CFO flags rising high-dollar claims and board approves IBNR and contingency reserves

Chief Financial Officer Iftikhar Hussain told the board Jan. 12 that through November the fund balance was about $4.8 million higher than at the start of the year, but he warned of mounting pressure from high-dollar medical claims concentrated in the Access Plus plan, citing late maternity and ICU claims, primarily at Stanford and UC, that could add millions to liabilities.

Hussain also reviewed mayoral budget instructions for the fiscal years 2023–24 and 2024–25. He said the city’s cost for the health benefit trust is about $845,000,000 and that including other affiliates the total the agency manages is about $1 billion; SFHSS’s general-fund annual budget is roughly $13,000,000 and the mayor asked departments to look at a roughly 5% reduction in the first year and an additional 3% in the following year. Hussain noted a health sustainability fund funded by a $3 per-member-per-month (PMPM) assessment that raises about $2.5 million annually.

On reserves, Mike Clark of Aon presented recommended incurred-but-not-reported (IBNR) and contingency reserve amounts as of June 30, 2022. Aon recommended increases in IBNR driven by higher claim levels and slower claims processing; they also reported discovery, during review of plan transitions, of unmapped UnitedHealthcare claim activity for early retirees that would have increased the non-Medicare PPO early-retiree IBNR by roughly $1,160,000. Auditors (MGO) reviewed the finding and determined the omission was not material to the audit; the board approved the recommended IBNR and contingency reserve amounts by unanimous roll call.

Board members asked what steps were being taken to prevent similar mapping or coding errors; Aon and staff said they had identified the issue, will include the corrected data in future calculations and expect catch-up adjustments in later reserve calculations.