BENEFITS PAYABLE

Activity in benefits payable, excluding military services, was as follows for the years ended December 31, 2015, 2014 and 2013:



	2015			2014			2013
	(in millions)
Balances at January 1	$	4,475		$	3,893		$	3,775
Less: Reinsurance recoverables	(78		)	—			—
Balances at January 1, net	4,397			3,893			3,775
Acquisitions	—			—			5
Incurred related to:
Current year	44,397			38,641			32,711
Prior years	(236		)	(518		)	(474		)
Total incurred	44,161			38,123			32,237
Paid related to:
Current year	(39,802		)	(34,357		)	(29,103		)
Prior years	(4,041		)	(3,262		)	(3,021		)
Total paid	(43,843		)	(37,619		)	(32,124		)
Premium deficiency reserve	176			—			—
Reinsurance recoverable	85			78			—
Balances at December 31	$	4,976		$	4,475		$	3,893

Amounts incurred related to prior years vary from previously estimated liabilities as the claims ultimately are settled. Negative amounts reported for incurred related to prior years result from claims being ultimately settled for amounts less than originally estimated (favorable development).

Actuarial standards require the use of assumptions based on moderately adverse experience, which generally results in favorable reserve development, or reserves that are considered redundant. We experienced favorable medical claims reserve development related to prior fiscal years of $236 million in 2015, $518 million in 2014, and $474 million in 2013. The favorable medical claims reserve development for 2015, 2014, and 2013 primarily reflects the consistent application of trend and completion factors estimated using an assumption of moderately adverse conditions. The decline in favorable prior period development in 2015 primarily was due to the impact of lower financial claim recoveries due in part to our gradual implementation during 2014 of inpatient authorization review prior to admission as opposed to post adjudication, as well as higher than expected flu associated claims from the fourth quarter of 2014 and continued volatility in claims associated with individual commercial medical products. The higher favorable prior period development during 2014 and 2013 resulted from increased membership, better than originally expected utilization across most of our major business lines and increased financial recoveries. The increase in financial recoveries primarily resulted from claim audit process enhancements as well as increased volume of claim audits and expanded audit scope. All lines of business benefited from these improvements.

Benefits expense excluded from the previous table was as follows for the years ended December 31, 2015, 2014 and 2013:



	2015			2014		2013
	(in millions)
Premium deficiency reserve for short-duration policies	$	176		$	—	$	—
Military services	12			11		(27		)
Future policy benefits	(80		)	32		354
Total	$	108		$	43	$	327

In the fourth quarter of 2015, we recognized a premium deficiency reserve for our individual commercial medical business compliant with the Health Care Reform Law associated with the 2016 coverage year as discussed in more detail in Note 7.

Military services benefits expense for 2015 and 2014 reflect expenses associated with our contracts with the Veterans Administration. Military services benefits expense for 2013 reflects the beneficial effect of a favorable settlement of contract claims with the DoD partially offset by expenses associated with our contracts with the Veterans Administration.

The decrease in benefits expense associated with future policy benefits payable in 2015 primarily reflects the release of reserves as individual commercial medical members transitioned to plans compliant with the Health Care Reform Law. The higher benefits expense associated with future policy benefits payable during 2013 relates to reserve strengthening for our closed block of long-term care insurance policies acquired in connection with the 2007 KMG America Corporation, or KMG, acquisition more fully described in Note 18.