Wednesday, February 22, 2006

Singin’ the Blues...

Did you know that the Internal Revenue Code gives certain Blue Cross plans a special tax deduction? I certainly didn’t.
I learned about this by way of an email I received from an insurance activist group (nothing wrong with that). Generally, I treat these much like I treat the numerous other warnings that appear in my “in box:” a healthy skepticism, followed by a click over to snopes, which generally debunks them as urban legends.
This time, though, the information seems to be on the up and up. Apparently, the Blues get a special tax break, which is ostensibly based on the “public good” that they are perceived to do. In reading through the statute, it appeared that other carriers could qualify for the deduction, so long as they met a rather interesting set of criteria:
(i) substantially all the activities of such organization involve the providing of health insurance,
(ii) at least 10 percent of the health insurance provided by such organization is provided to individuals and small groups (not taking into account any medicare supplemental coverage),
(iii) such organization provides continuous full-year open enrollment (including conversions) for individuals and small groups,
(iv) such organization’s policies covering individuals provide full coverage of pre-existing conditions of high-risk individuals without a price differential (with a reasonable waiting period), and coverage is provided without regard to age, income, or employment status of individuals under age 65,
(v) at least 35 percent of its premiums are determined on a community rated basis, and
(vi) no part of its net earnings inures to the benefit of any private shareholder or individual.
Looks to me like there’s only one carrier that meets this particular test. Could be wrong, of course, and I’d love to hear from IB readers who know of another qualifying insurer.
As in “the dog that didn’t bark,” I noticed that there is nothing which lets us know exactly why the Blues rate this special treatment, nor is there any test set forth to determine whether or not they continue to deserve it.
Now, I’m not saying that Blue Cross is evil incarnate, or that they shouldn’t take all the largesse that they can find (it is capitalism, after all). But I’d really like to know the justification for this special tax break, and its continued existence.
Any takers?
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