Quarterly report pursuant to Section 13 or 15(d)

Medical Claims Liability

v3.20.1
Medical Claims Liability
3 Months Ended
Mar. 31, 2020
Insurance [Abstract]  
Medical Claims Liability Medical Claims Liability

The following table summarizes the change in medical claims liability ($ in millions):
 
 
Three Months Ended March 31,
 
 
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
 
3,697

 
6

Incurred related to:
 


 
 
          Current year
 
20,866

 
14,376

          Prior years
 
(446
)
 
(494
)
         Total incurred
 
20,420

 
13,882

Paid related to:
 
 
 
 
          Current year
 
15,147

 
8,771

          Prior years
 
5,031

 
4,560

         Total paid
 
20,178

 
13,331

Balance at March 31, net
 
11,392

 
7,361

Plus: Reinsurance recoverable
 
21

 
20

Balance, March 31
 
$
11,413

 
$
7,381



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, we recorded $31 million as a reduction to premium revenue and $8 million as an increase to premium revenues in the three months ended March 31, 2020 and 2019, respectively.

Incurred but not reported (IBNR) plus expected development on reported claims as of March 31, 2020 was $7,527 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.