10-25-04 Regular Meeting of La Porte Audit Committee

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CITY OF LA PORTE, TEXAS ' Notes to the Financial Statements - Continued September 30, 2004 8. Risk Management ' The City is exposed to various risks related to torts: theft, damage to, and destruction of assets; errors and omissions; and natural disasters. The City's risk management program encompasses various means of protecting the City against loss by obtaining property, casualty, and liability coverage from participation in a risk pool. The participation of the City in the risk pool is limited to the payment of premiums. Further information regarding the pool is provided below. Settled claims have not exceeded insurance coverage in any of the previous three fiscal years. There has not been any significant reduction in insurance coverage ' from that of the previous year. Health Insurance Benefits ' The City self -insures a portion of health insurance benefits provided to employees. The City records revenues and expenses for providing employee health coverage in an Internal Service Fund and accrues the estimated incurred but not reported claims. Charges are assessed to various City divisions based on ' their full-time employee count. Activity during the year included: Revenues: Charges to divisions $ 2,094,734 Charges to employees 278,764 ' Charges to retirees 26,994 Charges to COBRA participants 4,009 Total revenues 2,404,501 ' Expenses: Claims administration 53,371 Claimes incurred 3,304,198 Re -insurance premiums 190,227 Other benefits - Consulting fees 4,787 Total health services expenses $ 3,552,583 Included in the claims paid amount is $226,387 for incurred but not reported claims. Settled claims have not exceeded insurance coverage in any of the previous four fiscal years. Estimates of claims payable and of claims incurred but not reported at September 30, 2003 are reflected as liabilities of the Internal Service Fund. Because actual claims liabilities depend on such complex factors as inflation, changes in legal requirements, and damage awards, the process used in computing claims liability is an estimate based on historical claims. Analysis of claims liability for the fiscal years 2001, 2002 and 2003 are ' as follows: Beginning Current Payment End of ' of Year Year for Year Accrual Estimates Claims Accrual Fiscal Year 2002 $ 218,609 $ 2,043,304 $ 2,077,832 $184,081 ' Fiscal Year 2003 184,081 2,194,142 2,214,771 163,452 Fiscal Year 2004 163,452 3,304,198 3,241,263 226,387 67