Before the internet, health & dental claims lived in shoeboxes for most of the year.

Before drug cards were rolled out, plan members used to have to pay for a service or product, and then submit it to the insurer using a paper claim form. 

Some people chose to throw them in a shoebox and then submit them all at the end of the year.

Therefore, when insurance companies would have to calculate premiums, they had to budget for the 'shoebox effect' : claims that we know exist, that we are liable to pay, but have not been submitted yet.

Now, with technology, the shoebox effect is much smaller, but it's still there to some extent. Not 100% of claims are being submitted electronically.

For that reasons, carriers (including Beneplan) have to build in a reserve to fund claims not yet received.

Beneplan charges an IBNR equivalent to 5% of annualized claims, funded over a multi-year period. The charge is subtracted from a policyholder's dividend, but not more than 10% of a dividend can be subtracted to fund the target reserve. Groups in their first year with Beneplan will have up to 50% of their first dividend subtracted to fund their target reserve.

Other carriers charge up to 9% IBNR, and it's charged fully at the first renewal. If you're negotiating, this is an area you can try to decrease.

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