IBNR: The Secret Healthcare Tax
Let’s talk about something that sounds like a surefire way to lose your audience at dinner—and yet, it’s draining more money from your business than overpriced coffee and bad consultants combined. It’s called IBNR.
Sounds like the name of an obscure band or a weird financial instrument, right? Nope. It’s insurance lingo. It stands for “Incurred But Not Reported.” Or, as your benefits advisor might’ve jokingly (but not really) referred to it:
Incurred But Not Really.
Now, before you mentally check out and assume this is just another alphabet soup acronym designed to make health insurance even more of a mystery than it already is—stick with me. Because this boring little acronym is probably quietly costing you more than you think. Especially if you’re in a fully insured health plan.
Odds are, if you’ve heard of IBNR, it was in passing—maybe during that fun annual renewal meeting where a 12% increase was dropped on your desk like a surprise party you didn’t want. And if you haven’t heard of it? Even better. Because we’re going to crack it wide open.
Imagine this: You walk into a restaurant, order a burger, and the server says, “Cool. We’re gonna go ahead and charge you for a second one in case you get hungry later.”
Ridiculous, right? Welcome to IBNR.
Here’s the real definition: IBNR is the cost of claims that have already happened, but haven’t been reported yet.
Maybe Josh from the warehouse tore his ACL playing pickup basketball two weeks ago, but HR still doesn’t know. Boom. IBNR.
Or, maybe the claim was reported—Josh had knee surgery—but then got a lovely infection post-op. That follow-up cost? Still part of the original claim. Still IBNR until it gets filed.
In other words, you’re paying for injuries that exist in limbo, floating around in insurance purgatory until someone decides to press “submit.”
And this is where the magic (read: margin) happens—for the carrier, not for you.
See, your insurance company uses their crystal ball—okay, it’s more like a spreadsheet with assumptions, multipliers, and some “trust us” math—to guess how much all these invisible claims might cost. Then they charge you for it now. If they overshoot the estimate? They pocket the difference as an underwriting gain. If they undershoot it? Don’t worry—they’ll just increase your rates next year.
Heads, they win. Tails…you lose again.
This is the problem with the traditional insurance game. You’re playing against a house that sets the odds, changes the rules, and still acts surprised when your premiums go up—even if your team barely used the plan.
But here’s the twist: it doesn’t have to be that way.
If you’re self-funded—or even better, in a captive, which is essentially a risk-sharing pool of smart, like-minded businesses—you flip the script. Suddenly, IBNR is your ally, not your enemy. If the actual costs come in lower than expected, you keep the savings. Imagine that: paying for what you actually use instead of funding an insurer’s yacht upgrade.
It’s like finding cash in your company’s metaphorical couch cushions—and this time, you get to keep it.
Even better? You get visibility. No more annual “surprise and deny” spreadsheets with fuzzy logic and buzzwords like “negotiated savings” or “blended rate relief.” With a custom, self-funded plan, you can see your claims data in real-time. You know what’s happening, why it’s happening, and how to course correct before renewal season feels like Groundhog Day again.
Look, IBNR might not be sexy. But it’s profitable.
It’s the difference between running your health plan like a black box and treating it like a business unit—with levers, visibility, and strategy. It’s the language of control, and CEOs and CFOs who get this start asking better questions. Like:
“What’s actually baked into this renewal?”
Or, “How do our projections compare to our actual utilization?”
And when your broker starts fumbling for answers like they’re doing karaoke without the lyrics—now you’ll know why.
So here’s the bottom line: if you’re still fully insured, nodding along while your costs go up for reasons you don’t understand, you’re not saving money. You’re subsidizing someone else’s bonus.
It’s time to flip the table. Take the wheel. Get in the game.
At Better Source Benefits, we do this all day, every day. We help companies find where the money’s hiding, pull back the curtain, and take control of their plan like it’s an actual line item—because it is.
IBNR isn’t just a weird acronym—it’s a wake-up call. And now, you can’t unsee it.
Let’s talk.
And listen – if you love overpaying for insurance, if you enjoy watching your profits disappear, then ignore everything I just said.
But if you want to win, then it’s time to stop playing THEIR game.
Escape the system, or just continue feeding it… Your gateway is here >>