Annual report pursuant to Section 13 and 15(d)

Medical Claims Liability

v3.19.3.a.u2
Medical Claims Liability
12 Months Ended
Dec. 31, 2019
Insurance [Abstract]  
Medical Claims Liability Medical Claims Liability

The Specialty Services segment 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):
 
 
Year Ended December 31,
 
 
2019
 
2018
 
2017
Balance, January 1
 
$
6,831

 
$
4,286

 
$
3,929

Less: reinsurance recoverable
 
27

 
18

 
5

Balance, January 1, net
 
6,804

 
4,268

 
3,924

Acquisitions and purchase accounting adjustments
 
59

 
1,204

 

Less: acquired reinsurance recoverable
 

 
8

 

Incurred related to:
 
 
 
 
 
 
          Current year
 
59,539

 
46,484

 
38,225

          Prior years
 
(677
)
 
(427
)
 
(374
)
         Total incurred
 
58,862

 
46,057

 
37,851

Paid related to:
 
 
 
 
 
 
          Current year
 
52,453

 
41,161

 
34,196

          Prior years
 
5,819

 
3,556

 
3,311

         Total paid
 
58,272

 
44,717

 
37,507

Balance at December 31, net
 
7,453

 
6,804

 
4,268

Plus: reinsurance recoverable
 
20

 
27

 
18

Balance, December 31
 
$
7,473

 
$
6,831

 
$
4,286


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 HBR and other return of premium programs, approximately $49 million, $25 million, and $1 million of the "Incurred related to: Prior years" was recorded as a reduction to premium revenues in 2019, 2018, and 2017, respectively. Further, claims processing initiatives yielded increased claim payment recoveries and coordination of benefits related to prior year dates of service. Changes in medical utilization and cost trends and the effect of population health management initiatives may also contribute to changes in medical claim liability estimates. While the Company has evidence that population health management initiatives are effective on a case by case basis, population health management initiatives primarily focus on events and behaviors prior to the incurrence of the medical event and generation of a claim. Accordingly, any change in behavior, leveling of care, or coordination of treatment occurs prior to claim generation and as a result, the costs prior to the population health management initiative are not known by the Company. Additionally, certain population health management initiatives are focused on member and provider education with the intent of influencing behavior to appropriately align the medical services provided with the member's acuity. In these cases, determining whether the population health management initiative changed the behavior cannot be determined. Because of the complexity of its business, the number of states in which it operates, and the volume of claims that it processes, the Company is unable to practically quantify the impact of these initiatives on its changes in estimates of IBNR.

The Company periodically reviews actual and anticipated experience compared to the assumptions used to establish medical costs. The Company establishes premium deficiency reserves if actual and anticipated experience indicates that existing policy liabilities together with the present value of future gross premiums will not be sufficient to cover the present value of future benefits, settlement and maintenance costs.

Information about incurred and paid claims development as of December 31, 2019 is included in the table below and is inclusive of claims incurred and paid related to the Fidelis Care businesses prior and subsequent to the acquisition date. The claims development information for all periods preceding the most recent reporting period is considered required supplementary information. Incurred and paid claims development as of December 31, 2019 is as follows ($ in millions):
Cumulative Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,
Claim Year
 
2017 (unaudited)
 
2018 (unaudited)
 
2019
 
 
 
 
 
 
 
2017
 
$
47,574

 
$
46,994

 
$
46,950

2018
 
 
 
51,572

 
50,944

2019
 
 
 
 
 
59,627

 
 
Total incurred claims
 
 
$
157,521

 
 
 
 
 
 
 
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,
Claim Year
 
2017 (unaudited)
 
2018 (unaudited)
 
2019
 
 
 
 
 
 
 
2017
 
$
42,205

 
$
46,767

 
$
46,904

2018
 
 
 
45,039

 
50,682

2019
 
 
 
 
 
52,482

 
 
Total payment of incurred claims
 
 
$
150,068

 
 
Medical claims liability, net of reinsurance
 
 
$
7,453

 
 
 
 
 
 
 

    
Incurred claims and allocated claim adjustment expenses, net of reinsurance, total IBNR plus expected development on reported claims and cumulative claims data as of December 31, 2019 are included in the following table and are inclusive of the acquired Fidelis Care business. For claims frequency information summarized below, a claim is defined as the financial settlement of a single medical event in which remuneration was paid to the servicing provider. 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. Information is summarized as follows (in millions):
 
December 31, 2019
 
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
 
Total IBNR Plus Expected Development on Reported Claims
 
Cumulative Paid Claims
 
 
 
 
 
 
 
 
 
2017
$
46,950

 
$

 
260.2

2018
50,944

 
88

 
281.7

2019
59,627

 
5,347

 
290.2