United Healthcare 2010 Annual Report Download - page 82

Estimated full year amortization expense relating to intangible assets for each of the next five years is as follows:
(in millions)
Estimated
Amortization
Expense
2011 ............................................................................ $316
2012 ............................................................................ 312
2013 ............................................................................ 304
2014 ............................................................................ 294
2015 ............................................................................ 280
Amortization expense relating to intangible assets for 2010, 2009 and 2008 was $317 million, $241 million and
$252 million, respectively.
7. Medical Costs and Medical Costs Payable
Medical costs and medical costs payable include estimates of the Company’s obligations for medical care
services that have been rendered on behalf of insured consumers, but for which claims have either not yet been
received or processed, and for liabilities for physician, hospital and other medical cost disputes. The Company
develops estimates for medical costs incurred but not reported using an actuarial process that is consistently
applied, centrally controlled and automated. The actuarial models consider factors such as time from date of
service to claim receipt, claim backlogs, care provider contract rate changes, medical care consumption and other
medical cost trends. The Company estimates liabilities for physician, hospital and other medical cost disputes
based upon an analysis of potential outcomes, assuming a combination of litigation and settlement strategies.
Each period, the Company re-examines previously established medical costs payable estimates based on actual
claim submissions and other changes in facts and circumstances. As the medical costs payable estimates recorded
in prior periods develop, the Company adjusts the amount of the estimates and includes the changes in estimates
in medical costs in the period in which the change is identified.
For the year ended December 31, 2010, there was $800 million of net favorable medical cost development related
to prior fiscal years. The favorable development in 2010 was primarily driven by lower than expected health
system utilization levels; more efficient claims handling and processing, which results in higher completion
factors; a reduction in reserves needed for disputed claims from care providers; and favorable resolution of
certain state-based assessments.
None of the factors discussed above were individually material to the net favorable medical cost development for
the years ended 2009 and 2008.
The following table shows the components of the change in medical costs payable for the years ended
December 31:
(in millions) 2010 2009 2008
Medical costs payable, beginning of period ............................. $ 9,362 $ 8,664 $ 8,331
Acquisitions ..................................................... 0 252 331
Reported medical costs:
Current year ................................................. 69,641 65,599 60,589
Prior years .................................................. (800) (310) (230)
Total reported medical costs ........................................ 68,841 65,289 60,359
Claim payments:
Payments for current year ...................................... (60,949) (57,109) (52,872)
Payments for prior year ........................................ (8,034) (7,734) (7,485)
Total claim payments .............................................. (68,983) (64,843) (60,357)
Medical costs payable, end of period .................................. $ 9,220 $ 9,362 $ 8,664
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