Hartford - Up to 40,000 Connecticut state workers and retirees will not get part of a $127 million stock windfall received by the state in 2001 and then used to help fill a budget gap.

The state Supreme Court on Wednesday dismissed the workers' lawsuit against the state over the Anthem Insurance Co. stock, which the company issued when it switched from a mutual company to a shareholder-owned company.

However, the court's decision lets the employees keep pursuing the case against Anthem, which they claim improperly granted the stock to the government rather than the individual workers covered by the health insurance policies.

"We originally brought this case to make sure the state employees received the compensation they were entitled to from Anthem, and we intend to continue pursuing those claims," said attorney E.J. Greenspan, who represents the workers.

If the workers' case against the state had been allowed to proceed and they eventually had won, the General Assembly would have had to find the money in its coffers to satisfy the judgment.

If the workers and retirees win against Anthem, the value of their stock payouts would range from a few hundred dollars to up to $15,000, depending on how long they were covered, how much they paid in premiums and other factors.

Sarah Yeager, a spokeswoman at Anthem Blue Cross and Blue Shield in North Haven, said in a written statement Wednesday that the company will continue to "vigorously" fight the case and its decision to distribute the shares to the state.

"We fully intend to present evidence at trial that will demonstrate that we properly relied on our books and records as to who was the eligible statutory member, and lawfully paid demutualization proceeds to the state," she said.

The state received 2.2 million shares of Anthem stock in 2001, with a value of $36 per share. It sold the shares at an average price of nearly $57 per share, making a profit of more than $127 million.

The money went into the 2002-03 state budget to help erase a budget gap.

Ronald Gold, a public defender who retired last year, filed a class-action suit in 2002 against the state and then-Gov. John G. Rowland over the stock proceeds. He said he began looking into the issue after hearing from other Anthem-insured people working in the private sector who received stock or money under the process.

Greenspan, who represents Gold, said they are reviewing whether there are grounds for appeal that would reinstate the state as a defendant in the lawsuit.

Attorney General Richard Blumenthal's office did not handle the case because its attorneys are state workers, and those who were on the state's insurance plan in 2001-02 would be affected by the case.

Nonetheless, Blumenthal praised the results Wednesday.

"This decision is a welcome outcome, denying claims that could have cost state taxpayers more than $125 million. The court's ruling is important as the state struggles to balance its budget," he said.

Anthem, which is now part of Indianapolis-based WellPoint Inc., has said that one term of its 1997 merger with the Connecticut company that insured state employees is that policies held before the merger keep their original terms. Before 1997, policies in Connecticut considered the group to be the official member, not the individuals.