Quarterly report pursuant to Section 13 or 15(d)

Medical Claims Liability

v3.7.0.1
Medical Claims Liability
6 Months Ended
Jun. 30, 2017
Insurance [Abstract]  
Medical Claims Liability
Medical Claims Liability

In January 2017, the Company reclassified Cenpatico Behavioral Health of Arizona, LLC and the related Cenpatico Integrated Care health plan from the Specialty Services segment to the Managed Care segment due to a reorganization of the Arizona management structure following the Health Net integration. As a result, the financial results of Cenpatico Behavioral Health of Arizona, LLC and the related Cenpatico Integrated Care health plan have been reclassified from the Specialty Services segment to the Managed Care segment for all periods presented. Due to this change in segment reporting, the Specialty Services segment now has an insignificant amount of medical claims liability and therefore disclosures related to medical claims liabilities have been aggregated and are presented on a consolidated basis.

The following table summarizes the change in medical claims liability ($ in millions):

 
 
Six Months Ended June 30,
 
 
2017
 
2016
Balance, January 1
 
$
3,929

 
$
2,298

Less: Reinsurance Recoverable
 
5

 

Balance, January 1, net
 
3,924

 
2,298

Acquisitions
 

 
1,462

Incurred related to:
 
 
 
 
          Current year
 
19,087

 
13,940

          Prior years
 
(352
)
 
(244
)
         Total incurred
 
18,735

 
13,696

Paid related to:
 
 
 
 
          Current year
 
15,477

 
11,626

          Prior years
 
3,022

 
1,880

         Total paid
 
18,499

 
13,506

Balance at June 30, net
 
4,160

 
3,950

Plus: Reinsurance Recoverable
 
10

 

Balance, June 30
 
$
4,170

 
$
3,950



Reinsurance recoverables related to medical claims are included in premium and related receivables. Changes in estimates of incurred claims for prior years are primarily attributable to reserving under moderately adverse conditions. Additionally, in the six months ended June 30, 2017 and 2016, respectively, approximately $4 million and $16 million was recorded as a reduction from premium revenues resulting from development within "Incurred related to: Prior years" due to minimum HBR and other return of premium programs.

Incurred but not reported (IBNR) plus expected development on reported claims as of June 30, 2017 was $3,124 million. Total IBNR plus expected development on reported claims represents estimates for claims incurred but not reported, development on reported claims, and estimates for the costs necessary to process unpaid claims at the end of each period. We estimate our liability using actuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice. These actuarial methods consider factors such as historical data for payment patterns, cost trends, product mix, seasonality, utilization of healthcare services and other relevant factors.