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Financial Reserves and Financial Statements
To assure eventual payment of expenses relating to injuries
incurred during a year but with respect to which the related
claims are not paid by yearend, health insurance companies are
required by insurance regulators to maintain financial reserves
relating to such estimated unpaid expenses (referred to as
“losses”) and to report such estimated unpaid losses on their
financial statements. Reserves for unpaid losses, then, reflect
actuarially estimated amounts health insurance companies set
aside for losses incurred during the year but with respect to
which claims are not paid by yearend.
As of December 31 of each year, Blue Cross and other health
insurance companies are required by insurance regulators and by
generally accepted accounting practices, as applicable to
insurance companies, to report the paid losses and the estimated
unpaid losses incurred during the year on specialized annual
financial statement forms (Annual Statements).
Paid losses reported on the Annual Statements reflect
amounts of medical expenses that are incurred during the year
that health insurance companies actually pay on claims.
Unpaid losses reported on the Annual Statements generally
reflect actuarially estimated amounts of medical expenses that
are incurred during the year but that by yearend are not yet paid
by the health insurance companies.
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Last modified: May 25, 2011