risk management’s premier conference! Don’t miss your chance to “walk the line of risk”! See you in Nashville!
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(As of April 27, 2012.)
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CYBERBULLYING: WHEN BULLYING LEAVES SCHOOL GROUNDS By Sharon Holt and Michael Otworth, CPCU, ASLI
Cyberbullying, like more familiar forms of bullying, is repeated aggressive or negative behavior intended to inflict mental, physical or emotional harm. The only difference between the two is the medium. Rather than face-to-face confrontations, cyberbullying happens across a range of electronic media. Moreover, because cyberbullying takes place in the 24/7 world of social networking, victims often feel that they have nowhere to hide, even in their own homes. Bullying, especially cyberbullying, presents a significant risk management concern for school districts across the U.S. The National Center for Education Statistics reports that more than 7 million U.S. middle school and high school students reported being bullied at school during the 2008-2009 school year—and more than 1.5 million reported they were cyberbullied, either at school or off school property. To make matters worse, estimates show that only 33 percent of all bullying incidents are reported. Left unchecked, bullying of any type can escalate into criminal harassment and physical violence. Furthermore, persistent bullying and cyberbullying is increasingly linked to suicide and depression. Not only can bullying lead to tragedy, but school districts and risk managers may find themselves vulnerable when questions about liability arise.
RECENT CYBERBULLYING CASES A case filed last February in New Jersey Superior Court, Sussex County, highlights the risk that schools face with cyberbullying. The parents of a female student filed a lawsuit against High Point Regional High School alleging that the school failed to stop the harassment, intimidation and cyberbullying that was carried out over a three-year period by other students. The lawsuit claims that school officials were told about the verbal abuse and provided copies of derogatory Facebook postings but never took any action to stop it. The suit seeks $1 million from the school district along with another $1 million from other student defendants. Considering that New Jersey has what is perceived by many to be the nation’s toughest Anti-Bullying Bill of Rights law, the case is being closely watched by both legal experts and state school board officials. The New Jersey Anti-Bullying Bill of Rights law enacted last year was propelled in the aftermath of the Tyler Clementi tragedy. Tyler, an 18-year-old New Jersey University student committed suicide after a dorm room encounter with another man was video streamed over the Internet without his knowledge. The roommate, Dharun Ravi, and a fellow hall mate were charged with invasion of privacy for setting up a Webcam in his dorm room and sharing the video with other students. Dharun Ravi, who refused a plea deal, was convicted earlier this year on multiple counts of invasion of privacy and bias intimidation. As a result of the guilty verdict, five states—Delaware, Indiana, Kentucky, Maine and New York—want to enact cyberbullying laws that stiffen the penalties for electronic intimidation and harassment. A bill introduced in Indiana would
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Districts are responsible for student safety when at school, on school grounds or participating in a school-sponsored event. Although cyberbullying often happens at home or in other off-campus settings, bullying often carries over or escalates at school since this is the primary group setting for the student population.
actually give schools more authority to punish students for cyberbullying activities that occur off school grounds.
WHO OWNS THE RISK IN CYBERBULLYING SITUATIONS? As of 2011, at least 48 states have enacted anti-bullying laws, and 36 states have cyberbullying laws already in place. Fewer than half of the laws, however, offer any real guidance about whether schools may intervene in cyberbullying situations. Clearly, this area remains largely uncharted and untested. Not only do laws vary by state, but few courts have vigorously assigned criminal responsibility to those involved in bullying and cyberbullying incidents. The legal system, however, has proven much more likely to assign financial responsibility in civil suits—both to individuals and to school districts. The primary result of state anti-bullying laws is that risk has been passed from governmental entities to schools and school districts. Most of the laws on the books today require school districts to police bullying and cyberbullying. As with other liability issues, you will be asked to answer three key questions, should a cyberbullying issue occur in your school district: • What did you know? • When did you know about it? • What did you do about it?
THE SCHOOL’S ROLE Districts are responsible for student safety when at school, on school grounds or participating in a school-sponsored event. Although cyberbullying often happens at home or in other off-campus settings, bullying often carries over or escalates at school since this is the primary group setting for the student population.
Beyond protecting the students’ safety, everyone benefits from proactive bullying prevention. Growing public awareness of cyberbullying has increased recognition of the seriousness of the problem of bullying and created a huge opportunity. Schools have the opportunity to take the lead in proactively addressing not only the risks involved, but the issue itself.
POLICY VS. PROGRAM No statistics exist indicating that policies banning bullying or cyberbullying make a difference in student behavior. Research, however, does suggest that when a comprehensive anti-bullying program is implemented in a school, incidents of bullying and cyberbullying decrease by as much as 20 percent. An effective anti-bullying program will require: • • • • • •
Detailed policies Questionnaires/surveys Training for faculty, staff and students Reporting mechanisms Investigation process Ongoing vigilance
While targeting one or two components would be better than doing nothing, any school or district adopting only a partial program may still be open to potential liability. When districts commit to a comprehensive anti-cyberbullying program, they put themselves in a stronger position in the event of a lawsuit. Perhaps more importantly, a compressive anti-bullying campaign increases the likelihood of preventing bullying and cyberbullying in the future.
A CYBERBULLYING PROGRAM: STEP-BY-STEP Enacting a comprehensive program is not difficult if you break it down into components. Following is a description
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Cyberbullying: When Bullying Leaves School Grounds
Taking proactive steps to curb cyberbullying is not only the fiscally responsible thing to do, but it is the right thing to do. When students are protected from the threats of bullying and cyberbullying, everybody wins.
of how to develop and implement each step of the process, from beginning to end.
bullying hot lines or provide an online reporting system that can be accessed anonymously.
Policy: Establishing a detailed policy alone will not prevent cyberbullying; a policy, however, can set expectations. Be sure that your policy is in compliance with state laws, and verify this on an annual basis.
A key component of any effective reporting system is mandatory reporting for faculty and staff. In several wellknown bullying and cyberbullying incidents, some believe that lives may have been saved if reporting mechanisms had been in place.
Remember that buy-in matters. Ask faculty, administrators, students and parents for input. When your policy is finalized, make it available to all stakeholders using various media, post it on school and district Web sites, notify all parties in writing, host meetings with parent and student organizations and take advantage of any other creative ways to spread the word. Questionnaire/Survey: Find out what students know and don’t know about cyberbullying to establish a baseline. Then measure the same general information at least annually. (Variations and enhancements to the questionnaire can be made, but continue baseline measurement for comparisons.) Ideally, the anti-bullying/cyberbullying program’s training and awareness efforts will improve the students’ knowledge over time. Survey results can provide evidence of your program’s success and documentation in case of liability claims. Training: Anyone who might potentially be involved in cyberbullying incidents—students, faculty and staff, administrators and parents—should receive training that helps them identify bullying and cyberbullying and be aware of the district policy and consequences. Appointing district experts—often school counselors or other trained faculty members—to serve as references for questions from faculty, students and parents can provide those in need with an obvious place to go for help. Finally, proof of training is essential from a risk management standpoint. Proper documentation and record-keeping has to be a key element in the process. Reporting mechanism: Make reporting cyberbullying as simple, anonymous and safe as possible for both victims and bystanders. If possible, post “bully boxes” in areas of the school where students can drop in information without being seen. You can also post information about nationwide anti-
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Investigations: Once a school becomes aware of a cyberbullying incident, action must be taken according to a mandatory investigation policy, similar to any other situation involving harassment. To the best of their capabilities, school officials should establish who was involved, when the incident took place and where. Then all parties—bullied student, alleged bully, known bystanders and parents—must be notified and interviewed. These initial interviews should seek a specific, objective description of what happened. District policy should specify consequences for different levels of bullying behaviors, so there should be no surprises regarding consequences for any of the parties involved. Be aware that mediation may not be a useful tool when addressing either type of bullying. Mediation is valuable in situations where there is a level playing field. Bullies and their victims do not operate on a level playing field. Vigilance: The concept of “BBB”—bully, bullied and bystander—is at the center of many anti-bullying programs. By placing emphasis on the bystander, witnesses can be empowered to report abuse and prevent escalation. If that individual with information about a cyberbullying incident does not feel threatened by the system, he or she will be more likely to pass this information on to a trusted adult at home or at school.
WHY IT MATTERS Statistics suggest that over 1.5 million students live in fear because of cyberbullying. Although the plan outlined above likely cannot stop all bullying situations, taking these or similar steps may both limit the extent of cyberbullying in your schools and lessen your districts’ exposure to risk. Taking proactive steps to curb cyberbullying is not only the fiscally responsible thing to do, but it is the right thing to do. When students are protected from the threats of bullying and cyberbullying, everybody wins. Sharon Holt is the director of e-learning for LocalGovU and SchoolDistrictU. Mike Otworth, CPCU, ASLI is a vice president and the head of claims for the public entity division of Genesis Management and Insurance Services Corporation.
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In 2012, PRIMA welcomes back one of its most popular and successful education programs:
PRIMA INSTITUTE!
Plan now to attend the 2012 PRIMA Institute, November 5–7, in Charlotte, NC. This comprehensive risk management program is perfect for those just starting out in risk management or who have less than five years of risk management experience. This three-day session will help you define the total cost of risk in your organization, the types of insurance programs available to public risk managers, how to empower your risk management team and get a seat at the decision-makers’ table. Each day concludes with case study presentations from experienced risk managers!
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PRIMA INSTITUTE 2012
A full schedule of sessions, as well as registration information, will be available soon.
MARK YOUR CALENDARS AND DON’T MISS THIS EVENT!
New to risk management? This article will tell you how to understand some of the intricacies of your job!
PUBLIC RISK 101:
UNDERSTANDING THE UNIQUENESS OF PUBLIC ENTITY RISK By: Michael G. Fann, ARM-P, MBA
While there are a number of principles that are universal regardless of whether the organization is a private enterprise or provides governmental services, there is no question that public entities provide the insurance and risk management professional substantial unique concerns. As a number of individuals making the move from the private sector to public have said, public entities are just, well,… “different.” From the obvious political challenges and constant scrutiny by the voting public, to the unique exposures provided by law enforcement, correctional facilities, right-of-way hazards, recreation leagues, planning and zoning restrictions and other primarily governmental functions, public entities demand a diligence with regard to understanding their unique position within the insurance marketplace. Further, the dramatic growth of the public risk management discipline over the past 25 years suggests that most public entities will expect, if not demand, effective risk identification and risk analysis services from the public sector risk manager as opposed to simply being a “compliance officer” or “insurance manager.”
POLITICAL ENVIRONMENT With the vast majority of public entity decision-makers subject to the ballot box, this represents the most easily identifiable concern that must be dealt with from a risk perspective. The possibility of routine turnover of elected officials and therefore the need for almost continuous “re-education” of elected officials and appointed staff means that the risk manager must structure his or her service effort in a simple format that can be easily duplicated from one decision-maker to the next. Additionally, there are other local political considerations and connections that must be evaluated, such as long-term relationships with consultants, financial advisors and even other insurance professionals. These political challenges and concerns require a diligence in the way the risk manager stays connected to the public entity leadership and discerns the local political environment.
RISK IDENTIFICATION Identification of exposures is a primary area where an effective risk professional can really be of significant initial (and on-going) benefit to a public entity and prove his or her worth with the decision-makers. All too frequently, public entity staff is so familiar with the nuances of the risks arising from the services they are providing, these risks are not adequately evaluated nor managed… and many times not even noticed. Having a fresh set of eyes to examine the operation and assist the entity with development of tools needed to keep up with all they have and all they do, is invaluable to the governmental unit. From time to time, one will hear a staff member of a public entity say, “Well, what we do is what we do,” and the familiarity of the routine will lead to risk exposures that go unaddressed. Many public entities fall into the trap that because the essential elements of the public services they provide (for example, police services, parks, sewer utilities, etc.) have not changed significantly in decades, they do not remain diligent in evaluating the risks that may arise from changing technology, a more litigious society or simply differing cultural values. A surface examination of items such as the agenda and previous meeting minutes of the governing board, the entity’s annual budget, financial statements, capital assets lists, loss history reports and any number of other official statements can indicate exposure areas where funds are being allocated and operations are being funded.
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Public Risk 101: Understanding the Uniqueness of Public Entity Risk
In many cases, it could take a significant investment of time to determine the true decisionmakers, the staff members who want to make a difference in the safety of co-workers and the general public or those who exhibit passionate risk leadership. But this investment of time can be worth it in helping establish the long-term effectiveness of the risk management efforts of that entity.
Another vital area where a risk manager can prove invaluable is in being a catalyst for constructive change. Many public organizations fall into a mindset of “that’s the way we’ve always done things,” which can lead to unidentified risk exposures or worse, a failure to realize that what was done in the past is not working. The entity may need to change the way it views and addresses problem areas and other risk exposures.
RISK LEADERSHIP Even though this may be too elementary to even warrant mentioning, it should noted that the person who appears to have the decision-making position regarding the implementation of sound risk management methods for the public entity may not always be the person who exhibits and holds the “risk leadership” position within the organization. Or certainly many entities have more than one person that are intricately involved in the success (or lack thereof) of the entity’s risk management efforts. In a small town, for example, it may appear that the mayor would be the most influential person as it relates to sound professional management efforts when in fact, it could be the city clerk, recorder, finance director, fire chief or other staff member that “gets things done” with regard to best risk practices. In other larger entities, the risk manager likely needs to be the facilitator and internal resource, but in fact it could be the human resources director, the councilperson who serves as chair of the insurance committee or other local official that may have the most influence and impact when programs and practices need to be changed. In many cases, it could take a significant investment of time to determine the true decision-makers, the staff members who want to make a difference in the safety of co-workers and the general public or those who exhibit passionate risk leadership. But this investment of time can be worth it in helping establish the long-term effectiveness of the risk management efforts of that entity.
RETENTION OPTIONS Once a public entity has a reasonable “handle” on its exposures and has the tools in place to continually identify and analyze their evolving risk issues, the next critical area for an effective risk professional to step in and provide essential expertise is risk retention. Assisting a governmental entity with analyzing its financial strengths and weaknesses and then developing a long-term plan through aggressive risk control measures for retaining more and more of the financial risk through larger deductibles and higher self-funded retentions is an essential element of the public entity’s strategy for a successful risk management effort.
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Even in the short term, the entity should be provided with deductible options showing how much they can save in premiums if their risk control efforts effectively prevent and reduce their claims and financial losses. Word of warning, however… increasing retention in the absence of aggressive risk control practices may lead to financial disaster. If the entity is not going to implement and follow risk control best practices in its operations, then increasing the financial retention just to enjoy a temporary savings in premium is simply not a good idea.
SPECIAL EVENTS, SPECIAL CONCERNS Special events tend to provide public entities with unique challenges, whether the events are being coordinated or sponsored by the entity or whether they are simply allowing the event to be held on the entity’s property or right-of-way by third parties. Far too often, these events contain activities that may be excluded from coverage under the entity’s policies or the third-party organizer of an event has not provided proof of adequate coverage for the special event to protect the interests of the public entity. This is another area where “that’s the way we’ve always done it” can lead to significant uninsured losses for the entity. A well-positioned risk professional will assist with the identification of these special risks and will address their entity’s process for managing the requests by third-parties to conduct events in public facilities and on public property and right-of-way.
RELATIONSHIP The key to constructing a successful partnership within almost any public entity is establishing a mutually beneficial and valued relationship with the decision-makers, the policymakers, functional department heads and the risk leaders of that entity. The risk management professional that seeks to build partnerships within the public entity will successfully accomplish a number of things. These elements include identifying the risk services that a particular entity needs, ensuring these services are provided efficiently and effectively, leading the entity toward more aggressive risk control practices and helping the entity assume greater financial risk retention. Effectively implementing these items will help the public entity control its losses and deliver its services in a manner that is financially responsible and safe for its staff and the general public. Michael G. Fann, ARM-P, MBA, as served in risk control for the TML Risk Management Pool since 1986 and also provides risk management presentations and consulting to organizations throughout the U.S.
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A COMMONWEALTH TAKES
AN UNCOMMON PATH How the Virginia School Boards Association Became a National Model for Improving School Safety and Risk Management While Reducing Claims
By Mark Drury
Washington, D.C., is a city of monuments. Practically every American who’s ever played a significant role in the life of the country can be found etched in marble or granite there. A few miles south of the District, the Commonwealth of Virginia begins and through the suburbs of Alexandria to the Old South capital of Richmond to the Blue Ridge Mountains of the western state, hundreds of thousands of school children gather each day to learn the story of their nation. Each of the school districts educating these children (called ‘divisions’ in state law) is charged with the responsibility of keeping students, teachers, staff and administrators safe. But, until a decade ago, school safety was largely an afterthought in many schools. The Virginia School Boards Association (VSBA), which provided the self-insured risk pool for school divisions, could see that in the numbers.
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“It wasn’t just about saving money, “Smith said. “Every claim can potentially take a key staff or faculty member out of action. We want the best teacher in the classroom, the best driver behind the wheel.” Smith “Ten years ago, our self-insured pools were close to insolvency,” said David Smith, VSBA’s director of insurance services. “Claim costs were high, accidents were frequent and the financial impact on our schools was taking a serious toll across the Commonwealth.” Only 15 of Virginia’s 134 school divisions took part in VSBA’s workers’ compensation group. Twenty-five were members of the property/casualty pool. Losses threatened to turn the pools’ balance sheets upside down. VSBA Insurance Services was staring at a $1 million deficit. That’s when the organization launched a turnaround campaign with profound results. “Today our pools are financially sound, employee injuries have dramatically decreased, transportation incidents are at an all-time low and we could not ask for a better record of risk management improvement in school safety.” said Smith. In 2003, VSBA board members turned to what they euphemistically called “the two Davids” to guide the change. First, Smith, a bright Hampden-Sydney graduate with a track record of successfully insuring municipalities in Virginia and David Brooks, a Murray State (KY) University graduate who leads an energetic, highly successful school safety consulting firm based in Nashville, TN.
able. “People don’t realize the degree to which teachers are susceptible to accidents, but teachers do a lot of lifting, carrying and working at heights to run their classes,” said Dave Sulzen, VSBA Insurance Services board chair. The organization learned teachers are injured at a much higher rate than support staff in U.S. schools. Last year, nearly a quarter of all teachers in America were injured. VSBA immediately launched an aggressive safety training series specifically addressing risks to teachers. State-of-theart programs were developed including live presentations, online safety videos, safety committees, safety assessments for each school and consistent emphasis on the importance of safety. The e-learning safety training uniquely covered safety topics such as slips, trips, falls, back injury prevention, hazard communication and personal protective equipment. More than 20,000 educators have completed the personalized, web-based safety training that was rolled out two years ago. The program has had remarkable results, with claims dropping by as much as 25 percent in a single year.
said board members knew lost productivity hampered gains in Virginia’s schools. To be the best in the nation meant becoming the safest as well. VSBA’s goal was to create a “culture of safety” in each member school division.
The initiative wasn’t limited to teachers, though.
“It wasn’t just about saving money,” Smith said. “Every claim can potentially take a key staff or faculty member out of action. We want the best teacher in the classroom, the best driver behind the wheel.” Smith said board members knew lost productivity hampered gains in Virginia’s schools. To be the best in the nation meant becoming the safest as well. VSBA’s goal was to create a “culture of safety” in each member school division.
“Our bus drivers transport children millions of miles each year in unbelievable driving conditions,” Sulzen said.“School nutrition employees are serving millions of meals each year in the midst of heat and sharp objects. Custodial and maintenance staffs deal with chemicals, work around many different types of energy sources, work at heights and handle trash and materials to keep our schools running safely for our educators and students. The potential for injury among support staff employees is very real and had to be addressed.”
A study by VSBA determined half of all school injuries were to teachers and the majority of those injuries were prevent-
“Many school divisions don’t have full-time risk managers or safety professionals to properly and effectively train staff
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A Commonwealth Takes an Uncommon Path CALENDAR OF EVENTS PRIMA’s calendar of events is current at time of publication. For the most up-to-date schedule, visit www.primacentral.org.
WEBINARS 2012 • May 16: Practical Issues Related to Litigation and Investigation • July 18: Concussion Education and Management in the Student-Athlete • September 19: You Don’t Choose Tragedy, But You Can Choose Your Response: Crisis Response for Schools • November 17: Generational Differences in the Workplace (session presented by Genesis Management and Insurance Services Corporation)
PRIMA ANNUAL CONFERENCES June 3–6, 2012 PRIMA 2012 Annual Conference Nashville, TN Opryland Hotel June 2–5, 2013 PRIMA 2013 Annual Conference Tampa, FL Tampa Convention Center June 8–11, 2014 PRIMA 2014 Annual Conference Long Beach, CA Long Beach Convention Center June 7–10, 2015 PRIMA 2015 Annual Conference Houston, TX George R. Brown Convention Center
November 5–7, 2012 PRIMA Institute 2012 Charlotte, NC
UPCOMING CHAPTER MEETINGS Chapter meetings are listed on a space-available basis. For a complete list of PRIMA chapter meetings, visit www.primacentral.org. For information on a specific meeting, please contact the chapter directly. Kansas May 18 Minnesota May 10 Missouri May 9–10
To have your chapter meeting listed on the PRIMA Website, contact Bles Dones at bdones@primacentral.org.
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Brooks believes one of the keys to the program’s success is incorporating safety into the culture of each school division. He believes each teacher and staffer must take ownership and constantly be on the lookout for risks. The best way to do that, Brooks said, is for school division leaders to train employees in the areas where injuries are occurring, use values-based safety training to teach employees to embrace the culture of safety and reinforce it on a consistent basis. “Our people and our students are the most valuable resource we have,” said Sulzen. “Keeping them safe is our most important responsibility.” Since 2003, VSBA has conducted thousands of safety training sessions for more than 50,000 employees in Virginia. In addition, most VSBA school divisions have created safety teams in the wake of training to monitor and reinforce safe behavior. When auto accidents and workers’ compensation claims began to decline, VSBA took the message to statewide meetings of school superintendents, school board members, plant managers, pupil transportation officials, school business officials and the Virginia chapter of PRIMA. VSBA instituted an awards program recognizing school systems making major improvements in transportation safety and promoting awareness of employees working safely. “Superintendents have responded to our safety programs and we can see the success in reduced claims and the calls to join the program have risen dramatically. The program doubled in size by 2008 and we believe better service was the key” Smith said. Weather, school maintenance budgets and the age of fleets can all impact claims but, after nearly a decade of working with clients to help them understand the importance of risk reduction and cost control, VSBA’s efforts have paid off. In 2011, auto claims costs per vehicle in client school systems were four times lower than 2002 levels and lost-time workers’ compensation claims were being filed at the lowest rate in the program’s history. VSBA’s turnaround is starting to get noticed nationwide. “We’ve had several other states contact us to ask about the improvements we’ve made to service delivery,” said Smith. “I tell them the key takeaway to what we’ve done in Virginia is to find the very best people you can to help you address the problem and take care of servicing your clients. If you do that, everything else falls into place.”
OTHER MEETINGS
Arizona May 3 Connecticut May 23 Idaho May 3
to reduce accidents,” Brooks said. “We stepped up the volume and intensity of many types of training to improve the culture of safety. VSBA launched customized, on-site safety training for custodial, maintenance, school nutrition, vocational-technical, transportation, teachers and special needs teachers.” VSBA has even been invited to conduct safety training for students taking part in vocational-technical classes as well.
PUBLIC RISK | MAY/JUNE 2012
Smith admits school systems could probably find less expensive insurance in the marketplace, but not with the same level of training and service they’ve received from VSBA. To school administrators, the strong message that the school system cares about the safety of its workers and its students is well worth the cost. Brooks feels the steps taken in Virginia can translate to other states as well. “VSBA’s success isn’t unique to us, any school system in the country can have the same results,” he said. “You need experts in the field, a consistent focus on organizational change and the zeal of a missionary.” Mark Drury is the president of Adeo Strategies, a marketing and communications consulting firm based in Nashville, Tenn.
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Has your entity launched a successful program? An innovative solution to a common problem? A money-saving idea that kept a program under-budget? Each month, Public Risk features articles from practitioners like you. Share your successes with your colleagues by writing for Public Risk magazine! For more information, or to submit an article, contact Jennifer Ackerman at jackerman@primacentral.org or 703.253.1267.
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Member Spotlight
ABBIE HUDGENS, MPA, ARM, AIC, EARNS 2012 DISTINGUISHED SERVICE AWARD Each month, Public Risk features a member who has gone above and beyond in a feature column titled “Member Spotlight.” Do you know someone who deserves recognition, has made a contribution or excelled in their profession? If so, we’d like to hear from you for this exciting column, as PRIMA shines the spotlight on its members. To be considered for the Member Spotlight column, contact Jennifer Ackerman at jackerman@primacentral.org or 703.253.1267.
T
he Public Risk Management Association (PRIMA) is proud to honor Abbie Hudgens, MPA, ARM, AIC, with the 2012 Distinguished Service Award. The PRIMA Distinguished Service Award honors an individual working within the field of public risk management who has made a significant contribution to the profession and given sustained service to PRIMA as an organization. Hudgens, who is the worker’s compensation division administrator for the Tennessee Department of Labor and Workforce Development, was chosen to receive the Distinguished Service Award based on her many years of dedicated service to both PRIMA and the profession of risk management. Hudgens is a former PRIMA board member and president (1995–96), as well as having served as president of the Association’s Tennessee chapter. During her career, Hudgens has been a pioneer in the public risk management field. Beginning as an intern in the City of Knoxville’s Finance Department while a student at the University of Tennessee, Hudgens built the risk and benefits management program from scratch, as many other risk managers had to do at that time. It was during this time that she helped found the Tennessee chapter of PRIMA in 1986. From the beginning, she prized the value of PRIMA to public sector risk managers. When Metro Nashville and Davidson County’s insurance manager retired, he specifically requested that Hudgens be brought in as the city’s risk manager. After developing new risk management programs there, Hudgens formed her own risk consulting firm before the State of Tennessee came calling. She was asked to succeed the state’s long-time workers’ compensation division administrator in 2011. “With her usual style, Abbie has thrust herself into this new role and her usual success is sure to follow,” said
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Michael Fann, ARM-P, MBA, Tennessee chapter president. “Even with this new assignment, Abbie remains an active contributor to our state chapter.” Hudgens’ contributions to public risk management extend far beyond the state of Tennessee. According to Fann, Hudgens’ presentations at early PRIMA conferences about the programs she developed for the City of Knoxville became the framework for many public entity programs throughout the 1980s. This was especially true of employee benefits, wellness programs, employee assistance programs and workers’ compensation management, said Fann. Hudgens was a pioneer in the development of the educational offerings at many of the early PRIMA conferences, and critical in the development of the PRIMA Government Risk Management Seminar (GRMS, the predecessor of today’s PRIMA Institute). “Perhaps most significantly, she was a contributor and developer of many of the early public risk management manuals and texts that were and still are utilized throughout the United States today, including PRIMA’s Public Sector Risk Management Manual and the Risk Management for Public Entities (RMPE 352) text, which is still utilized by the Insurance Institute of America,” said Fann. Hudgens’ career spans nearly three decades and her accomplishments are varied and far-reaching—not just helping those in her home state of Tennessee, but across the United States. Throughout her career, Hudgens has served as a promoter and “cheerleader” for the public risk discipline. Her dedication and perseverance on behalf of public sector risk management has earned her the respect and admiration of her peers. And it has earned her the 2012 Distinguished Service Award. Congratulations Abbie!
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Aon Risk Solutions
Public Service Announcement
Great partnerships are built on great endeavors. Like PRIMA, Aon is committed to serving the Public Sector and making a positive difference for our clients, colleagues and communities. Aon is proud to be a platinum sponsor of the 2012 PRIMA Annual Conference. Aon Risk Solutions’ Public Sector Practice is a team of professionals specialized in managing the unique challenges faced by governmental, quasi-governmental, civil, social and educational organizations. Are you thinking about what your city, state or organization might look like in 10 or 20 years, and how that evolution will change the risks your community or operation will face? Aon is. Visit us at booth 400 at the conference and at aon.com/publicsectoradvisor to register for our weekly newsletter Aon Public Sector Advisor.
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