Health Net 2005 Annual Report Download - page 136
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HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A reconciliation of the total reportable segments’ measures of profit to the Company’s consolidated income
from continuing operations before income taxes and cumulative effect of a change in accounting principle for the
years ended December 31, 2005, 2004 and 2003 is as follows:
2005 2004 2003
(Dollars in millions)
Total reportable segment pretax income ..................................... $459.6 $ 99.2 $514.5
Litigation, severance and related benefits and asset impairments ................. (83.3) (32.9) (16.4)
Net gain on sale of businesses and properties ................................. — 1.1 18.9
Income from continuing operations before income taxes ........................ $376.3 $ 67.4 $517.0
Note 16—Reserves for Claims and Other Settlements and Health Care and Other Costs Payable Under
Government Contracts
Reserves for claims and other settlements 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, 2005,
2004 and 2003.
Health Plan Services
Year Ended December 31,
2005 2004 2003
(Dollars in millions)
Reserve for claims (a), beginning of period ............................. $ 794.6 $ 777.1 $ 787.3
Divested health plans (b) ........................................ — — (5.1)
Incurred claims related to:
Current year .............................................. 5,130.4 5,048.3 4,487.7
Prior years (d) ............................................ (114.5) 8.7 (33.8)
Total incurred (c) .............................................. 5,015.9 5,057.0 4,453.9
Paid claims related to:
Current year .............................................. 4,401.3 4,286.9 3,738.6
Prior years ............................................... 640.5 752.6 720.4
Total paid (c) ................................................. 5,041.8 5,039.5 4,459.0
Reserve for claims (a), end of period .................................. 768.7 794.6 777.1
Add:
Claims payable ................................................... 126.7 127.1 142.3
Reserve for provider disputes (e) ..................................... 50.5 161.3 25.1
Other (f) ......................................................... 94.3 86.3 80.1
Reserves for claims and other settlements, end of period ................... $1,040.2 $1,169.3 $1,024.6
(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.
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