Section One - Motivational Issues

Part 1 - Trade and Commerce Laws

Our Federal (and/or state)Trade and Commerce laws commend (and in some instances command) that all engagers in trade and commerce (a) build, offer or market, (b) a better and/or cheaper product or service and (c) do so fairly.

This important Federal mandate (a) assuredly applies to self-funded health plans (such plan is an economic activity) and (b) recent changes (new millennial, e.g.) make it needful to have a fresh look at such claim reserves. Ee Attachment D-1.

Part 2 - Enterprise Risk Management

Following the Enron and Global Crossing scandals, Congress enacted the Sarbanes-Oxley Act. Such law created a new risk subculture which flourished under the name Ensterprise Risk Management. The letter and spirit of ERM make it needful that the risk-related aspects of the claim reserve be re-evaluated. See Attachments E-1 through E-5.

Part 3 - New Uses of Claim Reserve

Several new uses are cited: (a) the trend of self-funded health plans monitoring their on-going financial experience on an accrual (as opposed to a cash) basis and (b) the trend of regulators or financial reports wanting more-frequent claim reserves.

Part 4 – Increased Importance of Self-Funding

The increasing size and dominance of self-funding have made it economic significance quite large. This growing importance beg this question: hould the family of principles and practices traditionally used by fully insured plans by blindly applied to self-funded plans? This E-Text asserts that the self-funded plan should have its own claim reserve principles and practices.