Quarterly report pursuant to Section 13 or 15(d)

Medical Claims Liability

v3.20.2
Medical Claims Liability
6 Months Ended
Jun. 30, 2020
Insurance [Abstract]  
Medical Claims Liability Medical Claims Liability

The following table summarizes the change in medical claims liability ($ in millions):
 
 
Six Months Ended June 30,
 
 
2020
 
2019
Balance, January 1
 
$
7,473

 
$
6,831

Less: Reinsurance recoverable
 
20

 
27

Balance, January 1, net
 
7,453

 
6,804

Acquisitions and divestitures
 
3,746

 
61

Incurred related to:
 
 
 
 
          Current year
 
41,149

 
28,791

          Prior years
 
(422
)
 
(555
)
         Total incurred
 
40,727

 
28,236

Paid related to:
 
 
 
 
          Current year
 
34,783

 
22,384

          Prior years
 
5,742

 
5,289

         Total paid
 
40,525

 
27,673

Balance at June 30, net
 
11,401

 
7,428

Plus: Reinsurance recoverable
 
17

 
19

Balance, June 30
 
$
11,418

 
$
7,447



Reinsurance recoverables related to medical claims are included in premium and trade receivables. Changes in estimates of incurred claims for prior years are primarily attributable to reserving under moderately adverse conditions. Additionally, as a result of minimum health benefits ratio (HBR) and other return of premium programs, the Company recorded $46 million and $20 million as a reduction to premium revenue in the six months ended June 30, 2020 and 2019, respectively.

Incurred but not reported (IBNR) plus expected development on reported claims as of June 30, 2020 was $7,691 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. The Company estimates its 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.