Ending a bitter two-year saga, Anthem settled the last in a string of legal disputes questioning the insurance giant's practice of purchasing not-for-profit Blues plans.
Indianapolis-based Anthem last week agreed to pay $45 million for a new charitable foundation. In doing so, it curtailed a lawsuit claiming it had illegally withheld charitable assets when it acquired Blue Cross and Blue Shield of Kentucky in 1993.
"We're glad to have reached a settlement that sits well with everyone involved," said Anthem spokeswoman Patricia Coyle. "With the lawsuit behind us, we can once again focus on our primary mission-serving our 1 million Kentucky members and policyholders."
The $45 million will be used to create a not-for-profit healthcare foundation designed to support public education, research and patient care throughout Kentucky. Anthem, a $6.3 billion company, has funded similar foundations in four other states.
The settlement-which came at the end of a marathon two-day mediation-falls far short of the $230 million sought when the state filed suit in October 1997. But the deal averted a costly court battle that likely would have spanned up to five years, said Kentucky Attorney General Ben Chandler.
"Blue Cross (and) Blue Shield of Kentucky was formed more than 60 years ago to promote public health for the benefit of all Kentuckians," Chandler said in a written statement. "The creation of this new foundation will ensure that the original purpose of Blue Cross will be carried on."
The lawsuit accused Anthem of withholding hundreds of millions of dollars that the state's Blues plan had amassed for general public health over the past five decades.
The company, though, maintained that Chandler was confusing not-for-profits with charities. At the time of purchase, the Kentucky plan was a mutual insurer-owned and controlled by policyholders, not the general public. As such, all profits were retained by the plan rather than being doled out to the public.
Anthem is no stranger to the charitable-assets controversy. The Kentucky suit, in fact, is the third such dispute it has settled this year.
In February the company set aside $28 million for Ohio residents for its 1995 purchase of a Cincinnati-based Blues plan. And in August it settled a lawsuit over its 1997 acquisition of a Blues plan in Connecticut by agreeing to create a $41 million foundation there.
The latest settlement, however, elicited a lukewarm response from some consumer activists. Mary Ann Cryan, a lawyer with Consumers Union, noted that the $45 million figure pales next to the $155 million and $80 million Anthem recently set aside when it acquired plans in Colorado and New Hampshire, respectively.