Court Opinion

ID: 7800113
Source: CourtListenerOpinion
Date Created: 2022-08-12 13:01:20.288959+00
Date Added: 2024-06-11T16:29:01.974870
License: Public Domain

In the United States Court of Federal Claims
                                FOR PUBLICATION

                                     No. 17-898T
                               (Filed: August 11, 2022)

                                             )
 HIGHMARK, INC. and subsidiaries,            )
                                             )
                  Plaintiff,
                                             )     Tax Refund: Special Deduction
          v.                                 )     under I.R.C. § 833(b); Liability;
                                             )     Cost-Plus Contract
 UNITED STATES,                              )
                 Defendant.
                                             )
                                             )

Maria O’Toole Jones, Miller & Chevalier Chartered, Washington, DC, for plaintiff.
Laura G. Ferguson and Lisandra Ortiz, Miller & Chevalier Chartered, Washington,
DC, Of Counsel.

Karen E. Servidea, Trial Attorney, Court of Federal Claims Section, Tax Division,
U.S. Department of Justice, Washington, DC, for defendant. With her on the briefs
were David A. Hubbert, Deputy Assistant Attorney General, David I. Pincus, Chief,
Mary M. Abate, Assistant Chief, and Mark A. Ryan and Katherine Powers,
Trial Attorneys, Court of Federal Claims Section, Tax Division, U.S. Department
of Justice, Washington, DC.

                               OPINION AND ORDER

BONILLA, Judge.

       This tax refund case arises from a series of amended United States federal
income tax returns filed by an independent licensee of the Blue Cross Blue Shield
Association (BCBSA). Plaintiff, Highmark, Inc. and subsidiaries (Highmark), seeks
an income tax refund in the aggregate amount of approximately $185 million for
tax years 2004 through 2007. The principal basis for Highmark’s overpayment
claims rests upon the scope of the “special deduction” codified at 26 U.S.C. § 833(b),
I.R.C. § 833(b) [hereinafter “§ 833(b)”]. Highmark also asserts entitlement to an
increased interest deduction for tax year 2007, an offset to capital gains reported
in tax year 2007 based upon an alleged capital loss incurred in tax year 2006, and
consequent corrective adjustments to the company’s general business credit and
allowable charitable contribution deductions.
       Pending before the Court are the parties’ cross-motions for partial summary
judgment pursuant to Rule 56 of the Rules of the United States Court of Federal
Claims (RCFC), limited to Highmark’s asserted legal interpretation of the scope of
the § 833(b) special deduction. 1 For the reasons set forth below, plaintiff’s motion
for partial summary judgment is DENIED and defendant’s cross-motion for partial
summary judgment is GRANTED.
                                       BACKGROUND
        BCBSA is a national association of 35 independently owned and locally
operated Blue Cross Blue Shield (BCBS) companies, which collectively provide
health insurance coverage for 114.5 million members in all 50 states, the District
of Columbia, and Puerto Rico. BCBSA, which owns and manages the Blue Cross
and Blue Shield trademarks and names worldwide, grants use licenses to the
independent companies for the exclusive geographic areas in which they operate.
Each BCBS company (or licensee) engages local healthcare providers and medical
facilities which, in exchange for a participating (or preferred) provider designation,
negotiate discounts for medical treatment and services under Participating Provider
Agreements.
       BCBSA Licensing Agreements require BCBS companies—referred to as
“Plans”—to comply with the BCBSA Membership Standards. Relevant here,
Membership Standard 5 requires each Plan to participate in specified national
programs, including the BlueCard Program. Formally introduced on March 1, 1995,
the BlueCard Program enables BCBS members (a/k/a subscribers or policy holders)
to transport their Blue Cross and Blue Shield health insurance coverage across
state lines or otherwise outside a specific Plan’s service area. This national
coverage is accomplished through each Plan’s agreement with BCBSA to offer
all BCBS members access to their respective in-network (local) providers at
negotiated discounts regardless of the specific Plan associated with the member’s
enrollment; actual health insurance coverage, however, is governed by the Plan in
which the member is enrolled. When a Plan (Plan A) opens its preferred provider
network to a BCBS member of another Plan (Plan B), Plan A is known as the
“Host Plan” and Plan B is known as the “Home Plan.” Accordingly, under this

1Initially, Highmark also moved for partial summary judgment on its claimed increased interest
deduction and offsetting capital loss. During oral argument, Highmark withdrew its dispositive
motion with regard to the first issue and confirmed its mid-briefing withdrawal of the second.
Highmark’s claimed entitlements to increased general business tax credit and allowable charitable
contribution deductions are dependent upon favorable resolution of the primary tax issues presented.

                                                 2
collective national coverage scheme, each BCBS company serves as a Home Plan to
its subscribers and a Host Plan to subscribers of other BCBS companies.
       When a BCBS member receives medical treatment or services from a
Host Plan provider, the participating provider submits an invoice to the Host Plan.
The Host Plan then determines the discounted price of the services rendered as
previously negotiated under the Participating Provider Agreement executed
between the Host Plan and the participating provider. The Host Plan does not,
however, adjudicate the claim under the member’s Home Plan or otherwise make
any determinations regarding member eligibility or Home Plan coverage. Instead,
the Host Plan forwards a “Submission Format” record to the Home Plan through
a centralized inter-Plan software platform detailing the services rendered along
with the participating provider’s initial invoice and discounted costs under the
Host Plan’s Participating Provider Agreement. The Home Plan then adjudicates
the matter (referred to by Highmark as a “Host Claim”) under the terms of the
subscriber’s Home Plan health benefits contract to determine, among other things,
eligibility, coverage allowances, calendar year deductibles, coinsurance, Medicare or
other insurance, copayments, and penalties.
      Following its adjudication, the Home Plan returns a “Disposition Format”
record to the Host Plan through the same inter-Plan portal detailing the Home Plan
coverage and allowances, including any authorized payment to the participating
provider and the Administrative Expense Allowance and Access Fee due the
Host Plan. 2 Once the Home Plan coverage and allowances are approved and
communicated, the Host Plan typically remits payment to their participating
provider in the approved amount. 3 The Host Plan then prepares and transmits a
“Reconciliation Format” record to effect reimbursement from the Home Plan in the
aggregate amount approved in the Disposition Format record. As for any delta
between the participating provider’s (discounted) invoice and the payment
ultimately authorized by the Home Plan, the participating provider can appeal any
denial to the Home Plan or bill the BCBS member directly. The Host Plan does not
engage in either process.
       Reconciliation Format records are processed through the Central Financial
Agency (CFA): an independent financial institution serving as a clearing house
to verify, calculate, and distribute net settlements between Home Plans and

2The Administrative Expense Allowance and Access Fee are standard fee arrangements to
compensate Host Plans for overhead and costs attributable to opening their network of providers to
subscribers of other Plans and preparing and submitting the necessary reimbursement paperwork
described herein. The standard fees are memorialized in the BCBSA Licensing Agreements.

3In limited circumstances not applicable here, arrangements are made for Home Plans to remit
payment directly to Host Plan participating providers.

                                                 3
Host Plans on a daily basis. 4 To illustrate by simple example: if Plan A owes Plan B
$100, and Plan B owes Plan C $75, and Plan C owes Plan A $50, the CFA would
withdraw $50 from Plan A’s designated account and deposit $25 each in Plan B’s
and Plan C’s designated accounts. To effect the net transfers between and among
Home and Host Plans, each BCBS company is required to designate an account
at a financial institution of its choosing, authorize the CFA to make deposits and
withdrawals, and maintain a minimum balance. CFA deposits and withdrawals are
generally accomplished through Automated Clearing House (ACH) electronic bank
transfers.
       Highmark is the fourth largest BCBS company, serving more than six million
subscribers in Pennsylvania, Delaware, West Virginia, and New York. 5 As with
all BCBS companies, Highmark serves as the Home Plan for its subscribers and the
Host Plan for subscribers of other BCBS companies seeking medical treatment and
services from Highmark’s network of participating providers. In December 2011,
Highmark filed amended federal income tax returns for tax years 2004 through
2007, claiming increased § 833(b) special deductions in the aggregate amount of
approximately $520 million based on over $5 billion in payments Highmark
purportedly made to its participating provider networks while serving as the
Host Plan. Neither figure deducts nor otherwise accounts for reimbursements
received from Home Plans. Moreover, this marked the first time Highmark
ever sought to include reimbursed Host Claims in its § 833(b) calculus.
                                          DISCUSSION

I.        Legal Standard

      Summary judgment is appropriate “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” RCFC 56(a). A “genuine dispute” exists where a reasonable
factfinder “could return a verdict for the nonmoving party.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). “Material facts,” in turn, are those “that
might affect the outcome of the suit.” Id. In deciding motions for summary
judgment, particularly where, as here, the parties filed cross-motions for summary
judgment, the Court must draw all inferences in the light most favorable to the
nonmoving party, evaluating each motion on its own merits. Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587–88 (1986) (quoting United
States v. Diebold, Inc., 369 U.S. 654, 655 (1962)); Mingus Constructors, Inc. v.
United States, 812 F.2d 1387, 1391 (Fed. Cir. 1987).

4   Between at least 2004 and 2007, Mellon Bank, N.A., served as the CFA for the BCBSA.

5https://www.highmark.com/about/our-story.html#:~:text=Highmark%20is%20the%20largest%
20health,service%20marks%20in%20West%20Virginia (last visited Aug. 8, 2022).

                                                  4
       The moving party bears the initial burden to demonstrate the absence of
any genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). That burden can be met by showing “there is an absence of evidence to
support the nonmoving party’s case.” Dairyland Power Co-op. v. United States,
16 F.3d 1197, 1202 (Fed. Cir. 1994) (citing Celotex, 477 U.S. at 325). “Once the
moving party has satisfied its initial burden, the opposing party must establish a
genuine issue of material fact and cannot rest on mere allegations, but must present
actual evidence.” Crown Operations Int’l, Ltd. v. Solutia Inc., 289 F.3d 1367, 1375
(Fed. Cir. 2002) (citing Anderson, 477 U.S. at 248). Summary judgment is
warranted when “the record taken as a whole could not lead a rational trier of fact
to find for the non-moving party.” Matsushita, 475 U.S. at 587.

II.   Special Deduction

       The sole issue before the Court today is one of first impression: whether
BCBS companies like Highmark may include reimbursed Host Plan payments
to their network providers in calculating the § 833(b) special deduction on their
annual federal income tax returns. The short answer is no.
      As recently explained by the United States Court of Appeals for the
Federal Circuit:
      Statutory interpretation starts with the plain language of the statute.
      When interpreting a statute, however, courts must consider not only
      the bare meaning of each word but also the placement and purpose of
      the language within the statutory scheme. The meaning of statutory
      language, plain or not, thus depends on context. Courts may also rely
      on legislative history to inform their interpretation of statutes.
Safeguard Base Operations, LLC v. United States, 989 F.3d 1326, 1342 (Fed. Cir.
2021) (cleaned up). Here, the plain language of § 833(b)—read in context and
against the backdrop of the special deduction’s legislative history—does not allow
the inclusion of reimbursed Host Plan payments to network providers in the
BCBS special deduction calculation.
      Title 26, United States Code, Section 833—titled “Treatment of Blue Cross
and Blue Shield organizations, etc.”—provides in relevant part:
      (2) Special deduction allowed.—The deduction determined under
      subsection (b) for any taxable year shall be allowed.
             ...
             (b) Amount of deduction.—

                                          5
                    (1) In general.—Except as provided in paragraph (2),
                    the deduction determined under this subsection for
                    any taxable year is the excess (if any) of—
                           (A) 25 percent of the sum of—
                                  (i) the claims incurred during the taxable
                                  year and liabilities incurred during the
                                  taxable year under cost-plus contracts, and
                                  (ii) the expenses incurred during the taxable
                                  year in connection with the administration,
                                  adjustment, or settlement of claims or in
                                  connection with the administration of
                                  cost-plus contracts, over
                           (B) the adjusted surplus as of the beginning of the
                           taxable year.
                    (2) Limitation.—The deduction determined under
                    paragraph (1) for any taxable year shall not exceed
                    taxable income for such taxable year (determined without
                    regard to such deduction).
26 U.S.C. § 833(a)(2) & (b), I.R.C. § 833 (a)(2) & (b) (emphases in original). This
section of the United States tax code was enacted following the passage of the
Tax Reform Act of 1986 (Pub.L. No. 99–514, § 1012, 100 Stat. 2085, 2390–94
(codified at 26 U.S.C. §§ 501(m) & 833)), which revoked the tax-exempt status of
BCBS companies. See Cap. Blue Cross v. Comm’r of Internal Revenue, 431 F.3d
117, 120–21 (3rd Cir. 2005).
       Highmark argues that reimbursed Host Plan payments to their network
providers qualify as “liabilities incurred . . . under cost-plus contracts” for purposes
of § 833(b)(1)(a)(i). The Court disagrees. These payments are neither a liability
for Highmark nor incurred by Highmark under a cost-plus contract. As explained
supra, network provider payments are not remitted by a Host Plan unless and until
the subscriber’s Home Plan independently adjudicates eligibility and coverage and
pre-approves the amount, if any, payable to the participating provider under the
subscriber’s Home Plan; the Home Plan then near simultaneously reimburses the
Host Plan the full amount of the approved payment along with predetermined
administrative and access fees. For these reasons, the provider payments at issue
are properly included as “claims incurred” in the Home Plan’s § 833(b) calculation,
but not concurrently included as “liabilities incurred . . . under cost-plus contracts”
in the Host Plan’s § 833(b) calculus.

                                           6
       A.      Liability
        A liability is defined as a legal obligation to pay, “enforceable by civil remedy
or criminal punishment.” Black’s Law Dictionary 1097 (11th ed. 2019). When
serving as a Host Plan under the BlueCard Program, Highmark incurs no such
obligation. Instead, Highmark’s role is limited to: opening its network of healthcare
providers and facilities to all BCBS subscribers regardless of their specific Home
Plan; passing along its network providers’ invoices and pre-negotiated discounts to
the Home Plan for medical services provided to the Home Plan’s subscribers; and
remitting payment to its network providers in the amounts authorized and near
simultaneously reimbursed by the Home Plan in accordance with the terms of
the subscriber’s Home Plan policy. As the Host Plan, Highmark is not involved
in disputes between the Home Plan and the subscriber, the Home Plan and the
participating provider, or the participating provider and the subscriber. As such,
Highmark’s claimed “liability” is more accurately characterized as an asset
(i.e., account receivable). 6
       “The true character of expenditures, which depends upon the special facts
of each case, determines their income tax consequences.” Burnett v. Comm’r of
Internal Revenue, 356 F.2d 755, 758 (5th Cir. 1966) (cleaned up). Addressing the
analogous business expense deduction under I.R.C. § 162(a), the United States
Court of Appeals for the Fifth Circuit noted: “it is well settled that an expenditure
for which there is an unconditional right of reimbursement is not deductible
as a business expense since such expenditures are in the nature of loans or
advancements.” Burnett, 356 F.2d at 759 (cleaned up). The same must be said
of Highmark’s payments to its network providers as the Host Plan on behalf of
the subscriber’s Home Plan, particularly in light of the facts that the Home Plan
independently approves the amount to be remitted and Highmark is virtually
certain of immediate reimbursement. 7 Accordingly, Host Plan payments to their
network providers on behalf of Home Plans—more aptly characterized as loans
or advances pending imminent reconciliation by and reimbursement through the
independent CFA—do not constitute “liabilities” in a Host Plan’s special deduction
calculation under § 833(b).
       A contrary finding would create a statutory framework where multiple BCBS
companies could include the same participating provider payment in their § 833(b)
calculations, increasing exponentially dependent upon how many reimbursement

6In fact, as noted supra, in addition to a full reimbursement of the network provider payment,
Highmark receives predetermined administrative and access fees.

7During oral argument, the parties could not cite an example where a Home Plan refused or failed to
reimburse a Host Plan after pre-approving payment to the Host Plan’s participating provider.

                                                 7
layers are incorporated into a particular reimbursement scheme. Indeed, under
Highmark’s interpretation of the statute, the Home Plan and the Host Plan are
entitled to include the same participating provider payment as a “claim incurred”
and a “liability incurred,” respectively, in their special deduction calculations.
Congress generally disfavors such double counting, let alone the resulting windfall
sought by Highmark. See Sunoco, Inc. v. United States, 908 F.3d 710, 719 (Fed. Cir.
2018) (“Congress does not generally allow taxpayers to receive a tax benefit twice.”).
Home Plans bear the sole legal obligation to pay their subscribers’ policy claims
and, thus, are singularly entitled to include network provider payments in their
special deduction calculations under § 833(b).
          B.     Cost-Plus Contract
       Highmark’s novel interpretation of § 833(b) also fails because no cost-plus
contract exists between Home Plans and Host Plans. Under the BlueCard Program,
contracts exist between each Plan and the BCBSA (i.e., Licensing Agreements),
Host Plans and their network of providers (i.e., Participating Provider Agreements),
and Home Plans and their subscribers (i.e., Home Plan health benefits contracts).
Each Plan’s agreement with the BCBSA to support all Plans under their BCBSA
Licensing Agreement does not, in turn, create or otherwise establish 595 contracts
among the different Plans. 8 See St. Luke’s Episcopal Hosp. v. Louisiana Health
Serv. & Indemnity Co., No. 08-1870, 2009 WL 47125, at *9 (S.D. Tex. Jan. 6, 2009)
(BCBS companies are not in privity of contract with one another; rather, each BCBS
company joined BCBSA to secure national healthcare services for their respective
subscribers). As explained supra, the interaction between Host Plans and Home
Plans is limited to the exchange of Submission Format and Disposition Format
records when a subscriber seeks medical care outside their Home Plan service
area. 9 Host Plans and Home Plans do not normally engage in negotiations and the
exchange of reimbursement records is performed in accordance with each Plan’s
BCBSA License Agreement, not a Home-Host Plan contract. 10

8The combination calculation employed to generate the 595 contracts includes the 35 BCBS
companies in pair combination (without duplication): 35! / [2! (35 – 2)!] = 35! / (2! x 33!) = 595.

9   The Reconciliation Format records are submitted to and independently processed by the CFA.

10During oral argument, the Court inquired sua sponte whether the exchange of Submission Format
and Disposition Format records creates micro contracts between Home Plans and Host Plans
regarding specific healthcare claims. Highmark countered that the reimbursements evidence a
macro BlueCard Program cost-plus contract between Home Plans and Host Plans. For the reasons
stated herein, the Court finds that the individual administrative reimbursements further support
the conclusion that reimbursed Host Plan payments to network providers are advances or loans
made in accordance with each Plan’s obligations to BCBSA under its Licensing Agreement rather
than an implied-in-fact cost-plus contract between Home Plans and Host Plans.

                                                     8
       Further, a Host Plan’s payments to its network providers on behalf of the
Home Plan are not “incurred under” the BlueCard Program but, rather, the specific
Participating Provider Agreement. 11 See ECF 91-1 at 109 (“The Host Licensee
receives the claim from the provider and determines the price of the service
rendered based on its contract with the provider.” (emphasis added)). All
subsequent adjustments to the participating provider’s discounted invoice are
independently determined by the Home Plan under the Home Plan’s contract with
its subscriber. Id. (“The Home Licensee then adjudicates the claim according to the
member’s health benefits contract and determines the claim’s disposition.”). The
Host Plan’s remittance of the independently adjudicated payment due the network
provider on behalf of the Home Plan pending certain and imminent reimbursement
is a ministerial function arising from the Host Plan’s BCBSA Licensing Agreement.
The BlueCard Program does not create an independent liability to the network
provider beyond what is already required under Highmark’s Participating Provider
Agreements.
       In contradistinction, self-funded group health plans managed by insurance
companies have a direct contractual relationship between an employer assuming
the financial risk for providing healthcare benefits to employees and the third-party
administrator. More specifically, when an employer engages Highmark to serve
as the third-party administrator for a self-funded group health plan, the parties
execute the cost-plus contract contemplated in § 833(b). Under such contracts,
Highmark offers its network of healthcare providers and facilities to the employee-
subscribers and manages the employer-designed healthcare benefits. In its
management role, moreover, Highmark engages in disputes between the employer
and its employees regarding coverage as well as disputes between participating
providers and employees of the self-funded plans. In exchange, Highmark receives
payments for its administrative and program management services as well as
reimbursement for payments made to its participating providers as determined
under the employer-designed healthcare plan. 12
       C.      Legislative History
       Under the plain meaning of the statute, read in context, the Court concludes
that reimbursed Host Plan payments to network providers are not properly

11Highmark readily concedes that Host Plan contracts with its network providers (i.e., Participating
Provider Agreements) are not cost-plus contracts. ECF 91 at 27 n.13 (“Highmark does not maintain
that its contracts with providers are ‘cost-plus contracts.’”).

12 In sanctioning the applicability of the § 833(b) special deduction when BCBS companies serve as
third-party administrators of self-funded group health plans, the Court is mindful that employers
concurrently use participating provider payments in calculating their federal income tax deductions
(e.g., business expenses, medical expenses). Distinct from Highmark’s proposed interpretation of
§ 833(b)—which simultaneously classifies the same payment as both a “claim incurred” and a
“liability incurred” by two BCBS companies under the same subsection of the tax code—however,
the claimed tax deductions in this instance call upon separate provisions of the tax code employed for
distinct purposes.

                                                  9
included in Highmark’s § 833(b) special deduction calculation. Instead, they are
reserved for the Home Plan, which is legally obligated for the claims incurred. A
review of the legislative history of § 833(b) supports this statutory construction.
       The § 833(b) special deduction was enacted to ensure BCBS companies,
although no longer tax-exempt, could “maintain reserves equal to 25 percent of
the year’s health-related payouts” in recognition of “their continuing . . . role in
providing community-rated health insurance.” Congressional Research Service
for use by S. Comm. on the Budget, 102d Cong., 2d Sess., Tax Expenditures
Compendium of Background Material on Individual Provisions, 184 (Comm. Print
1992). The deduction allows BCBS companies to continue providing health
insurance coverage without significantly impacting the availability of healthcare
coverage or premiums paid by subscribers. Unlike claims paid by Home Plans,
Host Plan payments to network providers for services rendered to Home Plan
subscribers are immediately reimbursed by the Home Plans. Consequently, these
payments do not impact the Host Plan’s ability to maintain reserves or constitute
actual pay-outs.
       Moreover, as originally enacted, the special deduction codified in § 833(b)
of the Tax Reform Act of 1986 was limited to “claims incurred during the taxable
year.” See Pub. L. 99-514, § 1012, 100 Stat. 2085 (Oct. 22, 1986). Before Congress
passed the Tax Reform Act, counsel for BCBSA addressed the industry’s concern
that “[t]he deduction calculation is based only on claims under ‘health insurance
policies,’” as follows:
      The purpose of the compromise [between the United States House of
      Representatives and the United States Senate bills] is to permit the
      [BCBSA] organizations to base the deduction on the amounts reported
      as benefit payments on the [National Association of Insurance
      Commissioners (NAIC) Annual Statement B]lank, including payments
      under cost plus [sic] contracts. The organizations are directly liable to
      their subscribers for those payments and require the financial stability,
      which is facilitated by the deduction, to discharge those obligations.
      The IRS may argue that cost plus [sic] contracts are not health
      insurance policies, thus reducing the value of the deduction
      substantially.
ECF 94-6 at 262 (emphasis added). When serving as a Host Plan, Highmark is
not directly liable or otherwise obligated to its subscribers for any payments made
under the expansive definition of cost-plus contracts advanced here. Any resulting
liabilities or obligations are owed to the Home Plan’s subscriber(s) and borne by the
Home Plan.

                                          10
       A decade later, the Taxpayer Relief Act of 1997 amended § 833(b)(1)(A)(i)
to insert the clause at issue in this case: “and liabilities incurred during the taxable
year under cost-plus contracts.” See Pub. L. No. 105–34, § 1604(d)(2)(A)(i), 111 Stat.
788 (Aug. 5, 1997); see also H.R. Rep. No. 105–220, at 766 (1997) (“The conference
agreement clarifies that, for purposes of the section 833 deduction, liabilities
incurred during the taxable year under cost-plus contracts are added to claims
incurred under section 833(b)(1)(A)(i).”), reprinted at 143 Cong. Rec. H6606
(daily ed. July 30, 1997). Of note, in amending § 833(b), Congress expressly
made the change effective retroactive to the date of the Tax Reform Act of 1986.
See Pub. L. No. 105–34, § 1604(d)(2)(A)(B), 111 Stat. 788 (Aug. 5, 1997) (“The
amendment made by subparagraph (A) shall take effect as if included in the
amendments made by section 1012 of the Tax Reform Act of 1986.”).
       Contemporaneous industry usage and understanding undermine Highmark’s
novel interpretation of § 833(b). See Star-Glo Assocs., LP v. United States, 414 F.3d
1349, 1356–57 (Fed. Cir. 2005) (courts may look to industry usage and the backdrop
against which a particular statute was enacted in interpreting codified unclear
industry terminology). At the time Congress passed the Tax Reform Act of 1986
and the Taxpayer Relief Act of 1997, the health insurance industry understood the
term “cost-plus” to refer to contracts with groups (i.e., self-funded group health
plans) and not with healthcare providers or other Plans. See, e.g., ECF 99-1 at 41
(NAIC’s 1993 assessment of “ACS/Cost-Plus arrangements” in the context of
self-funded group health plans); id. at 153 (2000 life and health insurance
publication defining “cost-plus funding” as “[a] funding alternative for group
insurance benefits under which loss payments are based on the employer’s own
experience plus an allowance for expenses, contingencies, and profit.”). Neither
statute indicates Congress’ intent to significantly undercut Congress’ revocation
of the tax-exempt status of BCBS companies by allowing the double-counting of
billions of dollars in healthcare insurance claim reimbursements by both the
Home Plans and Host Plans in calculating special deductions.

       BCBSA’s BlueCard Program Manual similarly includes references to the
term “cost-plus” associated with Home Plans (as opposed to Host Plans) and the
administration of “self-funded accounts.” See, e.g., ECF 94-3 at 35-36. One
particular reference specifies: “If any of the claims paid . . . are for cost-plus or
National Accounts,[ 13] the Home Licensee will need to process the claims through
the appropriate billing systems to recognize the corresponding revenue related to
these types of businesses.” Id. at 78. This directive would be unnecessary if, as

13National Accounts involve “[a]n employer that has offices or branches in more than one location,
but offers uniform healthcare coverage of benefits to all of its employees.” See https://www.bcbs.com
/learn/glossary#N (last visited Aug. 4, 2022).

                                                 11
Highmark argues, the BlueCard Program is a cost-plus contract. Nothing in the
record suggests, let alone establishes, that BCBSA itself considers the cooperation
between Host Plans and Home Plans under the BlueCard Program to constitute
cost-plus contracts.

                                  CONCLUSION

      For the foregoing reasons, plaintiff’s motion for partial summary judgment
(ECF 91) is DENIED and defendant’s cross-motion for partial summary judgment
(ECF 94) is GRANTED. The parties shall file a Joint Status Report on or before
September 12, 2022, proposing a schedule of further proceedings in this matter.

      It is so ORDERED.

                                         12