- 18 - to pay COB savings amounts (i.e., amounts that primary insurers were responsible for and pay) and that Blue Cross never acquired fixed and genuine rights of recovery and salvage with regard thereto. We again agree with respondent. The applicable regulation under section 832 requires that unpaid losses, to be taken into account in computing losses incurred, are to represent a fair and reasonable estimate of the amount health insurance companies actually will be required to pay, not of what they theoretically might have to pay. Section 1.832-4(b), Income Tax Regs., in relevant part provides: Every insurance company to which this section applies must be prepared to establish to the satisfaction of the district director that the part of the deduction for “losses incurred” which represents unpaid losses at the close of the taxable year comprises only actual unpaid losses. * * * These losses must be stated in amounts which, based upon the facts in each case and the company's experience with similar cases, represent a fair and reasonable estimate of the amount the company will be required to pay. * * * The evidence shows that in the years before 1990, Blue Cross consistently used the wait-and-pay approach and did not pay (unless in error), reserve for, or expect to make payments with respect to its COB savings. Blue Cross argues that because it could, after 1989, elect to use the pay-and-pursue approach or that primary insurers could fail to make their payments (e.g., in the event a primary insurer becomes insolvent), Blue Cross’ COB savings, without the benefitPage: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
Last modified: May 25, 2011