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IS-1820 Self-Insurance Reserve Fund (Policy)

Financial Administration

Approved: 12/12/2017
Revised: 2/25/2020

Policy

CNM’s stop-loss insurance starts after 125% of estimated claims are exceeded. To cover the 25% exposure, CNM’s self-funded health insurance plan (medical and prescription) requires the College to establish an initial claims payment reserve. The reserve account is comprised of three (3) separate funds: Incurred But Not Reported (IBNR); Claims Fluctuation Reserve (CFR); and General Reserve.

IBNR

A minimum IBNR claim reserve equal to one month of estimated annual paid medical and prescription drug claims is required unless a greater or lower amount is approved by the Vice President of Finance and Operations or designee. IBNR reserve funds shall exist in a separate general ledger account. This reserve is maintained in order to fund liabilities that may exist should CNM choose to end its self-funded health insurance plan or make other health and welfare benefits program changes.

CFR

CFR funds shall exist in a separate general ledger account with a minimum annual reserve equal to two months of estimated annual paid medical and prescription drug claims unless a greater or lower amount is approved by the Vice President of Finance and Operations or designee. This reserve exists to safeguard against instances where actual costs surpass projected costs.

General Reserve

The general reserve is made up of funds in excess of IBNR and CFR reserves. Employee premiums are considered restricted. General reserve funds may be used for health and welfare purposes, reserve fund bank account fees, maintaining CFR and IBNR reserves, and reimbursing the initial funding of IBNR and CFR reserves upon approval by the Vice President of Finance and Operations or designee.

Annual Reports

CNM’s Vice President of Finance and Operations or designees shall report annually to the CNM Governing Board’s Finance Committee regarding the status of CNM’s health and welfare benefit programs, including the self-insured health insurance program, and status of the reserve funds stated in this policy.