Use of Anthem windfall sparks debate
Employee groups say they deserve a piece of the multimillion-dollar pie from insurance proceeds.
By RON COLE
VINDICATOR EDUCATION WRITER
Despite the dragging economy, money managers at dozens of school districts, city governments and other public institutions across Ohio have been smiling lately.
The reason? Anthem Insurance Companies Inc.'s decision to convert to a publicly traded company and distribute hundreds of millions of dollars in stock and cash to policyholders.
The Youngstown city schools received $7.2 million. The city of Warren got nearly $2.4 million. Youngstown State University netted $1.5 million. The city of East Liverpool got $711,000.
But behind the wide grins and jubilation is a bit of rumbling and consternation in some quarters over how the unexpected windfall should be allocated.
Administrators say they're free to spend it as they wish, but some employees say it's only fair that a large portion of it should come back to them.
It has created a tug-of-wills that both sides are hoping doesn't escalate into a tug-of-war.
"These are unrestricted funds," said Terry Ondreyka, YSU's chief financial officer. "They can be used for anything."
"We can do whatever we want with it," said Carolyn Funk, city schools treasurer.
Some employees feel differently.
"That money was paid out of the insurance fund as a benefit to employees, and it should go back into the insurance fund," said Ivan Maldonado, an administrative assistant in YSU's payroll department and chairman of the university's Health Care Task Force.
"We should be able to do what we want with it," said Dr. John Russo, president of YSU's faculty union.
"If we want wage increases, we should do that. If we want to have more vacations and holidays or something, we should be able to do that. If we want to offset increases in health care that are coming, we should be able to do that."
Anthem, a Blue Cross/Blue Shield provider based in Indianapolis, converted from a private mutual insurance company to a publicly traded insurance company late last year.
As a result, the company distributed nearly $2.1 billion in cash and stock to nearly 1 million policyholders in Ohio, Indiana, Kentucky and Connecticut, said Lauren Green-Caldwell, Anthem spokeswoman.
About 300,000 policyholders in Ohio, both individuals and groups, received money, she said. Citing confidentiality laws, Green-Caldwell would not identify policyholders receiving funds.
In some cases, individuals covered by Anthem insurance received a personal check from the company, Green-Caldwell said.
But in Ohio, membership rights in insurance policies historically have fallen to groups, not individuals, she said. So, when funds were distributed in Ohio, they went mostly to groups, not individuals, she said.
That's why, for instance, Youngstown city schools received the entire $7.2 million Anthem distribution and the district's employees did not get individual checks.
Green-Caldwell said Anthem has no control over how the money is spent once distributed.
In February, state Auditor Jim Petro issued a bulletin advising public bodies that Anthem funds can be used at their discretion and do not need to be placed in accounts from which insurance premiums were paid.
"The money is not a dividend or a rebate ... and can be used for any expenditure that the governing body decides," said David Griffing, Warren city auditor.
Warren, for instance, chose to use nearly all of the nearly $2.4 million from Anthem to pay off debt. The remaining $71,700, less than 3 percent of the total, was placed in the city's hospitalization fund, Griffing said.
In the Youngstown schools, about $4.1 million of the $7.2 million the school system received in Anthem proceeds will go to the school district's $180 million school facilities project, Funk said.
The remaining $3.1 million is likely to be placed in a trust fund, she said. Interest from the fund will be used for student activities, college scholarships for city school graduates and to help offset increases in health insurance costs, she said.
YSU has yet to decide how to allocate it's $1.5 million Anthem windfall, but President David Sweet said he will take a cautious approach.
"In view of the state cuts we have had to absorb, I view the Anthem proceeds as a safety net against any further reductions in state support," he said.
YSU's state funding was sliced $3 million this fiscal year and will go down $3 million next fiscal year, forcing an unprecedented midterm tuition increase in January.
Because employee salaries and fringe benefits are the major expense at YSU, employees are sure to benefit from the Anthem money, regardless of how it's allocated, he said.
"These proceeds may enable the university to avoid employee layoffs if further state cuts occur," he said.
Officials at YSU, the city schools and the city of Warren all noted that their employees do not contribute to the premiums for their insurance coverage.
Russo, YSU's faculty union head, said that doesn't matter. Health care coverage is a negotiated fringe benefit and the Anthem money is a direct result of that benefit, so employees should have control over how it is allocated, he said.
The money should not be dumped into the university's general fund to offset lost state revenue, he said.
Pete Lymber, first vice president of the city schools' teachers union, said the union strongly supports the school district's facilities project and doesn't object to some of the Anthem proceeds going to the project.
But he also said some of the money should be steered to teachers in some way, possibly to beef up the district's insurance fund or purchase classroom supplies or equipment.
In any event, teachers should have some say. "We should participate in those talks," he said. "If we don't, that would open up a can of worms."
In East Liverpool, the situation is a little different. East Liverpool police officers and firefighters contribute to their health insurance premiums, yet all of the $711,000 in Anthem money went directly to the city, which intended to place it in the general fund for city needs.
The police and fire unions sought an injunction, contending its members were due a share of the proceeds.
"We just want back what we paid into it," said police Capt. Terry Faulkner, secretary-treasurer of the police union.
A Columbiana County judge ruled this month that the Anthem assets be frozen and that an arbitrator should decide the dispute.
Faulkner estimated police and fire employees are due $2,000 to $5,000 each, depending on seniority.
"We're not trying to be greedy," he said. "We figure it's just fair."