2002 Comprehensive Annual Financial Report

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CITY OF SOUTH BEND NOTES TO FINANCIAL STATEMENTS (Continued) Claim expenditures and liabilities of the fund are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. These losses include an esti- mate of claims that have been incurred but not reported (IBNRs). Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amounts of pay outs and other economic and social factors. Changes in the balance of claim liabilities during the past two years are as follows: 2001 2002 Unpaid claims, beginning of fiscal year $ 48__1;' ~ ~'~i'.::: ;.t ..;: . Incurred claims and changes in estimates ~ 1.. `~ 'I; - Claim payments 1 ' ~'",;.1f Unpaid claims, end of fiscal year $ 486,211 $ 343,876 ~~ Group Health Insurance The government has chosen to establish a risk financing fund for risks associated with medical benefits of employees and their covered dependents.. The risk financing fund is accounted for in the Self-Funded Employee Benefits Fund, an internal service fund, where assets are set aside for benefit costs. An excess policy through commercial insurance covers individual claims in excess of $100,000 per year. Settled claims resulting from this risk did not exceed commercial insurance coverage in the past three years. A premium is charged to each fund based on the number of employees and estimated costs exceeding the employees' contributions. Provisions are also made for unexpected and unusual claims. Claim expenditures and liabilities of the fund are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported (IBNRs). Claim liabilities are cal- culated considering the effects of inflation, recent claim settlement trends including frequency and amounts of pay outs and other economic and social factors. Changes in the balance of claim liabilities during the past two years are as follows: 2001 2002 Unpaid claims, beginning of fiscal year $ 831,181 $ 676,761 Incurred claims and changes in estimates 7,571,217 8,728,441 Claim payments 7,725,637 8,476,072 Unpaid claims, end of fiscal year $ 676,761 $ 929,130 52