Humana 2012 Annual Report Download - page 84
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The completion and claims per member per month trend factors are the most significant factors impacting
the IBNR estimate. The portion of IBNR estimated using completion factors for claims incurred prior to the most
recent three months is generally less variable than the portion of IBNR estimated using trend factors. The
following table illustrates the sensitivity of these factors assuming moderate adverse experience and the
estimated potential impact on our operating results caused by reasonably likely changes in these factors based on
December 31, 2012 data:
Completion Factor (a): Claims Trend Factor (b):
Factor
Change (c)
Decrease in
Benefits Payable
Factor
Change (c)
Decrease in
Benefits Payable
(dollars in millions)
1.60% $(309) (4.75%) $(321)
1.20% $(232) (4.25%) $(288)
0.80% $(155) (3.50%) $(237)
0.60% $(116) (3.00%) $(203)
0.40% $ (77) (2.50%) $(169)
0.20% $ (39) (2.00%) $(135)
0.10% $ (19) (1.50%) $(101)
(a) Reflects estimated potential changes in benefits payable at December 31, 2012 caused by changes in
completion factors for incurred months prior to the most recent three months.
(b) Reflects estimated potential changes in benefits payable at December 31, 2012 caused by changes in
annualized claims trend used for the estimation of per member per month incurred claims for the most
recent three months.
(c) The factor change indicated represents the percentage point change.
The following table provides a historical perspective regarding the accrual and payment of our benefits
payable, excluding military services. Components of the total incurred claims for each year include amounts
accrued for current year estimated benefits expense as well as adjustments to prior year estimated accruals.
2012 2011 2010
(in millions)
Balances at January 1 .............................................. $ 3,415 $ 3,214 $ 2,943
Acquisitions ..................................................... 66 29 0
Incurred related to:
Current year ................................................. 30,198 25,834 24,226
Prior years .................................................. (257) (372) (434)
Total incurred ............................................ 29,941 25,462 23,792
Paid related to:
Current year ................................................. (26,738) (22,742) (21,309)
Prior years .................................................. (2,909) (2,548) (2,212)
Total paid ............................................... (29,647) (25,290) (23,521)
Balances at December 31 ........................................... $ 3,775 $ 3,415 $ 3,214
74