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Medical Claims Liability | 12 Months Ended
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Dec. 31, 2018
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):
|  | Year Ended December 31,
|  | 2018 |  | 2017 |  | 2016
Balance, January 1 |  | $ | 4,286 |  |  | $ | 3,929 |  |  | $ | 2,298 |
Less: reinsurance recoverable |  | 18 |  |  | 5 |  |  | — |
Balance, January 1, net |  | 4,268 |  |  | 3,924 |  |  | 2,298 |
Acquisitions |  | 1,204 |  |  | — |  |  | 1,482 |
Less: acquired reinsurance recoverable |  | 8 |  |  | — |  |  | — |
Incurred related to: |  |  |  |  |  |
Current year |  | 46,484 |  |  | 38,225 |  |  | 30,946 |
Prior years |  | (427 | ) |  | (374 | ) |  | (310 | )
Total incurred |  | 46,057 |  |  | 37,851 |  |  | 30,636 |
Paid related to: |  |  |  |  |  |
Current year |  | 41,161 |  |  | 34,196 |  |  | 28,532 |
Prior years |  | 3,556 |  |  | 3,311 |  |  | 1,960 |
Total paid |  | 44,717 |  |  | 37,507 |  |  | 30,492 |
Balance at December 31, net |  | 6,804 |  |  | 4,268 |  |  | 3,924 |
Plus: reinsurance recoverable |  | 27 |  |  | 18 |  |  | 5 |
Balance, December 31 |  | $ | 6,831 |  |  | $ | 4,286 |  |  | $ | 3,929 |
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 $25 million, $1 million, and $39 million of the “Incurred related to: Prior years” was recorded as a reduction to premium revenues in 2018, 2017, and 2016, 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 medical management initiatives may also contribute to changes in medical claim liability estimates. While the Company has evidence that medical management initiatives are effective on a case by case basis, medical 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 medical management initiative are not known by the Company. Additionally, certain medical 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 medical 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, 2018 is included in the table below and is inclusive of claims incurred and paid related to the Health Net and Fidelis Care businesses prior and subsequent to their respective acquisition dates. 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, 2018 is as follows ($ in millions):
Cumulative Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,
Claim Year |  | 2016 (unaudited) |  | 2017 (unaudited) |  | 2018
2016 |  | $ | 42,512 |  |  | $ | 41,947 |  |  | $ | 41,890 |
2017 |  |  |  | 47,310 |  |  | 46,738 |
2018 |  |  |  |  |  | 51,309 |
|  | Total incurred claims |  |  | $ | 139,937 |
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
For the Years Ended December 31,
Claim Year |  | 2016 (unaudited) |  | 2017 (unaudited) |  | 2018
2016 |  | $ | 37,876 |  |  | $ | 41,679 |  |  | $ | 41,803 |
2017 |  |  |  | 41,972 |  |  | 46,512 |
2018 |  |  |  |  |  | 44,818 |
|  | Total payment of incurred claims |  |  | $ | 133,133 |
|  | Medical claims liability, net of reinsurance |  |  | $ | 6,804 |
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, 2018 are included in the following table and are inclusive of the acquired Health Net and Fidelis Care businesses. 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. 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. Information is summarized as follows (in millions):
| December 31, 2018
| Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance |  | Total IBNR Plus Expected Development on Reported Claims |  | Cumulative Paid Claims
2016 | $ | 41,890 |  |  | $ | 3 |  |  | 228.8 |
2017 | 46,738 |  |  | 60 |  |  | 256.7 |
2018 | 51,309 |  |  | 5,092 |  |  | 266.8 |

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- Definition The entire disclosure for the types of coverages and products sold, and the assets, obligations, recorded liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -URI http://asc.fasb.org/topic&trid=2303980 + Details
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