Blue Cross and Blue Shield of Minnesota can't use its $469 million tobacco lawsuit settlement to fund antismoking and health improvement programs for its members, the Minnesota Supreme Court ruled Thursday.

The ruling supports an initial decision by the Minnesota Commerce Department that at least some of the money be returned to policyholders through rebates. Officials at Blue Cross, which must now submit a new plan to the Commerce Department, wouldn't say Thursday whether rebates would be included in their next proposal. Ever since Blue Cross and the state settled their lawsuit against the tobacco industry in 1998, Blue Cross officials have steadfastly opposed suggestions that money be given to subscribers as a rebate. But critics of Blue Cross said Thursday that they hope the Supreme Court decision will convince Blue Cross officials to change their position. "It is now time for Blue Cross to submit a plan that returns money it has received on behalf of past policyholders to those policyholders," said Scott Johnson, a former Blue Cross subscriber who challenged Blue Cross' plan during Commerce Department hearings in 1999. After those hearings were over, the presiding administrative law judge recommended that the Commerce Department approve the spending proposal. Instead, the department vetoed the plan, saying it "ignores the increased premium costs borne by past fully insured group subscribers" because of tobacco-related medical costs. The Minnesota Court of Appeals last year sided with Blue Cross' contention that the Commerce Department overstepped its authority, but the Supreme Court overturned that ruling Thursday, upholding the department's authority. "Although we are disappointed, we are still committed to health improvement and to our plan," said Dr. Sanne Magnan, medical director for the company's Center for Tobacco Reduction. But Magnan wouldn't comment on whether the new proposal would include rebates. "I'm not going to speculate on that," she said. The issue of whether rebates will be required now rests with the Commerce Department, which has authority to rule on the plan because it regulates the health insurance industry. Commerce Department officials weren't giving definitive signals Thursday about whether they will require Blue Cross to issue rebates. "I'm not going to commit and say this is what they have to do," said Commerce Commissioner Jim Bernstein. "The onus is now on Blue Cross to submit to the department another plan." But Bernstein did say that Blue Cross should heed the department's 1999 order that struck down the original spending proposal. Among other things, the Commerce Department objected because Blue Cross couldn't prove that its proposed $80 million health awareness program was cost-effective. The program would have provided educational brochures and merchandise to Blue Cross members to raise awareness about home safety, fitness, nutrition, emotional health and other topics. The department also objected because $109.9 million would go to a 20-year reserve that would pay for nicotine patches and gum to help members quit smoking. Regulators said they wanted to see Blue Cross dispose of the funds more quickly so it wouldn't have a competitive advantage over other insurers. And $148.1 million that Blue Cross wanted to use to fund community-based health improvement efforts was questioned by regulators as possibly duplicating similar efforts conducted by government and other health plans. Magnan said Blue Cross would work closely with Commerce Department regulators to develop a new plan. Bernstein said he hopes to resolve the issue by the end of the summer. In the meantime, Blue Cross' settlement funds, except for $75 million that has gone to taxes and another $21 million that went to the Blue Cross Foundation, cannot be spent.

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