Review of Postretirement Benefit Costs Claimed for Trailblazer Health Enterprises for Medicare Reimbursement by Blue Cross Blue Shield of South Carolina for Fiscal Years 2000 Through 2004

摘要

Blue Cross Blue Shield of South Carolina (South Carolina) administers Medicare Part A and Part B operations in its TrailBlazer Health Enterprises (TrailBlazer) and Palmetto Government Benefit Administrators subsidiaries under cost reimbursement contracts with the Centers for Medicare & Medicaid Services (CMS). South Carolina acquired TrailBlazer from Blue Cross Blue Shield of Texas (Texas) in October 1999 after Texas merged with Health Care Services Enterprises (HCSC). As part of the sales agreement between HCSC and South Carolina, HCSC funded TrailBlazer PRB liabilities in a grantor trust and transferred the PRB trust and liabilities to South Carolina. In claiming postretirement benefit (PRB) costs, contractors must follow cost reimbursement principles contained in the Federal Acquisition Regulation (FAR) and applicable Cost Accounting Standards, as required by the Medicare contract. In fiscal year (FY) 2000, South Carolina submitted a request to CMS to use accrual accounting for PRBs, and the parties began negotiations to resolve any compliance issues. South Carolina received a revocable grantor trust along with associated liabilities for the TrailBlazer PRB plan from HCSC and began claiming accrued costs in FY 2000. As part of the resolution of compliance issues, South Carolina agreed to use a Voluntary Employee Benefit Association (VEBA) trust to replace the revocable grantor trust and thereby met the FAR 31.205-6(o) and Statement of Financial Accounting Standards 106 requirements for recognition of the trust as a plan asset. In FY 2005, South Carolina finalized the VEBA and moved the funds from the revocable grantor trust. As part of this process, CMS and South Carolina entered into an agreement in December 2004 that stated that once the VEBA was established, all future years accrued PRB costs would be computed using trust assets as plan assets.