Review of Postretirement Benefit Costs Claimed by Blue Cross Blue Shield of Rhode Island

EXECUTIVE SUMMARY:

Our objective was to determine whether postretirement benefit costs claimed for the period subsequent to Blue Cross Blue Shield of Rhode Island's (Rhode Island) termination were allowable for Medicare reimbursement. Rhode Island's entire claim of $3,558,976 in postretirement benefit costs was unallowable for Medicare reimbursement. The claim represented (1) a retroactive change in accounting basis, (2) an immediate recognition of the transition obligation, and (3) a request for reimbursement of unfunded costs. None of these costs are allowable in accordance with the Federal Acquisition Regulation (FAR); therefore, the costs were unallowable for Medicare reimbursement. We recommended that Rhode Island withdraw its claim of $3,558,976 for postretirement benefit costs. Rhode Island disagreed with our recommendation.