Health Net 2004 Annual Report Download - page 132
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HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 16—Health Care Services and Government Contract Expenses
Reserves for claims and other settlements and health care and other costs payable under government contracts include reserve
for claims which consist of incurred but not reported claims (IBNR), received but unprocessed claims, claims in course of settlement
and other liabilities. The table below provides a reconciliation of changes in reserve for claims for the years ended December 31,
2004, 2003 and 2002.
F-46
Health Plan Services
Year Ended December 31,
2004
2003
2002
(amounts in thousands)
Reserve for claims (a), beginning of period
$777,059
$787,317
$822,203
Divested health plans (b)
—
(5,119)
—
Incurred claims related to:
Current year
5,048,289
4,487,698
3,988,896
Prior years (e)
8,769
(33,812)
(34,742)
Total incurred (c)
5,057,058
4,453,886
3,954,154
Paid claims related to:
Current year
4,286,929
3,738,599 3,228,952
Prior years
752,574
720,426
760,088
Total paid (c)
5,039,503
4,459,025
3,989,040
Reserve for claims (a), end of period
794,614
777,059
787,317
Add:
Claims payable
146,464
167,361
144,116
Reserve for provider settlements (d)
141,867
—
—
Other (f)
86,352
80,130
93,836
Reserves for claims and other settlements, end of period
$1,169,297
$1,024,550
$1,025,269
(a) Consists of incurred but not reported claims and received but unprocessed claims and reserves for loss adjustment expenses.
(b) Adjustment for 2003 consists primarily of reductions in reserves for claims resulting from the sales of our dental and vision
plans.
(c) Includes medical claims only. Capitation, pharmacy and other payments including provider settlements are not included.
(d) Related to provider settlements associated with claims processing and payment issues resolved during the fourth quarter of 2004.
(e) For incurred claims related to prior years, a negative amount would mean that our actual health care service claims related to
prior years were less than the estimates previously made by us.
(f) Includes accrued capitation, shared risk settlements, provider incentives and other reserve items.