2005-100 , ) W
RESOLUTION NO. 2005- 10
A. RESOLUTION ADOPTING THE VILLAGE OF BUFFALO GROVE
POLICY AND PRACTICE RELATIVE TO
HEALTH SELF-INSURANCE RESERVES
WHEREAS, the Village of Buffalo Grove will, beginning July 1, 2005, establish a fund and
accounting mechanism for purposes of administering a self-insurance health benefits program for the
employees of the Village; and
WHEREAS, the integrity of the self - insurance program is and must be maimamod through the
efficient and effective use and management of cash and reserve balances held to carry out the obligations
and programs that will be established from time to time to provide health benefit to employees and their
eligible dependants; and
WHEREAS, the development and adoption of policies and practices on matters of public finance
serve as a guide and directive to the fiscal affairs of the Village of Buffalo Grove.
NOW, THEREFORE, BE IT RESOLVED BY THE PRESIDENT AND BOARD OF TRUSTEES
OF THE VILLAGE OF BUFFALO GROVE, COOK AND LAKE COUNTIES, ILLINOIS that:
Section 1. The Village of Buffalo Grove Health Self- Insurance Reserve Policy dated May 16,
2005 which is attached hereto and made a part hereof as Exhibit "A" is hereby adopted as a guide
on how the Village shall manage its health care self - insurance fund, including the proper
establishment of claim and cash flow reserves.
Section 2. The Village's Director of Finance and General Services is responsible for the
management of this Policy as well as for any and all reporting required to support the intent of
said Policy. This Policy shall be effective with the adoption of this Resolution and as it is
amended from time -to -time.
AYES 6 — Braiman, Glover, Berman, Kahn, Trilling, Rubin
NAYES: 0 — None
ABSENT: 0 — None
ADOPTED: May 16 .2005.
APPROVED: Ma, 16 , 2005.
Village President
ATTEST:
Villa lerk
VILLAGE OF BUFFALO GROVE
HEALTH SELF-INSURANCE RESERVE POLICY
The Village of Buffalo Grove has determined that it is in its best interest to self - insure health benefits that it
provides for current full -time and eligible retired employees. In terms of affirming the basic funding
obligations for current and former employees, the Village as employer shall budget on an annual basis an
amount determined adequate and affordable to offset as much as 900/a of the medical and as much as 100%
of dental and life insurance benefits with the participating employees paying any difference. For former
employees choosing continued coverage, 100% of the cost of health care benefits will be paid by
themselves.
The costs of the self - insurance program will be financed from an established fund to be designated Health
Self-Insurance Fund. The nature of the Fund is unique in that it encapsulates the financial resources
committed for the payment of claims, administrative costs, and purchase of excess insurance coverage as
well as for other expenses necessary to be incurred.
In addition to establishing a financial structure to provide for the receipt of program funding, which is
assumed to be in the form of annual budgetary transfers from the staffed operating departments along with
employee premium contributions, interest income on held investments and any other revenue (assumed to
be contributions paid by eligible and participating retired employees), the Fund will maintain an
appropriate reserve. The intent of the reserve is to provide for Fund payments and expenses as well as to
maintain resources for large claims within an annually defined self retention limit prior to any excess
coverage recoveries. The objective. of the reserve is to maintain an appropriate fund level that is to be
established annually by a qualified actuary or other qualified insurance professional. The annual reserve
recommendation will be approved by the Village Board as part of the fiscal budget process for the claim
period applicable to the establishment of the reserve balance.
In terms of a cash balance for the Fund, the following minimum is proposed, which is based on a
combination of budgeted premium, employee contributions, estimated investment earnings and other
revenue that may accrue to the Fund:
The reserve balance shall equal, at minimum, 25% of the projected liabilities of the Fund based on
the approved level of benefits and fund expenses anticipated to be incurred, plus the premium due
for the budget year, employee contributions, anticipated interest income and other revenue. The
25% is that which may be paid by the Village within a self - retention limit prior to recovery from
any and all individual and aggregate excess coverage policies. In addition, an additional 20 -30%
of estimated paid claims will be maintained as a terminal reserve for the payment of outstanding
claims should the Village choose to discontinue the self - insurance plan.
While the reserve balance may exceed the minimums noted, not more than 100% of projected
liabilities and expenses plus the fiscal period premium due, including employee contributions,
interest income and other revenue, shall be maintained.
May 1 b, 2005