Blue Cross & Blue Shield of Texas, Inc. and Subsidiaries - Page 14




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                  Approximately 94 percent of the total $70,950,582 claimed by                         
            Blue Cross as estimated salvage recoverable reflected COB                                  
            savings.  Further, as previously indicated, approximately                                  
            85 percent of the COB savings amount reflected Medicare-related                            
            COB savings.                                                                               
                  Only approximately 3 percent of the $70,950,582 claimed by                           
            Blue Cross as estimated salvage recoverable reflected amounts                              
            that Blue Cross actually paid and then recovered from tortfeasors                          
            and from other insurance companies.2                                                       
                  The relevant statutory provisions do not define what is                              
            meant by “estimated salvage recoverable”.  E.g., OBRA 1990,                                
            sec. 11305(c), 104 Stat. 1388-451.  It is therefore necessary to                           
            look beyond the statutory language to the limited regulatory and                           
            case authority on point.                                                                   
                  Section 1.832-4(c), Income Tax Regs., provides that                                  
            estimated salvage recoverable includes --                                                  






            2     Approximately 1 percent of the $70,950,582 Blue Cross                                
            calculated as total estimated salvage recoverable reflected                                
            amounts for which it was both primary and secondary insurer, or                            
            “blue on blue”.  The parties recognize that with respect to blue-                          
            on-blue duplicate coverage, Blue Cross could not recover salvage                           
            from itself.  Another approximate 2 percent reflected amounts for                          
            which Blue Cross did not assume the health insurance risks of                              
            employees and dependents, but provided employers with                                      
            administrative services only.  Blue Cross concedes that this                               
            2 percent clearly does not represent genuine salvage recoverable.                          




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Last modified: May 25, 2011