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Aon: IBNR and contingency reserves largely stable; Blue Shield processing change and UHC population growth drive movement
Summary
Aon presented incurred‑but‑not‑reported (IBNR) and contingency reserve calculations as of 06/30/2018. Blue Shield pharmacy processing reduced claim lag and IBNR needs, while UnitedHealthcare City Plan growth increased IBNR; contingency reserves are projected to rise ~4.4% overall.
Mike Clark of Aon presented the annual reserves report that covers incurred‑but‑not‑reported (IBNR) and contingency reserve calculations as of June 30, 2018. He described three plan buckets used for calculations: Blue Shield of California flex-funded plans (Access Plus and Trio combined), the UnitedHealthcare City Plan (active employees and early retirees), and Delta Dental's active employee PPO.
Clark said an administrative processing change at Blue Shield—eliminating a multi‑week pharmacy claim lag—was the primary driver of a decrease in the Blue Shield IBNR estimate. By contrast, the UnitedHealthcare City Plan experienced substantial population growth between 2017 and 2018, which pushed its IBNR estimate higher. In total, Aon recommended reserve levels as of 06/30/2018 that were very similar in aggregate to the prior year; contingency reserves across plans showed a projected increase of about 4.4 percent.
Board members asked whether KPMG had reviewed these calculations; Clark said KPMG had thoroughly reviewed them as part of the audit process and had not raised outstanding questions to Aon or the CFO in recent months. Clark noted the contingency reserve change feeds into future claim stabilization reserve calculations that staff will present in coming months.
No board vote occurred; the report was accepted for planning and will be included in rate-setting discussions.
