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Explanation of BCBS so called deduction
Posted: Mar 24, 2010
I think you are referring to the language related to a special tax benefits offered as an incentive for HMO and non-profits to achieve high percentage medical loss ratios (the percentage of HMO premium revenues that pay for medical services). Common perception is that a high ratio is indicative of high quality care.
Sec. 9016. Special deduction for Blue Cross Blue Shield (BCBS). Requires that non-profit BCBS organizations have a medical loss ratio of 85 percent or higher in order to take advantage of the special tax benefits provided to them under IRC Section 833, including the deduction for 25 percent of claims and expenses and the 100 percent deduction for unearned premium reserves.
http://www4.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000833----000-.html
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