Medical Claims and Benefits Payable

The following table provides the details of our medical claims and benefits payable as of the dates indicated.



	December 31,
	2018		2017		2016
	(In millions)
Fee-for-service claims incurred but not paid (“IBNP”)	$	1,562	$	1,717	$	1,352
Pharmacy payable	115		112		112
Capitation payable	52		67		37
Other	232		296		428
	$	1,961	$	2,192	$	1,929

“Other” medical claims and benefits payable include 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 operations. Non-risk provider payables amounted to $107 million, $122 million and $225 million, as of December 31, 2018, 2017, and 2016, 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 amount by which our original estimate of medical claims and benefits payable at the beginning of the period were (more) less than the actual amount of the liability based on information (principally the payment of claims) developed since that liability was first reported.



	Year Ended December 31,
	2018			2017			2016
	(In millions)
Medical claims and benefits payable, beginning balance	$	2,192		$	1,929		$	1,685
Components of medical care costs related to:
Current period	15,478			17,037			14,966
Prior periods ⁽¹⁾	(341		)	36			(192		)
Total medical care costs	15,137			17,073			14,774

Change in non-risk provider payables	13			(106		)	58

Payments for medical care costs related to:
Current period	13,671			15,130			13,304
Prior periods	1,710			1,574			1,284
Total paid	15,381			16,704			14,588
Medical claims and benefits payable, ending balance	$	1,961		$	2,192		$	1,929

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(1)	Includes the 2018 benefit of the 2017 Marketplace CSR reimbursement of $81 million.

The following tables provide information about incurred and paid claims development as of December 31, 2018, as well as cumulative claims frequency and the total of incurred but not paid claims liabilities. The cumulative claim frequency is measured by claim event, and includes claims covered under capitated arrangements.



Incurred Claims and Allocated Claims Adjustment Expenses							Total IBNP		Cumulative number of reported claims
Benefit Year	2016		2017		2018		Total IBNP		Cumulative number of reported claims

	(Unaudited)		(Unaudited)
	(In millions)
2016	$	15,064	$	15,093	$	15,057	$	18	105
2017			17,037		16,728		57		119
2018					15,478		1,477		105
					$	47,263	$	1,552



Cumulative Paid Claims and Allocated Claims Adjustment Expenses
Benefit Year	2016		2017		2018

	(Unaudited)		(Unaudited)
	(In millions)
2016	$	13,403	$	14,952	$	15,039
2017			15,130		16,752
2018					13,671
					$	45,462

The following table represents a reconciliation of claims development to the aggregate carrying amount of the liability for medical claims and benefits payable.



	2018
	(In millions)
Incurred claims and allocated claims adjustment expenses	$	47,263
Less: cumulative paid clams and allocated claims adjustment expenses	(45,462		)
All outstanding liabilities before 2016	10
Non-risk provider payables and other	150
Medical claims and benefits payable	$	1,961

Our estimates of medical claims and benefits payable recorded at December 31, 2017, 2016 and 2015 developed favorably (unfavorably) by approximately $341 million, $(36) million and $192 million in 2018, 2017 and 2016, respectively.

The favorable prior year development recognized in 2018 includes a benefit of approximately $81 million in reduced medical care costs relating to Marketplace CSR subsidies for 2017 dates of service. The remainder of the favorable prior period development was primarily due to lower than expected utilization of medical services by our Medicaid and Marketplace members and improved operating performance. The differences between our original estimates in 2017 and the ultimate costs in 2018 were not discernable until additional information was provided to us in 2018 and the effect became clearer over time as claim payments were processed.

The unfavorable prior year development in 2017 was primarily due to higher than expected costs for settling certain claims with certain providers in states where we had recently commenced operations, such as in Illinois and Puerto Rico, or had instituted significant changes due to provider contract changes, such as in Florida and New Mexico. The differences between our original estimates in 2016 and the ultimate costs in 2017 were not discernable until additional information was provided to us in 2017 and the effect became clearer over time as claim payments were processed.

The favorable prior year development we recognized in 2016 was primarily due to reprocessing a significant number of claims in 2016 for provider submission of claims that were not compliant with new diagnostic coding requirements instituted in late 2015; several high-dollar claims at our New Mexico health plan that were settled for amounts lower than we initially estimated; recoveries on certain outpatient facility claims at our Washington health plan; and lower than expected claims costs for Medicaid Expansion members that were new to our California health plan in 2015. The differences between our original estimates in 2015 and the ultimate costs in 2016 were not discernable until additional information was provided to us in 2016 and the effect became clearer over time as claim payments were processed.