FEP members consist of United States government employees and their dependents within our geographic markets through our participation in the national contract between the BCBSA and the U.S. Office of Personnel Management. FEP business accounted for 4.2%, 4.4% and 4.3% of our medical members at December 31, 2012, 2011 and 2010, respectively.
Medicare Advantage Part D membership increased 47, or 8.2%, primarily due to strong sales during the open enrollment period resulting from our geographic expansion into several new counties, partially offset by our withdrawal of the California Regional PPO Medicare Advantage product.
Physician services trend was in the mid single digit range and was 75% unit cost related and 25% utilization related. Increases in the physician care category were partially driven by contracting changes. We continue to collaborate with physicians to improve quality of care through pay-for-performance programs and bundled payment initiatives. Additionally, we continue to enhance our ability to detect and deter fraud and abuse, reducing waste in the system.
In response to cost trends, we continue to pursue contracting and plan design changes, promote and implement performance-based contracts that reward clinical outcomes and quality, and expand our radiology management, disease management and advanced care management programs. We are taking a leadership role in the area of payment reform as evidenced by the introduction of the Patient Centered Primary Care program. By establishing the primary care doctor as central to the coordination of a patient’s health care needs, the initiative builds on the success of current patient-centered medical home programs in helping to improve patient care while lowering costs. Additionally, our value-based contracting initiative continues to underscore our commitment to partnering with providers to improve quality and lower cost.
Total operating revenue increased $863.3, or 1.4%, to $60,728.5 in 2012, resulting primarily from higher premium revenue and, to a lesser extent, increased other revenue and administrative fees. The higher premium revenue was due primarily to membership growth in our Senior Medicare Advantage business, including CareMore, and growth in our State-Sponsored business, primarily in the California market, as well as revenue
Total operating revenue increased $2,124.7, or 3.7%, to $59,865.2 in 2011, primarily due to premium rate increases in our Local Group and Individual businesses designed to cover cost trends, increased fully-insured membership in our Senior Medicare Advantage business and increased reimbursement in the FEP business. These increases were partially offset by fully-insured membership declines in our Local Group and National Accounts businesses resulting from the unfavorable economic conditions and the conversions of two large accounts from fully-insured to self-funded status in 2010. Administrative fees also increased due to higher self-funded membership in our Local Group and National Accounts businesses, including the impact of conversions from fully-insured to self-funded membership.
Operating gain increased $109.2, or 3.5%, to $3,199.7 in 2012, primarily due to an improved benefit expense ratio for our Local Group business, including the impact of favorable prior year reserve development in 2012 compared to modest reserve strengthening in 2011, as well as increased operating results in our ancillary businesses, including ocular product sales by 1-800 CONTACTS during the post-acquisition period. These
Operating revenue increased $165.0, or 2.2%, to $7,747.3 in 2012, primarily due to growth in our FEP business resulting from premium rate increases designed to cover overall cost trends during 2012.
On December 24, 2012, we completed our acquisition of Amerigroup, one of the nation’s leading managed care companies focused on meeting the health care needs of financially vulnerable Americans. This acquisition furthers our goal of creating better health care quality at more affordable prices for our customers. Amerigroup also advances our capabilities in effectively and efficiently serving the growing Medicaid population, including the expanding dual eligibles, seniors, persons with disabilities and long-term services and support markets.
The pro-forma effects of this acquisition for prior periods were not material to our consolidated results of operations.
As a result of restructuring activities implemented during 2012, 2011 and 2010, we recorded liabilities for employee termination costs and lease and other contract exit costs. The restructuring activities are classified as components of general and administrative expenses in the consolidated statements of income for the respective period in which they occurred.
On May 7, 2012, we issued $850.0 of 3.125% notes due 2022 and $900.0 of 4.625% notes due 2042 under our shelf registration statement. We used the proceeds from this offering for working capital and for general corporate purposes, including, but not limited to, repayment of short-term and long-term debt. The notes have a call feature that allows us to repurchase the notes at any time at our option and a put feature that allows a note holder to require us to repurchase the notes upon the occurrence of both a change in control event and a downgrade of the notes below an investment grade rating.
We have accounted for the Debentures in accordance with the cash conversion guidance in FASB guidance for debt with conversion and other options. As a result, the value of the embedded conversion option has been bifurcated from its debt host and recorded as a component of “additional paid-in capital” (net of deferred taxes and equity issuance costs) in our consolidated balance sheet. The following table summarizes at December 31, 2012 the related balances, conversion rate and conversion price of the Debentures:
A summary of stock option activity for the year ended December 31, 2012 is as follows:
A summary of the cash dividend activity for the years ended December 31, 2012 and 2011 is as follows:
We lease office space and certain computer and related equipment using noncancelable operating leases. At December 31, 2012, future lease payments for operating leases with initial or remaining noncancelable terms of one year or more consist of the following: