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Valparaiso Univ. Law School

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Wednesday, February 2, 2005

Millions ride on interpretation of "member"

A knotty interpretation problem is bubbling up in Connecticut, where the meaning of the word "member" will determine who gets $100 million—the state or its employees—and whether an insurance company will be stuck with a double payment.

When mutual insurance companies "de-mutualize" (turn into stock companies), their "members," usually policy holders, are issued the stock.  Anthem Blue Cross and Blue Shield de-mutualized in 2001.  At the time, it had a deal to provide health insurance to services to the state of Connecticut for its employees, but did not issue individual policies to the employees.  It therefore considered the state, not the individual employees, as the "member."  When it de-mutualized it issued the state $93 million in shares. The state sold the shares and pocketed the money.

Now the individual state employees are suing Anthem, demanding that they were, in reality, the policy holders and that they were "members" entitled to get the issued shares.  If they are successful, the recovery could be several thousand dollars per employee.

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