Incurred But Not Reported Reserves (IBNR)

Key Benefit ConceptsActuarial, Services

If you offer a self-insured health or dental plan, an important and essential aspect of the plan is the incurred but not reported reserve (IBNR). Essentially, IBNR is an estimate, generally determined as of the plan year end, of all covered claims that have occurred but have not yet been reported.  For example, say an individual is in a car accident and is transported to the emergency room for medical treatment.  On the date(s) the individual is in the hospital and receiving treatment, a claim would be generated.  However, until the provider actually reports the claim to the self-insurer, in this case, they would not know that the claim occurred nor what amount they are responsible to cover.  Hence the term incurred but not reported, as the covered claim has occurred and while it has not yet been reported to the self-insurer, they still bear the responsibility to cover the claim amount.

Since the total number of ‘outstanding’ claims are unknown as of the plan year end, in addition to the severity of each, an IBNR calculation is required to determine an estimate of the amount that should be held in a reserve account to cover such losses that have occurred but haven’t been made known to the self-insurer.  This annual calculation and certification of the plan’s IBNR reserves ensures that such reserves can adequately cover the costs of any outstanding claims and administration costs after completion of the plan year.  Holding too much or not enough in this reserve can be a potential issue and, in some situations, a red flag!  We provide our clients with an in-depth analysis of the self-insured plan(s), including a review of recent claims lag reports to determine a ‘best estimate’ of the plan’s current IBNR. 

Contact us today to learn more about IBNR, the process and how we can assist you with any of your self-insured plan needs!