These increases in the benefit expense ratio were partially offset by an improvement in the State Sponsored benefit expense ratio, reflecting the withdrawal from Ohio Medicaid business, and the loss of the New York State prescription drug contract, which had a benefit expense ratio higher than the overall Company average.
Premium and Cost Trends: Trends represent Local Group fully insured business.
For the year ended December 31, 2008, underlying medical cost trends were less than 8.0 percent. Unit cost increases continue to be the primary driver of medical cost trends. The Company continues to price its business so that expected premium yield exceeds total cost trend, where total cost trend includes medical costs and selling, general and administrative ("SG&A") expense.
Days in Claims Payable: Days in Claims Payable ("DCP") as of December 31, 2008, was 47.7 days, a 1.4 day decline from 49.1 days at September 30, 2008. The sequential decrease in DCP was driven primarily by medical benefit seasonality in the Commercial business, which experiences a higher benefit expense ratio in the fourth quarter of the year. DCP was equal to 47.7 days as of December 31, 2008, and June 30, 2008, and 2.7 days higher than the 45.0 days of DCP at December 31, 2007.
Medical claims payable totaled $6.2 billion as of December 31, 2008, a decrease of $87.8 million, or 1.4 percent, from September 30, 2008, reflecting a 0.9 percent sequential decline in fully insured membership and a reduction in claims inventories of 8.4 percent. The Company continues to establish reserves for medical claims in a consistent and conservative manner.
SG&A Expense Ratio: The SG&A expense ratio was 15.1 percent in the fourth
quarter of 2008, an increase of 130 basis points from 13.8 percent in the
fourth quarter of 2007. The increase refle
|SOURCE WellPoint, Inc.|
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