Is ISTA Indiana’s A.I.G.?
Okay, I will freely admit using a little hyperbole with the title, but it may not be as off base as you think.
An order filed by the Indiana Department of Insurance in Marion County Court regarding the Indiana State Teachers Association’s medical insurance program reveals some pretty questionable financial practices by the Union. Ironically enough, it has nothing to do health insurance and everything to do with long-term disability insurance.
You see for the past few years ISTA and the Department have been going back and forth over whether the Union’s health insurance plan it offers school boards is subject to state regulation. To make a long story short, it is. However when state officials sent in a team to examine the books, what they found raised an eyebrow or two.
It turns out ISTA was co-mingling money taken from health insurance premiums and mixing it into a trust fund with premiums from long-term disability payments. This is a legal practice, but not the best practice, if you know what I mean.
According to the order, ISTA had been making some risky investments in private equities like real estate (you see where this is going) instead government bonds. And now ISTA’s liabilities in its health insurance trust fund exceed its assests by $67 million. While the organization has the money for now, it could really put school organizations, i.e. taxpayers, on the hook down the road should the fund become totally insolvent because someone would have to pay the outstanding claims.
The order also states that when ISTA went to liquidate some of its private equity investments, it got less than half the value. ISTA also had not provided any accounting information to support its December 31, 2008 financial statements. ISTA’s independent auditors couldn’t deliver their opinion on the Union’s past fiscal year. And internal financial statements and audit reports failed to include payments to school districts.
ISTA is getting out of the health insurance business, which by the way was on a collision course with financial trouble because it had taken in $76 million in premiums and paid out $64 million in medical claims and still had millions in unprocessed claims to go. United Health Care is taking over the administration of medical benefits and ISTA must place nearly $5 million by Friday into a trust account to secure the cash necessary to facilitate the transaction.
If this isn’t the same kind of stuff that got AIG in trouble, I don’t know what is. I’m going to try and track down the ISTA folks today. Hopefully, there’s a reasonable explanation for all this. Hopefully.
May 13th, 2009 at 6:35 am
Oops! and tsk, tsk.
May 13th, 2009 at 7:08 am
D’OH!!!!!
May 13th, 2009 at 7:40 am
Oh, but they’re doing it for the children!
May 13th, 2009 at 7:53 am
Wow. AIG did get in trouble by mis-investing their reserve funds. Now the only question is…like AIG, did ISTA have big time recipients like obama and dodd?
May 13th, 2009 at 8:38 am
ISTA discussing with IDOE these past few years has been like discussing things with your pet dog or Irsay discussing CIB with Peterson, et al.
May 13th, 2009 at 9:03 am
Are any of the instructors/administrators from Ivy Tech who happen to be members of the Indiana Legislature also members of ISTA?
May 13th, 2009 at 9:05 am
Common thread in a lot of current issues is health care. Common thread with health care and the other major issues is America’s delusion that everything will turn out fine, regardless of our action or inaction. Like we’re some sort of cat that will always, ALWAYS land on all four paws. It doesn’t matter whether citizen or non-citizen, responsible or irresponsible, domestic or foreign, premeditated or accident. If it “feels” right or it’s a way to make money, why, there MUST be some way to do it! Responsibility, accountability, and self-reliance should be expected of “those people”, not us. Not all of us.
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Reality doesn’t give a damn about our history, intentions, and damned political, ethnic, and economic divisions. Our geopolicital competitors care even less.
May 13th, 2009 at 9:35 am
I hate to hear this and hope it isn’t true. Since the ISTA Trust took over the health insurance for my school system, the premiums have dropped by over 1/2 while the service has remained the same….We all know that healthcare all over this country is a mess.
May 13th, 2009 at 9:46 am
ISTA problem, one of a counterfeit culture; doing it to the taxpayers, in the name of the children, to cover the self serving expenses of adult day care? Then it’s uh-greed?
May 13th, 2009 at 10:44 am
The question is “how does ISTA manage risk?” An adequate risk management process would have kept ISTA investments far away from real estate. That’s precisely where ISTA seems to align with AIG.
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Among many others, one fo AIG’s biggest failures was participating in the unregulated derivatives ponzi – the largest finance scheme in world history that was allowed by the SEC to function without regulation. Later, AIG was guilty of conspiring with the Obama Administration to funnel 10′s of billions of AIG TARP money in “off record” transactions to Goldman Sachs and other institutional finance organizations who would have been forced to open books if they’d taken money directly. The media villified AIG over a few bonus dollars while ignoring billions of our tax dollars that AIG funneled into private coffers.
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Who ever said that crime doesn’t pay?
May 13th, 2009 at 11:33 am
I’m not sure what real estate ISTA invested in—they own the building they’re in, they bought it for a song, renovated it, and it produces positive cashflow.
This is distressing news, Abdul, especially if it’s even mildly true. Sad, too.
And of course some folks don’t miss the chance to pounce on teacher unions. Which is a chepa shot.
If I had to leave the future of public education to teacher unions or administrators, it’s not even a close call.
May 13th, 2009 at 11:55 am
Maybe you should ask the Indiana Department of Insurance if the $1 Billion they allowed Lincoln National to withdrawal from its Indiana subsidiary to shore up its parent company puts Hoosier policy holders at more risk than the ISTA problems.
May 13th, 2009 at 12:43 pm
Maybe now is the time for ISTA to raise salaries for a commendable job and outstanding past performance.
May 13th, 2009 at 2:09 pm
Does ISTA, through the implementation of its policies, support Sharia law like AIG does? Just curious, Abdul.
May 13th, 2009 at 2:11 pm
Ron,
Might I suggest getting a life. You will live longer.
May 13th, 2009 at 5:10 pm
Off topic:
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ArcelorMittal plans ‘mass layoff’ at Indiana mill
http://www.reuters.com/article/marketsNews/idUSN1341444620090513
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This is great. I wonder which country their orders are going to?
May 13th, 2009 at 8:09 pm
That’s a good point rico. obama could easily have decreed the payback money…err….bailout money to AIG should not have gone to any of their Shaira-based financial products.
May 14th, 2009 at 12:40 am
Okay, help us out Abdul. Who’s Ron?
May 14th, 2009 at 6:36 am
[...] Comments Rico on Is ISTA Indiana’s A.I.G.?Stu-hater on Pacers to Vancouver???Canucklehead on Pacers to Vancouver???Observer on Pacers to [...]
May 14th, 2009 at 12:23 pm
ISTA Trust does make a profit. Since there are no shareholders, all excess monies are put back into the Trust. Until recently, if the Trust took in more money than it paid out, the individual corporation group built up a reserve.
It looks like the Trust relied too much on one man, who, incidentally is now gone.
May 14th, 2009 at 12:24 pm
Umm, didn’t proofread well. That should read “does NOT make a profit.”
May 18th, 2009 at 4:49 pm
[...] Bennett called it “disappointing” that the FBI and the Indiana Secretary of State are investigating the Indiana State Teachers Association Health Insurance Trust [...]
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