Reserves for Claims and Other Settlements

Reserves for claims and other settlements include reserves for claims (IBNR claims and received but unprocessed claims), and other liabilities including capitation payable, shared risk settlements, provider disputes, provider incentives and other reserves for our health plan services. The table below provides a reconciliation of changes in reserve for claims for the years ended December 31, 2015, 2014 and 2013.



	For the Year Ended December 31,
	2015			2014			2013
	(Dollars in millions)
Reserve for claims (a), beginning of period	$	1,186.3		$	807.4		$	808.7
Incurred claims related to:
Current year (f)	6,425.8			5,613.0			4,666.0
Prior years (c)	(107.4		)	(14.6		)	(56.2		)
Total incurred (b)	6,318.4			5,598.4			4,609.8
Paid claims related to:
Current year	5,321.0			4,443.2			3,872.5
Prior years	1,058.5			776.3			738.6
Total paid (b)	6,379.5			5,219.5			4,611.1
Reserve for claims (a), end of period	1,125.2			1,186.3			807.4
Add:
Claims and claims-related payable (d)	107.8			175.4			67.0
Other (e)	260.4			534.3			109.7
Reserves for claims and other settlements, end of period	$	1,493.4		$	1,896.0		$	984.1

__________


(a)	Consists of IBNR claims and received but unprocessed claims and reserves for loss adjustment expenses.


(b)	Includes medical claims only. Capitation, pharmacy and other payments (including, for example, provider settlements) are not included.

(c)

This line represents the change in reserves attributable to the difference between the original estimate of incurred claims for prior years and the revised estimate. Negative amounts in this line represent favorable development in estimated prior years’ health care costs. Positive amounts in this line represent unfavorable development in estimated prior years’ health care costs. For the year ended December 31, 2015, we had $107.4 million in favorable reserve developments related to prior years. This reserve development for the year ended December 31, 2015 consisted of $29.7 million in favorable prior year development and a release of $77.7 million of the provision for adverse deviation held at December 31, 2014. We believe that the $29.7 million favorable development for the year ended December 31, 2015 was primarily due to the growth of the new Medicaid expansion population in 2014. For the year ended December 31, 2014, we had $14.6 million in net favorable reserve developments related to prior years. This reserve development for the year ended December 31, 2014 consisted of $36.6 million in unfavorable prior year development primarily due to the existence of moderately adverse conditions and a release of $51.2 million of the provision for adverse deviation held at December 31, 2013. We believe that the $36.6 million unfavorable development for the year ended December 31, 2014 was primarily due to unanticipated benefit utilization in our commercial business arising from dates of service in the fourth quarter of 2013 as a result of an uncertain environment related to the ACA. The favorable development related to prior years that was recorded in the year ended December 31, 2013 resulted from claims being settled for amounts less than originally estimated. In 2013, this was primarily due to the absence of moderately adverse conditions. The favorable developments related to prior years do not directly correspond to an increase in our operating results because any favorable prior period reserve development increases current period net income only to the extent that the current period provision for adverse deviation (see footnote (f)) is less than the benefit recognized from the prior period favorable development. See Note 2 under the heading "Health Plan Services Health Care Cost" for more information.


(d)	Includes claims payable, provider dispute reserve, and other claims-related liabilities.


(e)	Includes accrued capitation, shared risk settlements, provider incentives and other reserve items.

(f) Our IBNR estimate also includes a provision for adverse deviation, which is an estimate for known environmental factors that are reasonably likely to affect the required level of IBNR reserves. Such amounts were $74.3 million, $77.7 million and $53.4 million as of December 31, 2015, 2014 and 2013, respectively; the increase in the provision for adverse deviation from December 31, 2013 to December 31, 2014 was primarily driven by growth in our new products offered or programs administered under the ACA.

The following table shows the Company’s health plan services expenses for the years ended December 31:



	Health Plan Services
	2015		2014		2013
	(Dollars in millions)
Total incurred fee for service claims	$	6,318.4	$	5,598.4	$	4,609.8
Capitated expenses and shared risk	4,466.2		4,256.8		3,108.0
Pharmacy and other	2,256.4		1,452.6		1,168.7
Health plan services	$	13,041.0	$	11,307.8	$	8,886.5

For the years ended December 31, 2015, 2014 and 2013, the Company’s capitated, shared risk, pharmacy and other expenses represented 52%, 50% and 48%, respectively, of the Company’s total health plan services.