Humana 2002 Annual Report Download - page 72

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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
5. MEDICAL AND OTHER EXPENSES PAYABLE
Activity in medical and other expenses payable is summarized as follows:
For the year ended December 31,
2002 2001 2000
(in thousands)
Balances at January 1 .............................. $1,086,386 $ 1,181,027 $ 1,432,226
Acquisitions and divestitures, net ..................... — 85,052 5,213
Incurred related to:
Current year .................................. 9,125,915 8,303,256 8,790,478
Prior years ................................... 12,281 (23,412) (8,480)
Total incurred .................................... 9,138,196 8,279,844 8,781,998
Paid related to:
Current year .................................. (8,002,610) (7,291,541) (7,634,338)
Prior years ................................... (1,079,841) (1,167,996) (1,404,072)
Totalpaid........................................ (9,082,451) (8,459,537) (9,038,410)
Balances at December 31 ........................... $1,142,131 $ 1,086,386 $ 1,181,027
Amounts incurred related to prior years vary from previously estimated liabilities as the claims are
ultimately settled. Changes in estimates of incurred claims for prior years during 2002 of $12.3 million included
a $25.7 million increase in TRICARE medical expense estimates. These higher medical expenses generally
resulted in an equitable adjustment to the TRICARE contract via change orders and the bid price adjustment
process resulting in the recognition of higher premium revenue during 2002. Negative amounts reported for
incurred related to prior years in 2001 and 2000 resulted from claims being settled for amounts less than
originally estimated.
6. INCOME TAXES
The provision for income taxes consisted of the following:
For the year ended December 31,
2002 2001 2000
(in thousands)
Current provision (benefit):
Federal ....................................................... $(5,157) $ 527 $ 2,715
States and Puerto Rico ........................................... 22,775 9,278 1,936
Total current provision ....................................... 17,618 9,805 4,651
Deferred provision:
Federal ....................................................... 44,605 50,494 17,358
States and Puerto Rico ........................................... 4,956 5,610 1,929
Total deferred provision ...................................... 49,561 56,104 19,287
Provision for income taxes .................................... $67,179 $65,909 $23,938
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