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Texas Teachers Sue in Wake Of Insurance-Trust Failure

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A health-insurance trust set up by a coalition of rural Texas school districts has filed for bankruptcy, prompting the Texas State Teachers Association to file a lawsuit demanding that the districts pay the $8.5 million in outstanding medical bills of some 7,000 employees.

The Texas Association of School Boards was planning last week to convene an informal meeting with administrators of the districts involved to try to resolve the dispute. The school-boards group was to hold its state convention over the weekend in San Antonio.

Unless the districts pay the claims, a spokesman for the tsta said, teachers will be held liable for individual medical bills that range from a few hundred dollars up to $10,000.

The bankruptcy filing and subsequent lawsuit have renewed the union's demands that the legislature enact a statewide health-insurance program covering all school personnel. The legislature adopted such a law in 1981, but it was vetoed by Gov. Bill Clements.

"This is just another tragedy in the larger drama of health insurance," said Brad Ritter, a tsta spokesman.

Mr. Ritter said that the union, an affiliate of the National Education Association, would renew its lobbying for a mandated health-insurance program for all teachers when the legislature reconvenes for its biennial session in January.

Education Code at Issue

The Educators' Group Health Trust was formed in 1983 by superintendents representing 209 rural school districts that were allied as the Texas Association of Community Schools.

Its purpose was to provide a self-insurance program for teachers and other school employees at lower rates than those offered by commercial insurers. According to Mr. Ritter, the trust was not subject to state insurance regulations.

Patrick Wiseman, a lawyer for the tsta, said that at some point the trust began to lose school districts and its membership dwindled to about 80.

The trust apparently had no reserve fund, Mr. Wiseman said, and began using premiums to pay claims. It borrowed approximately $1 million last year to stay in business, he said.

With its membership decreasing and unable to raise the funds to pay outstanding claims, the self-insurance trust filed for bankruptcy in early September, he said.

The teachers' association filed suit on Sept. 22, charging that the trust did not have the legal authority to set up a self-insurance plan in 1983 and should be subject to state education statutes enacted in 1985. Those regulations allow for the creation of such self-insurance trusts but hold school districts liable for unpaid medical claims in cases of insolvency.

According to Mr. Ritter, the trust is claiming that because it was not formed under the Texas education codes, the school districts it serves cannot be held liable. He said the union's lawyers have asked a Travis County judge to order the districts to pay the outstanding claims.

The union's lawyers have also written to affected claim-holders to explain the circumstances of the current legal dispute and ask for their patience while the association seeks repayment.

Barbara Williams, a spokesman for the Texas Association of School Boards, said her group was trying through informal means to determine what needs to be done to resolve the matter.

"It's a concern for all of us in Texas because it's really hitting the teachers hard," she said.

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