Aetna 2012 Annual Report Download - page 99

Annual Report- Page 93
6. Health Care Costs Payable
The following table shows the components of the change in health care costs payable during 2012, 2011 and 2010:
(Millions) 2012 2011 2010
Health care costs payable, beginning of the period $ 2,675.5 $ 2,630.9 $ 2,895.3
Less: Reinsurance recoverables 3.3 1.7 1.9
Health care costs payable, beginning of the period, net 2,672.2 2,629.2 2,893.4
Acquisition of businesses —89.4 —
Add: Components of incurred health care costs
Current year 23,875.6 22,047.9 23,045.6
Prior years (146.7) (394.4) (326.0)
Total incurred health care costs 23,728.9 21,653.5 22,719.6
Less: Claims paid
Current year 21,067.7 19,642.9 20,588.5
Prior years 2,344.7 2,057.0 2,395.3
Total claims paid 23,412.4 21,699.9 22,983.8
Health care costs payable, end of period, net 2,988.7 2,672.2 2,629.2
Add: Reinsurance recoverables 3.8 3.3 1.7
Health care costs payable, end of the period $ 2,992.5 $ 2,675.5 $ 2,630.9
Our prior year estimates of health care costs payable decreased by approximately $147 million, $394 million and
$326 million in 2012, 2011 and 2010, respectively, resulting from claims being settled for amounts less than
originally estimated. These reductions were primarily the result of lower health care cost trends as well as the
actual claim submission time being faster than we assumed in establishing our health care costs payable in the prior
year. These reductions were offset by estimated current period health care costs when we established our estimate
of the current year health care costs payable. When significant decreases (increases) in prior-years' health care cost
estimates have occurred that we believe have significantly impacted our current year operating results, we have
disclosed that amount as favorable (unfavorable) development of prior-years' health care cost estimates. There was
no significant development of prior-years' health care cost estimates during 2012. In 2011, we had approximately
$207 million pretax of favorable development of prior-years' health care cost estimates that primarily resulted from
lower than projected paid claims in the first half of 2011 for claims incurred in the latter half of 2010 caused by
lower than projected utilization of medical services. In 2010, we had approximately $118 million pretax of
favorable development of prior-years' health care cost estimates that primarily resulted from lower than projected
paid claims in the first half of 2010 for claims incurred in the latter part of 2009 caused by lower than projected
utilization of medical services driven by the abatement of H1N1 and other flu, among other factors.
7. Goodwill and Other Acquired Intangible Assets
As discussed in Note 3, we completed four significant acquisitions during 2011. In accordance with applicable
accounting guidance, we allocated the amount paid to the fair value of the net assets acquired, with any excess
amounts recorded as goodwill. The increase in goodwill in 2012 and 2011 is as follows:
(Millions) 2012 2011
Balance, beginning of the period $ 6,203.9 $ 5,146.4
Goodwill acquired:
Prodigy (1.7) 446.2
Medicity .1 384.7
PayFlex 1.6 147.4
Genworth 1.5 51.9
Other (1) 9.0 27.3
Balance, end of the period (2) $ 6,214.4 $ 6,203.9
(1) Goodwill related to other acquisitions in 2012 is considered preliminary, pending the final allocation of the applicable purchase price.
(2) At December 31, 2012 and 2011, approximately $113 million and $104 million, respectively, was assigned to the Group Insurance
segment, with the remainder assigned to the Health Care segment.