Accrual Analysis

Self-funded health care describes a Self insurance arrangement whereby an employer provides health or disability benefits to employees by assuming the direct risk for payment of their claims for benefits. Many employers seek to mitigate the financial risk of self funding claims under the plan by purchasing stop loss insurance from an insurance carrier. (Wikipedia)

Possible cash flow advantages.
Expense paid arrears.
Very high plan control & design.
Choose or eliminate services.
Reduced Services and Cost.

Companies with stable cash flows and available cash.
Companies with predictable employee claims.

RSC has also worked with its clients to manage through the balance sheet issues associated with many years of self-insured programs. Long tail coverages, such as workers compensation, product liability and malpractice, create reserves/accruals for future claim payments. Companies are required to maintain these reserves as liabilities on their balance sheets. With high deductible plans, these reserves typically require collateral to be posted to the policy issuing carrier as a hedge against the credit risk the carrier has assumed for claims within the deductible.

RSC again has a proven process for helping its clients reduce, manage, and transfer balance sheet reserves related to retained claims. The process' first step is the same as that used to determine the most favorable risk financing alternative, a thorough analytical review. This review allows RSC to determine the ultimate value of the reserves/accruals. Having a complete understanding of the reserves allows RSC to work with carriers, accountants, financial institutions, and other interested parties on behalf of the client to ensure the appropriate amounts are posted.

This process also allows for a better understanding both internally and externally of the implications of risk retention. RSC can also assist its clients in transferring the reserves, if financially viable; through a mechanism know as a loss portfolio transfer. If the client has posted collateral (letters of credit/cash) to the policy issuing carrier, this process can also be helpful in managing and reducing this collateral over time.