Managed Care Chpt 48

[Black Mage]

In Chapter 48, what is meant by "economic performance"? And how does this relate to the all-events test?

[Random Walk]

In Chapter 48, what is meant by "economic performance"? And how does this relate to the all-events test?

"Economic performance" seems to be IRS lingo.

According to page 924 of MHCH, the all-events test and the economic performance requirement are the two conditions for an outstanding claims liability to meet, in order for an HMO that is not an insurance company to include that claims liability in its tax deductions.

Since claims liabilities are related to the provision of services, "economic performance" simply means that the services have been provided.

The text gives an example of a case where the IRS determined that an HMO could not include in its claims liability services that had been preauthorized but not yet performed, because they did not meet the economic performance requirement. However, there's an exception to the economic performance requirement for "recurring items", which is given at the top of p. 925.

(My take-away from this discussion was that it's much easier to be an HMO that is an insurance company, because an HMO that is an insurance company can just come up with "a reasonable estimate of its incurred losses" to include in its outstanding claims liability, and not bother with the all-events test and the economic performance requirement.)

[Black Mage]

Thanks!!