More than seven years after reaching a landmark settlement with the tobacco industry, Blue Cross and Blue Shield of Minnesota ended a class-action lawsuit that had prevented it from putting the $469 million in proceeds to use. Under an agreement finalized late November, the insurer will pay $41 million in refunds and legal fees to about 10,000 employers that had paid for smoking-related illnesses through their insurance premiums. The Minnesota Blues sued the tobacco industry in 1994, alleging that cigarette manufacturers deceived consumers about the health risks of tobacco products, resulting in higher costs for the insurer. The industry settled the lawsuit in 1998 for $469 million. In 2002, state regulators approved the insurer's plan to refund $30 million of the settlement to employers and another $30 million to individual members and to spend the rest on health-related programs. The plan was blocked later that year when several law firms sued the Blues, claiming that employers were entitled to larger refunds.
Under the latest deal, the Blues agreed to pay employers an additional $11 million, including $6.1 million in attorneys' fees. The agreement clears the way for the Blues to invest the rest of the settlement proceeds. In addition to the $71 million in refunds, the insurer will spend $241 million on disease prevention, including anti-smoking programs, $30 million for clinics serving uninsured patients and $70 million to provide insurance to those who can't otherwise get it. In 2001, the insurer transferred $21 million to the Blue Cross and Blue Shield of Minnesota Foundation and paid $36 million in taxes on the settlement proceeds. -- by Laura B. Benko