New Jersey Administrative Code › Title 8 - HEALTH › Chapter 31B - HOSPITAL FINANCIAL REPORTING › Subchapter 4 - FINANCIAL ELEMENTS AND REPORTING › Part I - REPORTING PRINCIPLES AND CONCEPTS › Section 8:31B-4.24 - Self insurance

Current through Register Vol. 56, No. 14, July 15, 2024
(a) Self insurance by a
				  hospital for potential losses due to unemployment, and workmen's compensation claims
				  but excluding self insurance for employee health care to be provided by the hospital
				  asserted or otherwise, places all or part of the risk of such losses on the hospital
				  rather than passing all or part of such losses to a third party. Where this method
				  of insuring is used by the hospital, the payments into the fund or pool (if one is
				  maintained) or payments on actual losses incurred are to be considered as insurance
				  expense.
(b) It is required that where
				  self insurance for other than those items listed above is elected to be used by a
				  facility, the method should conform with the following:
1. Self-Insurance Fund: The hospital or pool
				  establishes a fund with a recognized independent fiduciary such as a bank or a trust
				  company. The hospital or pool and fiduciary enter into a written agreement which
				  includes all of the following elements:
i. General
				  Legal Responsibility: The fiduciary agreement must include the appropriate legal
				  responsibilities and obligations required by State laws.
ii. Control of Fund: The fiduciary must have legal
				  title to the fund and be responsible for proper administration and control. The
				  fiduciary cannot be related to the provider either through ownership or control.
				  Thus, the home office of a chain organization or a religious order of which the
				  hospital is an affiliate cannot be the fiduciary. In addition, investments which may
				  be made by the fiduciary from the fund are limited to those approved under State law
				  governing the use of such fund; notwithstanding this, loans by the fiduciary from
				  the fund to the hospital or persons related to the hospital are not
				  permitted.
iii. Payments by Fiduciary:
				  The agreement must provide that withdrawals must be for malpractice and
				  comprehensive general patient liability losses only and those expenses listed in
				  (b)4 below. Any rebates, dividends, etc., to the hospital from the fund will be used
				  to reduce allowable cost.
iv. Reporting:
				  The agreement must require that a financial statement be forwarded to the hospital
				  or pool members by the fiduciary no later than 60 days after the end of each annual
				  insurance reporting period. This statement must show the balance in the fund at the
				  beginning of the period, current period contributions, and amount and nature of
				  final payments, including a separate accounting for claims management, legal
				  expenses, claims paid, etc., and the fund balance. This report and fiduciary's
				  records must be available for review and audit.
v. Income Earned: The agreement must provide that
				  any income earned by the fund less any income taxes attributable to such income,
				  must become part of the Fund and must be used in establishing adequate fund
				  levels.