Quarterly report pursuant to Section 13 or 15(d)

Medical Claims Liability

v3.8.0.1
Medical Claims Liability
9 Months Ended
Sep. 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):

 
 
Nine Months Ended September 30,
 
 
2017
 
2016
Balance, January 1
 
$
3,929

 
$
2,298

Less: Reinsurance Recoverable
 
5

 

Balance, January 1, net
 
3,924

 
2,298

Acquisitions
 

 
1,453

Incurred related to:
 
 
 
 
          Current year
 
28,666

 
22,372

          Prior years
 
(388
)
 
(300
)
         Total incurred
 
28,278

 
22,072

Paid related to:
 
 
 
 
          Current year
 
24,787

 
20,121

          Prior years
 
3,099

 
1,935

         Total paid
 
27,886

 
22,056

Balance at September 30, net
 
4,316

 
3,767

Plus: Reinsurance Recoverable
 
17

 

Balance, September 30
 
$
4,333

 
$
3,767



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, as a result of development within "Incurred related to: Prior years" due to minimum HBR and other return of premium programs, we recorded approximately $4 million as an increase to premium revenues in the nine months ended September 30, 2017 and approximately $27 million as a reduction to premium revenues in the nine months ended September 30, 2016.

Incurred but not reported (IBNR) plus expected development on reported claims as of September 30, 2017 was $3,292 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.