Health Net 2011 Annual Report Download - page 158

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
When we terminated our amortizing financing facility and fully repaid the outstanding balance in May 2010,
we determined that this constituted a reconsideration event and re-evaluated the VIE status of these entities. Due
to our termination of our amortizing financing facility, we have repaid the outstanding balance in full and own
100% of the controlling financial interest of these entities as of December 31, 2010. Accordingly, we continued
to be their primary beneficiary and have consolidated these entities with our financial results as of
December 31, 2010. Subsequent to the full repayment of the amortizing financing facility, the only remaining
amounts were from intercompany transactions, which were eliminated in consolidation. Accordingly, the
consolidation of these entities had no impact on our consolidated financial statements as of December 31, 2010.
On December 16, 2011 these entities were dissolved and all intercompany balances related to the amortizing
financing facility were settled. There are no amounts related to these entities in our consolidated financial
statements as of December 31, 2011.
Note 16—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, 2011, 2010 and 2009.
Health Plan Services Year Ended
December 31,
2011 2010 2009
(Dollars in millions)
Reserve for claims (a), beginning of period ............................. $ 727.5 $ 692.2 $ 957.1
Incurred claims related to:
Current year .............................................. 4,733.0 4,644.2 6,422.8
Prior years (c) ............................................ (96.5) (70.0) (80.0)
Total incurred (b) ............................................. 4,636.5 4,574.2 6,342.8
Paid claims related to:
Current year .............................................. 4,024.4 3,929.3 5,572.2
Prior years ............................................... 618.8 609.6 857.8
Total paid (b) ................................................. 4,643.2 4,538.9 6,430.0
Less divested businesses ............................................ — — (177.7)
Reserve for claims (a), end of period .................................. 720.8 727.5 692.2
Add:
Claims and claims-related payable (d) ................................. 111.0 123.6 165.6
Other (e) ........................................................ 80.3 90.9 93.9
Reserves for claims and other settlements, end of period ................... $ 912.1 $ 942.0 $ 951.7
(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 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. In developing the revised estimate, there have been
no changes in the approach used to determine the key actuarial assumptions, which are the completion factor
and medical cost trend. Claims liabilities are estimated under actuarial standards of practice and GAAP. The
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