Federation of Connecticut Taxpayer Organizations

Three years after Anthem Blue Cross & Blue Shield changed its ownership structure and passed millions of dollars along to its policyholders, municipalities and unions across the state are still trying to figure out who gets the windfall.

Thanks to the state Supreme Court, they are one step closer to resolution.

In a decision to be officially released this week, the Supreme Court ruled in favor of unions that argued that the issue of the windfall is a contractual, not a legal, dispute and is therefore subject to arbitration.

Several union locals statewide have made claims for the money on behalf of their members. Some decided to take up the issue as a matter of law and some as a contractual dispute.

"This decision has nothing to do with the merits," said Wallingford Town Attorney Janis Small, whose case was decided by the court and who asked the court to rule that the issue was not in fact a matter for arbitration. "The sole issue is where do you have the fight - in court, or in arbitration."

Blue Cross & Blue Shield of Connecticut merged with Anthem in 1997. Anthem converted from a policy owner-held, or mutual, company, into a stock company, through a process called "demutualization" that became effective Nov. 2, 2001.

As a result of demutualization, qualified policyholders - or "statutory members" - were eligible for shares in Anthem Inc. stock. Because many municipalities administered policies for their employees, and because Anthem considered the municipalities to be the policyholders, the municipalities initially got the windfall.

One of those towns was Wallingford, which got about $2.9 million in proceeds from its stock. It has used $500,000 each year to offset the increase in health care premiums for its employees, Mayor William Dickinson has said.

But labor unions, such as the Connecticut Education Association, have been arguing that the matter should be resolved before an arbitrator.

Wallingford, Enfield, Region 14, North Haven, Branford, Old Saybrook, Region 16 and New London all have raised the question of arbitration in court, according to Connecticut Education Association attorney Ronald Cordilico. Roughly a dozen other municipalities were awaiting the Supreme Court's ruling, he said.

In Wallingford, the town won a decision from a trial court judge declaring that the matter was not subject to arbitration.

According to the Supreme Court ruling, the trial court decided that the claim was not subject to arbitration because there is nothing in the contract that addresses the demutualization of an insurance company. The trial court ruled that "the dispute between the parties does not have an origin in the contract or a breach of a term."

The Supreme Court argued that because the teachers' contract language spells out how much the teachers have to pay toward their medical insurance premiums (10 percent), the contract therefore "governs" how much the teachers should get should there be some sort of a refund.

Therefore, the dispute is addressed in the contract and is subject to arbitration, the court said.

"The fact that the distribution of the proceeds from the demutualization of Anthem might not have been anticipated by the parties is irrelevant to our determination of the issue being presented," the court wrote.

The court also wrote that it errs on the side of arbitration, not on that of litigation.

The court cited a Connecticut case called White v. Kampner, quoting as follows: "Because we favor arbitration, we will defer to this alternative method of dispute resolution if the contractual arbitration provisions fall within the grey area of arbitrability."

The decision may have immediate effects in Enfield, where an arbitrator has already awarded more than $111,000 plus interest to the union, officials said. It was unclear Friday whether the Enfield Board of Education would continue its own lawsuit on the matter or whether it would settle.

"Our argument is that it's just throwing good money after bad," Cordilico said, adding that three arbitrators have already ruled in favor of the unions.

"Here's the surprising thing," he said. "Some towns have spent more money [litigating] than it would have taken to settle the matter."

An attorney for the Enfield Board of Education did not return a call for comment.