Translate[Archived] Question #21: Provide the history of usage of the self-insurance reserve. Does the new stop-loss insurance reduce the need for this reserve level?
Question:
Can you provide the history of usage of the self-insurance reserve? Does the new stop-loss insurance reduce the need for this reserve level?
Response:
The FY 2019 Proposed Budget includes funding for a new stop-loss insurance policy relating specifically to large health insurance claims for United Health Care (UHC) members. The UHC plan is self-funded by the City, and the City maintains separate funds specifically for this purpose. The new insurance policy will help guard against significant outlier claims ($1 million and greater) causing major reductions in those funds. This added security will make it easier to plan and manage this fund balance over time and will help to minimize major swings in health insurance premiums.
Separately, the City has a $5 million General Fund balance reserve to support other liabilities (e.g., major property damage, large legal claims, etc.). The City rarely utilizes this reserve amount, as the first preference when dealing with a claim is to cover the costs with General Fund savings rather than reducing General Fund balance. The City is also cautious about submitting liability claims for more minor incidents, as these would impact the City’s insurance experience history and could drive future year increases in premiums. Alexandria has also been fortunate to avoid many significant claims that would require utilization of the $5 million reserve. While the City may not draw upon these funds routinely, rating agencies and insurance brokers consider these amounts when assessing the City's ratings for bonds and insurance.
If the UHC fund balance was ever under severe duress, the General Fund would be the most likely source to restore it. However, the UHC fund is managed and premiums are set in a manner to be self-sustaining and to reduce the reliance on the $5 million General Fund reserve. So, the new insurance policy does not directly enable the City to reduce the $5 million General Fund reserve amount.