BENEFITS PAYABLE

On a consolidated basis, activity in benefits payable, excluding military services, was as follows for the years ended December 31, 2018, 2017 and 2016:



	2018			2017			2016
	(in millions)
Balances at January 1	$	4,668		$	4,563		$	4,976
Less: Premium deficiency reserve	—			—			(176		)
Less: Reinsurance recoverables	(70		)	(76		)	(85		)
Balances at January 1, net	4,598			4,487			4,715
Incurred related to:
Current year	46,385			44,001			45,318
Prior years	(503		)	(483		)	(582		)
Total incurred	45,882			43,518			44,736
Paid related to:
Current year	(41,736		)	(39,496		)	(40,852		)
Prior years	(3,977		)	(3,911		)	(4,112		)
Total paid	(45,713		)	(43,407		)	(44,964		)
Reinsurance recoverable	95			70			76
Balances at December 31	$	4,862		$	4,668		$	4,563

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).

As previously discussed, our reserving practice is to consistently recognize the actuarial best estimate of our ultimate liability for claims. 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 $503 million in 2018, $483 million in 2017, and $582 million in 2016. The table below details our favorable medical claims reserve development related to prior fiscal years by segment for 2018, 2017, and 2016.



	Favorable Medical Claims Reserve Development
	2018			2017			2016

Retail Segment	$	(398	)	$	(386	)	$	(429	)
Group and Specialty Segment	(46		)	(40		)	(46		)
Individual Commercial Segment	(57		)	(56		)	(106		)
Other Businesses	(2		)	(1		)	(1		)
Total	$	(503	)	$	(483	)	$	(582	)

The favorable medical claims reserve development for 2018, 2017, and 2016 primarily reflects the consistent application of trend and completion factors estimated using an assumption of moderately adverse conditions. Favorable prior period development primarily resulted from our Medicare Advantage and individual commercial medical businesses.

Benefits expense excluded from the previous table was as follows for the years ended December 31, 2018, 2017 and 2016:



	2018		2017			2016
	(in millions)
Premium deficiency reserve for short-duration policies	$	—	$	—		$	(176	)
Military services	—		—			8
Future policy benefits	—		(22		)	439
Total	$	—	$	(22	)	$	271

Military services benefits expense for 2016 in the table above reflect expenses associated with our contracts with the Veterans Administration.

The higher benefits expense associated with future policy benefits payable during 2016 primarily relates to reserve strengthening for our closed block of long-term care insurance policies, which were sold in 2018, as more fully described in Note 18.

Incurred and Paid Claims Development

The following discussion provides information about incurred and paid claims development for our segments as of December 31, 2018, net of reinsurance, as well as cumulative claim frequency and the total of IBNR included within the net incurred claims amounts. The information about incurred and paid claims development for the years ended December 31, 2016 and 2017 is presented as supplementary information.

Claims frequency is measured as medical fee-for-service claims for each service encounter with a unique provider identification number. Our claims frequency measure includes claims covered by deductibles as well as claims under capitated arrangements. Claim counts may vary based on product mix and the percentage of delegated capitation arrangements.

Retail Segment

Activity in benefits payable for our Retail segment was as follows for the years ended December 31, 2018, 2017 and 2016:



	2018			2017			2016
	(in millions)
Balances at January 1	$	3,963		$	3,506		$	3,600
Less: Reinsurance recoverables	(70		)	(76		)	(85		)
Balances at January 1, net	3,893			3,430			3,515
Incurred related to:
Current year	41,323			38,604			37,212
Prior years	(398		)	(386		)	(429		)
Total incurred	40,925			38,218			36,783
Paid related to:
Current year	(37,189		)	(34,781		)	(33,784		)
Prior years	(3,386		)	(2,974		)	(3,084		)
Total paid	(40,575		)	(37,755		)	(36,868		)
Reinsurance recoverable	95			70			76
Balances at December 31	$	4,338		$	3,963		$	3,506

At December 31, 2018, benefits payable for our Retail segment included IBNR of approximately $2.9 billion, primarily associated with claims incurred in 2018. The cumulative number of reported claims as of December 31, 2018 was approximately 104.3 million for claims incurred in 2018, 102.1 million for claims incurred in 2017, and 96.2 million for claims incurred in 2016.

The following tables provide information about incurred and paid claims development for the Retail segment as of December 31, 2018, net of reinsurance.



	Incurred Claims, Net of Reinsurance
	For the Years Ended December 31,
Claims Incurred Year	2016 Unaudited		2017 Unaudited		2018
	(in millions)
2016	$	37,212	$	36,891	$	36,811
2017			38,604		38,341
2018					41,323
Total					$	116,475



	Cumulative Paid Claims, Net of Reinsurance
	For the Years Ended December 31,
Claims Incurred Year	2016 Unaudited		2017 Unaudited		2018
	(in millions)
2016	$	33,784	$	36,841	$	36,811
2017			34,781		38,232
2018					37,189
Total					$	112,232
All outstanding benefit liabilities before 2015, net of reinsurance					N/A
Benefits payable, net of reinsurance					$	4,243

Group and Specialty Segment

Activity in benefits payable for our Group and Specialty segment, excluding military services, was as follows for the years ended December 31, 2018, 2017 and 2016:



	2018			2017			2016
	(in millions)
Balances at January 1	$	568		$	579		$	616
Less: Reinsurance recoverables	—			—			—
Balances at January 1, net	568			579			616
Incurred related to:
Current year	5,466			5,403			5,271
Prior years	(46		)	(40		)	(46		)
Total incurred	5,420			5,363			5,225
Paid related to:
Current year	(4,957		)	(4,843		)	(4,700		)
Prior years	(514		)	(531		)	(562		)
Total paid	(5,471		)	(5,374		)	(5,262		)
Balances at December 31	$	517		$	568		$	579

At December 31, 2018, benefits payable for our Group and Specialty segment included IBNR of approximately $448 million, primarily associated with claims incurred in 2018. The cumulative number of reported claims as of December 31, 2018 was approximately 10.4 million for claims incurred in 2018, 11.1 million for claims incurred in 2017, and 12.9 million for claims incurred in 2016.

The following tables provide information about incurred and paid claims development for the Group and Specialty segment as of December 31, 2018, net of reinsurance.



	Incurred Claims, Net of Reinsurance
	For the Years Ended December 31,
Claims Incurred Year	2016 Unaudited		2017 Unaudited		2018
	(in millions)
2016	$	5,271	$	5,234	$	5,235
2017			5,403		5,358
2018					5,466
Total					$	16,059



	Cumulative Paid Claims, Net of Reinsurance
	For the Years Ended December 31,
Claims Incurred Year	2016 Unaudited		2017 Unaudited		2018
	(in millions)
2016	$	4,700	$	5,226	$	5,234
2017			4,843		5,351
2018					4,957
Total					$	15,542
All outstanding benefit liabilities before 2015, net of reinsurance					N/A
Benefits payable, net of reinsurance					$	517

Individual Commercial Segment

Activity in benefits payable for our Individual Commercial segment, was as follows for the years ended December 31, 2018, 2017 and 2016:



	2018			2017			2016
	(in millions)
Balances at January 1	$	101		$	454		$	741
Less: Premium deficiency reserve	—			—			(176		)
Balances at January 1, net	101			454			565
Incurred related to:
Current year	—			669			3,677
Prior years	(56		)	(56		)	(106		)
Total incurred	(56		)	613			3,571
Paid related to:
Current year	—			(583		)	(3,233		)
Prior years	(38		)	(383		)	(449		)
Total paid	(38		)	(966		)	(3,682		)
Balances at December 31	$	7		$	101		$	454

At December 31, 2018, benefits payable for our Individual Commercial segment included IBNR of approximately $1 million, associated with claims prior to 2018. The cumulative number of reported claims as of December 31, 2017 was approximately 2.2 million for claims incurred in 2017 and 9.5 million for claims incurred in 2016.

The following tables provide information about incurred and paid claims development for the Individual Commercial segment as of December 31, 2018, net of reinsurance.



	Incurred Claims, Net of Reinsurance
	For the Years Ended December 31,
Claims Incurred Year	2016 Unaudited		2017 Unaudited		2018
	(in millions)
2016	$	3,677	$	3,621	$	3,609
2017			669		627
2018					—
Total					$	4,236



	Cumulative Paid Claims, Net of Reinsurance
	For the Years Ended December 31,
Claims Incurred Year	2016 Unaudited		2017 Unaudited		2018
	(in millions)
2016	$	3,233	$	3,606	$	3,609
2017			583		620
2018					—
Total					$	4,229
All outstanding benefit liabilities before 2015, net of reinsurance					N/A
Benefits payable, net of reinsurance					$	7

Reconciliation to Consolidated

The reconciliation of the net incurred and paid claims development tables to benefits payable in the consolidated statement of financial position is as follows:



	December 31, 2018
Net outstanding liabilities
Retail	$	4,243
Group and Specialty	517
Individual Commercial	7
Benefits payable, net of reinsurance	4,767
Reinsurance recoverable on unpaid claims
Retail	95
Total benefits payable, gross	$	4,862