Sunday, June 17, 2012

Anthem Settlement Only Good For Attorneys

Class action lawyers leave a lot to be desired when they appear to pursue cases merely for the purpose of entering into settlements that ensure that they will pocket tens of millions of dollars while the plaintiffs they are representing receive settlements that are barely worth the effort of cashing the check for the settlement they receive. That pretty much sums up the deal the class action lawyers reached with Wellpoint over the demutualization of Anthem's Blue Cross-Blue Shield franchisees in Indiana and three other states. The settlement amount, $90 million, sounds like a large amount, but it really isn't. That's because it is divided among 700,000 policyholders after deducting the attorney's fees. The settlement agreement allows the attorneys to take up to one-third of the settlement amount, or $30 million, plus obtain reimbursement from the settlement fund for the expenses the attorneys incurred.

The Star reports the average payout to the policyholders is $128 per person, but that's before attorney's fees and expenses are deducted. Kathleen DeLaney of DeLaney & DeLaney, PC. boasts that it is among the largest settlements of its types; however, as the Star notes, Anthem would have been on the hook for a settlement reaching into the hundreds of millions of dollars if the case has gone to trial and the court found in favor of the class action plaintiffs. DeLaney is in the same family law firm with her father and mother, Ed and Ann, who would pocket about $7.5 million assuming the four law firms divide the attorney's fees equally among them. Ed is a Democratic state representative and his son, Tim, is a Democratic candidate running for the state senate against Scott Schneider.

The back story here is that the insiders who ran Anthem decided to convert the state-regulated, mutual health insurance companies into publicly-traded stock company, which today is known as Wellpoint. Before conversion, mutual insurance companies largely operated as nonprofits with the tax status nonprofits enjoy. The legislature passed a one-sided law back in 1999 that provided the basis for Anthem to demutualize. Gov. Evan Bayh's successor and lieutenant governor, Frank O'Bannon, gladly signed it into law. Ann DeLaney, is a former Democratic state chairman and worked on Bayh's staff as his legislative liaison. The legislation vested authority in the insurance commissioner to approve the conversion after a public hearing. Not surprisingly, one of the insurance commissioners who worked in the Bayh administration, Marjorie McGinn, later became a Regional Vice President of Industry and Political Affairs for Wellpoint. Even more interesting is the fact that Gov. Bayh's wife, Susan, was appointed to the company's board of directors after it became a publicly-traded company. She's made a fortune from her service on that board alone, not to mention all of the other corporate boards on which she has served, which were only offered to her because of the political positions her husband held.

My understanding is that the insiders all became instant multi-millionaires as a result of a large amount of stock they were awarded as part of the transactions, which paid pitiful cash benefits or token stock awards to the policyholders who actually owned the company. The state's Attorney General at the time of the conversion should have fought the transaction, but he didn't because the insiders who became instant multi-millionaires were politically influential persons. It's also the reason many people can't afford health insurance anymore because the health insurer no longer operates for the mutual benefit of its insureds; instead it operates for profit for the benefit of its stockholders. That's why I view this settlement as another slap in the face. The policyholders who got screwed at the time of the conversion are once are getting screwed again; only the attorneys benefit from this settlement in my opinion.


indisbelief said...

Well said....the mutual share holders in Anthem get screwed twice.

The attorneys in the class action suit stand to receive $30 million in compensation PLUS $7 million in expenses reimbursement. The average share holder will receive between $19 - $425. Really? I mean really?

In the notice of the settlement there are clear instructions on how class participants can object to the attorney compensation - we CAN and SHOULD submit opposition to the proposed settlement terms. Why should the attorneys make these gross amounts = our legal system, like our political system is severely broken.

Why doesn't someone start a web site where class participants can create the opposition enmasse?

While you are at it, start a web site to change the rules so that Congress and their families have to pay for their own damn health care, instead of taxpayers footing the bill.

Anonymous said...

I just got my $117 check today, more than a year after the settlement. Doesn't go very far in making up for the $4,000+ that was stolen from me with the phoney stock valuation. The stock doubled on the first day of trading (after many of us had been bought out). Some powerful types in Indiana need to go to prison.