Our Adjusted SG&A expense ratio measures selling, general and administrative expense as a percentage of total premium revenue, excluding premium taxes and Medicaid ACA industry fee reimbursements. The ratio also excludes the effect of investigation costs for all years presented, and Sterling divestiture, Iowa SG&A and pharmacy benefit manager ("PBM") transitory costs for the years ended December 31, 2016 and 2015.
In the first quarter of 2016, we retrospectively adopted Accounting Standards Update ("ASU") 2015-03 "Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs," that requires debt issuance costs to be netted against long-term debt. Amounts presented above for the years 2012 through 2015 for total assets, long-term debt, and total liabilities have been retrospectively adjusted to conform to the new guidance. These reclassifications were not material. Additionally, in the first quarter of 2016, we retrospectively adopted ASU 2015-17 "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes," that requires an entity to classify all deferred tax assets and liabilities as noncurrent. Accordingly, amounts for deferred income tax assets of $34.8 million, $37.1 million, $23.7 million and $27.2 million previously recorded as current are reflected as a reduction to deferred income tax liabilities recorded as noncurrent at December 31, 2015, 2014, 2013 and 2012, respectively. Refer to Note 2 - Summary of Significant Accounting Policies, Recently Adopted Accounting Standards to the Consolidated Financial Statements for further discussion.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Item 6 - Selected Financial Data and our consolidated financial statements and related notes appearing elsewhere in this 2016 Form 10-K. The following discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause our actual results to differ materially from management's expectations. Factors that could cause such differences include those set forth under Part I, Item 1 - Business and Part I, Item 1A - Risk Factors, as well as Forward-Looking Statements discussed earlier in this 2016 Form 10-K.
Summarized below are the key financial highlights for the year ended December 31, 2016. For additional information, refer to the "Results of Operations" section, which discusses both consolidated and segment results in more detail.
On January 1, 2017, we began serving Medicaid beneficiaries under Nebraska's Medicaid Managed Care program, Heritage Health. Our Nebraska contract has an initial five-year term and two additional one-year renewal options at the discretion of the Nebraska Department of Administrative Services. As of January 1, 2017, we served approximately 71,000 Medicaid members in Nebraska.
In October 2016, we received a Notice of Award from the Missouri Office of Administration, Division of Purchasing to continue to participate in the MO HealthNet Managed Care (Medicaid) program, including expansion of our Medicaid program statewide. Services under the new contract are expected to begin on May 1, 2017, with an initial one-year term and four additional one-year renewal options. As of December 31, 2016, we served approximately 121,000 Medicaid members in Missouri.
Please refer to Part I, Item 1 - Business, General Economic and Political Environment Affecting our Business and Health Care Reform for a further discussion of the current economic and political environment that is affecting our business, including discussion of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the "ACA") and its potential effect on our business.
Refer to the risks and uncertainties related to health care reform as discussed in Part I, Item 1A - Risk Factors.
Medicare PDPs. Membership decreased by 16,000, or 1.6%, compared with December 31, 2015. The decrease was primarily the result of our 2016 bid strategy. Our 2016 PDP bids resulted in one of our basic plans being below the benchmarks in 17 of the 34 CMS regions, and within the de minimis range in nine other regions, compared with our 2015 bids, in which our plans were below the benchmarks in 13 of the 33 CMS regions for which we submitted bids and in the de minimis range in nine regions.
Medicare PDPs. Membership decreased by 367,000, or 26.4%, compared with December 31, 2014. The decrease was primarily due to bid positioning for the 2015 plan year, in which our plans were below the benchmarks in 13 of the 33 CMS regions for which we submitted bids and in the de minimis range in nine regions compared with our 2014 bids, in which we were below the benchmark in 30 out of 33 regions, and in the de minimis range in two other regions. PDP members who had been auto-assigned to us in 2014 in regions where our plans were not below or within the de minimis range for 2015 were assigned to other plans effective January 1, 2015.
Premium revenue for the year ended December 31, 2016 increased approximately $346.1 million, or 2.5%, compared with the same period in 2015, reflecting organic membership growth in our Medicaid Health Plans segment, the Advicare acquisition and net rate increases in certain Medicaid markets. These increases were partially offset by the effect of lower membership in our Medicare PDPs segment and the divestiture of Sterling Life Insurance Company ("Sterling"), our former Medicare Supplement business, on July 1, 2015.
Medical benefits expense for the year ended December 31, 2016 increased $110.9 million, or 0.9%, compared with the same period in 2015, primarily driven by organic Medicaid membership growth and the Advicare acquisition, partially offset by the favorable result of actions taken relating to our 2016 MA and PDP bids and the divestiture of our Medicare Supplement business in 2015.
SG&A expense includes aggregate costs related to the resolution of the previously disclosed government investigations and related litigation and resolution costs ("Investigation costs"). Refer to Note 13-Commitments and Contingencies within the Consolidated Financial Statements for additional discussion of these costs. SG&A expense also includes certain activities relating to the divestiture of Sterling Life Insurance Company ("Sterling divestiture costs"), transitory costs related to our decision to change our pharmacy claims processing to a new pharmacy benefit manager ("PBM") effective January 1, 2016, ("PBM transitory costs") and non-recurring Iowa SG&A costs relating to readiness costs, certain wind-down costs of WellCare's Iowa operations and certain legal costs incurred during 2015 and 2016 ("Iowa SG&A costs"). We believe it is appropriate to evaluate SG&A expense exclusive of these costs as we do not consider them to be indicative of long-term business operations. A reconciliation of SG&A expense, including and excluding such costs, is presented below.
We were assessed $228.4 million for the ACA industry fee for the year ended December 31, 2016, compared with $227.3 million for the same period in 2015, consistent year-over-year as the total fee levied on the industry remained at $11.3 billion in 2016. We received amendments, written agreements or other documentation from all of our state Medicaid customers that commit them to reimburse us for the portion of the ACA industry fee attributable to our Medicaid programs, including its non-deductibility for income tax purposes.
As a result of the Windsor acquisition on January 1, 2014, we recognized a bargain purchase gain of approximately $29.5 million during the year ended December 31, 2014, as the estimated fair value of the net tangible and intangible assets that we acquired exceeded the total consideration paid or payable to the seller. After consideration of all relevant factors, we concluded that the excess fair value constituted a bargain purchase gain in accordance with accounting rules related to business combinations.
Income tax expense for the year ended December 31, 2016 increased $69.9 million, or 32.1%, compared with the same period in 2015, while the effective tax rate for the year ended December 31, 2016 decreased to 54.3% compared with 64.7% for the same period in 2015. The increase in income tax expense and decrease in the effective tax rate were both attributable to higher income before income taxes, as well as the adoption of Accounting Standards Update ("ASU") 2016-09 "Compensation-Stock Compensation (Topic 718)." Our effective tax rate for the year ended December 31, 2016 also includes the favorable effect of the recognition of certain previously unrecognized tax benefits. Refer to Part IV, Item 15, Note 2 and Note 14 to the Consolidated Financial Statements in this 2016 Form 10-K for further discussion regarding the adoption of ASU 2016-09 and the recognition of previously unrecognized tax benefits in 2016, respectively.
Our primary measurements of profitability for our reportable segments are premium revenue, gross margin and MBR. Gross margin is defined as premium revenue less medical benefits expense, less ACA industry fees. MBR measures the ratio of medical benefits expense to premium revenue, excluding Medicaid premium taxes and Medicaid ACA industry fee reimbursement.
"All other states" consists of Hawaii, Illinois, Missouri, New Jersey, New York and South Carolina during all years presented. In 2016, it also includes Arizona.
Our Medicaid Health Plans MBR decreased by 50 basis points for the year ended December 31, 2016 compared with 2015. Our Medicaid Health Plans Adjusted MBR decreased by 30 basis points for the year ended December 31, 2016 compared with 2015. The decreases in both MBRs were primarily driven by improved operational execution and pharmacy cost structure, as well as higher ACA industry fee reimbursement (affecting the Medicaid Health Plans MBR).
Medicaid total premiums increased $1.3 billion, or 16.7%, for the year ended December 31, 2015 compared with the same period in 2014. Excluding Medicaid premium taxes and Medicaid ACA industry fee reimbursements, Medicaid premium revenue for the year ended December 31, 2015 increased $1.2 billion, or 15.7%, compared with the same period in 2014. These increases were driven by increased membership in Florida due to organic growth and participation in the Florida MMA program, higher per member per month ("PMPM") rates related to the Florida MMA membership, growth in Kentucky from increased participation in the ACA Medicaid expansion program and growth in Illinois resulting from higher auto-assigned membership. The increase in Medicaid premium revenue in 2015 also reflects a full year of premiums related to the Healthfirst NJ acquisition.
Medical benefits expense for the year ended December 31, 2015 increased by approximately $1.0 billion, or 14.8%, compared with the same period in 2014, primarily driven by the increase in membership. Our Medicaid Health Plans MBR decreased by 150 basis points for the year ended December 31, 2015 compared with 2014. Our Medicaid Health Plans Adjusted MBR decreased by 70 basis points for the year ended December 31, 2015 compared with 2014, primarily due to improved operating performance across the segment, in particular in our Florida MMA program, which included a rate increase for this program that was effective September 1, 2015, as well as unfavorable prior year reserve development recognized in 2014. The decrease was partially offset by a rate decrease in Kentucky that was effective July 1, 2015.
Medicare Health Plans premium revenue in 2015 decreased $64.4 million, or 1.6%, compared with the same period in 2014, primarily resulting from the decline in membership as a result of our 2015 bid actions, which included exiting two counties in California, as well as exiting from MA in Arizona, Missouri and Ohio. The decline also reflects the divestiture of Sterling, partially offset by organic membership growth in Florida and Texas.
Medicare Health Plans medical benefits expense for the year ended December 31, 2015 decreased $105.2 million, or 3.0%, compared with the same period in 2014, primarily driven by the decrease in membership discussed above and improved operational execution on healthcare value-added programs during 2015. The Medicare Health Plans MBR decreased by 130 basis points compared with 2014, reflecting improved operating performance as a result of bid actions for the 2015 plan year as well as improved operational execution on medical expense initiatives launched in 2015.
We have contracted with CMS to serve as a plan sponsor offering stand-alone Medicare Part D PDPs to Medicare eligible beneficiaries through our Medicare PDPs segment. As of December 31, 2016, we offered PDPs in 50 states and the District of Columbia. The PDP benefit design generally results in our incurring a greater portion of the responsibility for total prescription drug costs in the first half of a plan year and less in the second half of a plan year due to the members' share of cumulative out-of-pocket costs increasing throughout the plan year. As a result, the Medicare PDPs MBR generally decreases throughout the year. Also, the level and mix of members who are auto-assigned to us and those who actively choose our PDPs will affect the segment MBR pattern across periods.
The following table sets forth the summarized results of operations and other relevant performance measures for our Medicare PDPs segment for the years ended December 31, 2016, 2015 and 2014:
The Medicare PDPs premium revenue decreased $56.7 million, or 6.3%, in 2016 compared with 2015, primarily due to the decrease in membership resulting from our 2016 bid strategy. The Medicare PDPs MBR for the year ended December 31, 2016 decreased 500 basis points over the same period in 2015, reflecting improvement in our pharmacy cost structure, including rebate management, and continued improved operational execution.
The Medicare PDPs premium revenue decreased $276.7 million, or 23.5%, in 2015 compared with 2014, primarily due to the decrease in membership resulting from specific actions taken in the 2015 bids. The Medicare PDPs MBR for the year ended December 31, 2015 decreased 1,420 basis points over the same period in 2014, reflecting improvement from bid positioning taken to better balance membership and margin improvement for the 2015 plan year, an improvement in pharmacy rebates and improved operational execution.
Medicaid Health Plans - We expect premium revenue (GAAP) for our Medicaid Health Plans segment to be in the range of $10.3 billion to $10.7 billion for 2017, compared with $9.5 billion for 2016. We expect premium revenue for our Medicaid Health Plans, excluding $113.0 million to $118.0 million in Medicaid premium taxes, to be in the range of $10.2 billion to $10.6 billion for 2017, compared with $9.1 billion reported for 2016, excluding $244.9 million in Medicaid ACA industry fee reimbursement and $110.0 million in Medicaid premium taxes. The expected year-over-year increase reflects our expansion into the Nebraska Medicaid market, effective January 1, 2017; Missouri Medicaid reprocurement with an expanded service area; acquisition of Care1st Arizona; and organic growth.
Medicare Health Plans - We expect premium revenue for our Medicare Health Plans segment to be in the range of $4.1 billion to $4.3 billion for 2017, compared with $3.9 billion reported for 2016. Medicare Health Plans MBR is expected to be in the range of 85.50% to 86.75% for 2017, compared with 84.6% in 2016, reflecting planned increased quality investments and bid process considerations due to the ACA industry fee moratorium in 2017.
Medicare PDPs - We expect premium revenue for our Medicare PDPs segment to be in the range of $825.0 million to $900.0 million for 2017, compared with $845.0 million for 2016, primarily due to our bid positioning for the 2017 plan year. Medicare PDPs MBR is expected to be in the range of 80.50% to 82.50% for 2017, compared with 73.7% for 2016 due to our bid positioning for the 2017 plan year.
Consolidated SG&A - Our consolidated SG&A ratio (GAAP) is not estimable as we currently are not able to project future amounts associated with investigation costs. We expect that our consolidated Adjusted SG&A ratio, which excludes the effect of investigation costs, for 2017 will be approximately 7.7% to 7.9%, compared with 8.0% for 2016, resulting from improved operating leverage associated with premium revenue growth.
Each of our existing and anticipated sources of cash is affected by operational and financial risks that influence the overall amount of cash generated and the capital available to us. Additionally, we operate as a holding company in a highly regulated industry. The parent and other non-regulated companies ("non-regulated subsidiaries") are dependent upon dividends and management fees from our regulated subsidiaries, most of which are subject to regulatory restrictions. For a further discussion of risks that can affect our liquidity and cash flows, see Part I - Item 1A - Risk Factors included in this 2016 Form 10-K.
dividends paid to our non-regulated subsidiaries, as approved by our state regulators.
Funding may be provided to certain regulated subsidiaries from our unregulated subsidiaries to cover any shortfall resulting from the amount of Part D benefits paid for members on behalf of CMS that exceeds the prospective subsidy payments that these regulated subsidiaries receive from CMS, which is discussed further in Medicare Part D Funding and Settlements below.
Our regulated subsidiaries are each subject to applicable state regulations that, among other things, require the maintenance of minimum levels of capital and surplus. We continue to maintain appropriate levels of aggregate excess statutory capital and surplus in our regulated subsidiaries. See further discussion under Regulatory Capital and Dividend Restrictions below.
In November 2016, we received a $556.3 million settlement payment from CMS primarily relating to catastrophic reinsurance and LICS cost reimbursements for the 2015 Part D plan year, which resulted in a meaningful reduction to our funds receivable for the benefit of members. Growth in our PDP and MA membership and high drug unit costs in 2014 resulted in higher benefit payments made on behalf of CMS compared with our bids and compared with prior years, as well as an increase in the CMS risk corridor receivable. Based on our experience in 2014, our 2015 PDP and MA bids reflected significantly higher estimates for cash outflows for the government's responsibility of the Part D benefit plan design, particularly for the catastrophic reinsurance subsidy. However, the level of subsidy payments we made on behalf of CMS compared with our 2015 bids were still significant due to the composition of our 2015 PDP membership, which reflected a higher number of dual-eligible members relative to our overall membership than expected in our original 2015 bids.
Cash provided by operating activities for 2015 was $712.6 million compared with $299.3 million for 2014. The improvement in cash flow from operations primarily resulted from improved year-over-year operating performance across all segments and higher pharmacy rebates consistent with an improved pharmacy rebates management contract. The increase is also related to the timing of settlement of the current year Medicare Part D risk corridor payables due to CMS as compared with the Medicare Part D risk corridor net receivables in 2014. Net cash provided by operating activities was reduced by the $227.3 million ACA industry fee payment remitted to the IRS in September 2015, compared with $137.7 million remitted for such fee in September 2014.
Additionally, in January 2016, $200.0 million of the 2016 Revolving Credit Facility (described below) was drawn upon and, along with $100.0 million in cash, used to repay our $300.0 million Term Loan. In September 2016, we repaid $100.0 million of the $200.0 million borrowed under the 2016 Revolving Credit Facility. Debt-related activity for the year ended December 31, 2015 includes net proceeds of $308.9 million resulting from the issuance of $300.0 million aggregate principal amount of our Senior Notes.
Cash flows from financing activities are primarily affected by net funds received or paid for the benefit of members of our MA and PDP plans as well as debt-related activity. Cash flows from financing activities in 2015 increased by $897.8 million compared with the same period in 2014 primarily resulting from net funds received for the benefit of members of approximately $201.1 million in 2015, compared with funds paid of $687.9 million during the same period in 2014. These funds represent the net amounts of prescription drug benefits we paid or collected in connection with the low-income cost sharing, catastrophic reinsurance and coverage gap discount components of the Medicare Part D program related to the government's portion of financial responsibility, net of the related subsidies received from CMS inclusive of the annual settlement payments. We received a $845.5 million settlement payment from CMS during 2015 relating to the 2014 Part D plan year, which significantly improved financing cash flows for 2015 compared with 2014. Additionally, in June 2015, we received net proceeds from the issuance of the Senior Notes discussed above, compared with net proceeds of $298.6 million in 2014 resulting from the Term Loan issuance in September 2014.
At the closing of the 2016 Credit Agreement, $200.0 million of the 2016 Revolving Credit Facility was drawn upon and, along with $100.0 million in cash, used to repay our $300.0 million term loan under our prior credit agreement, which was terminated. Borrowings under the Revolving Credit Loans may be used for general corporate purposes, including, but not limited to, working capital, organic growth and acquisitions. In September 2016, we repaid $100.0 million of the $200.0 million borrowed under the 2016 Revolving Credit Facility, and as a result, $100.0 million remained outstanding as a component of our long-term debt as of December 31, 2016. Commitments under the 2016 Revolving Credit Facility expire on January 8, 2021, and any amounts outstanding under the 2016 Revolving Credit Facility will be payable in full at that time. The interest rate on the outstanding amount of the 2016 Credit Facility was 2.25% as of December 31, 2016.
The 2016 Credit Agreement includes negative and financial covenants that limit certain activities of us and our subsidiaries, including (i) restrictions on our ability and the ability of our subsidiaries to incur additional indebtedness; and (ii) financial covenants that require (a) the ratio of total net debt to cash flow not to exceed a maximum; and (b) a minimum interest expense and principal payment coverage ratio. The 2016 Credit Agreement also contains customary representations and warranties that must be accurate in order for us to borrow under the 2016 Revolving Credit Facility. In addition, the 2016 Credit Agreement contains customary events of default. If an event of default occurs and is continuing, we may be required immediately to repay all amounts outstanding under the 2016 Credit Agreement. Lenders holding at least 50% of the loans and commitments under the 2016 Credit Agreement may elect to accelerate the maturity of the loans and/or terminate the commitments under the 2016 Credit Agreement upon the occurrence and during the continuation of an event of default.
As of December 31, 2016, and as of the date of this filing, we remain in compliance with all covenants under both the Senior Notes and the 2016 Credit Agreement.
We may pursue alternatives to raise additional unregulated cash. Some of these initiatives may include, but are not limited to; obtaining dividends from certain of our regulated subsidiaries, provided sufficient capital in excess of regulatory requirements exists in these subsidiaries and/or accessing the debt and equity capital markets. However, we cannot provide any assurances that we will obtain applicable state regulatory approvals for additional dividends to our non-regulated subsidiaries by our regulated subsidiaries or be successful in accessing the capital markets if we determine to do so. We believe that we have sufficient capital, or sufficient access to capital, including through the 2016 Revolving Credit Facility, to meet our capital needs, including pending acquisitions, for at least the next twelve months.
Such statues, regulations and capital requirements also restrict the timing, payment, and amount of dividends and other distributions that may be paid to us as the sole stockholder. Dividend restrictions vary by state, but the maximum amount of dividends which can be paid without prior approval from the applicable state is subject to restrictions relating to statutory capital, surplus and net income for the previous year. Some states require prior approval of all dividends, regardless of amount. States may disapprove any dividend that, together with other dividends paid by a subsidiary in the prior 12 months, exceeds the regulatory maximum as computed for the subsidiary based on its statutory surplus and net income. We received $241.0 million, $152.0 million and $68.0 million in dividends from our regulated subsidiaries during the years ended December 31, 2016, 2015, and 2014, respectively. The 2016 amount included $49.6 million not requiring prior regulatory approval, and $191.4 million paid after obtaining prior regulatory approval. Under applicable regulatory requirements at December 31, 2016, the amount of dividends that may be paid through the end of 2017 by our HMO and insurance subsidiaries without prior approval by regulatory authorities is approximately $210.7 million in the aggregate. Actual dividends paid may vary due to consideration of excess statutory capital and surplus and expected future surplus requirements related to, for example, premium volume and product mix.
Represents the principal amount of our outstanding Senior Notes and Credit Facility as of December 31, 2016. These amounts exclude the remaining $9.6 million debt premium on the Senior Notes, which is being amortized over the remaining term of the Senior Notes. Additionally, these amounts are gross of $12.0 million of debt issuance costs, which is reflected as a reduction of our long-term debt in our Consolidated Balance Sheet.
At December 31, 2016, we did not have any off-balance sheet financing arrangements except for operating leases as described in the table above.
We earn supplemental premium payments for eligible obstetric deliveries and newborns of our Medicaid members in Arizona, Florida, Georgia, Illinois, Missouri, New Jersey, New York and South Carolina. Effective January 1, 2017, we are also eligible to receive these supplemental premiums in Nebraska. Each state Medicaid contract specifies how and when these supplemental payments are earned and paid. We also earn supplemental Medicaid premium payments in some states for high cost drugs and other eligible services. We recognize supplemental premium revenue in the period we provide related services to our members.
In some instances, our Medicaid premiums are subject to risk score adjustments based on the health profile of our membership. Generally, the risk score is determined by the state agency's analysis of encounter submissions of processed claims data to determine the acuity of our membership relative to the entire state's Medicaid membership. The frequency of when states adjust premiums varies, but is usually done quarterly or semi-annually on a retrospective basis. We recognize periodic changes to risk-adjusted premiums as revenue when the amounts are determinable and collection is reasonably assured.
The ACA imposed certain new taxes and fees including an annual premium-based health insurance industry assessment on health insurers, which began in 2014. We received amendments, written agreements or other documentation from all our state Medicaid customers that commit them to reimburse us for the portion of the ACA industry fee attributable to our Medicaid programs, including its non-deductibility for income tax purposes. Consequently, we recognized $244.9 million, $219.2 million and $124.6 million of reimbursement for the ACA industry fee as premium revenue for the years ended December 31, 2016, 2015 and 2014, respectively.
Certain of our Medicaid contracts require us to expend a minimum percentage of premiums on eligible medical benefits expense. To the extent that we expend less than the minimum percentage of the premiums on eligible medical benefits, we are required to refund to the state all or some portion of the difference between the minimum and our actual allowable medical benefits expense. We estimate the amounts due to the state agencies as a return of premium based on the terms of our contracts with the applicable state agency. Historically, we have not experienced material differences between our recorded estimates and the subsequent state agencies settlement amounts.
(1) The components of net payables to government partners are classified in the consolidated balance sheets as $6.5 million and $303.2 million in current assets and current liabilities, respectively, as of December 31, 2016, and $172.7 million in current liabilities as of December 31, 2015.
For qualifying low income PDP members, CMS pays for some, or all, of the member's monthly premium. We receive certain Part D prospective subsidy payments from CMS for our MA and PDP members as a fixed monthly per member amount, based on the estimated costs of providing prescription drug benefits over the plan year, as reflected in our bids. Approximately nine to ten months subsequent to the end of the plan year, or later in the case of the coverage gap discount subsidy, a settlement payment is made between CMS and our plans based on the difference between the prospective payments and actual claims experience. The subsidy components under Part D are described below.
Medical benefits payable recorded developed favorably by approximately $284.7 million, $211.0 million and $26.2 million in 2016, 2015 and 2014, respectively. A portion of the prior year development was attributable to the release of the provision for moderately adverse conditions, which is included as part of the assumptions. The release of the provision for moderately adverse conditions was substantially offset by the provision for moderately adverse conditions established for claims incurred in the current year. Accordingly, the change in the amount of the incurred claims related to prior years in the Medical benefits payable does not directly correspond to an increase in net income recognized during the period.
Excluding the prior year development related to the release of the provision for moderately adverse conditions, our estimates of medical benefits expense recorded developed favorably by approximately $154.3 million and $78.1 million in 2016 and 2015, respectively, and unfavorably by $48.1 million in 2014. Such amounts are net of the development relating to refunds due to government customers with minimum loss ratio provisions. The favorable development recognized in 2016 and 2015 was primarily due to lower than expected utilization in our Medicaid Health Plans segment, and to a lesser extent, our Medicare Health Plans segment. The unfavorable development in 2014 was due to higher than expected medical services in our Medicaid Health Plans and Medicare Health Plan segments that were not discernible until the effect became clearer over time as claim payments were processed.
We evaluate our contracts to determine if it is probable that a loss will be incurred. We establish a premium deficiency reserve ("PDR") when it is probable that expected future medical benefits and administrative expenses will exceed future premiums and reinsurance recoveries for the remainder of a contract period. For purposes of determining a PDR, we do not consider investment income and contracts are grouped in a manner consistent with our method of acquiring, servicing and measuring the profitability of such contracts. A PDR is recorded as medical benefits expense and in medical benefits payable. Once established, a PDR is reduced over the contract period as an offset to actual losses. We re-evaluate our PDR estimates each reporting period and, if estimated future losses differ from those in the current PDR estimate, we adjust the liability through medical benefits expense, as necessary. We had no PDR liability recorded in our consolidated balance sheets as of December 31, 2016 and 2015, respectively.
Our acquisitions typically result in goodwill, which represents the excess of the acquisition cost over the fair value of net assets acquired. Goodwill is assigned to reporting units, which we determined to be the same as our operating segments. Goodwill recorded at December 31, 2016 was $392.5 million compared with $263.2 million at December 31, 2015. Goodwill attributable to our Medicaid reporting unit was $282.1 million and $152.8 million at December 31, 2016 and 2015, respectively. Goodwill attributable to our MA reporting unit was $110.4 million at both December 31, 2016 and 2015. Medicaid Health Plans goodwill, as of December 31, 2016, includes approximately $102.7 million of goodwill resulting from our acquisition of Care1st Arizona effective on December 31, 2016. We anticipate that goodwill will be allocated to the Medicare Health Plans segment and/or certain acquired intangible assets upon completion of our valuation procedures. Refer to Note 3 - Acquisitions and Divestitures, included in the Consolidated Financial Statements for additional discussion of the Care1st acquisition.
We test goodwill for impairment at the reporting unit level at least annually, or more frequently if events or circumstances indicate that it would be more likely than not that the fair value of a reporting unit is below its carrying value. Such events or circumstances could include a significant adverse change in business climate, an adverse action or assessment by a regulator, unanticipated competition and the testing for recoverability of a significant asset group within a reporting unit, among others. To determine whether goodwill is impaired, we compare an estimate of the fair value of the applicable reporting unit to its carrying value, including goodwill. If the carrying value exceeds the estimated fair value, we compare the implied fair value of the applicable goodwill to its carrying value to measure the amount of goodwill impairment, if any. We perform our annual goodwill impairment test based on our financial position and results of operations as of June 30 of each year, which generally coincides with the finalization of federal and state contract negotiations and our initial budgeting and planning process. The annual impairment tests are based on an evaluation of estimated future discounted cash flows. The estimated discounted cash flows are based on the best information available to us at the time, including supportable assumptions and projections we believe are reasonable. Our discounted cash flow estimates use discount rates that correspond to a weighted-average cost of capital consistent with a market-participant view. The discount rates are consistent with those used for investment decisions and take into account the operating plans and strategies of our operating segments. Certain other key assumptions utilized, including changes in membership, premium, health care costs, operating expenses, fees, assessments and taxes and effective tax rates, are based on estimates consistent with those utilized in our annual budgeting and planning process that we believe are reasonable. However, if we do not achieve the results reflected in the assumptions and estimates, our goodwill impairment evaluations could be adversely affected, and we may impair a portion of our goodwill, which would adversely affect our operating results in the period of impairment. Impairments, if any, would be classified as an operating expense. Based on the results of our annual impairment testing in 2016, we determined that the fair value of each reporting unit substantially exceeded its carrying value and no further goodwill impairment assessment was necessary.
Other intangible assets resulting from our acquisitions include provider networks, broker networks, trademarks, state contracts, non-compete agreements, licenses and permits. We review our other intangible assets for impairment when events or changes in circumstances occur, which may potentially affect the estimated useful life or recoverability of the remaining balances of our intangible assets. Such events and changes in circumstances would include significant changes in membership, state funding, federal and state government contracts and provider networks. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to current forecasts of undiscounted future net cash flows expected to be generated by the assets. Identifiable cash flows are measured at the lowest level for which they are largely independent of the cash flows of other groups of assets and liabilities. If these assets are determined to be impaired, the amount of impairment recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. During 2016 and 2015, no events or circumstances have occurred, which may potentially affect the estimated useful life or recoverability of the remaining balances of our other intangible assets. Accordingly, there were no impairment losses recognized during 2016 or 2015.