ST. PAUL (AP) -- The Minnesota Supreme Court on Tuesday fielded arguments over a dispute between the state and Blue Cross and Blue Shield of Minnesota over how to spend money from Minnesota' s tobacco settlement.

An appellate court has ruled that the insurer should be able to spend the bulk of its $469 million award on health programs instead of on rebates to subscribers. That ruling reversed an earlier decision by Deputy Commerce Commissioner Gary LaVasseur, who argued that the money should be returned to policy holders. The Supreme Court took the case under advisement. The state reached a $6.6 billion settlement with the tobacco industry in 1998. The state and Blue Cross accused the tobacco industry of breaking consumer fraud and antitrust laws in the way it marketed cigarettes. People who smoked, according to the suit, had higher health care costs, which drove up premiums. Commerce officials argue that the Legislature gave ultimate authority on how to spend the money to a top agency official, not an administrative law judge whose decision the appellate court followed. An attorney representing a Blue Cross subscriber who paid higher premiums as a result of smoking-related illnesses told the Supreme Court on Tuesday that the company has a surplus, but has forgotten its subscribers.

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