A complex four-year legal battle between 141 school districts and the Wisconsin Education Association Council-affiliated insurer WEA Trust has ended in a $7.5 million settlement.
Foley & Lardner LLP, which represented the school districts in legal proceedings, announced the settlement in a statement released Tuesday. After deducting fees and payments, the 141 school districts involved in the suit will split $4.9 million. In southeastern Wisconsin, 36 school district will split roughly $2 million of the settlement.
Four school districts in Milwaukee County — Brown Deer, Franklin, Greendale and Shorewood — received payments totaling $66,646.
The school districts filed a class action lawsuit against WEA Trust in 2012 that claimed the insurer had intentionally withheld millions in federal funding from school districts that had switched from WEA Trust to competing insurance providers.
The case bounced through federal, state and county courts for years before a settlement was reached.
At question was federal funding dispersed as part of the $5 billion Early Retiree Reinsurance Program, a federal reimbursement program which was enacted as part of the Affordable Care Act to financially assist employment-based health plan sponsors that made coverage available to early retirees.
The plan allowed employers to apply for reimbursements based on claims they had filed in the past on behalf of early retirees enrolled in their insurance plans.
When the program was enacted, WEA Trust, which had extensive data on school districts’ prior insurance claims, offered to apply for the federal funds on their behalf and the school districts obliged. WEA then kept millions of that money instead of paying it out to certain school districts.
In the lawsuit, the school districts claimed WEA Trust was not entitled to keep the money, and had withheld the funds specifically from school districts who had switched insurance providers as a form of punishment. WEA Trust contested that claim and argued it was entitled to keep the federal reimbursement dollars.
“It was a complicated case,” said Brett Ludwig, a partner at Foley & Lardner. “This whole program was a one-time federal subsidy. There was no precedent for it. As far as I know, there are no other cases related to (ERRP). We’re just very happy as lawyers that we were able to achieve such a substantial recovery. This case happened to be public school districts who really need as much funding as they can get. That’s why we did it.”
A WEA Trust representative was not immediately available for comment.
By the time the suit was settled, Ludwig said the 141 school districts claimed $11.9 million had been withheld by WEA Trust. The settlement gave the school districts roughly 63 percent of what they claimed was withheld.
More school districts were initially involved in the lawsuit, but an unspecified number had settled independently with WEA Trust over the past four years.
