Blue Cross & Blue Shield of Texas, Inc. and Subsidiaries - Page 19




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            of hindsight, theoretically could reflect salvage recoverable                              
            taken into account as of December 31, 1989.                                                
                  As previously indicated, for the years in issue and in                               
            subsequent years, Blue Cross generally did not make payments for                           
            which other companies under the COB provisions were primarily                              
            responsible.  We conclude that (because Blue Cross used the wait-                          
            and-pay approach before making secondary payments) Blue Cross’                             
            COB savings do not qualify as estimated salvage recoverable and                            
            are not allowable as a deduction under the special deduction                               
            rule.                                                                                      
                  To qualify as estimated salvage recoverable for purposes of                          
            the special deduction rule there must exist an expectation of                              
            actual payment.  The mere fact that a loss has been incurred on                            
            the date of an injury does not mean that health insurance                                  
            companies expect to be responsible for and expect to pay the full                          
            amount of claims relating to the injury.                                                   
                  With respect, however, to the 3 percent of the $70,950,582                           
            that Blue Cross calculated as its total estimated salvage                                  
            recoverable reflecting amounts Blue Cross actually paid and then                           
            recovered from third-party tortfeasors and other health insurance                          
            companies, such amounts do represent genuine subrogation                                   
            recoverable and do qualify as estimated salvage recoverable under                          
            the special deduction rule.                                                                

            Safe Harbor Relief                                                                         





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