Hartland-Lakeside considers legal action against WEA

Posted: Aug. 1, 2011

The Hartland-Lakeside School District is considering taking legal action against WEA Trust for withholding roughly $46,000 that the School District contends should be theirs. The insurance company said it would risk violating federal law if it were to distribute any money to the School District, since it is no longer a WEA plan participant.

In March, the Hartland-Lakeside School District received a letter indicating the WEA Trust had received $46,000 from the federal government through a temporary program called the Early Retirement Reinsurance Program (ERRP), which helps districts offset the insurance costs of early retirees. At the time, WEA insured the district's teachers, but the School Board voted in June to switch to a United Health Care plan for its teachers.

A March 31 letter from WEA Field Operations Director Kathryn Otto stated that the district would receive the allotted funds, but it also said, "The funds received through this program may only be used to reduce plan costs for school districts and members participating in the trust plan. In compliance with federal law, the trust will distribute 100 percent of the funds received through this program by issuing premium credits to participating school districts."

Otto also wrote that the $46,000 credit would be applied to the district's insurance premium during the 2011-12 school year. Hartland-Lakeside had hoped to apply the credit to the 2010-11 school year instead, an option WEA maintains does not comply with federal law.

As a result, district Superintendent Glenn Schilling is working to organize other school districts in similar situations and pursue legal action against the insurance carrier. Schilling thinks that the WEA used the ERRP money as leverage to get school districts to renew their policies for 2011-12 and says WEA could have distributed the money when his district was still a WEA member.

"We believe that your method of connecting the credit to an insurance renewal with WEA is unethical, as the credit could have been applied to the 2010-11 school year," he wrote in a June 24 letter to WEA.

Schilling said, "Their argument is that they couldn't give it to us in a lump sum. They got the money. They notified us in March that they had the money. They could have credited us in March, April, May, June and July."

He continued, "I checked with the federal government. I can find nothing in any of the documents … to say that they cannot do that."

Not so, said WEA.

"We applied for it (ERRP funds), qualified for it, received the money, and again it's for those who are in our plan," said WEA spokesman Steve Lyons. "So when school districts leave our plan, unfortunately, based on very strict and very specific regulations, they don't qualify for that money anymore because they're not in our plan."

"There are a series of restrictions placed on how the funds could be used," Lyons explained. "One of the restrictions is that they only be used to offset teacher premium increases. As a result, it's not possible for us legally to apply reimbursements received in the same plan year in which they are generated."

Lyons said WEA is bound by other federal restrictions as well, including one that prohibits districts from using ERRP funds as general purpose revenue.

"The program prohibits use of these funds as a source of general revenue, and specifically prohibits us from just giving rebates to districts. You can't just cut somebody a check. The only thing that you can write out these funds for are either premium increase offsets or plan participant costs."

"We're following what the federal law requires," said Vaughn Vance, assistant general counsel for WEA.

WEA said it communicated to school districts from the beginning how it would handle the funds it received from the federal government, and that the money was not used as a tool to entice districts to renew insurance policies.

Lyons added, "It's federal money with federal strings. It's very clear in our analysis, and we think very clear in federal statutes, that again, money applied for is the plan participants', and we give 100 percent of that to those that participate in that fund."

"From the very beginning, we were very clear in stating that numerous times and numerous different opportunities and conversations. There weren't any questions," the spokesman said. "Now that they've decided to leave the trust, they want their quote unquote money. Unfortunately it's not their money. It's federal money with very specific statutes and very strict strings that are attached with that."

WEA said the $46,000 originally allotted for Hartland-Lakeside, the $60,000 allotted for the Pewaukee School District, which also dropped WEA in favor of United Health Care, and any other ERRP funds from other school districts that switched carriers would be distributed in 2011-12 to other school districts that remained with WEA.

The Hartland-Lakeside School Board is hoping to organize with other school districts in the same position to challenge the legal premises on which WEA rests its claims.

"Our board thought that the way it was handled by WEA, that this needs to be addressed," the superintendent said.