Pat Johnson

Photos by Kris Kathmann

She burst through a glass ceiling that had held back other women, as jagged shards flew everywhere, only to settle down with hardly a scratch on the uppermost floor of a Bloomington office building. Such a societal barrier could never hold back a person with this much drive. Once at the top, Patricia Johnson would begin gazing out her office window towards the frothy skylines of Minneapolis and St. Paul, where she saw only a panorama of opportunity for the business she led.

Johnson, 50, a Freeborn native, and third-generation graduate of Minnesota State University, Mankato, has worked herself into a standing as possibly the foremost expert on workers’ compensation insurance in Minnesota – and that in an industry traditionally dominated by men. She has the responsibility of caring for the largest workers’ compensation insurer in Minnesota, State Fund Mutual, which has 180 employees and over 7,500 customers with over $50 million in written premiums. As President and CEO since 1992, she has experienced the good, the bad and the ugly: from the current boom times to the ugly and bad days of workers’ compensation in the early ’90s.

Along with her ties to southern Minnesota – she is an MSU Foundation board member and an advisory board chair – other state and national responsibilities set her apart from industry peers. Currently, she serves as a Minnesota Insurance Federation board member, as Vice Chair of the Minnesota Workers’ Compensation Insurers Association, and as Vice President of the American Association of State Compensation Insurance Funds.

Business owner take caution: The trend toward lower workers’ compensation rates for Minnesota employers could be reversing, Johnson warns, mainly because of a recent increase in injury claims among new hires.

CONNECT: How does a person from Freeborn, Minnesota, become President and CEO of Minnesota’s largest workers’ compensation insurance company?

JOHNSON: My school teacher mom and part-time farmer father had a very big world. Education was very important in our household. Every child, both boys and girls, were expected to have a career plan, and that plan didn’t necessarily have to result in a high-paying career. Life wasn’t to be wasted.

CONNECT: How large is State Fund Mutual in relation to other companies in its industry?

JOHNSON: Small versus other insurance companies, but in workers’ compensation, we are the largest writer of workers’ compensation insurance in Minnesota. We focus only on workers’ compensation and Minnesota employers.

CONNECT: How do you measure your size?

JOHNSON: Most people measure an insurance company in premium dollars written, but that’s not how I do it. My objective isn’t to have our premium costs as high as possible – it can be a sort of a proxy, I suppose, for how much insurance a company writes. Since State Fund Mutual is a mutual, which resembles a co-op, our goal isn’t to inflate premiums to appear big but to keep costs down for customers. I measure our size in our ability to serve more of our customers, who are primarily employers and their employees.

True, workers’ compensation premiums have dropped over the past eight years and with it our premium volume, but our market share, our percentage of the pie, has increased. Also, as any business owner will tell you, gross revenue isn’t as important as margin.

CONNECT: It seems MSU has had a hand in molding you. You’re a third-generation MSU graduate, on the MSU Foundation board, and an MSU advisory board chair. What’s your take on MSU’s direction?

JOHNSON: I hold a very high regard and strong respect for the vision currently shown by Dick Rush. He is an extraordinary leader. I admire him because he has raised the University’s vision and not limited it. He knows when to consult, and when to get going. He has helped the institution and its supporters see that it can be more than they ever thought it could be.

CONNECT: What’s your impression of the name change to Minnesota State?

JOHNSON: It’s fabulous. It ties in with raising the University’s vision. Even when I graduated from MSU, in the early ’70s, the University was serving the entire state and beyond. On the other hand, MSU should still jealously guard its connection to Mankato.

CONNECT: While practicing law at a Minneapolis law firm in your first job out of law school in the mid-’70s, you were also a commissioner for the Minneapolis Commission for Human Rights. What did you learn from that experience?

JOHNSON: I learned firsthand of the diversity that existed in Minneapolis and many other communities. The Commission tried to resolve complaints so employment relationships could continue, which is something, unfortunately, that often is lost in today’s litigious society. People came to us primarily because they felt they had been discriminated against on the basis of race.

CONNECT: Do people bypass that commission and sue nowadays?

JOHNSON: When I was involved it was early in the history of the Commission. The City of Minneapolis had taken the lead statewide. The laws now require the State Human Rights Commission as a first step before litigation. The State of Minnesota has become much more active.

CONNECT: Any culture shock going from Freeborn and Mankato to Minneapolis?

JOHNSON: With the Human Rights Commission, one discrimination case involved anti-semitism. From my upbringing, and my perspective, I didn’t understand anti-semitism at all. Growing up, I don’t remember anyone ever making any distinctions about any Jewish person. It was a great culture shock to me.

CONNECT: You were a senate counsel in the late ’70s. As you saw it, what were the factors that drove most legislation at the Capitol?

JOHNSON: The process of legislation is a very complex one, and intentionally so. It’s much easier for a bill to be tripped up than it is for it to pass. The keys to driving worthwhile legislation forward were, and still are: 1) Having a significant, legitimate problem that can be easily portrayed and understood 2) Having an easily recognizable and clear solution 3) Having a strong proponent with a will of steel to see the bill through to the very end, a willingness to do legwork, and good communication skills to help eliminate people’s fears about some of the bill’s ancillary concerns.

In a nutshell: a focused problem, a focused solution, and a strong proponent.

Often an idea would come up one session, the next year there might be a really big debate over it, and the third year it might pass – a sort of “Rule of Three.” On more important, complex issues people need to realize the process might take three years, which may be a good thing in order to help people prepare for a new idea.

CONNECT: As senate counsel, what were your personal responsibilities?

JOHNSON: In that era, the late ’70s, it may seem odd, but the senate often used fairly rookie attorneys, like myself, with little experience. My job was to review, analyze, summarize and advise legislators about the impact of legislation they had proposed. We had to look outside the words by thinking through every possibility in order to predict a bill’s true impact. And sometimes I had to advise the bill’s author of an impact they hadn’t realized. It was a nonpartisan position, and sometimes I even had to draft amendments that would oppose proposed legislation I had helped write.

My job wasn’t to form an opinion about the bill but to interpret it, and I took this role very seriously. Sometimes I even worked on a previously passed bill to fix it if it weren’t doing what the original author had intended. In my four years at the Capitol, while dealing with both legislators and lobbyists, it seemed like many good ideas came from lobbyists.

A good lobbyist worries that when drafting a piece of legislation it might accidently result in an unintended effect. This is a lobbyist’s worst fear. They can’t burn people and expect to accomplish their agenda in the long-term. Trust is very important to them. The legislature benefits greatly from expert knowledge on complicated issues, including theirs. There’s nothing evil about them, and I believe they are an important part of participatory government. And I don’t think having lobbyists at the State Capitol excludes the average citizen from having an impact on their legislators. Two letters from average citizens make a stronger impact than any one lobbyist – any legislator will tell you that.

CONNECT: Any regrets about leaving the Capitol to have children?

JOHNSON: Being a senate counsel was a very exciting job. It seemed everything I did mattered, and sometimes my work mattered too much when I would worry a lot over whether I’d not caught everything in a bill. It was a very difficult job to have with two small children. When the session began, about the final five weeks of it, I would begin working almost around the clock, which I found very exciting, and liked, but that life-style didn’t lend itself to another very important job for me, raising two children.

CONNECT: Is there a glass ceiling for women in business?

JOHNSON: I can speak only from personal experience. I have never felt held back because of my gender, but that can be attributed to my state of mind. Growing up I was taught that if you have a goal and you begin encountering some difficulty in reaching it, just figure out a way around it.

I do think it is harder for women to be tapped for the very top position in a large corporation. Being in the top position is the ultimate in responsibility and trust. Boards pause a lot longer before deciding who should have it. I believe a lingering, pervasive ceiling still exists because it is harder for women to build that sense of trust. Getting there can be difficult.

CONNECT: You went from in-house general counsel with State Fund Mutual to its President and CEO in 1992. What in your background filled what State Fund Mutual needed?

JOHNSON: My breadth of experience, I think. Certainly in the workers’ compensation field, having relevant law experience helped my cause. Because it is a heavily regulated industry, much of this business involves applying the law and deciding claims. Our business philosophy stresses litigation avoidance, but there is some litigation.

The public policy arena always has intrigued me. Workers’ compensation is part of the public benefits system and a perennial area of interest for state government because Minnesotans, I think, have a strong desire for fairness. The State spends a great deal more time reviewing and changing workers’ compensation than other states do. A person in my position has to know their way around the Capitol, understand public policy, and know how change happens or doesn’t happen.

It is an ever changing business, all aspects of it. I have a belief in not doing something the same way every time – in innovation, which also has been a cornerstone for this company. If you’re doing your job well, this business can change as rapidly as changing a career.

CONNECT: What about your personal qualities that filled what your board was seeking?

JOHNSON: Drive. I have a lot of drive, and a strong belief in collaboration. This company can work smarter when it works in collaboration with policy makers and the business community. I also have a tremendous curiosity about businesses and what they do. It helps me serve them better.

CONNECT: In the early ’90s, workers compensation prices were very high. Why?

JOHNSON: A combination of factors. If you recall, the U.S. economy wasn’t doing as well in the early ’90s as it is today. Minnesota was faring better than other parts of the country then, but we still didn’t have the same job growth and work availability for those returning to work after injuries. And the workers’ compensation system was struggling to know then how to deal with spiraling medical costs and a medical culture that sometimes seemed oblivious about their part in getting workers back to productivity. We hadn’t yet learned the better lessons of managed care. Also, benefits were undergoing a series of changes, including some surprising judicial decisions interpreting legislated changes. Repeated changes are themselves expensive and added a level of uncertainty. Overall, Minnesota’s benefit system then, relative to other states’, was far more generous. All those factors converged to produce high costs and high prices.

CONNECT: Prices have gone down significantly since. Why?

JOHNSON: Improvement in loss costs, and for several reasons. Employers and their employees have improved safety. Another key factor is our increasingly robust economy and the availability of work. Employers are offering good jobs to people returning to work after an injury. Employers are very interested in retaining their employees today. The biggest financial burden on the workers’ compensation system occurs when people injured on the job aren’t returning to work. Legislation has adjusted the benefit system and so far the changes haven’t been reversed by the courts. Other legislation made available more options for managing medical care and disability from work injuries. Physicians seem more focused on helping people return to the work place and overall productivity than a decade ago. The idea is to help people get better faster – and prompt, focused, effective treatment helps them get better. I call it the “good version” of managed medical care.

Managed care in workers’ compensation is different from non-occupational medical care. With the biggest part of workers’ compensation costs going for wage loss benefits, employers and their insurers must care about people actually getting better. We can’t afford shortsightedness. We won’t be overcharged, but we also know that shortchanging on quality, effective medical treatment doesn’t help someone recover. Sometimes I wish this same holistic approach were more common in non-occupational medical management, too.

CONNECT: What are the most important issues facing workers’ compensation today?

JOHNSON: Minnesota has a tremendous worker shortage, and the lowest unemployment rate in the country. Employers know how difficult it is to find good people who are prepared and adequately trained. After years of declining injury rates, we’re noticing a more recent reversal of that positive trend. Especially claims from workers who have been on the job just a couple of weeks, and sometimes these are pretty serious injuries. As employers cast the net wider and wider for employees, you can’t always rely to the same extent on that person’s ability to pick up on the job skills quickly. Employers may be hard pressed to find training staff, too. But they must invest more at the front end in training, not only for job quality but for job safety. It’s a big challenge that may get worse before it gets better. And because of our acute shortage we’ll feel it in Minnesota more so than in other parts of the country.

Another challenge would be this: I hope the legislature – and really all policy makers and policy influencers – carefully think through any benefit changes. Loss cost reductions over the past several years are leading many to consider whether benefits can be adjusted upward again. But there is inherent lag time in collecting and evaluating injury costs and experience. More recent experience, which has not yet been compiled and analyzed statewide, may well show rising costs once again because of more injuries and more serious injuries, even without benefit level increases. If public policy decisions don’t anticipate that this is a possibility, we could find ourselves surprised that we’re back to spiraling workers’ compensation costs and prices.

CONNECT: From your experience as vice president of the American Association of State Compensation Insurance Funds, have other states experienced the same changes as Minnesota?

JOHNSON: Even though other states have had legislative reforms, no other state has experienced our level of dramatic change.

CONNECT: You’ve been CEO and President at State Fund Mutual for eight years now. Anything you would do differently if you could do it all over again?

JOHNSON: I’ve learned to trust my instincts and act on them more quickly. However, I made that same comment to someone just last week, in a peer group in the same business, and they said if you move too fast people haven’t had the opportunity to learn your process and personality. That was something I hadn’t thought of before.

CONNECT: Why be involved in the North Star Opera?

JOHNSON: Music is a family tradition. My father served in WWII mostly in Italy. It was a tough time and when other on-leave soldiers were out drinking, my dad went to the opera. Music helped him through tough times. I love all kinds of music, not just opera. I like Patsy Cline, too.

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