New Ohio BWC chief running a changed agency
The checks have been arriving for Ohio employers during the past few weeks: The Ohio Bureau of Workers’ Compensation is returning $1.5 billion in dividends thanks to lower claims and solid investment returns. That’s on top of $1.5 billion returned in 2018—in fact, this year marks the fifth billion-dollar dividend to employers since 2013.
It’s a welcome boost for businesses, for whom workers’ compensation insurance represents a significant expense, many times trailing only health insurance and salaries. As the chief BWC executive leading the 2019 return, Stephanie McCloud is upbeat. “Our goal, our hope, our prayer is that they are investing those back into their businesses for the economy, into their businesses to increase safety,” McCloud says. “And we love hearing what folks are doing with the return. We’ve been out scouring, asking for stories.”
Some employers, such as Columbus-based Reitter Stucco, are giving the money back to employees. The largest dividend payments in the state this year have gone to the city of Columbus, $20 million; the city of Cleveland, $6 million; and Columbus City Schools, $4.5 million. In Franklin County, 14,867 private employers were to receive a combined $118.2 million, according to the Columbus Dispatch.
Reitter Stucco received a $39,000 rebate this year, owner Fritz Reitter says. “It’s kind of manna from heaven, if you will,” he says. “We aren’t expecting it.” Reitter plans to share the money with his employees, who have improved the company’s safety record dramatically since 20 years ago, he says. In the past, he says premiums were “a couple hundred thousand dollars a year. This past year, they were in the middle $50,000s.”
Since 2010, the state agency, which is the largest of its kind in the country, has decreased rates an average of 35 percent for private employers and 42 percent for public. It’s paid employers $5.7 billion in dividends since 2013. Thanks to efforts around preventing falls and other campaigns by the BWC plus greater awareness of safety by employers, new injury claims dropped to 85,000 in 2018 from 262,000 in 2000, the bureau reports.
But the story hasn’t always been so happy at the bureau McCloud now runs. It was rocked by scandal in 2006 when Toledo coin dealer Tom Noe was convicted of theft, engaging in corrupt activity, money laundering and forgery and sentenced to 18 years in prison. An influential figure in GOP political life in the state’s capital, he was found to have stolen $13 million from a $50 investment fund in rare coins that he established for the BWC. Noe also was found guilty of campaign contribution violations. More than a dozen officials across the state were implicated in various corrupt dealings, which extended all the way to Republican Gov. Bob Taft and his chief of staff Brian Hicks, who admitted committing financial disclosure violations and were fined. Following the Coingate scandal, Democrats swept all statewide executive offices but one.
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Times were tough at the BWC. Some of its more creative, riskier investment practices came under fire, such as those involving hedge funds and private equity. Then, in 2007, a group of thousands of businesses sued the Ohio BWC, alleging the fund overcharged them for premiums from 2001 through 2009. The bureau admitted doing so and settled the lawsuit for $420 million.
McCloud says the timing of those scandals was actually kind of fortuitous. As the nation’s largest banks melted down in fall 2008 amid a housing crisis and a deepening Great Recession, the Ohio Bureau of Workers’ Compensation, stung by the Coingate losses, already had moved its investments into the safe harbor of bonds.
She experienced those troubles from her vantage point as deputy chief counsel for Attorney General Jim Petro, where she was responsible for helping to sell off the state’s portfolio of Noe coins. “There was a receiver appointed during that time, and they had counsel and I worked with the receiver and counsel,” she says. “There was a strategy for which coins go out when—you don’t want to flood the market trying to get the maximum value out of the coins.” McCloud also worked on hedge fund investment litigation faced by BWC. “They were difficult times to get through, but the bureau came out much stronger, much better,” she says.
The Ohio General Assembly created the BWC’s board of directors, which adopted much more conservative investment policies that continue today. McCloud says half the agency’s $27.5 billion under management is in bonds, 30 percent is in traditional equities such as the S&P 500, and the rest in real estate. “It has allowed us year-over-year to produce some great returns, which not all the institutional investments have been able to do,” McCloud says. “The formula there has worked for us, and I don’t think there’s going to be any big push to change that.”
When Gov. Mike DeWine took office in January, one of the first things he did was establish Recovery Ohio, an effort to address the state’s opioid addiction problems. He also appointed McCloud administrator of the BWC. The October before, the bureau had run a pilot of its new Substance Use Recovery and Workplace Safety Program in three counties hard-hit by addiction—Montgomery, Ross and Scioto. The idea is to support employers in hiring people in recovery by funding drug testing and training for managers and human resources departments about how to manage someone in recovery. The hope is to expand it to 12 counties and $15 million in state finding this biennium.
The bureau in June began to phase out the use of oxycontin and its generics in favor of a substitute that offers “abuse deterrent technology, meaning if you crush it and snort it or inject it, you don’t get the same kind of high that you do with oxy,” McCloud says. “Within a month, we got a call from an injured worker who was on oxycontin who said, ‘I don’t know if I ever would have got off of this, but I’m going to take this opportunity to get the help you’re offering. And I’m going to get off of oxycontin because I want to get a job in the rail, and they have a zero tolerance policy for opioids.’ ”
With 242,000 employer policies, the Ohio Bureau of Workers’ Compensation is the largest of 27 state-run workers’ comp insurance funds and among the top five single-line insurance carriers in the country. McCloud says she doesn’t think most people realize how large the fund actually is and that’s one reason the bureau is working on improving its communications strategy, including being more active on social media. “Employers are always interested in you when you’re a hardship on them, and we have not been a hardship on them,” McCloud says. “But we’re doing so much good stuff. We’ve increased our safety grant program from $4 million to $20 million. That doesn’t include the [$15] million for the substance use recovery program. We have the safety intervention grants in the public sector for body armor for law enforcement, protective gear from carcinogens for firefighters, school safety programs.
“[Gov. DeWine] had a quote early on that I really latched on to. He said, ‘I want to do as much good as I can with the time that I have.’ And we are working very hard—he moves fast. Keeping up with the governor has been a challenge because he moves very, very fast … trying to address the opioid epidemic, trying to be innovative with regard to safety and come up with new ways to protect injured workers.”
McCloud’s life has, in a sense, come full circle with her current role—her first job out of law school was as a staff attorney at the BWC. She’d started there as an intern at 26 and was hired once she passed the bar examination. The first fall she worked at BWC, 1996, an injured welder named James Dailey who had been denied benefits stormed into the William Green Building at 30 W. Spring St. with guns, gasoline and his two children. He took four hostages. About eight hours later, he was overtaken by one of them, a former FBI agent, McCloud says.
Security was enhanced after that. “So when I go through security [now], I remember sitting and doing all the research on what we could do as far as searches,” McCloud says. “We used to just be able to walk in and out of the building.”
McCloud also met her husband, Brad McCloud, while she was a staff attorney at the bureau. They did not begin dating until a few months after she left the job to work for Gov. George Voinovich. “It was my rule. I didn’t date people I worked with,” she says. They married and had a son, and McCloud went on to serve in progressively more responsible roles in government. She launched two businesses, a law firm and a lobbying firm, and spent some years with a Memphis-based third-party administrator, Sedgwick Claims Management Services. She was on the board of Maryhaven for more than a decade and a member of Ohio’s Counselor, Social Worker and Marriage and Family Therapist Board. The year before she was hired as CEO at BWC, she was a Truro Township trustee. Her husband is mayor of Reynoldsburg.
“I usually spin about four or five plates at the same time and stay busy,” McCloud says. “I like it that way, which is one of the things I love about the governor, because he spins about 10 to 20 plates at the same time. I love working for somebody who keeps that kind of pace, because it forces everybody underneath of him to rise to the occasion.
“My husband would say everybody asks him how I’m doing, and his response is when he sees me, I seem to be doing OK,” she says, only half laughing. “Stephanie is a force of nature,” Brad McCloud says. “I’ve never seen anyone that had that kind of vision to so quickly identify what the issue is and then just as quickly identify how we’re going to deal with it.”
Judge Michael Watson of the United States District Court for the Southern District of Ohio worked with McCloud early in her career. “I think she’s got a leader’s mentality,” Watson says. “She is willing to listen to people. And she listens first and then makes decisions after a full consideration of all the issues.”
The issues when McCloud was in college at Ohio University included a landlord who refused to give her and her two roommates their security deposit back. She took him to court and not only got the deposit back, but he was ordered to pay twice the amount in question, she says. “He wouldn’t pay it, and I ended up attaching his bank account. It’s funny, you talk about full circle—I used that money as my down payment on law school.”
Ohio BWC CEO Stephanie McCloud has the agency focused on the opioid epidemic and workplace safety as claims and premiums fall.
How do you encourage employers to hire people in recovery?
“I was on the board of Maryhaven for 13 years, and having a job and a reason to get up every day and a purpose and a feeling of accomplishment is critical to recovery. [For employers], it can be kind of a circular problem of not wanting to hire someone in recovery. And the person in recovery then struggles with abstaining from substance abuse because they can’t find a job. It’s very circular.”
What else is the bureau doing to combat the opioid epidemic?
“[We are rolling out a new safe disposal bag for prescription drugs.] The pharmacies will dispense it anytime someone gets their first opioid prescription because there are, as we know, injuries that create a legitimate need for opioids to manage pain. The disposable bag hopefully will [keep drugs] from falling into the wrong hands.”
The BWC had about 262,000 new claims a year in 2010. It had 85,000 in 2018. What happened?
“We are very encouraged by the new culture that’s being created in safety. Employers are taking the time to recognize—just like with wellness programs and your health insurance—that doing a little bit up front can pay a lot of dividends. As we educate people about the importance of safety equipment … employers are investing in and taking advantage of our [free] safety services. It’s also a changing culture. You know, sometimes the older generations, it was the tough thing to do your work without the safety equipment … ‘I don’t need that’ and ‘I’m the big strong person and I can do it without it.’ And those attitudes are changing. And I think that’s helping claims fall.”
Katy Smith is the editor of Columbus CEO.