You asked whether the recent Anthem Blue Cross-Blue Shield policy payouts to seniors would affect their eligibility for the federal Department of Housing and Urban Development (HUD)'s Section 8 housing voucher program or to live in federally sponsored housing.

The Office of Legislative Research is not authorized to give legal opinions and this report should not be considered one.

SUMMARY

HUD will consider payouts, which may be in stock or cash, to be assets, as long as any cash payouts are held in a bank account and are not spent. This means the payouts will not be counted as income and will not affect a senior's income eligibility for Section 8 or federally sponsored housing. If the cash is not held in such an account, HUD will consider it income "derived from an asset," which will increase the recipient's income level and may affect his eligibility for Section 8 or federal public housing.

BACKGROUND

Blue Cross-Blue Shield converted its structure from a mutual insurance company to a stock company as a result of its merger with Anthem. Some mutual insurance company policyholders are considered to have ownership rights. The payout or "demutualization" allows these policyholders either to take a cash payout or retain some ownership by accepting the stock offer.

This demutualization affected more than 150,000 Connecticut individual policyholders, including over 67,000 seniors. At this point it is not clear how many of the seniors receiving the cash payout are receiving Section 8 or federally assisted housing benefits.

OLR report 2001-R-0941 details the effects of demutualization on a broader range of programs for seniors with income- and asset-based eligibility criteria.

HUD ELIGIBILITY AND PAYOUTS

HUD's New England Office of Public Housing informed the state Department of Social Services in a January 3, 2002 letter that HUD will consider payouts in stock or cash to be assets and not income as long as, in the case of cash payments, they are held in a bank account and not spent (see Attachment 1). The letter from Robert P. Cwieka, deputy public housing director, states that HUD will consider the payouts to be assets when determining eligibility for federal housing programs such as Section 8 housing vouchers or federally assisted public housing. This will apply to people previously deemed eligible and already receiving benefits as well as new applicants.

Cwieka stated that cash payouts must be kept in a bank account of some type or they will be treated as income derived from an asset and added into the individual's income total as required by federal regulations (24 CFR 5. 609(b)(3)). (If a recipient sells his stocks, the money from the sale would be considered income. )

If family assets are greater than $ 5,000, HUD uses a formula to determine how interest or other income from the assets will be added to an individual's annual income. This is a standing policy and not the result of the payouts.

JM: eh