Self-funded health & welfare rate setting can be established based on a short or long view.
A short view is based on reported loss under the assumption the plan will never be terminated and will live on to eternity.
A long view is based on more than just reported loss. Unreported loss is calculated as a risk to be assumed when a plan is terminated.
Short view rate setting can be based on a de facto long view if reserves exceed 4 months of claims. Basing rates without recognizing and accounting for adequate booked and earned reserves (as opposed to unearned reserves) holds the plan sponsor hostage to adverse events.
