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With regard to the calculation each year of the estimated
unpaid losses for which financial reserves are maintained, health
insurance companies that use the pay-and-pursue approach for COB
savings calculate their reserves for unpaid losses based on the
full, total amount of coverage on their health insurance plans –-
including amounts which, under the COB provisions, the reporting
insurance companies will pay and thereafter be reimbursed by
other insurance companies which are the primary insurers with
regard to the claims.
Health insurance companies, however, such as Blue Cross,
that use the wait-and-pay approach for COB savings, need only
estimate their financial reserves for unpaid losses after taking
into account and subtracting amounts which, under COB provisions,
the reporting insurance companies will not have to pay because of
the responsibility of other insurance companies as the primary
insurers to pay such amounts.
Because actual funds must be maintained by health insurance
companies in their financial reserves for amounts they calculate
as incurred but unpaid losses, significant financial and economic
differences exist for health insurance companies between
insurance company calculations of loss reserves that do not
subtract estimated COB savings and insurance company calculations
of loss reserves that do subtract estimated COB savings.
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Last modified: May 25, 2011