Humana 2013 Annual Report Download - page 80

The detail of benefits payable was as follows at December 31, 2013, 2012 and 2011:
Change
2013 2012 2011 2013 2012 2011
(in millions)
IBNR (1) .......................................... $2,586 $2,552 $2,056 $ 34 $ 496 $ 5
Reported claims in process (2) ......................... 381 315 376 66 (61) 239
Military services benefits payable (3) .................... 0 4 339 (4) (335) 84
Other benefits payable (4) ............................. 926 908 983 18 (75) (43)
Total benefits payable ................................ $3,893 $3,779 $3,754 114 25 285
Payables from acquisition ............................. (5) (66) (29)
Change in benefits payable per cash flow statement resulting
in cash from operations ............................. $109 $ (41) $256
(1) IBNR represents an estimate of benefits payable for claims incurred but not reported (IBNR) at the balance
sheet date. The level of IBNR is primarily impacted by membership levels, medical claim trends and the
receipt cycle time, which represents the length of time between when a claim is initially incurred and when
the claim form is received (i.e. a shorter time span results in a lower IBNR).
(2) Reported claims in process represents the estimated valuation of processed claims that are in the post claim
adjudication process, which consists of administrative functions such as audit and check batching and
handling, as well as amounts owed to our pharmacy benefit administrator which fluctuate due to bi-weekly
payments and the month-end cutoff.
(3) Military services benefits payable primarily represents the run-out of the claims liability associated with our
previous TRICARE South Region contract that expired on March 31, 2012. A corresponding receivable for
reimbursement by the federal government is included in the military services receivable in the previous
receivables table.
(4) Other benefits payable include amounts owed to providers under capitated and risk sharing arrangements.
The increase in benefits payable in 2013 primarily was due to an increase in the amount of processed but
unpaid claims due to our pharmacy benefit administrator, which fluctuate due to month-end cutoff, and an
increase in IBNR, primarily as a result of Medicare Advantage membership growth. The increase in benefits
payable in 2012 primarily was due to an increase in IBNR, primarily as a result of Medicare Advantage
membership growth, partially offset by a $335 million decrease in the military services benefits payable due to
the run-out of claims under the previous TRICARE South Region contract that expired on March 31, 2012, a
decrease in amounts owed to providers under capitated and risk sharing arrangements, and a decrease in the
amounts due to our pharmacy benefit administrator which fluctuate due to month-end cutoff. Under the current
TRICARE South Region contract effective April 1, 2012, the federal government retains the risk of the cost of
health benefits and related benefit obligation as further described in Note 2 to the consolidated financial
statements included in Item 8. – Financial Statements and Supplementary Data. The increase in benefits payable
in 2011 primarily was due to an increase in processed but unpaid claims, including amounts due to our pharmacy
benefit administrator, which fluctuate due to month-end cutoff, and an increase in military services benefits
payable.
In addition to the timing of receipts for premiums and services fees and payments of benefits expense, other
working capital items impacting operating cash flows primarily resulted from the timing of payments for the
Medicare Part D risk corridor provisions of our contracts with CMS, changes in the timing of the collection of
pharmacy rebates, and the timing of payments for premium rebates associated with minimum benefit ratios
required under the Health Care Reform Law. In 2014, our operating cash flows will also be impacted by the
timing of payments and receipts associated with the commercial risk adjustment, risk corridor, and reinsurance
provisions of the Health Care Reform Law as discussed above.
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