Insurance chief blasts ISTA for benefit halt-WEB ONLY

The troubled ISTA Insurance Trust says it will discontinue paying long-term-disability benefits to teachers next month – a move that drew a rebuke this morning from Indiana Insurance Commissioner Jim Atterholt.

“It’s pretty shocking what they are attempting to do here,” he said. “These people on disability – they have nothing after July. How do they pay their bills?”

The Indiana Department of Insurance estimates the ISTA Insurance Trust’s liabilities exceed its assets by $67 million, with $40 million of the shortfall stemming from its long-term-disability insurance program.

About 90 school districts provide the trust’s long-term-disability coverage to their teachers. About 650 disabled teachers are receiving monthly benefit payments.

Atterholt said the honorable thing for the National Education Association and its Hoosier affiliate, the Indiana State Teachers Association, to do would be to continue paying benefits while they seek to recover money from parties at fault in the trust’s collapse.

He said the decision to stop disability benefits, disclosed in an ISTA memo to school districts yesterday, flies in the face of assurances he received from Edward Sullivan, an NEA official who took over operation of ISTA last month, that teachers would be protected.

Sullivan could not be reached this morning, but ISTA Deputy Executive Director Dan Clark said he did not think the organization had made an outright promise.

“I think what we did was express our hopes,” Clark said.

Jim Mervilde, superintendent of the Metropolitan School District of Washington Township in Indianapolis, expressed surprise this morning that the trust planned to discontinue payments.

His district stopped offering coverage through the ISTA Insurance Trust in late April, but has six to eight disabled teachers receiving benefits from it.

“Wow, that’s a real break in trust, in my view,” Mervilde said of the halt to payments.

In the memo to school districts, Sullivan said teachers may be able to recover benefits through lawsuits against parties affiliated with the trust. However, Atterholt said such cases take years to litigate, longer than teachers can afford to wait.

At least one lawsuit already has been filed. Last month, teachers filed a class-action case in Indianapolis against former ISTA Executive Director Warren Williams, the ISTA Insurance Trust’s trustees and its former financial adviser, Morgan Stanley’s David Karandos.

Representing the plaintiffs is Irwin Levin, who has brought many of the city’s highest-profile class-action cases in recent years.