Medical claims payable for the Global Health Care segment reflects estimates of the ultimate cost of claims that have been incurred but not yet reported, those that have been reported but not yet paid (reported claims in process), and other medical expenses payable that is primarily comprised of accruals for incentives and other amounts payable to health care professionals and facilities. The liability for incurred but not yet reported claims is the majority of the reserve balance as follows:

	March 31,		December 31,
(In millions)	2013		2012
Incurred but not yet reported	$	1,717	$	1,541
Reported claims in process		190		243
Physician incentives and other medical expense payable		93		72
Medical claims payable	$	2,000	$	1,856

	For the period ended
	March 31,		December 31,
(In millions)	2013		2012
Balance at January 1,	$	1,856	$	1,305
Less: Reinsurance and other amounts recoverable		242		249
Balance at January 1, net		1,614		1,056


Acquired net:		-		504
Incurred claims related to:
Current year		4,164		14,428
Prior years		(117)		(200)
Total incurred		4,047		14,228
Paid claims related to:
Current year		2,694		12,854
Prior years		1,162		1,320
Total paid		3,856		14,174
Ending Balance, net		1,805		1,614
Add: Reinsurance and other amounts recoverable		195		242
Ending Balance	$	2,000	$	1,856

Reinsurance and other amounts recoverable reflect amounts due from reinsurers and policyholders to cover incurred but not reported and pending claims for minimum premium products and certain administrative services only business where the right of offset does not exist. See Note 6 for additional information on reinsurance. For the three months ended March 31, 2013, actual experience differed from the Company's key assumptions resulting in favorable incurred claims related to prior years' medical claims payable of $117 million, or 0.8% of the current year incurred claims as reported for the year ended December 31, 2012. Actual completion factors accounted for $47 million, or 0.3% of the favorability while actual medical cost trend resulted in the remaining $70 million, or 0.5%.

For the year ended December 31, 2012, actual experience differed from the Company's key assumptions, resulting in favorable incurred claims related to prior years' medical claims payable of $200 million, or 2.2% of the current year incurred claims as reported for the year ended December 31, 2011. Actual completion factors accounted for $91 million, or 1.0% of favorability while actual medical cost trend resulted in the remaining $109 million

The impact of prior year development on shareholders' net income was $48 million for the three months ended March 31, 2013 compared with $41 million for the three months ended March 31, 2012. The favorable effect of prior year development for both years primarily reflects low utilization of medical services, as well as the impact of the medical loss ratio (MLR) rebate accrual. The change in the amount of the incurred claims related to prior years in the medical claims payable liability does not directly correspond to an increase or decrease in the Company's shareholders' net income recognized for the following reasons:

First, the Company consistently recognizes the actuarial best estimate of the ultimate liability within a level of confidence, as required by actuarial standards of practice that require the liabilities be adequate under moderately adverse conditions. As the Company establishes the liability for each incurral year, the Company ensures that its assumptions appropriately consider moderately adverse conditions. When a portion of the development related to the prior year incurred claims is offset by an increase determined appropriate to address moderately adverse conditions for the current year incurred claims, the Company does not consider that offset amount as having any impact on shareholders' net income.

Second, as a result of the MLR provisions of the Patient Protection and Affordable Care Act, changes in medical claim estimates due to prior year development may be offset by a change in the MLR rebate accrual.

Third, changes in reserves for the Company's retrospectively experience-rated business do not always impact shareholders' net income. For the Company's retrospectively experience-rated business only adjustments to medical claims payable on accounts in deficit affect shareholders' net income. An increase or decrease to medical claims payable on accounts in deficit, in effect, accrues to the Company and directly impacts shareholders' net income. An account is in deficit when the accumulated medical costs and administrative charges, including profit charges, exceed the accumulated premium received. Adjustments to medical claims payable on accounts in surplus generally accrue directly to the policyholder with no impact on the Company's shareholders' net income. An account is in surplus when the accumulated premium received exceeds the accumulated medical costs and administrative charges, including profit charges.

The determination of liabilities for Global Health Care medical claims payable requires the Company to make critical accounting estimates. See Note 2(N) to the Consolidated Financial Statements in the Company's 2012 Form 10-K.