Consolidated claims for the year were $2.5 billion, up 7.4% over last year, primarily reflecting the $128.7 million unfavorable prior period reserve development in the Property and Casualty segment related to Hurricane Maria losses. Hurricane Maria was a category 4 hurricane that impacted Puerto Rico in September 2017. In addition, in 2017 the Managed Care segment experienced significantly lower utilization in the aftermath of Hurricanes Irma and Maria. The consolidated loss ratio was up 280 basis points, to 86.0%, and the MLR decreased 110 basis points, to 84.5%.
Investment Income. Investment income consists of interest and dividend income from investment securities. See Note 5, Net Investment Income, of the Notes to Consolidated Financial Statements, included in “Item 8, Financial Statements and Supplementary Data”, of this Annual Report on Form 10-K.
Administrative service fees decreased $1.4 million, or 7.8%, mainly due to lower membership enrolled in this business.
Medical operating expenses increased by $78.1 million, or 22.0%, to $433.0 million. The operating expense ratio increased by 240 basis points to 16.0% in 2018. The higher operating expenses and expense ratio are mostly driven by the reinstatement of the HIP fee in 2018, resulting in an increase of $50.1 million, and professional services and personnel costs related to ongoing operational and clinical initiatives.
Medical premiums generated by the Commercial business decreased by $38.1 million, or 4.5%, to $803.3 million. This fluctuation primarily reflects lower fully-insured enrollment during the year of approximately 228,600 member months and $14.5 million related to the suspension of the HIP fee pass-through; offset by an increase in average premium rates of approximately 5%.
To monitor the solvency of the operations, the BCBSA requires us, TSS, TSA, and TSB to comply with certain specified levels of Risk Based Capital (”RBC”). RBC is designed to identify weakly capitalized companies by comparing each company’s adjusted surplus to its required surplus (RBC ratio). The RBC ratio reflects the risk profile of insurance companies. At December 31, 2018, TSM and TSS estimated RBC ratio was above the 375% minimum BCBSA RBC requirement to avoid monitoring. At December 31, 2018, TSA estimated RBC ratio was above the minimum BCBSA RBC requirement of 100% for smaller controlled affiliate.
The Property and Casualty segment is also member of the Puerto Rico Fire and Allied Lines Underwriting Association and the Puerto Rico Auto Assign Plan. These entities periodically impose assessments to cover operations and other charges. The assessments recorded from these entities were $9 thousand in 2018 and $1 thousand in 2017 and 2016.
Circumstances to be considered in developing our best estimate of reserves include changes in enrollment, utilization levels, unit costs, mix of business, benefit plan designs, provider reimbursement levels, processing system conversions and changes, claim inventory levels, regulatory and legislative requirements, claim processing patterns, and claim submission patterns. A comparison or prior period liabilities to re-estimated claim liabilities based on subsequent claims development is also considered in making the liability determination. In the actuarial process, the methods and assumptions are not changed as reserves are recalculated, but rather the availability of additional paid claims information drives our changes in the re-estimate of the unpaid claim liability. Changes in such development are recorded as a change to current period benefit expense. The re-estimates or recasts are done monthly for the previous four calendar quarters. On average, about 91% of the claims are paid within three months after the last day of the month in which they were incurred and about 5% are within the next three months, for a total of 96% paid within six months after the last day of the month in which they were incurred.
Management expects that substantially all of the development of the 2018 estimate of medical claims payable will be known during 2019.