First of all, we have to commend him on the idea.   These are the types of things that we need to discuss, but in this case we do not agree.  

  1. Here is a link to the spreadsheet
  2. Watch the meeting   starting at 3:35

Although 21,000,000 sounds like alot, it was mentioned that “just 3 months of claims add up to $21,000,000”.     Translation is that we most likely have a 12/15 contract, which means:

  •  12/15 – This covers claims incurred within the policy year and paid within 3 months after the policy year ends. This type of contract is often referred to as a “run-out policy”

As opposed to a 12/12 contract:

  • This covers only claims incurred and paid within the policy year. This type of contract is typically only used for the initial year of coverage.

In other words at the end of a plan year, we may have a balance of $21,000,000 in the fund at the end of the plan, but we are responsible for claims that come in the next 3 months that were incurred during the plan year.   Let me give you an example, assuming the plan year ends December 31 st:

  1. Assume we have a balance in the  fund of $21,000,000 on December 31st.
  2. The next 3 months we are still responsible for any claims that are submitted prior to December 31st


Again we commend Councilor Gaffney, but in this case (assuming it is a 12/15 contract), we do not support this recommendation.  If we, on the other hand, do not have a 12/15 contract, we reserve the right to change our position.      

We do have some ideas that , however, that we should consider.    Stay tuned.
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