Health Plan Services
Calculation of IBNR Reserves
Incurred But Not Reported (IBNR) reserves or liability is an estimate of the value of the unpaid portion of medical and/or prescription drug claims that have been incurred during the current and prior periods but have not yet been reported or have been reported but are unpaid as of the reporting date. When calculating this liability, we consider factors that could influence the timing and reporting of your claim activity.
Calculations of Incurred But Not Reported (IBNR) Reserves with Watkins Ross
At Watkins Ross, we apply multiple models to determine unpaid claim liabilities. Most often utilized is a form of the claim triangle or lag method. In addition, historical payment patterns are observed in order to detect any irregularities that might be occurring that would suggest an adjustment is needed to the reserve otherwise determine by the formula.
In addition to gathering claim information, we will consider plan, provider or other personnel changes that might have occurred that would impact claim processing. Average monthly claim experience will be calculated and compared with reserve estimates for reasonableness as well. Finally, a margin is added to allow for any unforeseen claim experience that actuarial approaches might otherwise have missed or not anticipated.
As claim run-out becomes available, we compare IBNR calculations retroactively and inform you of any recommended adjustments.
The IBNR report includes a description of the method used to determine the IBNR, the data and source of data reconciliation of prior year’s IBNR calculations and actual run-out to the current year as well as year-over-year comparisons. External factors such as extreme weather events can delay processing so, if considered in the calculations, would be disclosed as well.
We review the results with you and, if necessary or desired, with the audit teams once the results of the calculations and report are completed.
To start your calculation of incurred but not reported reserves, or for additional questions regarding IBNR please contact:
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Financial & Management Resources
Incurred But Not Reported (IBNR)
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