State correctional employees to see refund of paid premiums

LITTLE ROCK — State employees who bought into unlicensed insurance plans run by the state’s former parole and probation director will receive checks as restitution for some of premiums they paid, the state Insurance Department said Thursday.

The announcement of direct payments comes close to a year after the Insurance Department closed its investigation of the Arkansas Association of Correctional Employees Trust for selling its members dental, vision and life insurance benefits without carrying the proper credentials to do so.

The nonprofit organization, which is led by former Community Corrections Director Kevin Murphy, was forced to turn over $495,475 it collected from its members to the Insurance Department.

On Thursday, a subcommittee of the Legislature’s Joint Budget Committee approved an appropriation from the State Insurance Department Trust Fund to begin sending money back to trust members. The full Joint Budget Committee must still sign off on the appropriation before it goes to the full Legislature for enactment. The Legislature is in a fiscal session to consider spending bills for fiscal 2021, which begins July 1.

“State employees who are affected by this issue will receive a refund check for illegally obtained premiums in the near future,” Insurance Department spokesman Ryan James said Thursday of the prison employees.

It was unclear how many people will receive checks, or how much money they will receive.

The nonprofit trust had roughly 4,400 members who were moved on to properly regulated dental and vision plans for state employees in May 2019, according to a consent decree reached between the trust and the Insurance Department.

In January, the trust reported it had a membership of 3,673, according to quarterly board minutes posted to its website. The nonprofit group continues to offer scholarships, emergency assistance to employees and other benefits, according to Murphy, who remains the head of its board.

The employees trust reported paying out $78,266 in assistance to its members in its most recent quarter, according to the January report.

In a short phone call Thursday, Murphy gave the example of the nonprofit group paying for the funeral of a former corrections employee.

“It’s benevolence for all employees when they face times of crisis, that’s what it was originally designed to do,” Murphy said.

None of the group’s leaders were fined as a result of the Insurance Department investigation, which concluded they “received and relied in good faith upon third-party advice of licensed professionals in offering these coverages.”

However, Murphy was forced to pay $89,945 to the Insurance Department for money he collected as the trust’s leader. An earlier legislative staff audit found Murphy collected more than $250,000 in salary over three years as head of the group.

The Insurance Department’s investigation was revealed about a week after Murphy was passed over for the role of Gov. Asa Hutchinson’s corrections secretary in favor of Wendy Kelley, who had led the state’s prison system.

Murphy announced his retirement from state government in September, after 41 years spent in both the Department of Corrections and Community Corrections.