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Medical Claims and Benefits Payable | 3 Months Ended
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Mar. 31, 2018
Other Liabilities Disclosure [Abstract] |
Medical Claims and Benefits Payable | Medical Claims and Benefits Payable The following table provides the details of our medical claims and benefits payable (including amounts payable for the provision of long-term services and supports, or LTSS) as of the dates indicated:
| March 31, 2018 |  | December 31, 2017
| (In millions)
Fee-for-service claims incurred but not paid (IBNP) | $ | 1,586 |  |  | $ | 1,717 |
Pharmacy payable | 127 |  |  | 112 |
Capitation payable | 62 |  |  | 67 |
Other | 248 |  |  | 296 |
| $ | 2,023 |  |  | $ | 2,192 |
“Other” medical claims and benefits payable includes amounts payable to certain providers for which we act as an intermediary on behalf of various government agencies without assuming financial risk. Such receipts and payments do not impact our consolidated statements of income. Non-risk provider payables amounted to $146 million and $122 million as of March 31, 2018 and December 31, 2017, respectively. The following table presents the components of the change in our medical claims and benefits payable for the periods indicated. The amounts presented for “Components of medical care costs related to: Prior periods” represent the amounts by which our original estimate of medical claims and benefits payable at the beginning of the period were more than the actual amount of the liability based on information (principally the payment of claims) developed since that liability was first reported.
| Three Months Ended March 31,
| 2018 |  | 2017
| (Dollars in millions)
Medical claims and benefits payable, beginning balance | $ | 2,192 |  |  | $ | 1,929 |
Components of medical care costs related to: |  |  |
Current period | 3,963 |  |  | 4,253 |
Prior periods | (241 | ) |  | (142 | )
Total medical care costs | 3,722 |  |  | 4,111 |
Change in non-risk provider payables | 45 |  |  | (96 | )
Payments for medical care costs related to: |  |  |
Current period | 2,498 |  |  | 2,683 |
Prior periods | 1,438 |  |  | 1,335 |
Total paid | 3,936 |  |  | 4,018 |
Medical claims and benefits payable, ending balance | $ | 2,023 |  |  | $ | 1,926 |
Benefit from prior period as a percentage of: |  |  |
Balance at beginning of period | 11.0 | % |  | 7.4 | %
Premium revenue, trailing twelve months | 1.3 | % |  | 0.8 | %
Medical care costs, trailing twelve months | 1.4 | % |  | 0.9 | %
Assuming that our initial estimate of IBNP is accurate, we believe that amounts ultimately paid would generally be between 8% and 10% less than the IBNP liability recorded at the end of the period as a result of the inclusion in that liability of the provision for adverse claims deviation and the accrued cost of settling those claims. Because we establish the provision for adverse claims deviation and the accrued cost of settling claims on a consistent basis every quarter, the lower cost recognized in a subsequent period if such a provision proved unnecessary would be offset by the establishment of a similar provision during that subsequent period. Because the amount of our initial liability is an estimate (and therefore not perfectly accurate), we will always experience variability in that estimate as new information becomes available with the passage of time. Therefore, there can be no assurance that amounts ultimately paid out will fall within the range of 8% to 10% lower than the liability that was initially recorded. Furthermore, because our initial estimate of IBNP is derived from many factors, some of which are qualitative in nature rather than quantitative, we are seldom able to assign specific values to the reasons for a change in estimate—we only know when the circumstances for any one or more factors are out of the ordinary. The differences between our original estimates and the amounts ultimately paid out for the most part relate to IBNP. While many related factors working in conjunction with one another serve to determine the accuracy of our estimates, we are seldom able to quantify the impact that any single factor has on a change in estimate. In addition, given the variability inherent in the reserving process, we will only be able to identify specific factors if they represent a significant departure from expectations. As a result, we do not expect to be able to fully quantify the impact of individual factors on changes in estimates. We believe that the most significant uncertainties surrounding our IBNP estimates at March 31, 2018 are as follows:
• | Across all of our health plans, the inventory of unpaid claims increased significantly during the first half of 2017, then decreased in the last half of 2017 and into 2018. Changes in claims inventories impact the timing between date of service and the date of claim payment, increasing the volatility of our liability estimates.
• | According to The Centers for Disease Control and Prevention, and confirmed by our own claims experience, the influenza season was much more severe this year than last year in several states in which we operate health plans. Although we have established liabilities for additional expected claims related to influenza, our liability estimates are subject to more than the usual amount of uncertainty.
• | At our Florida health plan a new clinical service system was implemented in the first quarter of 2018. This system impacted the reporting of inpatient authorizations used in our development of claims liabilities, which makes our liability estimates subject to more than the usual amount of uncertainty.
• | We recently implemented a new process for increased quality review of claims payments in nine of our health plans. While we do not anticipate this new process will impact the percentage of claims paid within the timely turnaround requirements, we believe it will have a minor impact on the timing of some paid claims. For this reason, our liability estimates in the nine health plans are subject to more than the usual amount of uncertainty.
We recognized favorable prior period claims development in the amount of $241 million for the three months ended March 31, 2018. This amount represents our estimate as of March 31, 2018, of the extent to which our initial estimate of medical claims and benefits payable at December 31, 2017, was more than the amount that will ultimately be paid out in satisfaction of that liability. We believe the overestimation was due primarily to the following factors:
• | The impact of the provision for adverse claims deviation and the accrued cost of settling claims as discussed above. Because we re-establish the provision for adverse claims deviation and the accrued cost of settling claims on a consistent basis every quarter, the impact of this item on first quarter 2018 results was minimal.
• | Across all of our health plans, the inventory of unpaid claims increased significantly during the first half of 2017, then decreased in the last half of 2017. In hindsight, the impact of the changes in claims processing timing reduced our liabilities more than we had anticipated.
• | December 2017 data from The Centers for Disease Control and Prevention indicated widespread influenza activity in several states in which we operate health plans. The additional liabilities established in consideration of increased claims related to a more severe influenza season turned out to be conservative.
• | In establishing our liability at December 31, 2017, we anticipated an increase in the utilization of medical services by Marketplace members concerned about the future of their healthcare coverage as a result of uncertainties related to high premium increases and issuer exits. This induced demand did not materialize to the degree we expected.

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