THE HEALTHSMART LAWSUIT, OPENING A CAN OF WORMS

By Juan Montoya
During today's meeting of the Brownsville Independent School District board of trustees, there will be a legal presentation to discuss the resurrected lawsuit against HealthSmart, the health insurance company which was replaced by Omaha-based Mutual Assurance Administrators, the firm whose agent was the late Johnny Cavazos.
The item reads: c. Discussion and consideration regarding BISD vs. Healthsmart.
Right before the then-board majority awarded the Third Party Adminsitrators for the Self-Insured Group Health Plan and Stop-Loss Insurance in August 2009, the board of trustees received correspondence warning them that the representations by then-insurance consultant Gary Looney and Alamo Insurance Group were not factual and tainted by self interest.
That correspondence didn't just come from HealthSmart, which had the business for the past two years, but also from Blas Tobias, a representative of the Concerned Taxpayers of Brownsville (CTOB), Texas. While Tobias was suggesting that the district join the statewide TRS Active Care Program established by the Texas Legislature as a solution to the costs associated with paying for the $50 million health and pharmaceutical care of BISD employees, HealthSmart was concerned that Looney was steering the lucrative contract to Cavazos with the connivance of a majority of the board members.
Nonetheless, the majority at that time chose to go with Cavazos' Mutual Assurance despite hte issues raised by both Tobias and HealthSmart.
The issues came to a head  in August the following year, just a little over two months before the 2010 election where two trustees who voted not to choose HealthSamrt the year before. They convinced a majority of the board that the district stood to make $14.3 million in alleged overcharges to the BISD. Considered an election ploy at the time, both trustees – Rick Zayas and Ruben Cortez 2 were soundly defeated at the polls.
The majority of the new board then voted to dismiss the lawsuit.
The blog riskkmanagers.com stated it quite simply: "On the other hand, we believe this lawsuit is politically motivated and a waste of taxpayer money. In reading he pleadings, we find errors of facts as we know them, easily addressed by defense attorneys. We are confident a jury will reach the right judgement/s if this case goes that far. But, as appears to be the norm in our legal system, sometimes it is less expensive to settle a case than to pay lawyers over a protracted period of time. In our litigious society, you can sue a Ham Sandwich and win (settle) every time."
Then, two years later, a new board majority reinstated the lawsuit on a contingency basis and that's where we stand.
But it is interesting to go back and review some of the issues surrounding this lawsuit.
Correspondence starting in May 2009 from the CTOB to BISD purchasing administrator and Superintendent Bret Springston warned even back then that "BISD can offer essentially the same or better benefits through the TRS plan" and could save the district approximately "$11,500,000 in taxpayer contribution, representing a 23 percent savings off the current liability plan of $50 million."
Additionally, Tobias sais that the state plan would contain no commissions and would not require a insurance broker or agent (like Cavazos), an insurance consultant like Looney, and would not need to be bid out every year.
When his correspondence went unheeded, Tobias, on June 22, unloaded the big guns. He wrote individual trustees that the supposedly independent consultant Looney and Blue Cross representative Carey Malek "had business ties with Mr. Cavazos to wit:
– Mr. Looney, Mr. Malek and Mr. Cavazos were recipients of an all-expense paid trip to Costa Rica by Texas True Choice...when Looney was consultant to the BISD
– Looney, Malek and Cavazos were awarded a Rolex watch as team winners at a Texas True Choice-sponsored golf tournament in San Antonio
– If the board chose the state TRS ActiveCare program, it will remove agent commissions that would save the BISD $15 million
The board majorithen, however, chose Cavazos as agent and awarded the contract to Mutual Assurance, which in turn prompted a formal protest from HealthSmart chief sales officer Alex Arnett which he made in two letters dated August 11 and August 13, 2009.
In the first letter, Arnett said that HealthSmart wanted the district's decision to be made "on facts and not misleading information" made by Looney in favor of Cavazos and Blue Cross' Mutual Assurance. Arnett than goes on to list the benefits that the district received under his company and which would prevent the district paying $378,730 just to make a change to the Omaha-based company.
He also said that in the two years that his company serviced the BISD, the Employee Insurance Committee and administration have commended HealthSmart for great service delivered."
The "constant effort to renegotiate and improve the district discounts...will result in $5.5 million of additional savings to the district plan."
Arnett also stated that "current plan savings year to date are at 60.5 percent with is the highest savings rate in the district's history."
HealthSmart, he said "has over 40 nurses available to service the district as compared to one nurse" proposed by the Oklahoma-based TPA.
But it was the HealthSmart letter of August 13 which laid bare the company's displeasure at Looney's presentations on behalf of Cavazos' company.
"We have received nothing but continued endorsement from the teachers' union, the insurance committee, and the faculty and staff we deal on a daily basis. As such, the report compiled by Gary Loony, consultant to the ISD, came as quite a shock to our organization and to the members who support our organization."
Much of the key information given to the members of the board of trustees, Arnett charged, "contained substantially false and misleading date about HealthSmart and its performance over the past two years. Upon review of the materials provided to the board by Alamo Insurance Group and Gary Looney, HealthSmart identified numerous areas within the document that were wholly inaccurate, materially misleading, or omitted key information of relevance. Approximately 20 different financial inaccuracies (the sum total of which skewered the date in excess of $10 million) were tallied in then report..."
"(We)...determined that the recommendation of the Employee Insurance Committee appears to have been manufactured, or at the very least, tainted...the bottom line is that of the 64 members of the EIC who were asked to participate, only eight individuals (approximately 12.5 percent) were able to attend....As such the unanimous vote consisted of less than 10 percent of the legitimate, qualified members, and blatantly excluded the vote of at least one member who was denied participation."
The HealthSmart lawsuit was based on the board's contention that the rising costs of its employee health plan was based on overcharges by that company.
But consider this. Under HealthSmart, from 2007-2008 to 2009-1010 BISD's health costs rose from $34 million to $41 million ($7 million). Under MMA's costs were projected to increase from 2009-2010's $37.8 million to 2011-2012's $51 million ($14 million, twice as much).
Will the board majority who decided to revive the lawsuit against HealthSmart do the same against Mutual Assurance?  
Today, the BISD board will hear an update on the lawsuit. It might make a sensible decision and ditch the case instead of wasting their time and opening that can of worms.