SHARE:
War On Two Fronts
And when he got to be a Marine, he always wanted to join Force Recon.
That says a lot about Shebel, the longtime president of the Tallahassee-based lobbying group Associated Industries of Florida (AIF).
Force Recon (short for reconnaissance) was the Marine commando unit in Vietnam, the elite equivalent of the Army Rangers or Navy SEALs.
The unit's mission: To drop into enemy-controlled territory in small teams of four to eight, gather information for air and artillery strikes and even ambush enemy soldiers. It was a bold approach - and usually successful. In 1967, Recon Marines killed 34 of the enemy for every one of their own losses, a ratio nearly five times higher than that for regular Marine units, according to "Inside Force Recon," a book by Michael Lanning and Ray Stubbe.
"We won all the battles and lost the war," says Shebel, who earned the Bronze Star and the Purple Heart himself. "Maybe until today it was the most challenging part of my life."
Characteristically, Shebel now finds himself fighting hard again. Only this time, it's on two fronts. And as any military tactician will confirm, two-front wars are extremely dangerous propositions.
In Tallahassee, Shebel has staked AIF's considerable prestige on a battle to repeal a state law that imperils the nation's entire tobacco industry.
At the same time, AIF also is waging a little-noticed battle in South Florida over insurance - one that holds potentially vital financial implications for the organization that Shebel has built over the last 25 years.
Under pressure from new competition, Shebel is attempting to upgrade AIF's long-profitable workers' compensation subsidiary into a full-fledged insurance company. It's a mission that he regards as so important that he recently moved from Tallahassee, where he has lived for more than 20 years, to Fort Lauderdale, near AIF's insurance headquarters in Boca Raton.
Shebel is typically confident that he'll prevail.
But as the legislative session began, AIF lobbyists suffered a chastening defeat in their effort to aid the tobacco industry. And a report to the Legislature by Wakely and Associates of Stone Mountain, Ga., suggested that changes underway in the workers' comp marketplace could have severe consequences for groups like AIF.
Critics and even those close to Shebel can't help wondering if his gung-ho style has helped to bring on at least some of the challenges he and AIF face. "Jon over the years has almost gone out of his way to make enemies," says one friend and fellow lobbyist in Tallahassee. "The list of people in this town he's managed to alienate is as long as your arm."
Mellowed over the years
To be sure, friends and foes alike are quick to praise Shebel for his savvy and determination, especially in his battles for business against perennial bogeymen like the Academy of Florida Trial Lawyers. Shebel even has been willing on occasion to balance his members' narrow economic interests against the state's broader needs, they note.
In 1993, for example, AIF supported Gov. Chiles' ambitious plans for health care, in an unlikely partnership that landed Shebel and the governor in bed together on Florida Trend's cover.
"Through the years Jon's mellowed, I think," says Doug Cook, Chiles' former budget director and current health-care czar. "He's become more statesmanlike as AIF's influence has grown."
Shebel also wins praise for his organizational success at AIF, just a tiny manufacturers' association when he joined in April 1971 after resigning from the Marine Corps as a captain.
Says Mallory Horne, a key adviser to Gov. Chiles and recent opponent of Shebel in the tobacco fight: "I was in the Senate when Jon began to develop AIF. It wasn't long before anyone watching could discern that his goal was to have the most automated, technologically advanced strike force in government. And he's done that."
Despite the broad respect he's earned, however, the 55-year-old Shebel remains undeniably controversial.
Partly that's because of his candor about Florida's unfriendly business climate and what he sees as the Legislature's indulgence of trial lawyers. Partly it's because of his occasional swaggering. (His AIF staff "can beat anybody in the country 'cause we're better in everything we do than anybody in the country," he growled in a recent interview.)
It might even relate to his size (6-5) and his penchant for dark clothes, a fashion quirk that has led some to nickname him "Darth Vader." (Actually, the black threads are his way of coping with his severe color-blindness.)
And like Force Recon itself, which was all but abolished in the 1970s following U.S. withdrawal from Vietnam, Shebel also has drawn occasional criticism for his high-risk tactics. For example, in 1990 Shebel deserted his fellow Republican, Gov. Martinez, to support challenger Chiles. But by 1992, Shebel was attacking Lt. Gov. Buddy MacKay personally, distributing buttons that showed MacKay's grinning face with the caption "Non-essential Employee of the Month."
As the 1996 legislative session got underway, Floridians watched the latest confrontation unfold on statewide television. Shebel and AIF waged a costly ad campaign to defeat Chiles over Florida's now-famous Medicaid Third-Party Liability Act, so threatening to tobacco companies - a campaign that, at least initially, failed.
The bill had passed as a little-noticed sneak amendment in the waning days of the 1994 legislative session, with the governor's secret backing. Chiles, angered over Republican rejections of his tax and health-care proposals, clearly was searching for a weapon against the GOP. The Medicaid liability law provided a big one, by attacking one of the GOP's most generous contributors: Big Tobacco.
The measure made it much easier for the state to recover Medicaid expenditures in court whenever a manufacturer's product - such as tobacco - caused a poor person's illness. The law did so by junking many traditional legal defenses. Legal observers quickly realized that the law threatened to bring the entire tobacco industry to its knees, by causing other states to adopt similar tactics or miss out on the money. In early 1995, Florida took advantage of the new law by filing a $1.4 billion suit against the major cigarette makers.
Even before the suit was filed, however, Shebel and AIF sprang into action to combat it. Arguing that the liability law potentially applied to all businesses, AIF in 1994 joined in filing a separate suit challenging the law's constitutionality. Then, in 1995, AIF helped tobacco lobbyists pass a repeal of the law. After Chiles vetoed the repeal, Shebel launched his costly TV blitz to convince the public - and his members - that lawmakers ought to override the veto. The ads' chief beneficiaries have been camouflaged, however: Most of the spots mention nothing about tobacco or smoking.
Heifer dust demagoguery
"Heifer dust," Chiles said of AIF's claims in his state-of-the-state speech to open the 1996 legislative session. "Demagoguery," said the normally mild-mannered House speaker, Rep. Peter Rudy Wallace of St. Petersburg, in denouncing the ads.
Even AIF's own actions appeared to undermine its arguments. For example, in the summer of 1994, Chiles seemed willing to trade away the Medicaid liability law in exchange for a health-care reform bill. Later, he offered to limit the Medicaid law explicitly to tobacco. Even then, AIF stood firm with Big Tobacco. In one letter, Shebel compared the tobacco industry to a "wounded Marine" that he refused to leave behind on the battlefield.
Some trial lawyers hinted that the Medicaid-liability controversy appealed more to AIF's bottom line than to its high principles because of the lobbying fees that tobacco companies were paying. Shebel denies it, saying that AIF has lost money on its campaign. However, with a pack of Merits peeking through his shirt pocket, Shebel admitted in a recent interview that tobacco companies paid a portion of the cost of the recent TV blitz.
In fact, as Shebel points out, it's the trial lawyers who have the big financial stake in the tobacco debate. Citing the state's contract with a "dream team" of lawyers from Florida and elsewhere to sue the tobacco industry, AIF notes the attorneys stand to make more than the state itself.
Despite the logic of AIF's argument, it's worth asking how AIF and its members can benefit from their intimate association with an industry that appears to be losing public sympathy. "How in the hell he can sell all the other industries down the river is beyond me," gripes Fredric G. Levin, one of the trial attorneys who thought up the Medicaid liability law.
In the end, tobacco's supporters couldn't even hold several of their Republican lawmakers. The most visible GOP defector, Sen. Virginia Brown-Waite, announced during a dramatic March 13 floor debate that she refused to "play the tobacco game" any longer. Tobacco supporters hurriedly backed off a planned floor vote, to avoid an embarrassing defeat.
On the other front, Shebel finds himself fighting a battle that is potentially even more important for his 76-year-old organization. In recent months, changing insurance market conditions have forced Shebel into a little-noticed rear-guard action to protect one of his association's key assets - AIF Property & Casualty Trust (AIFPCT), which sells workers' comp insurance to the group's 6,000 or so members.
Like many similar Florida-based workers' comp funds, AIFPCT faces new competition from regular insurance companies, especially multi-state giants like Liberty Mutual that are increasing their presence in the state. The reason for the big carriers' renewed interest: 1993 legislation wiping out a competitive advantage the Florida-based funds like AIFPCT enjoyed over commercial carriers.
Florida funds, known as "self-insurance funds" or SIFs, first appeared in the 1950s and 1960s, when some state construction associations started realizing they could insure their members as a group for less than the cost of their individual insurance policies. Gradually, other business associations began starting SIFs, too, like AIF which first sponsored a fund in 1978.
Market upheavel
Prior to 1993, the Florida SIFs held a big competitive advantage over multi-state carriers, because they didn't have to help pay the excess losses of high-risk businesses that couldn't find insurance in the open market. Instead, the state's regulatory scheme placed the whole burden of those excess losses - $300 million in some years - on the commercial carriers. As a result, commercial carriers bailed out of Florida, limiting new policy-writing to a bare minimum. Predictably, the SIFs flourished. Occupying just 3.5% of the market in 1975, the SIFs occupied 42.3% by 1994, when the legislation took effect.
But the 1993 changes pushed by the Chiles administration eliminated the commercial carriers' responsibility for high-risk employers. That suddenly gave commercial carriers an advantage over SIFs. The reason: By law, employers who are insured through SIFs are subject to assessment if their SIFs ever become insolvent, in order to make up the amount still owed to claimants. By contrast, an employer who buys insurance from a commercial carrier isn't subject to assessment if the carrier goes belly up. As a result, experts say, a Florida employer these days is likely to pick a commercial carrier's policy over an SIF policy, just to avoid potential assessment.
That change is producing upheaval in the workers' comp market, as SIFs search for a way to compete with carriers. Some SIFs are selling out to commercial carriers. Others are being bought out by their administrators and converted to commercial carriers. That's what happened, for instance, to the fund formerly sponsored by the Florida Chamber of Commerce. It's now part of Sarasota-based RISCORP, which recently went public.
Now, AIFPCT is following suit. In a recent interview, Shebel disclosed that in response to conversions by other Florida funds, AIFPCT is moving forward with its own conversion to a stock insurance company to be owned by AIF. But while RISCORP is publicly owned, the majority owner of AIFPCT will be its parent, AIF. Shebel is in South Florida to oversee the process.
"My decision to move down was based on the fact that we are making this a stock company," Shebel says. Quick conversions by other Florida SIFs "caused us to bring our timetable back and convert before we wanted to," he says - in fact, about two years ahead of schedule. But conversion is no problem, Shebel asserts, particularly since AIF has found a partner to share in the cost of capitalizing. He declined to name the partner.
However, the relatively small Florida carriers like AIF and RISCORP still face a challenge from big interstate carriers such as Liberty Mutual and Wausau. A few big carriers already have filed for rate "deviations" that could represent the first step toward a price war in workers' comp, where tight regulation has kept premium prices fairly uniform until now. A price war could prove disastrous for homegrown Florida insurers, especially the smaller SIFs, according to the Wakely study.
The report states: "Any substantial decrease in rate levels or change in market share [for big carriers] raises potential concerns regarding the viability and solvency of the group self-insurers" and possibly of "specialty carriers," as recently converted Florida carriers are known.
With about $58 million in direct written premiums, AIFPCT was the seventh-largest of the Florida SIFs in 1994.
Shebel notes that AIFPCT has been more conservatively operated than many other SIFs and has built up a healthy surplus. That should help smooth the transition to insurance carrier status, he says. AIF also began playing the price card itself, with a new state-approved plan that boasts of guaranteed return of some premium for low-loss employers.
Despite Shebel's confidence, however, the upheavals clearly bring back bad memories of the last time one of AIF's insurance operations faced a challenge. Back then, in the mid-1980s, AIF's health-insurance arm became insolvent. In the litigation that followed, the health fund's outside administrators accused Shebel and other AIF leaders of overtaxing their operation with large fees in order to finance their political operations.
For its part, AIF alleged that the fund had been run into the ground by its outside administrator. In the end, the two sides reached a settlement that involved substantial payments by both sides into a fund for beneficiaries. None of the parties admitted liability.
At about the same time, in 1986, AIF got into a dispute with the outside administrator of its workers' comp fund. Shebel characteristically dug in, and within weeks, AIF had started another workers' comp fund, the current AIFPCT. This time, AIF created its own insurance operation in-house, without using an independent administrator. (Such outside administrators are widely used by other SIFs.)
Holding his ground
Shebel, who is fiercely loyal to AIF, went without salary. Other executives also took big cuts. The trust soon was profitable enough to help pay for AIF's new $4 million plantation-style headquarters in Tallahassee. And by the mid-1990s, Shebel was receiving an estimated $500,000 in total annual compensation, according to a filing with the Department of Insurance. Shebel insists that he and AIF don't live off their insurance subsidiary, however. Other divisions of AIF are expected to carry their own weight.
As Florida Trend reported last year, the Florida Chamber stopped offering insurance services in response to the market changes caused by the 1993 law change. The Florida Chamber and its carrier parted ways so that no longer did Chamber members need to belong to the organization to purchase workers' comp from the carrier - and that move cost the chamber approximately half of its 15,000 members. Other associations also have gotten out of the insurance business. Chamber Executive Vice President Blake A. Wilson says it might be the best thing that's happened to his organization, because it's forcing the Chamber to get more in touch with its members.
But characteristically, Shebel intends to hold his ground with AIF's insurance services. He even talks of expansion into other states and other insurance lines. For one new subsidiary, AIF has adopted a logo depicting a map of the world.
"I would just like when I leave here to be in a posture where we know this thing is financially set and will carry on for years," Shebel says, "because I think AIF, its board and members and staff have done a great job for business.
"Others have not been willing to get run over by a truck for their members' interests," he says. "Our people have."
