Actuarial standards of practice generally require the actuarially developed medical claims estimates to cover obligations under an assumption of moderately adverse conditions. Adverse conditions are situations in which the actual claims are expected to be higher than the otherwise estimated value of such claims. In many situations, the claims paid amount experienced will be less than the estimate that satisfies the actuarial standards of practice. Medical claims liabilities are recorded at an amount we estimate to be appropriate. Adjustments of prior years estimates may result in additional medical costs or, as we experienced during the last several years, a reduction in medical costs in the period an adjustment was made. Our reserve models have historically developed favorably suggesting that the accrued liabilities calculated from the models were more than adequate to cover our ultimate liability for unpaid claims. We believe that this favorable development has been a result of good communications between our health plans and our actuarial staff regarding medical utilization, mix of provider rates and other components of medical cost trend.
The change in Medicare Part D related subsidy liabilities identified in the table above represents subsidy amounts received from CMS for reinsurance and for cost sharing related to low income individuals. These subsidies are recorded in medical liabilities and we do not recognize premium revenue or claims expense for these subsidies.
Managed care premium revenue increased primarily as a result of higher membership in our Medicare business in Part D, PFFS, and CCP as a result of successful enrollment for 2009. The revenue increases were also a result of increased Individual membership. Partially offsetting this increase was lower revenue for our Commercial Risk business due to membership declines.
The nature of a majority of our operations is such that cash receipts from premium revenues are typically received up to two months prior to the expected cash payment for related medical costs. Premium revenues are typically received at the beginning of the month in which they are earned, and the corresponding incurred medical expenses are paid in a future time period, typically 15 to 60 days after the date such medical services are rendered. The lag between premium receipts and claims payments creates positive cash flow and overall cash growth. As a result, we typically hold approximately one to two months of “float.” In addition, accumulated earnings provide further positive cash flow. Due to the non-renewal of our PFFS product, we will be paying medical claims in 2010 without the benefit of premium collections for this product. As a result, this will have a negative effect on cash flows. Despite this, the Company has planned for this market exit and accordingly has ample current liquidity. In addition, our long-term investment portfolio is available for further liquidity needs including satisfaction of policy holder benefits.
Our net cash from operating activities in 2009 was $254.5 million higher than 2008. The primary driver of this increase was a change in other receivables related to pharmacy rebate receivable accruals and CMS related receivable accruals. Also contributing to the change in cash from operating activities from 2009 compared to 2008 is the change in other payables, which was the result of incentive compensation accruals in 2009 but not in 2008 and the increase in income taxes payable and Medicare payables during 2009. The increase in other receivables during 2008 and other payables during 2009 was partially offset by a decline in net earnings in 2009 compared to 2008 and a smaller increase in medical liabilities in 2009 than in 2008.
Capital expenditures in 2009 of approximately $60.3 million consisted primarily of computer hardware, software and related costs associated with the development and implementation of improved operational and communication systems. Projected capital expenditures in 2010 of approximately $55-$65 million consisted primarily of computer hardware, software and other equipment.
Although the provisions of any future legislation adopted at the state or federal level cannot be accurately predicted at this time, management believes that the ultimate outcome of currently proposed legislation should not have a material adverse effect on the results of our operations in the short-term. Nevertheless, it is possible that future legislation or regulation could have a significant effect on our operations. See “Government Regulation” under Part I., Item 1 for additional discussion of government regulation that impacts our businesses.
Discontinued Operations - The Company accounts for discontinued operations in accordance with ASC 360-10 “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company determines whether the group of assets being disposed of comprises a component of the entity, which requires cash flows that can be clearly distinguished from the rest of the entity. The Company also determines whether the cash flows associated with the group of assets have been or will be eliminated from the ongoing operations of the Company as a result of the disposal transaction and whether the Company has no significant continuing involvement in the operations of the group of assets after disposal. If these determinations result in an affirmative response, the results of operations of the asset group being disposed of, as well as the gain or loss on disposal are aggregated for separate presentation apart from the continuing operating results of the Company in the Consolidated Statements of Operations. See Note D, Discontinued Operations, to consolidated financial statements for additional disclosure related to our discontinued operations.
A reconciliation of the final risk sharing, low-income subsidy, and reinsurance subsidy amounts is performed following the end of contract year. For both contract years of 2008 and 2009, as of December 31, 2009, the CMS risk sharing payable was $4.8 million and is included in accounts payable and other accrued liabilities and the CMS risk sharing receivable was $9.1 million and is included in other receivables. For both contract years of 2007 and 2008, as of December 31, 2008, the CMS risk sharing payable was $21.4 million and is included in accounts payable and other accrued liabilities and the CMS risk sharing payable was $7.0 million and is included in other receivables. As of December 31, 2009, the reinsurance subsidy amounts payable totaled $84.5 million and is included in medical liabilities and the reinsurance subsidy amounts payable totaled $62.8 million and is included in other receivables. As of December 31, 2008, the reinsurance subsidy amounts payable totaled $55.8 million and is included in medical liabilities and the reinsurance subsidy amounts receivable totaled $12.8 million and is included in other receivables.
The Company’s current income taxes payable has been increased by tax expense resulting from equity based compensation transactions. For the year ended December 31, 2009, these expenses were debited to shareholder’s equity and amounted to $8.1 million. For the year ended December 31, 2008, the Company's current income taxes payable were reduced by tax benefits resulting from equity based transactions. These benefits were credited to shareholder's equity and amounted to approximately $0.4 million.