Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Oct. 14, 2016 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CENTENE CORP | |
Entity Central Index Key | 1,071,739 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 170,892,049 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 2,982 | $ 1,760 |
Premium and related receivables | 3,445 | 1,279 |
Short term investments | 406 | 176 |
Other current assets | 922 | 390 |
Total current assets | 7,755 | 3,605 |
Long term investments | 4,568 | 1,927 |
Restricted deposits | 137 | 115 |
Property, software and equipment, net | 725 | 518 |
Goodwill | 4,730 | 842 |
Intangible assets, net | 1,566 | 155 |
Other long term assets | 153 | 177 |
Total assets | 19,634 | 7,339 |
Current liabilities: | ||
Medical claims liability | 3,767 | 2,298 |
Accounts payable and accrued expenses | 3,187 | 976 |
Return of premium payable | 651 | 207 |
Unearned revenue | 573 | 143 |
Current portion of long term debt | 845 | 5 |
Total current liabilities | 9,023 | 3,629 |
Long term debt | 3,744 | 1,216 |
Other long term liabilities | 995 | 170 |
Total liabilities | 13,762 | 5,015 |
Commitments and contingencies | ||
Redeemable noncontrolling interests | 148 | 156 |
Stockholders’ equity: | ||
Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued or outstanding at September 30, 2016 and December 31, 2015 | 0 | 0 |
Common stock, $0.001 par value; authorized 400,000,000 shares; 176,467,825 issued and 170,860,752 outstanding at September 30, 2016, and 126,855,477 issued and 120,342,981 outstanding at December 31, 2015 | 0 | 0 |
Additional paid-in capital | 4,154 | 956 |
Accumulated other comprehensive earnings (loss) | 46 | (10) |
Retained earnings | 1,655 | 1,358 |
Treasury stock, at cost (5,607,073 and 6,512,496 shares, respectively) | (145) | (147) |
Total Centene stockholders’ equity | 5,710 | 2,157 |
Noncontrolling interest | 14 | 11 |
Total stockholders’ equity | 5,724 | 2,168 |
Total liabilities and stockholders’ equity | $ 19,634 | $ 7,339 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2016 | Dec. 31, 2015 |
Stockholders' equity | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 400,000,000 | 400,000,000 |
Common stock, shares issued | 176,467,825 | 126,855,477 |
Common stock, shares outstanding | 170,860,752 | 120,342,981 |
Treasury stock (in shares) | 5,607,073 | 6,512,496 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenues: | ||||
Premium | $ 9,625 | $ 4,983 | $ 25,299 | $ 13,974 |
Service | 590 | 480 | 1,603 | 1,434 |
Premium and service revenues | 10,215 | 5,463 | 26,902 | 15,408 |
Premium tax and health insurer fee | 631 | 358 | 1,794 | 1,050 |
Total revenues | 10,846 | 5,821 | 28,696 | 16,458 |
Expenses: | ||||
Medical costs | 8,376 | 4,433 | 22,072 | 12,475 |
Cost of services | 504 | 413 | 1,386 | 1,234 |
General and administrative expenses | 940 | 458 | 2,611 | 1,291 |
Amortization of acquired intangible assets | 43 | 6 | 95 | 18 |
Premium tax expense | 512 | 274 | 1,460 | 794 |
Health insurer fee expense | 129 | 54 | 333 | 161 |
Total operating expenses | 10,504 | 5,638 | 27,957 | 15,973 |
Earnings from operations | 342 | 183 | 739 | 485 |
Other income (expense): | ||||
Investment and other income | 33 | 8 | 80 | 27 |
Interest expense | (57) | (11) | (142) | (32) |
Earnings from continuing operations, before income tax expense | 318 | 180 | 677 | 480 |
Income tax expense | 171 | 87 | 376 | 234 |
Earnings from continuing operations, net of income tax expense | 147 | 93 | 301 | 246 |
Discontinued operations, net of income tax benefit | (1) | 1 | (3) | 0 |
Net earnings | 146 | 94 | 298 | 246 |
(Earnings) attributable to noncontrolling interests | (1) | (1) | (1) | (2) |
Net earnings | 145 | 93 | 297 | 244 |
Amounts attributable to Centene Corporation common shareholders: | ||||
Earnings from continuing operations, net of income tax expense | 146 | 92 | 300 | 244 |
Discontinued operations, net of income tax benefit | (1) | 1 | (3) | 0 |
Net earnings | $ 145 | $ 93 | $ 297 | $ 244 |
Basic: | ||||
Continuing operations (in dollars per share) | $ 0.85 | $ 0.77 | $ 1.93 | $ 2.05 |
Discontinued operations (in dollars per share) | 0 | 0.01 | (0.02) | 0 |
Basic earnings per common share (in dollars per share) | 0.85 | 0.78 | 1.91 | 2.05 |
Diluted: | ||||
Continuing operations (in dollars per share) | 0.84 | 0.75 | 1.89 | 1.99 |
Discontinued operations (in dollars per share) | (0.01) | 0.01 | (0.02) | 0 |
Diluted earnings per common share (in dollars per share) | $ 0.83 | $ 0.76 | $ 1.87 | $ 1.99 |
Weighted average number of common shares outstanding: | ||||
Basic (in shares) | 170,774,587 | 119,121,524 | 155,680,769 | 118,970,853 |
Diluted (in shares) | 174,312,416 | 123,131,810 | 158,960,068 | 122,904,476 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Earnings - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Statement of Comprehensive Income [Abstract] | ||||
Net earnings | $ 146 | $ 94 | $ 298 | $ 246 |
Reclassification adjustment, net of tax | (1) | 0 | 0 | 0 |
Change in unrealized gain on investments, net of tax | 5 | 2 | 57 | 3 |
Foreign currency translation adjustments | (1) | 0 | (1) | (4) |
Other comprehensive earnings (loss) | 3 | 2 | 56 | (1) |
Comprehensive earnings | 149 | 96 | 354 | 245 |
Comprehensive (earnings) attributable to noncontrolling interests | (1) | (1) | (1) | (2) |
Comprehensive earnings attributable to Centene Corporation | $ 148 | $ 95 | $ 353 | $ 243 |
Consolidated Statement of Stock
Consolidated Statement of Stockholders' Equity - 9 months ended Sep. 30, 2016 - USD ($) $ in Millions | Total | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Earnings (Loss) | Retained Earnings | Treasury Stock | Non controlling Interest |
Balance at Dec. 31, 2015 | $ 2,168 | $ 0 | $ 956 | $ (10) | $ 1,358 | $ (147) | $ 11 |
Balance (in shares) at Dec. 31, 2015 | 120,342,981 | 126,855,477 | 6,512,496 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net earnings | $ 297 | 297 | |||||
Other comprehensive earnings, net of $20 tax | 56 | 56 | |||||
Common stock issued for acquisitions | 3,105 | $ 0 | 3,074 | $ 31 | |||
Common stock issued for acquisitions (in shares) | 48,218,310 | (1,375,596) | |||||
Common stock issued for employee benefit plans | 7 | $ 0 | 7 | ||||
Common stock issued for employee benefit plans (in shares) | 1,394,038 | ||||||
Common stock repurchases | (29) | $ (29) | |||||
Common stock repurchases (in shares) | 470,173 | ||||||
Stock compensation expense | 112 | 112 | |||||
Excess tax benefits from stock compensation | 5 | 5 | |||||
Contribution from noncontrolling interest | 3 | 3 | |||||
Balance at Sep. 30, 2016 | $ 5,724 | $ 0 | $ 4,154 | $ 46 | $ 1,655 | $ (145) | $ 14 |
Balance (in shares) at Sep. 30, 2016 | 170,860,752 | 176,467,825 | 5,607,073 |
Consolidated Statement of Stoc7
Consolidated Statement of Stockholders' Equity (Parenthetical) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2016 | Dec. 31, 2015 | |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Other comprehensive earnings, tax | $ 20 | |
Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.001 | 0.001 |
Treasury Stock | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities: | ||
Net earnings | $ 298 | $ 246 |
Adjustments to reconcile net earnings to net cash provided by operating activities | ||
Depreciation and amortization | 189 | 82 |
Stock compensation expense | 112 | 48 |
Deferred income taxes | (17) | (14) |
Gain on contingent consideration | (2) | (37) |
Goodwill and intangible adjustment | 0 | 28 |
Changes in assets and liabilities | ||
Premium and related receivables | (906) | (360) |
Other current assets | (81) | (103) |
Medical claims liabilities | 15 | 394 |
Unearned revenue | 301 | (104) |
Accounts payable and accrued expenses | 99 | 209 |
Other long term liabilities | 156 | 101 |
Other operating activities, net | 91 | (33) |
Net cash provided by operating activities | 255 | 457 |
Cash flows from investing activities: | ||
Capital expenditures | (211) | (101) |
Purchases of investments | (1,528) | (1,077) |
Sales and maturities of investments | 955 | 418 |
Investments in acquisitions, net of cash acquired | (848) | (16) |
Other investing activities, net | 0 | 7 |
Net cash used in investing activities | (1,632) | (769) |
Cash flows from financing activities: | ||
Proceeds from borrowings | 6,956 | 1,305 |
Payment of long term debt | (4,257) | (910) |
Common stock repurchases | (29) | (9) |
Purchase of noncontrolling interest | (14) | 0 |
Debt issue costs | (59) | (4) |
Other financing activities, net | 1 | (15) |
Net cash provided by financing activities | 2,598 | 367 |
Effect of exchange rate changes on cash and cash equivalents | 1 | 0 |
Net increase in cash and cash equivalents | 1,222 | 55 |
Cash and cash equivalents, beginning of period | 1,760 | 1,610 |
Cash and cash equivalents, end of period | 2,982 | 1,665 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 113 | 28 |
Income taxes paid | 394 | 229 |
Equity issued in connection with acquisitions | $ 3,105 | $ 12 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation Basis of Presentation The accompanying interim financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited financial statements included in the Form 10-K for the fiscal year ended December 31, 2015 . The unaudited interim financial statements herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, footnote disclosures which would substantially duplicate the disclosures contained in the December 31, 2015 audited financial statements have been omitted from these interim financial statements where appropriate. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of the interim periods presented. Certain 2015 amounts in the notes to the consolidated financial statements have been reclassified to conform to the 2016 presentation. These reclassifications have no effect on net earnings or stockholders’ equity as previously reported. On March 24, 2016 , the Company completed the acquisition of Health Net, Inc. (Health Net) for approximately $6.0 billion , including the assumption of debt. The acquisition was accounted for as a business combination, which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Those estimated amounts are reflected in the accompanying financial statements. As a result of the completion of the Health Net acquisition, the Company's results of operations for the three and nine months ended September 30, 2016 include the results of operations of Health Net from March 24, 2016 to September 30, 2016 . The Health Net segment previously known as the Western Region Operations, with the exception of certain operations of its pharmaceutical services and behavioral health subsidiaries, is included in the Company's Managed Care segment. The portions of Health Net's Western Region Operations segment included in the Managed Care segment consist of the following Health Net operations: commercial, Medicare, Medicaid and dual eligible health plans, primarily in Arizona, California, Oregon, and Washington. The Company's Specialty Services segment includes the Health Net segment previously known as Government Contracts as well as certain operations of its pharmaceutical services and behavioral health subsidiaries, primarily in Arizona, California, Oregon and Washington (which Health Net previously included in its Western Region Operations segment). Health Net's Government Contracts segment included its federal government-sponsored managed care support contract with the U.S. Department of Defense (DoD) under the TRICARE program in the North Region, its Military and Family Life Counseling (MFLC) contract with the DoD and other health care related government contracts, including the Veterans Choice and Patient Centered Community Care program (PC3/Choice) with the U.S. Department of Veterans Affairs (VA). Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) which introduces a lessee model that requires the majority of leases to be recognized on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in Accounting Standards Codification 606, the FASB's new revenue recognition standard, and addresses other concerns related to the current lessee model. The standard also requires lessors to increase the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. It is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the effect of the new lease guidance. In March 2016, the FASB issued an ASU which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under the new guidance, an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. The ASU also allows an entity to elect as an accounting policy either to continue to estimate the total number of awards for which the requisite service period will not be rendered, as currently required, or to account for forfeitures when they occur. Finally, the ASU modifies the current exception to liability classification of an award when an employer uses a net-settlement feature to withhold shares to meet the employee's minimum statutory tax withholding requirement. The new standard is effective for annual periods beginning after December 15, 2016, including interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the effect of the employee share-based payment guidance. In August 2016, the FASB issued an ASU which clarifies how entities should classify certain cash receipts and cash payments on the Consolidated Statements of Cash Flows. The new guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The new standard is effective for annual periods beginning after December 15, 2017, including interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the effect of the new statement of cash flows guidance. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies A summary of the Company’s significant accounting policies is included in Note 2 entitled “Summary of Significant Accounting Policies” to the company’s Annual Report on Form 10-K for the year ended December 31, 2015. As a result of the Health Net acquisition, material changes to the Company's significant accounting policies during the three and nine months ended September 30, 2016 are described below: Business Combinations Business combinations are accounted for using the acquisition method of accounting. The Company allocates the fair value of purchase consideration to the assets acquired and liabilities assumed based on their fair values at the acquisition date. The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Goodwill is generally attributable to the value of the synergies between the combined companies and the value of the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset. The Company uses its best estimates and assumptions to value assets acquired and liabilities assumed at the acquisition date; however, these estimates are sometimes preliminary and in some instances, all information required to value the assets acquired and liabilities assumed may not be available or final as of the end of a reporting period subsequent to the business combination. If the accounting for the business combination is incomplete, provisional amounts are recorded. The provisional amounts are updated during the period determined, up to one year from the acquisition date. The Company includes the results of operations of acquired businesses in the Company's consolidated results prospectively from the date of acquisition. Acquisition related expenses and post-acquisition restructuring costs are recognized separately from the business combination and are expensed as incurred. Revenue Recognition The Company's health plans generate revenues primarily from premiums received from the states in which it operates health plans. The Company receives a fixed premium per member per month pursuant to its state contracts. The Company generally receives premium payments during the month it provides services and recognizes premium revenue during the period in which it is obligated to provide services to its members. In some instances, the Company's base premiums are subject to an adjustment, or risk score, based on the acuity of its membership. Generally, the risk score is determined by the State analyzing submissions of processed claims data to determine the acuity of the Company's membership relative to the entire state's Medicaid membership. Some states enact premium taxes, similar assessments and provider pass-through payments, collectively premium taxes, and these taxes are recorded as a separate component of both revenues and operating expenses. Some contracts allow for additional premiums related to certain supplemental services provided such as maternity deliveries. Revenues are recorded based on membership and eligibility data provided by the states, which is adjusted on a monthly basis by the states for retroactive additions or deletions to membership data. These eligibility adjustments are estimated monthly and subsequent adjustments are made in the period known. The Company continuously reviews and updates those estimates as new information becomes available. It is possible that new information could require us to make additional adjustments, which could be significant, to these estimates. The Company's Medicare Advantage contracts are with the CMS. CMS deploys a risk adjustment model which apportions premiums paid to all health plans according to health severity and certain demographic factors. The CMS risk adjustment model pays more for members whose medical history would indicate that they are expected to have higher medical costs. Under this risk adjustment methodology, CMS calculates the risk adjusted premium payment using diagnosis data from hospital inpatient, hospital outpatient and physician treatment settings. The Company and the health care providers collect, compile and submit the necessary and available diagnosis data to CMS within prescribed deadlines. The Company estimates risk adjustment revenues based upon the diagnosis data submitted and expected to be submitted to CMS. The Company's specialty services generate revenues under contracts with state and federal programs, healthcare organizations, and other commercial organizations, as well as from our own subsidiaries. Revenues are recognized when the related services are provided or as ratably earned over the covered period of services. The Company recognizes revenue related to administrative services under the T-3 TRICARE government-sponsored managed care support contract in the North Region for the DoD's TRICARE program (T-3 contract) on a straight-line basis over the option period, when the fees become fixed and determinable. The T-3 contract includes various performance-based incentives and penalties. For each of the incentives or penalties, the Company adjusts revenue accordingly based on the amount that it has earned or incurred at each interim date and are legally entitled to in the event of a contract termination. Premium and Related Receivables and Unearned Revenue Premium and service revenues collected in advance are recorded as unearned revenue. For performance-based contracts the Company does not recognize revenue subject to refund until data is sufficient to measure performance. Premiums and service revenues due to the Company are recorded as premium and related receivables and are recorded net of an allowance based on historical trends and management's judgment on the collectibility of these accounts. As the Company generally receives payments during the month in which services are provided, the allowance is typically not significant in comparison to total revenues and does not have a material impact on the presentation of the financial condition or results of operations. Amounts receivable under government contracts are comprised primarily of contractually defined billings, accrued contract incentives under the terms of the contract and amounts related to change orders for services not originally specified in the contract. Pursuant to the Company's T-3 contract, the government has the right to unilaterally modify the contract in certain respects by issuing change orders directing it to implement terms or services that were not originally included in the contract. Following receipt of a change order, the Company has a contractual right to negotiate an equitable adjustment to the contract terms to account for the impact of the change order. The Company starts to perform under such change orders and begins to incur associated costs after it receives the government's unilateral modification, but before it has negotiated the final scope and/or value of the change order. In these situations, costs are expensed as incurred, and the Company estimates and records revenue when it has met all applicable revenue recognition criteria. These criteria include the requirements that change order amounts are determinable, that the Company has performed under the change orders, and that collectability of amounts payable to the Company is reasonably assured. |
Health Net
Health Net | 9 Months Ended |
Sep. 30, 2016 | |
Business Combinations [Abstract] | |
Health Net | Health Net On March 24, 2016 , the Company acquired all of the issued and outstanding shares of Health Net, a publicly traded managed care organization that delivers health care services through health plans and government-sponsored managed care plans. The transaction was valued at approximately $5,990 million , including the assumption of $703 million of outstanding debt. The acquisition allows the Company to offer a more comprehensive and scalable portfolio of solutions and provides opportunity for additional growth across the combined company's markets. The total consideration for the acquisition was $5,287 million , consisting of Centene common shares valued at $3,038 million (based on Centene's stock price of $62.70 ), $2,247 million in cash, and $2 million related to the fair value adjustment to stock based compensation associated with pre-combination service. Each Health Net share was converted into 0.622 of a validly issued, fully paid, non-assessable share of Centene common stock and $28.25 in cash. In total, 48,449,444 shares of Centene common stock were issued in connection with the transaction. The cash portion of the acquisition consideration was funded through the issuance of long-term debt as further discussed in Note 7. Debt . For the three and nine months ended September 30, 2016 , the Company also recognized acquisition related expenses of $10 million and $224 million , respectively, that were recorded in general and administrative expense in the Consolidated Statements of Operations. The acquisition of Health Net has been accounted for as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. The valuation of all the assets acquired and liabilities assumed has not yet been finalized. As a result, preliminary estimates have been recorded and are subject to change. Any necessary adjustments from our preliminary estimates will be finalized within one year from the date of acquisition. Measurement period adjustments will be recorded in the period in which they are determined, as if they had been completed at the acquisition date. Since the initial allocation of purchase price, the Company made adjustments and reclassifications to the fair value of certain assets and liabilities acquired, including the premium and related receivables, medical claims liability, accrued liabilities, return of premium payable and deferred taxes, resulting in a net increase of $275 million to goodwill. The Company will continue to revise its preliminary purchase price allocation as additional information becomes available during the remainder of the measurement period. The Company's preliminary allocation of the fair value of assets acquired and liabilities assumed as of the acquisition date of March 24, 2016 is as follows ($ in millions): Assets Acquired and Liabilities Assumed Cash and cash equivalents $ 1,401 Premium and related receivables (a) 1,258 Short term investments 74 Other current assets 448 Long term investments 2,037 Restricted deposits 30 Property, software and equipment, net 41 Intangible assets (b) 1,500 Other long term assets 136 Total assets acquired 6,925 Medical claims liability 1,453 Borrowings under revolving credit facility 285 Accounts payable and accrued expenses (c) 2,033 Return of premium payable 435 Unearned revenue 130 Long term deferred tax liabilities (d) 330 Long term debt (e) 418 Other long term liabilities 430 Total liabilities assumed 5,514 Total identifiable net assets 1,411 Goodwill (f) 3,876 Total assets acquired and liabilities assumed $ 5,287 The Company has made certain preliminary fair value adjustments based on information reviewed through September 30, 2016 . Significant preliminary fair value adjustments are noted as follows: (a) The preliminary fair value of premium and related receivables approximated their historical cost, with the exception of the risk corridor receivable associated with the Health Insurance Marketplace. The fair value of the risk corridor receivable was estimated at $9 million. (b) The identifiable intangible assets acquired are to be measured at fair value as of the completion of the acquisition. The fair value of intangible assets is determined primarily using variations of the "income approach," which is based on the present value of the future after tax cash flows attributable to each identified intangible asset. Other valuation methods, including the market approach and cost approach, were also considered in estimating the fair value. The Company has estimated the preliminary fair value of intangibles to be $1.5 billion with a weighted average life of 10 years. The Company expects the identifiable intangible assets to include purchased contract rights, provider contracts, trade names and developed technology. The Company is still in the process of finalizing its intangible valuation. (c) Accounts payable and accrued expenses includes approximately $285 million related to premium deficiency reserves based on cost trends existing prior to the acquisition date. The premium deficiency reserves are primarily associated with losses in the individual commercial business, largely in California, unfavorable performance in the Arizona commercial business as well as unfavorable performance in the Medicare business primarily in Oregon and Arizona. The premium deficiency reserve for the individual PPO commercial contracts in California includes anticipated future losses in 2016 associated with substance abuse rehabilitation claims. During the third quarter, the Company lowered the premium deficiency reserve by $15 million , reflecting its revised estimate of substance abuse cost trends. (d) The preliminary deferred tax liabilities are presented net of $526 million of deferred tax assets. (e) Debt is required to be measured at fair value under the acquisition method of accounting. The fair value of Health Net's $400 million Senior Notes assumed in the acquisition was $418 million . The $18 million increase will be amortized as a reduction to interest expense over the remaining life of the debt. (f) The acquisition resulted in $3.9 billion of goodwill related primarily to buyer specific synergies expected from the acquisition and the assembled workforce of Health Net. This goodwill is not deductible for income tax purposes. The assignment of goodwill to the Company's respective segments has not been completed at this time. Statement of Operations From the acquisition date through September 30, 2016 , the Company's Consolidated Statements of Operations include total Health Net revenues of $3,981 million and $8,604 million for the three and nine months ended September 30, 2016 , respectively. It is impracticable to determine the effect on net income resulting from the Health Net acquisition for the three and nine months ended September 30, 2016 , as the Company immediately integrated Health Net into its ongoing operations. Unaudited Pro Forma Financial Information The unaudited pro forma total revenues for the nine months ended September 30, 2016 were $32,369 million . The following table presents supplemental pro forma information for the three and nine months ended September 30, 2015 ($ in millions, except per share data). Three Months Ended Nine Months Ended Total revenues $ 9,960 $ 28,617 Net earnings attributable to Centene Corporation $ 85 $ 215 Diluted earnings per share $ 0.49 $ 1.25 The pro forma results do not reflect any anticipated synergies, efficiencies, or other cost savings of the acquisition. Accordingly, the unaudited pro forma financial information is not indicative of the results if the acquisition had been completed on January 1, 2015 and is not a projection of future results. It is impracticable for the Company to determine the pro forma earnings information for the nine months ended September 30, 2016 due to the nature of obtaining that information as the Company immediately integrated Health Net into its ongoing operations. The unaudited pro forma financial information reflects the historical results of Centene and Health Net adjusted as if the acquisition had occurred on January 1, 2015, primarily for the following: • Additional interest income associated with adjusting the amortized cost of Health Net's investment portfolio to fair value. • Elimination of historical Health Net intangible asset amortization expense and addition of amortization expense based on the current preliminary values of identifiable intangible assets. • Interest expense associated with financing the acquisition and amortization of the fair value adjustment to Health Net's debt. • Additional stock compensation expense related to the amortization of the fair value increase to Health Net rollover stock awards. • Increased tax expense due to the assumption that Centene would be subject to the IRS Regulation 162(m)(6) beginning in 2015. • Elimination of acquisition related costs. Restructuring Related Charges In connection with the Health Net acquisition, the Company undertook a restructuring plan as a result of the integration of Health Net's operations into its business, resulting in a reduction in workforce beginning in 2016 and expected to continue through early 2017. The restructuring related costs are classified as general and administrative expenses in the Consolidated Statements of Operations. Changes in the restructuring liability for the nine months ended September 30, 2016 were as follows ($ in millions): September 30, 2016 Employee Termination Costs Stock Based Compensation Total Total accrued restructuring costs as of December 31, 2015 $ — $ — $ — Charges incurred 39 40 79 Paid/settled (25 ) (40 ) (65 ) Total accrued restructuring costs as of September 30, 2016 $ 14 $ — $ 14 For the three and nine months ended September 30, 2016, the Company recorded employee termination costs of $7 million and $39 million and stock based compensation of $2 million and $40 million , respectively, in the Managed Care Segment. The Company expects to record a total of approximately $50 million of employee termination costs and $44 million of stock based compensation in connection with the acquisition, the majority of which is expected to be incurred through 2016 and early 2017. Commitments In connection with obtaining regulatory approval of the Health Net acquisition from the California Department of Insurance and th e California Department of Managed Health Care, the Company committed to certain undertakings (the Undertakings). The Undertakings included, among other items, operational commitments around premiums, dividend restrictions, minimum Risk Based Capital (RBC) levels, local offices, growth, accreditation, HEDIS scores and other quality measures, network adequacy, certifications, investments and capital expenditures. Specifically, the Company agreed to, among other things: • invest an additional $30 million through the California Organized Investment Network over the five years following completion of the acquisition; • build a service center in an economically distressed community in California, investing $200 million over ten years and employing at least 300 people; • contribute $65 million to improve enrollee health outcomes ( $10 million over ten years), support locally-based consumer assistance programs ( $5 million over five years) and strengthen the health care delivery system ( $50 million over five years), (of which, the present value of $61 million was expensed in the nine months ended September 30, 2016 and classified as general and administrative expenses in the Consolidated Statements of Operations); and • invest $75 million of its investment portfolio in vehicles supporting California’s health care infrastructure. |
Short term and Long term Invest
Short term and Long term Investments, Restricted Deposits | 9 Months Ended |
Sep. 30, 2016 | |
Investments, Debt and Equity Securities [Abstract] | |
Short term and Long term Investments, Restricted Deposits | Short term and Long term Investments, Restricted Deposits Short term and long term investments and restricted deposits by investment type consist of the following ($ in millions): September 30, 2016 December 31, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 288 $ 2 $ — $ 290 $ 431 $ — $ (2 ) $ 429 Corporate securities 1,915 30 (2 ) 1,943 859 2 (8 ) 853 Restricted certificates of deposit 6 — — 6 5 — — 5 Restricted cash equivalents 70 — — 70 78 — — 78 Municipal securities 1,638 24 (1 ) 1,661 496 2 (1 ) 497 Asset-backed securities 289 2 — 291 163 — (1 ) 162 Residential mortgage-backed securities 215 3 (1 ) 217 66 1 — 67 Commercial mortgage-backed securities 341 15 (1 ) 355 40 — — 40 Cost and equity method investments 162 — — 162 71 — — 71 Life insurance contracts 116 — — 116 16 — — 16 Total $ 5,040 $ 76 $ (5 ) $ 5,111 $ 2,225 $ 5 $ (12 ) $ 2,218 The Company’s investments are classified as available-for-sale with the exception of life insurance contracts and certain cost and equity method investments. The Company’s investment policies are designed to provide liquidity, preserve capital and maximize total return on invested assets with the focus on high credit quality securities. The Company limits the size of investment in any single issuer other than U.S. treasury securities and obligations of U.S. government corporations and agencies. As of September 30, 2016 , 95% of the Company’s investments in rated securities carry an investment grade rating by S&P and Moody's. At September 30, 2016 , the Company held certificates of deposit, life insurance contracts and cost and equity method investments which did not carry a credit rating. The Company's residential mortgage-backed securities are primarily issued by the Federal National Mortgage Association, Government National Mortgage Association or Federal Home Loan Mortgage Corporation, which carry implicit or explicit guarantees of the U.S. government. The Company's commercial mortgage-backed securities are primarily senior tranches with a weighted average rating of AA+ and a weighted average duration of 3.3 years at September 30, 2016 . In January 2016, the Company completed a 19% investment in a data analytics business and as a result, issued 1.1 million shares of Centene common stock, valued at $68 million , to the selling stockholders. The investment is being accounted for using the equity method of accounting. The fair value of available-for-sale investments with gross unrealized losses by investment type and length of time that individual securities have been in a continuous unrealized loss position were as follows ($ in millions): September 30, 2016 December 31, 2015 Less Than 12 Months 12 Months or More Less Than 12 Months 12 Months or More Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value U.S. Treasury securities and obligations of U.S. government corporations and agencies $ — $ 4 $ — $ 2 $ (2 ) $ 294 $ — $ 14 Corporate securities (1 ) 309 (1 ) 80 (6 ) 561 (2 ) 41 Municipal securities (1 ) 231 — 32 (1 ) 208 — 5 Asset-backed securities — 29 — 21 (1 ) 121 — 8 Residential mortgage-backed securities (1 ) 45 — — — 30 — — Commercial mortgage-backed securities (1 ) 119 — 1 — 34 — — Total $ (4 ) $ 737 $ (1 ) $ 136 $ (10 ) $ 1,248 $ (2 ) $ 68 As of September 30, 2016 , the gross unrealized losses were generated from 569 positions out of a total of 2,731 positions. The change in fair value of fixed income securities is primarily a result of movement in interest rates subsequent to the purchase of the security. For each security in an unrealized loss position, the Company assesses whether it intends to sell the security or if it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If the security meets this criterion, the decline in fair value is other-than-temporary and is recorded in earnings. The Company does not intend to sell these securities prior to maturity and it is not likely that the Company will be required to sell these securities prior to maturity; therefore, there is no indication of other-than-temporary impairment for these securities. The contractual maturities of short term and long term investments and restricted deposits are as follows ($ in millions): September 30, 2016 December 31, 2015 Investments Restricted Deposits Investments Restricted Deposits Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value One year or less $ 406 $ 406 $ 122 $ 123 $ 176 $ 176 $ 93 $ 93 One year through five years 1,978 2,000 14 14 1,662 1,654 22 22 Five years through ten years 1,098 1,116 — — 267 268 — — Greater than ten years 577 589 — — 5 5 — — Asset-backed securities 845 863 — — — — — — Total $ 4,904 $ 4,974 $ 136 $ 137 $ 2,110 $ 2,103 $ 115 $ 115 Actual maturities may differ from contractual maturities due to call or prepayment options. Cost and equity method investments and life insurance contracts are included in the five years through ten years category. The Company has an option to redeem at amortized cost substantially all of the securities included in the greater than ten years category listed above. The Company continuously monitors investments for other-than-temporary impairment. Certain investments have experienced a decline in fair value due to changes in credit quality, market interest rates and/or general economic conditions. The Company recognizes an impairment loss for cost and equity method investments when evidence demonstrates that it is other-than-temporarily impaired. Evidence of a loss in value that is other-than-temporary may include the absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are categorized based upon observable or unobservable inputs used to estimate fair value. Level inputs are as follows: Level Input: Input Definition: Level I Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. Level II Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date. Level III Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The following table summarizes fair value measurements by level at September 30, 2016 , for assets and liabilities measured at fair value on a recurring basis ($ in millions): Level I Level II Level III Total Assets Cash and cash equivalents $ 2,982 $ — $ — $ 2,982 Investments available for sale: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 215 $ 14 $ — $ 229 Corporate securities — 1,943 — 1,943 Municipal securities — 1,661 — 1,661 Asset-backed securities — 291 — 291 Residential mortgage-backed securities — 217 — 217 Commercial mortgage-backed securities — 355 — 355 Total investments $ 215 $ 4,481 $ — $ 4,696 Restricted deposits available for sale: Cash and cash equivalents $ 70 $ — $ — $ 70 Certificates of deposit 6 — — 6 U.S. Treasury securities and obligations of U.S. government corporations and agencies 61 — — 61 Total restricted deposits $ 137 $ — $ — $ 137 Other long term assets: Interest rate swap agreements $ — $ 25 $ — $ 25 Total assets at fair value $ 3,334 $ 4,506 $ — $ 7,840 The following table summarizes fair value measurements by level at December 31, 2015 , for assets and liabilities measured at fair value on a recurring basis ($ in millions): Level I Level II Level III Total Assets Cash and cash equivalents $ 1,760 $ — $ — $ 1,760 Investments available for sale: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 325 $ 72 $ — $ 397 Corporate securities — 853 — 853 Municipal securities — 497 — 497 Asset-backed securities — 162 — 162 Residential mortgage-backed securities — 67 — 67 Commercial mortgage-backed securities — 40 — 40 Total investments $ 325 $ 1,691 $ — $ 2,016 Restricted deposits available for sale: Cash and cash equivalents $ 78 $ — $ — $ 78 Certificates of deposit 5 — — 5 U.S. Treasury securities and obligations of U.S. government corporations and agencies 32 — — 32 Total restricted deposits $ 115 $ — $ — $ 115 Other long term assets: Interest rate swap agreements $ — $ 11 $ — $ 11 Total assets at fair value $ 2,200 $ 1,702 $ — $ 3,902 Liabilities Other long term liabilities: Interest rate swap agreements $ — $ 2 $ — $ 2 Total liabilities at fair value $ — $ 2 $ — $ 2 The Company periodically transfers U.S. Treasury securities and obligations of U.S. government corporations and agencies between Level I and Level II fair value measurements dependent upon the level of trading activity for the specific securities at the measurement date. The Company’s policy regarding the timing of transfers between Level I and Level II is to measure and record the transfers at the end of the reporting period. At September 30, 2016 , there were no transfers from Level I to Level II and $46 million of transfers from Level II to Level I. The Company utilizes matrix pricing services to estimate fair value for securities which are not actively traded on the measurement date. The Company designates these securities as Level II fair value measurements. The aggregate carrying amount of the Company’s life insurance contracts and other non-majority owned investments, which approximates fair value, was $278 million and $87 million as of September 30, 2016 and December 31, 2015 , respectively. |
Affordable Care Act
Affordable Care Act | 9 Months Ended |
Sep. 30, 2016 | |
Affordable Care Act [Abstract] | |
Affordable Care Act | Affordable Care Act The Affordable Care Act (ACA) established risk spreading premium stabilization programs effective January 1, 2014. These programs, commonly referred to as the “three Rs,” include a permanent risk adjustment program, a transitional reinsurance program, and a temporary risk corridor program. Additionally, the ACA established a minimum annual medical loss ratio. Each of the three R programs are taken into consideration to determine if the Company’s estimated annual medical costs are less than the minimum loss ratio and require an adjustment to Premium revenue to meet the minimum medical loss ratio. During the second quarter of 2016, the Company recognized a $70 million net pre-tax benefit related to the reconciliation of 2015 risk adjustment and reinsurance programs. During the third quarter of 2016, the Company received information from CMS, indicating that some of the participants in the Arizona risk adjustment program were unable to pay the amounts owed. As a result, the uncollected portion has been allocated pro-rata to other insurers in the market. Accordingly, the Company reduced the pre-tax earnings by $19 million during the third quarter. The Company's receivables (payables) for each of these programs are as follows ($ in millions): September 30, 2016 December 31, 2015 Risk adjustment $ (294 ) $ (108 ) Reinsurance 101 24 Risk corridor — (4 ) Minimum medical loss ratio (18 ) (15 ) |
Debt
Debt | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Debt | Debt Debt consists of the following ($ in millions): September 30, 2016 December 31, 2015 $425 million 5.75% Senior notes, due June 1, 2017 $ 426 $ 428 $400 million 6.375% Senior notes, due June 1, 2017 411 — $1,400 million 5.625% Senior notes, due February 15, 2021 1,400 — $1,000 million 4.75% Senior notes, due May 15, 2022 1,008 500 $1,000 million 6.125% Senior notes, due February 15, 2024 1,000 — Fair value of interest rate swap agreements 25 9 Total senior notes 4,270 937 Revolving credit agreement 300 225 Mortgage notes payable 65 67 Capital leases and other 18 6 Debt issuance costs (64 ) (14 ) Total debt 4,589 1,221 Less current portion (845 ) (5 ) Long term debt $ 3,744 $ 1,216 Senior Notes In February 2016, a wholly owned unrestricted subsidiary of the Company (Escrow Issuer) issued $1,400 million in aggregate principal amount of 5.625% Senior Notes ( $1,400 Million Notes ) at par due 2021 and $1,000 million in aggregate principal amount of 6.125% Senior Notes ( $1,000 Million Notes ) at par due 2024 . In July 2016, the Company completed an exchange offer, whereby it offered to exchange all of the outstanding $1,400 Million Notes and the $1,000 Million Notes for identical securities that have been registered under the Securities Act of 1933. The Company used the net proceeds of the offering, together with borrowings under the Company's new $1,000 million revolving credit facility and cash on hand, primarily to fund the cash consideration for the Health Net acquisition, and to pay acquisition and offering related fees and expenses. In connection with the February 2016 issuance, the Company entered into interest rate swap agreements for notional amounts of $600 million and $1,000 million , at floating rates of interest based on the three month LIBOR plus 4.22% and the three month LIBOR plus 4.44% , respectively. Gains and losses due to changes in the fair value of the interest rate swaps completely offset changes in the fair value of the hedged portion of the underlying debt and are recorded as an adjustment to the $1,400 Million Notes and $1,000 Million Notes . In connection with the closing of the Health Net acquisition, the Company assumed the $400 million in aggregate principal amount of Health Net's 6.375% Senior Notes due 2017, recorded at acquisition date fair value of $418 million . In June 2016, the Company issued an additional $500 million in aggregate principal amount of 4.75% Senior Notes due 2022 ( $500 Million Add-on Notes ) at a premium to yield of 4.41% . The $500 Million Add-on Notes were offered as additional debt securities under the indenture governing the $500 million in aggregate principal amount of 4.75% Senior Notes issued in April 2014. The Company used the net proceeds of the offering to repay amounts outstanding under its Revolving Credit Facility and to pay offering related fees and expenses. The indentures governing the $425 million in aggregate principal amount of 5.75% Senior Notes due 2017, the $1,400 Million Notes , the $1,000 million of its 4.75% Senior Notes due 2022, and the $1,000 Million Notes contain non-financial and financial covenants of Centene Corporation, including requirements of a minimum fixed charge coverage ratio. The indentures governing the $400 million notes due 2017 contain non-financial and financial covenants of Health Net, Inc., including requirements of a minimum fixed charge coverage ratio. At September 30, 2016, the Company was in compliance with all covenants. Interest Rate Swaps The Company uses interest rate swap agreements to convert a portion of its interest rate exposure from fixed rates to floating rates to more closely align interest expense with interest income received on its cash equivalent and variable rate investment balances. The Company has $2,350 million of notional amount of interest rate swap agreements consisting of: • $250 million expiring on June 1, 2017 ; • $600 million expiring on February 15, 2021; • $500 million expiring on May 15, 2022 ; and, • $1,000 million expiring on February 15, 2024. Under the Swap Agreements, the Company receives a fixed rate of interest and pays an average variable rate of the three month LIBOR plus 3.88% adjusted quarterly. At September 30, 2016 , the weighted average rate was 4.69% . The Swap Agreements are formally designated and qualify as fair value hedges and are recorded at fair value in the Consolidated Balance Sheets in other assets or other liabilities. Gains and losses due to changes in fair value of the interest rate swap agreements completely offset changes in the fair value of the hedged portion of the underlying debt. Therefore, no gain or loss has been recognized due to hedge ineffectiveness. Offsetting changes in fair value of both the interest rate swaps and the hedged portion of the underlying debt both were recognized in interest expense in the Consolidated Statements of Operations. The Company does not hold or issue any derivative instrument for trading or speculative purposes. Revolving Credit Agreement In connection with the closing of the Health Net acquisition on March 24, 2016 , the Company's existing unsecured $500 million revolving credit facility was terminated and simultaneously replaced with a new $1,000 million unsecured revolving credit facility. Borrowings under the agreement bear interest based upon LIBOR rates, the Federal Funds Rate or the Prime Rate. The agreement has a maturity date of March 24, 2021 . As of September 30, 2016 , the Company had $300 million of borrowings outstanding under the agreement with a weighted average interest rate of 4.25% , and the Company was in compliance with all covenants. The revolving credit facility contains non-financial and financial covenants, including requirements of minimum fixed charge coverage ratios and maximum debt-to-EBITDA ratios. The Company is required to not exceed a maximum debt-to-EBITDA ratio of 3.5 to 1.0 prior to December 31, 2016 and 3.0 to 1.0 on and subsequent to December 31, 2016. As of September 30, 2016 , there were no limitations on the availability under the revolving credit agreement as a result of the debt-to-EBITDA ratio. Also, upon the closing of the Health Net acquisition, the Company assumed, fully repaid $285 million in outstanding borrowings under, and terminated the existing Health Net revolving credit facility. Letters of Credit & Surety Bonds The Company had outstanding letters of credit of $43 million as of September 30, 2016 , which were not part of the revolving credit facility. The Company also had letters of credit for $48 million (valued at September 30, 2016 conversion rate), or €42 million , representing its proportional share of the letters of credit issued to support Ribera Salud’s outstanding debt, which are a part of the revolving credit facility. Collectively, the letters of credit bore interest at 1.44% as of September 30, 2016 . The Company had outstanding surety bonds of $370 million as of September 30, 2016 . |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
Stockholders' Equity | Stockholders' Equity In March 2016, the Company issued 48,449,444 shares of Centene common stock, with a fair value of approximately $3,038 million , paid approximately $2,247 million in cash in exchange for all the outstanding shares of Health Net common stock and outstanding equity awards, and recorded $2 million related to the fair value adjustment to stock based compensation associated with pre-combination service. In January 2016, the Company completed a 19% investment in a data analytics business and as a result, issued 1,144,462 shares of Centene common stock to the selling stockholders. The investment is being accounted for using the equity method of accounting. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share The following table sets forth the calculation of basic and diluted net earnings per common share ($ in millions, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Earnings attributable to Centene Corporation: Earnings from continuing operations, net of tax $ 146 $ 92 $ 300 $ 244 Discontinued operations, net of tax (1 ) 1 (3 ) — Net earnings $ 145 $ 93 $ 297 $ 244 Shares used in computing per share amounts: Weighted average number of common shares outstanding 170,774,587 119,121,524 155,680,769 118,970,853 Common stock equivalents (as determined by applying the treasury stock method) 3,537,829 4,010,286 3,279,299 3,933,623 Weighted average number of common shares and potential dilutive common shares outstanding 174,312,416 123,131,810 158,960,068 122,904,476 Net earnings per common share attributable to Centene Corporation: Basic: Continuing operations $ 0.85 $ 0.77 $ 1.93 $ 2.05 Discontinued operations — 0.01 (0.02 ) — Basic earnings per common share $ 0.85 $ 0.78 $ 1.91 $ 2.05 Diluted: Continuing operations $ 0.84 $ 0.75 $ 1.89 $ 1.99 Discontinued operations (0.01 ) 0.01 (0.02 ) — Diluted earnings per common share $ 0.83 $ 0.76 $ 1.87 $ 1.99 The calculation of diluted earnings per common share for the three and nine months ended September 30, 2016 excludes the impact of 51,593 and 48,380 shares, respectively, related to anti-dilutive restricted stock and restricted stock units. The calculation of diluted earnings per common share for the three and nine months ended September 30, 2015 excludes the impact of 28,716 and 84,644 shares, respectively, related to anti-dilutive restricted stock and restricted stock units. |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Centene operates in two segments: Managed Care and Specialty Services. The Managed Care segment consists of Centene’s health plans including all of the functions needed to operate them. Subsequent to the closing of the Health Net acquisition, the Managed Care segment also includes the operations previously included in Health Net's Western Region Operations Segment, with the exception of certain operations of its pharmaceutical services and behavioral health subsidiaries. The portions of Health Net's Western Region Operations segment included in the Managed Care segment consist of the following Health Net operations: commercial, Medicare, Medicaid and dual eligible health plans, primarily in Arizona, California, Oregon and Washington. The Specialty Services segment consists of Centene’s specialty companies offering auxiliary healthcare services and products. Subsequent to the closing of the Health Net acquisition, the Specialty Services segment also includes the operations previously included in the Government Contracts segment of Health Net as well as certain operations of its pharmaceutical services and behavioral health subsidiaries, the latter of which Health Net previously included in its Western Region Operations segment. The Government Contracts business includes the Company's government-sponsored managed care support contract with the DoD under the TRICARE program in the North Region, the MFLC contract with the DoD, and other health care related government contracts, including PC3/Choice with the VA. Segment information for the three months ended September 30, 2016 , follows ($ in millions): Managed Care Specialty Services Eliminations Consolidated Total Total revenues from external customers $ 10,010 $ 836 $ — $ 10,846 Total revenues from internal customers 55 1,525 (1,580 ) — Total revenues $ 10,065 $ 2,361 $ (1,580 ) $ 10,846 Earnings from operations $ 304 $ 38 $ — $ 342 Segment information for the three months ended September 30, 2015 , follows ($ in millions): Managed Care Specialty Services Eliminations Consolidated Total Total revenues from external customers $ 5,278 $ 543 $ — $ 5,821 Total revenues from internal customers 23 1,274 (1,297 ) — Total revenues $ 5,301 $ 1,817 $ (1,297 ) $ 5,821 Earnings from operations $ 138 $ 45 $ — $ 183 Segment information for the nine months ended September 30, 2016 , follows ($ in millions): Managed Care Specialty Services Eliminations Consolidated Total Total revenues from external customers $ 26,439 $ 2,257 $ — $ 28,696 Total revenues from internal customers 143 4,384 (4,527 ) — Total revenues $ 26,582 $ 6,641 $ (4,527 ) $ 28,696 Earnings from operations $ 618 $ 121 $ — $ 739 Segment information for the nine months ended September 30, 2015 , follows ($ in millions): Managed Care Specialty Services Eliminations Consolidated Total Total revenues from external customers $ 14,857 $ 1,601 $ — $ 16,458 Total revenues from internal customers 73 3,525 (3,598 ) — Total revenues $ 14,930 $ 5,126 $ (3,598 ) $ 16,458 Earnings from operations $ 358 $ 127 $ — $ 485 As discussed in Note 3. Health Net , the assignment of goodwill to the Company's segments has not been completed at this time. The Company will update segment asset disclosures once an allocation is finalized. |
Contingencies
Contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies Overview The Company records reserves and accrues costs for certain legal proceedings and regulatory matters to the extent that it determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While such reserves and accrued costs reflect the Company's best estimate of the probable loss for such matters, the recorded amounts may differ materially from the actual amount of any such losses. In some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and regulatory proceedings, which may be exacerbated by various factors, including but not limited to, they may involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; involve a large number of parties, claimants or regulatory bodies; are in the early stages of the proceedings; involve a number of separate proceedings and/or a wide range of potential outcomes; or result in a change of business practices. As of the date of this report, amounts accrued for legal proceedings and regulatory matters were not material. However, it is possible that in a particular quarter or annual period the Company’s financial condition, results of operations, cash flow and/or liquidity could be materially adversely affected by an ultimate unfavorable resolution of or development in legal and/or regulatory proceedings, including as described below under the headings "Kentucky" and "California." Except for the "Kentucky" and "California" proceedings, the Company believes that the ultimate outcome of any of the regulatory and legal proceedings that are currently pending against it should not have a material adverse effect on financial condition, results of operations, cash flow or liquidity. Kentucky On July 5, 2013, the Company's subsidiary, Kentucky Spirit Health Plan, Inc. (Kentucky Spirit), terminated its contract with the Commonwealth of Kentucky (the Commonwealth). Kentucky Spirit believed it had a contractual right to terminate the contract and filed a lawsuit in Franklin Circuit Court seeking a declaration of this right. In response, the Commonwealth alleged that Kentucky Spirit's exit would constitute a material breach of contract. The Commonwealth seeks to recover substantial damages and to enforce its rights under Kentucky Spirit's $25 million performance bond. The Commonwealth has asserted that the Commonwealth's expenditures due to Kentucky Spirit's departure range from $28 million to $40 million plus interest, and that the associated CMS expenditures range from $92 million to $134 million . Kentucky Spirit disputes the Commonwealth's alleged damages on several grounds. Prior to terminating the contract, Kentucky Spirit filed a legal complaint in April 2013, amended in October 2014, in Franklin Circuit Court seeking damages against the Commonwealth for losses sustained due to the Commonwealth's alleged breaches. On February 6, 2015, the Kentucky Court of Appeals affirmed a Franklin Circuit Court ruling that Kentucky Spirit did not have a contractual right to terminate the contract early. The Court of Appeals also found that the contract’s liquidated damages provision “is applicable in the event of a premature termination of the Contract term.” On April 27, 2016, the Kentucky Supreme Court declined discretionary review, thereby making the Court of Appeals decision final. The question of damages is pending and will be determined by the Franklin Circuit Court. Kentucky Spirit believes it is not liable for damages because there was a prior breach of the contract by the Commonwealth, as alleged in Kentucky Spirit’s complaint. On May 26, 2015, the Commonwealth issued a demand for indemnification to its actuarial firm, for "all defense costs, and any resultant monetary awards in favor of Kentucky Spirit, arising from or related to Kentucky Spirit's claims which are predicated upon the alleged omissions and errors in the Data Book and the certified actuarially sound rates." The actuarial firm moved to intervene in the litigation and the Franklin Circuit Court granted that motion on September 8, 2015. Also, on August 19, 2015, the actuarial firm filed a petition seeking a declaratory judgment that it is not liable to the Commonwealth for indemnification related to the claims asserted by Kentucky Spirit against the Commonwealth. On October 5, 2015, the Commonwealth filed an answer to the actuarial firm's petition and asserted counterclaims/cross-claims against the firm. On March 9, 2015, the Secretary of the Kentucky Cabinet for Health and Family Services (CHFS) issued a determination letter finding that Kentucky Spirit owed the Commonwealth $40 million in actual damages plus prejudgment interest at 8% percent. On March 18, 2015, in a letter to the Kentucky Finance and Administration Cabinet (FAC), Kentucky Spirit contested CHFS' jurisdiction to make such a determination. The FAC did not issue a decision within the required 120 days. On August 13, 2015, Kentucky Spirit filed a declaratory judgment action against the Commonwealth in Franklin Circuit Court seeking a declaration that the Commonwealth may not purport to issue a decision against Kentucky Spirit awarding damages to itself when the matter is already before the Kentucky courts. The Commonwealth filed counterclaims seeking a Declaration of Rights and Entry of Judgment on its determination letter. On December 1, 2015 the Franklin Circuit Court consolidated this declaratory judgment action with Kentucky Spirit’s other litigation claims against the Commonwealth. On August 19, 2016, the Franklin Circuit Court held a status conference with all parties. Discovery is continuing in the consolidated litigation matters. If the litigation is not settled, a trial is expected in the latter half of 2017. The resolution of the Kentucky litigation matters are subject to numerous uncertainties and may result in a range of possible outcomes. If Kentucky Spirit prevails on its claims, it would be entitled to damages. If the Commonwealth prevails, a liability to the Commonwealth could be recorded. California The Company's California subsidiary, Health Net of California, Inc. (Health Net California), has been named as a defendant in a California taxpayer action filed in Los Angeles County Superior Court, captioned as Michael D. Myers v. State Board of Equalization, et al., Los Angeles Superior Court Case No. BS158655. This action is brought under a California statute that permits an individual taxpayer to sue a governmental agency when the taxpayer believes the agency has failed to enforce governing law. Plaintiff contends that Health Net California, a California licensed Health Care Service Plan (HCSP), is an “insurer” for purposes of taxation despite acknowledging it is not an “insurer” under regulatory law. Under California law, “insurers” must pay a gross premiums tax (GPT), calculated as 2.35% on gross premiums. As a licensed HCSP, Health Net California has paid the California Corporate Franchise Tax (CFT), the tax generally paid by California businesses. Plaintiff contends that Health Net California must pay the GPT rather than the CFT. Plaintiff seeks a writ of mandate directing the California taxing agencies to collect the GPT, and seeks an order requiring Health Net California to pay GPT, interest and penalties for a period dating to eight years prior to the October 20, 2015 filing of the complaint. This lawsuit is being coordinated with similar lawsuits filed against other entities. The Company expects an initial status conference shortly after the assignment of a presiding judge. The Company intends to vigorously defend itself against these claims; however this matter is subject to many uncertainties. Miscellaneous Proceedings Excluding the "Kentucky" and "California" matters discussed above, the Company is also routinely subjected to legal and regulatory proceedings in the normal course of business. These matters can include, without limitation: • periodic compliance and other reviews by various federal and state regulatory agencies with respect to requirements applicable to the Company's business, including, without limitation, payment of out-of-network claims, rules relating to pre-authorization penalties, timely review of grievances and appeals, timely and accurate payment of claims, and the Health Insurance Portability and Accountability Act of 1996; • litigation arising out of general business activities, such as tax matters, disputes related to health care benefits coverage or reimbursement, and medical malpractice, privacy, real estate, intellectual property and employment-related claims; • disputes regarding reinsurance arrangements, claims arising out of the acquisition or divestiture of various assets, class actions and claims relating to the performance of contractual and non-contractual obligations to providers, members, employer groups and others, including, but not limited to, the alleged failure to properly pay claims and challenges to the manner in which the Company processes claims, and claims alleging that the Company has engaged in unfair business practices. Among other things, these matters may result in awards of damages, fines or penalties, which could be substantial, and/or could require changes to the Company’s business. The Company intends to vigorously defend itself against the miscellaneous legal and regulatory proceedings to which it is currently a party; however, these proceedings are subject to many uncertainties. In some of the cases pending against the Company, substantial non-economic or punitive damages are being sought. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Business Combinations | Business Combinations Business combinations are accounted for using the acquisition method of accounting. The Company allocates the fair value of purchase consideration to the assets acquired and liabilities assumed based on their fair values at the acquisition date. The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Goodwill is generally attributable to the value of the synergies between the combined companies and the value of the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset. The Company uses its best estimates and assumptions to value assets acquired and liabilities assumed at the acquisition date; however, these estimates are sometimes preliminary and in some instances, all information required to value the assets acquired and liabilities assumed may not be available or final as of the end of a reporting period subsequent to the business combination. If the accounting for the business combination is incomplete, provisional amounts are recorded. The provisional amounts are updated during the period determined, up to one year from the acquisition date. The Company includes the results of operations of acquired businesses in the Company's consolidated results prospectively from the date of acquisition. Acquisition related expenses and post-acquisition restructuring costs are recognized separately from the business combination and are expensed as incurred. |
Revenue Recognition | Revenue Recognition The Company's health plans generate revenues primarily from premiums received from the states in which it operates health plans. The Company receives a fixed premium per member per month pursuant to its state contracts. The Company generally receives premium payments during the month it provides services and recognizes premium revenue during the period in which it is obligated to provide services to its members. In some instances, the Company's base premiums are subject to an adjustment, or risk score, based on the acuity of its membership. Generally, the risk score is determined by the State analyzing submissions of processed claims data to determine the acuity of the Company's membership relative to the entire state's Medicaid membership. Some states enact premium taxes, similar assessments and provider pass-through payments, collectively premium taxes, and these taxes are recorded as a separate component of both revenues and operating expenses. Some contracts allow for additional premiums related to certain supplemental services provided such as maternity deliveries. Revenues are recorded based on membership and eligibility data provided by the states, which is adjusted on a monthly basis by the states for retroactive additions or deletions to membership data. These eligibility adjustments are estimated monthly and subsequent adjustments are made in the period known. The Company continuously reviews and updates those estimates as new information becomes available. It is possible that new information could require us to make additional adjustments, which could be significant, to these estimates. The Company's Medicare Advantage contracts are with the CMS. CMS deploys a risk adjustment model which apportions premiums paid to all health plans according to health severity and certain demographic factors. The CMS risk adjustment model pays more for members whose medical history would indicate that they are expected to have higher medical costs. Under this risk adjustment methodology, CMS calculates the risk adjusted premium payment using diagnosis data from hospital inpatient, hospital outpatient and physician treatment settings. The Company and the health care providers collect, compile and submit the necessary and available diagnosis data to CMS within prescribed deadlines. The Company estimates risk adjustment revenues based upon the diagnosis data submitted and expected to be submitted to CMS. The Company's specialty services generate revenues under contracts with state and federal programs, healthcare organizations, and other commercial organizations, as well as from our own subsidiaries. Revenues are recognized when the related services are provided or as ratably earned over the covered period of services. The Company recognizes revenue related to administrative services under the T-3 TRICARE government-sponsored managed care support contract in the North Region for the DoD's TRICARE program (T-3 contract) on a straight-line basis over the option period, when the fees become fixed and determinable. The T-3 contract includes various performance-based incentives and penalties. For each of the incentives or penalties, the Company adjusts revenue accordingly based on the amount that it has earned or incurred at each interim date and are legally entitled to in the event of a contract termination. |
Premium and Related Receivables and Unearned Revenue | Premium and Related Receivables and Unearned Revenue Premium and service revenues collected in advance are recorded as unearned revenue. For performance-based contracts the Company does not recognize revenue subject to refund until data is sufficient to measure performance. Premiums and service revenues due to the Company are recorded as premium and related receivables and are recorded net of an allowance based on historical trends and management's judgment on the collectibility of these accounts. As the Company generally receives payments during the month in which services are provided, the allowance is typically not significant in comparison to total revenues and does not have a material impact on the presentation of the financial condition or results of operations. Amounts receivable under government contracts are comprised primarily of contractually defined billings, accrued contract incentives under the terms of the contract and amounts related to change orders for services not originally specified in the contract. Pursuant to the Company's T-3 contract, the government has the right to unilaterally modify the contract in certain respects by issuing change orders directing it to implement terms or services that were not originally included in the contract. Following receipt of a change order, the Company has a contractual right to negotiate an equitable adjustment to the contract terms to account for the impact of the change order. The Company starts to perform under such change orders and begins to incur associated costs after it receives the government's unilateral modification, but before it has negotiated the final scope and/or value of the change order. In these situations, costs are expensed as incurred, and the Company estimates and records revenue when it has met all applicable revenue recognition criteria. These criteria include the requirements that change order amounts are determinable, that the Company has performed under the change orders, and that collectability of amounts payable to the Company is reasonably assured. |
Health Net (Tables)
Health Net (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Business Combinations [Abstract] | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The Company's preliminary allocation of the fair value of assets acquired and liabilities assumed as of the acquisition date of March 24, 2016 is as follows ($ in millions): Assets Acquired and Liabilities Assumed Cash and cash equivalents $ 1,401 Premium and related receivables (a) 1,258 Short term investments 74 Other current assets 448 Long term investments 2,037 Restricted deposits 30 Property, software and equipment, net 41 Intangible assets (b) 1,500 Other long term assets 136 Total assets acquired 6,925 Medical claims liability 1,453 Borrowings under revolving credit facility 285 Accounts payable and accrued expenses (c) 2,033 Return of premium payable 435 Unearned revenue 130 Long term deferred tax liabilities (d) 330 Long term debt (e) 418 Other long term liabilities 430 Total liabilities assumed 5,514 Total identifiable net assets 1,411 Goodwill (f) 3,876 Total assets acquired and liabilities assumed $ 5,287 The Company has made certain preliminary fair value adjustments based on information reviewed through September 30, 2016 . Significant preliminary fair value adjustments are noted as follows: (a) The preliminary fair value of premium and related receivables approximated their historical cost, with the exception of the risk corridor receivable associated with the Health Insurance Marketplace. The fair value of the risk corridor receivable was estimated at $9 million. (b) The identifiable intangible assets acquired are to be measured at fair value as of the completion of the acquisition. The fair value of intangible assets is determined primarily using variations of the "income approach," which is based on the present value of the future after tax cash flows attributable to each identified intangible asset. Other valuation methods, including the market approach and cost approach, were also considered in estimating the fair value. The Company has estimated the preliminary fair value of intangibles to be $1.5 billion with a weighted average life of 10 years. The Company expects the identifiable intangible assets to include purchased contract rights, provider contracts, trade names and developed technology. The Company is still in the process of finalizing its intangible valuation. (c) Accounts payable and accrued expenses includes approximately $285 million related to premium deficiency reserves based on cost trends existing prior to the acquisition date. The premium deficiency reserves are primarily associated with losses in the individual commercial business, largely in California, unfavorable performance in the Arizona commercial business as well as unfavorable performance in the Medicare business primarily in Oregon and Arizona. The premium deficiency reserve for the individual PPO commercial contracts in California includes anticipated future losses in 2016 associated with substance abuse rehabilitation claims. During the third quarter, the Company lowered the premium deficiency reserve by $15 million , reflecting its revised estimate of substance abuse cost trends. (d) The preliminary deferred tax liabilities are presented net of $526 million of deferred tax assets. (e) Debt is required to be measured at fair value under the acquisition method of accounting. The fair value of Health Net's $400 million Senior Notes assumed in the acquisition was $418 million . The $18 million increase will be amortized as a reduction to interest expense over the remaining life of the debt. (f) The acquisition resulted in $3.9 billion of goodwill related primarily to buyer specific synergies expected from the acquisition and the assembled workforce of Health Net. This goodwill is not deductible for income tax purposes. The assignment of goodwill to the Company's respective segments has not been completed at this time. |
Schedule of Unaudited Pro Forma Financial Information | The following table presents supplemental pro forma information for the three and nine months ended September 30, 2015 ($ in millions, except per share data). Three Months Ended Nine Months Ended Total revenues $ 9,960 $ 28,617 Net earnings attributable to Centene Corporation $ 85 $ 215 Diluted earnings per share $ 0.49 $ 1.25 |
Restructuring Related Charges | Changes in the restructuring liability for the nine months ended September 30, 2016 were as follows ($ in millions): September 30, 2016 Employee Termination Costs Stock Based Compensation Total Total accrued restructuring costs as of December 31, 2015 $ — $ — $ — Charges incurred 39 40 79 Paid/settled (25 ) (40 ) (65 ) Total accrued restructuring costs as of September 30, 2016 $ 14 $ — $ 14 |
Short term and Long term Inve22
Short term and Long term Investments, Restricted Deposits (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Investments, Debt and Equity Securities [Abstract] | |
Short-Term and Long-Term Investments and Restricted Deposits by Investment Type | Short term and long term investments and restricted deposits by investment type consist of the following ($ in millions): September 30, 2016 December 31, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 288 $ 2 $ — $ 290 $ 431 $ — $ (2 ) $ 429 Corporate securities 1,915 30 (2 ) 1,943 859 2 (8 ) 853 Restricted certificates of deposit 6 — — 6 5 — — 5 Restricted cash equivalents 70 — — 70 78 — — 78 Municipal securities 1,638 24 (1 ) 1,661 496 2 (1 ) 497 Asset-backed securities 289 2 — 291 163 — (1 ) 162 Residential mortgage-backed securities 215 3 (1 ) 217 66 1 — 67 Commercial mortgage-backed securities 341 15 (1 ) 355 40 — — 40 Cost and equity method investments 162 — — 162 71 — — 71 Life insurance contracts 116 — — 116 16 — — 16 Total $ 5,040 $ 76 $ (5 ) $ 5,111 $ 2,225 $ 5 $ (12 ) $ 2,218 |
Fair Value of Available-For-Sale Investments With Gross Unrealized Losses by Investment Type and Length of Time | The fair value of available-for-sale investments with gross unrealized losses by investment type and length of time that individual securities have been in a continuous unrealized loss position were as follows ($ in millions): September 30, 2016 December 31, 2015 Less Than 12 Months 12 Months or More Less Than 12 Months 12 Months or More Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value U.S. Treasury securities and obligations of U.S. government corporations and agencies $ — $ 4 $ — $ 2 $ (2 ) $ 294 $ — $ 14 Corporate securities (1 ) 309 (1 ) 80 (6 ) 561 (2 ) 41 Municipal securities (1 ) 231 — 32 (1 ) 208 — 5 Asset-backed securities — 29 — 21 (1 ) 121 — 8 Residential mortgage-backed securities (1 ) 45 — — — 30 — — Commercial mortgage-backed securities (1 ) 119 — 1 — 34 — — Total $ (4 ) $ 737 $ (1 ) $ 136 $ (10 ) $ 1,248 $ (2 ) $ 68 |
Contractual Maturities of Short-Term and Long-Term Investments and Restricted Deposits | The contractual maturities of short term and long term investments and restricted deposits are as follows ($ in millions): September 30, 2016 December 31, 2015 Investments Restricted Deposits Investments Restricted Deposits Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value One year or less $ 406 $ 406 $ 122 $ 123 $ 176 $ 176 $ 93 $ 93 One year through five years 1,978 2,000 14 14 1,662 1,654 22 22 Five years through ten years 1,098 1,116 — — 267 268 — — Greater than ten years 577 589 — — 5 5 — — Asset-backed securities 845 863 — — — — — — Total $ 4,904 $ 4,974 $ 136 $ 137 $ 2,110 $ 2,103 $ 115 $ 115 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements by Level for Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following table summarizes fair value measurements by level at September 30, 2016 , for assets and liabilities measured at fair value on a recurring basis ($ in millions): Level I Level II Level III Total Assets Cash and cash equivalents $ 2,982 $ — $ — $ 2,982 Investments available for sale: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 215 $ 14 $ — $ 229 Corporate securities — 1,943 — 1,943 Municipal securities — 1,661 — 1,661 Asset-backed securities — 291 — 291 Residential mortgage-backed securities — 217 — 217 Commercial mortgage-backed securities — 355 — 355 Total investments $ 215 $ 4,481 $ — $ 4,696 Restricted deposits available for sale: Cash and cash equivalents $ 70 $ — $ — $ 70 Certificates of deposit 6 — — 6 U.S. Treasury securities and obligations of U.S. government corporations and agencies 61 — — 61 Total restricted deposits $ 137 $ — $ — $ 137 Other long term assets: Interest rate swap agreements $ — $ 25 $ — $ 25 Total assets at fair value $ 3,334 $ 4,506 $ — $ 7,840 The following table summarizes fair value measurements by level at December 31, 2015 , for assets and liabilities measured at fair value on a recurring basis ($ in millions): Level I Level II Level III Total Assets Cash and cash equivalents $ 1,760 $ — $ — $ 1,760 Investments available for sale: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 325 $ 72 $ — $ 397 Corporate securities — 853 — 853 Municipal securities — 497 — 497 Asset-backed securities — 162 — 162 Residential mortgage-backed securities — 67 — 67 Commercial mortgage-backed securities — 40 — 40 Total investments $ 325 $ 1,691 $ — $ 2,016 Restricted deposits available for sale: Cash and cash equivalents $ 78 $ — $ — $ 78 Certificates of deposit 5 — — 5 U.S. Treasury securities and obligations of U.S. government corporations and agencies 32 — — 32 Total restricted deposits $ 115 $ — $ — $ 115 Other long term assets: Interest rate swap agreements $ — $ 11 $ — $ 11 Total assets at fair value $ 2,200 $ 1,702 $ — $ 3,902 Liabilities Other long term liabilities: Interest rate swap agreements $ — $ 2 $ — $ 2 Total liabilities at fair value $ — $ 2 $ — $ 2 |
Affordable Care Act (Tables)
Affordable Care Act (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Affordable Care Act [Abstract] | |
Schedule of Receivables (Payables) Related to the Affordable Care Act Programs | The Company's receivables (payables) for each of these programs are as follows ($ in millions): September 30, 2016 December 31, 2015 Risk adjustment $ (294 ) $ (108 ) Reinsurance 101 24 Risk corridor — (4 ) Minimum medical loss ratio (18 ) (15 ) |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | Debt consists of the following ($ in millions): September 30, 2016 December 31, 2015 $425 million 5.75% Senior notes, due June 1, 2017 $ 426 $ 428 $400 million 6.375% Senior notes, due June 1, 2017 411 — $1,400 million 5.625% Senior notes, due February 15, 2021 1,400 — $1,000 million 4.75% Senior notes, due May 15, 2022 1,008 500 $1,000 million 6.125% Senior notes, due February 15, 2024 1,000 — Fair value of interest rate swap agreements 25 9 Total senior notes 4,270 937 Revolving credit agreement 300 225 Mortgage notes payable 65 67 Capital leases and other 18 6 Debt issuance costs (64 ) (14 ) Total debt 4,589 1,221 Less current portion (845 ) (5 ) Long term debt $ 3,744 $ 1,216 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Calculation of Basic and Diluted Net Earnings Per Common Share | The following table sets forth the calculation of basic and diluted net earnings per common share ($ in millions, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Earnings attributable to Centene Corporation: Earnings from continuing operations, net of tax $ 146 $ 92 $ 300 $ 244 Discontinued operations, net of tax (1 ) 1 (3 ) — Net earnings $ 145 $ 93 $ 297 $ 244 Shares used in computing per share amounts: Weighted average number of common shares outstanding 170,774,587 119,121,524 155,680,769 118,970,853 Common stock equivalents (as determined by applying the treasury stock method) 3,537,829 4,010,286 3,279,299 3,933,623 Weighted average number of common shares and potential dilutive common shares outstanding 174,312,416 123,131,810 158,960,068 122,904,476 Net earnings per common share attributable to Centene Corporation: Basic: Continuing operations $ 0.85 $ 0.77 $ 1.93 $ 2.05 Discontinued operations — 0.01 (0.02 ) — Basic earnings per common share $ 0.85 $ 0.78 $ 1.91 $ 2.05 Diluted: Continuing operations $ 0.84 $ 0.75 $ 1.89 $ 1.99 Discontinued operations (0.01 ) 0.01 (0.02 ) — Diluted earnings per common share $ 0.83 $ 0.76 $ 1.87 $ 1.99 |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Segment Information | Segment information for the three months ended September 30, 2016 , follows ($ in millions): Managed Care Specialty Services Eliminations Consolidated Total Total revenues from external customers $ 10,010 $ 836 $ — $ 10,846 Total revenues from internal customers 55 1,525 (1,580 ) — Total revenues $ 10,065 $ 2,361 $ (1,580 ) $ 10,846 Earnings from operations $ 304 $ 38 $ — $ 342 Segment information for the three months ended September 30, 2015 , follows ($ in millions): Managed Care Specialty Services Eliminations Consolidated Total Total revenues from external customers $ 5,278 $ 543 $ — $ 5,821 Total revenues from internal customers 23 1,274 (1,297 ) — Total revenues $ 5,301 $ 1,817 $ (1,297 ) $ 5,821 Earnings from operations $ 138 $ 45 $ — $ 183 Segment information for the nine months ended September 30, 2016 , follows ($ in millions): Managed Care Specialty Services Eliminations Consolidated Total Total revenues from external customers $ 26,439 $ 2,257 $ — $ 28,696 Total revenues from internal customers 143 4,384 (4,527 ) — Total revenues $ 26,582 $ 6,641 $ (4,527 ) $ 28,696 Earnings from operations $ 618 $ 121 $ — $ 739 Segment information for the nine months ended September 30, 2015 , follows ($ in millions): Managed Care Specialty Services Eliminations Consolidated Total Total revenues from external customers $ 14,857 $ 1,601 $ — $ 16,458 Total revenues from internal customers 73 3,525 (3,598 ) — Total revenues $ 14,930 $ 5,126 $ (3,598 ) $ 16,458 Earnings from operations $ 358 $ 127 $ — $ 485 |
Basis of Presentation (Details)
Basis of Presentation (Details) $ in Millions | Mar. 24, 2016USD ($) |
Health Net, Inc. | |
Business Acquisition [Line Items] | |
Business combination, consideration transferred, including assumed debt | $ 5,990 |
Health Net (Narrative) (Details
Health Net (Narrative) (Details) $ / shares in Units, $ in Millions | Mar. 24, 2016USD ($)$ / sharesshares | Sep. 30, 2016USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2016USD ($) |
Business Acquisition [Line Items] | ||||
Centene's stock price (in dollars per share) | $ / shares | $ 62.7 | |||
Health Net, Inc. | ||||
Business Acquisition [Line Items] | ||||
Business combination, consideration transferred, including assumed debt | $ 5,990 | |||
Assumption of outstanding debt | 703 | |||
Consideration transferred | 5,287 | |||
Common stock issued for acquisition | 3,038 | |||
Payments to acquire business | 2,247 | |||
Fair value adjustment to stock based compensation | $ 2 | |||
Share exchange, per share | 0.622 | |||
Cash paid with each share (in dollars per share) | $ / shares | $ 28.25 | |||
Common stock issued for acquisitions (in shares) | shares | 48,449,444 | |||
Goodwill increase | $ 275 | |||
Revenue of acquiree since acquisition date, actual | $ 3,981 | $ 8,604 | ||
Health Net, Inc. | General and Administrative Expense | ||||
Business Acquisition [Line Items] | ||||
Acquisition related costs | $ 10 | $ 224 |
Health Net (Schedule of Recogni
Health Net (Schedule of Recognized Identified Assets Acquired and Liabilities Assumed) (Details) - USD ($) $ in Millions | Mar. 24, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 |
Business Acquisition [Line Items] | ||||||
Goodwill | $ 4,730 | $ 4,730 | $ 842 | |||
Health Net, Inc. | ||||||
Business Acquisition [Line Items] | ||||||
Cash and cash equivalents | $ 1,401 | |||||
Premium and related receivables | 1,258 | |||||
Short term investments | 74 | |||||
Other current assets | 448 | |||||
Long term investments | 2,037 | |||||
Restricted deposits | 30 | |||||
Property, software and equipment, net | 41 | |||||
Intangible assets, net | 1,500 | |||||
Other long term assets | 136 | |||||
Total assets acquired | 6,925 | |||||
Medical claims liability | 1,453 | |||||
Borrowings under revolving credit facility | 285 | |||||
Accounts payable and accrued expenses | 2,033 | |||||
Return of premium payable | 435 | |||||
Unearned revenue | 130 | |||||
Long term deferred tax liabilities | 330 | |||||
Long term debt | 418 | |||||
Other long term liabilities | 430 | |||||
Total liabilities assumed | 5,514 | |||||
Total identifiable net assets | 1,411 | |||||
Goodwill | 3,876 | |||||
Total assets acquired and liabilities assumed | 5,287 | |||||
Fair value of the risk corridor receivable | $ 9 | |||||
Weighted average life of intangibles | 10 years | |||||
Premium deficiency reserves | $ 285 | 15 | 15 | |||
Deferred tax assets | 526 | |||||
Revenue of acquiree since acquisition date, actual | $ 3,981 | 8,604 | ||||
Unaudited pro forma total revenues | $ 9,960 | $ 32,369 | $ 28,617 | |||
Health Net, Inc. | Senior Notes | ||||||
Business Acquisition [Line Items] | ||||||
Long term debt | 418 | |||||
Face amount of senior notes | 400 | |||||
Unamortized premium | $ 18 |
Health Net (Schedule of Unaudit
Health Net (Schedule of Unaudited Pro Forma Financial Information) (Details) - Health Net, Inc. - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Business Acquisition [Line Items] | |||
Total revenues | $ 9,960 | $ 32,369 | $ 28,617 |
Net earnings attributable to Centene Corporation | $ 85 | $ 215 | |
Diluted earnings per share (in dollars per share) | $ 0.49 | $ 1.25 |
Health Net (Restructuring Relat
Health Net (Restructuring Related Charges) (Details) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2016USD ($) | Sep. 30, 2016USD ($) | |
General and Administrative Expense | ||
Accrued Restructuring Cost [Roll Forward] | ||
Total accrued restructuring costs as of beginning of period | $ 0 | |
Charges incurred | 79 | |
Paid/settled | (65) | |
Total accrued restructuring costs as of end of period | $ 14 | 14 |
Employee Termination Costs | ||
Accrued Restructuring Cost [Roll Forward] | ||
Employee termination costs | 50 | 50 |
Employee Termination Costs | General and Administrative Expense | ||
Accrued Restructuring Cost [Roll Forward] | ||
Total accrued restructuring costs as of beginning of period | 0 | |
Charges incurred | 39 | |
Paid/settled | (25) | |
Total accrued restructuring costs as of end of period | 14 | 14 |
Employee Termination Costs | General and Administrative Expense | Managed Care | ||
Accrued Restructuring Cost [Roll Forward] | ||
Charges incurred | 7 | 39 |
Stock Based Compensation | ||
Accrued Restructuring Cost [Roll Forward] | ||
Employee termination costs | 44 | 44 |
Stock Based Compensation | General and Administrative Expense | ||
Accrued Restructuring Cost [Roll Forward] | ||
Total accrued restructuring costs as of beginning of period | 0 | |
Charges incurred | 40 | |
Paid/settled | (40) | |
Total accrued restructuring costs as of end of period | 0 | 0 |
Stock Based Compensation | General and Administrative Expense | Managed Care | ||
Accrued Restructuring Cost [Roll Forward] | ||
Charges incurred | $ 2 | $ 40 |
Health Net (Commitments) (Detai
Health Net (Commitments) (Details) | 9 Months Ended |
Sep. 30, 2016USD ($)employee | |
Long Term Investment, California Organized Investment Network | |
Other Commitments [Line Items] | |
Committed to undertakings | $ 30,000,000 |
Committed to undertakings, term | 5 years |
Long Term Investment, Service Center in California | |
Other Commitments [Line Items] | |
Committed to undertakings | $ 200,000,000 |
Committed to undertakings, term | 10 years |
Long Term Investment, Improvement in Enrollee Health, Locally Based Consumer Assistance, and Health Care Delivery System | |
Other Commitments [Line Items] | |
Committed to undertakings | $ 65,000,000 |
Long Term Investment, Improvement in Enrollee Health, Locally Based Consumer Assistance, and Health Care Delivery System | General and Administrative Expense | |
Other Commitments [Line Items] | |
Committed to undertakings, expensed | 61,000,000 |
Long Term Investment, Improvement in Enrollee Health | |
Other Commitments [Line Items] | |
Committed to undertakings | $ 10,000,000 |
Committed to undertakings, term | 10 years |
Long Term Investment, Support Locally Based Consumer Assistance | |
Other Commitments [Line Items] | |
Committed to undertakings | $ 5,000,000 |
Committed to undertakings, term | 5 years |
Long Term Investment, Strengthen the Health Care Delivery System | |
Other Commitments [Line Items] | |
Committed to undertakings | $ 50,000,000 |
Committed to undertakings, term | 5 years |
Long Term Investment, Vehicles Supporting California’s Health Care Infrastructure | |
Other Commitments [Line Items] | |
Committed to undertakings | $ 75,000,000 |
Minimum | Long Term Investment, Service Center in California | |
Other Commitments [Line Items] | |
Commitment to employ, employees | employee | 300 |
Short term and Long term Inve34
Short term and Long term Investments, Restricted Deposits (By Investment Type) (Details) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Schedule Of Investments And Restricted Deposits By Type [Line Items] | ||
Amortized Cost | $ 5,040 | $ 2,225 |
Gross Unrealized Gains | 76 | 5 |
Gross Unrealized Losses | (5) | (12) |
Fair Value | 5,111 | 2,218 |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | ||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | ||
Amortized Cost | 288 | 431 |
Gross Unrealized Gains | 2 | 0 |
Gross Unrealized Losses | 0 | (2) |
Fair Value | 290 | 429 |
Corporate securities | ||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | ||
Amortized Cost | 1,915 | 859 |
Gross Unrealized Gains | 30 | 2 |
Gross Unrealized Losses | (2) | (8) |
Fair Value | 1,943 | 853 |
Restricted certificates of deposit | ||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | ||
Amortized Cost | 6 | 5 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | 0 | 0 |
Fair Value | 6 | 5 |
Restricted cash equivalents | ||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | ||
Amortized Cost | 70 | 78 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | 0 | 0 |
Fair Value | 70 | 78 |
Municipal securities | ||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | ||
Amortized Cost | 1,638 | 496 |
Gross Unrealized Gains | 24 | 2 |
Gross Unrealized Losses | (1) | (1) |
Fair Value | 1,661 | 497 |
Asset-backed securities | ||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | ||
Amortized Cost | 289 | 163 |
Gross Unrealized Gains | 2 | 0 |
Gross Unrealized Losses | 0 | (1) |
Fair Value | 291 | 162 |
Residential mortgage-backed securities | ||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | ||
Amortized Cost | 215 | 66 |
Gross Unrealized Gains | 3 | 1 |
Gross Unrealized Losses | (1) | 0 |
Fair Value | 217 | 67 |
Commercial mortgage-backed securities | ||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | ||
Amortized Cost | 341 | 40 |
Gross Unrealized Gains | 15 | 0 |
Gross Unrealized Losses | (1) | 0 |
Fair Value | 355 | 40 |
Cost and equity method investments | ||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | ||
Amortized Cost | 162 | 71 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | 0 | 0 |
Fair Value | 162 | 71 |
Life insurance contracts | ||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | ||
Amortized Cost | 116 | 16 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | 0 | 0 |
Fair Value | $ 116 | $ 16 |
Short term and Long term Inve35
Short term and Long term Investments, Restricted Deposits (Narrative) (Details) $ in Millions | 1 Months Ended | 9 Months Ended |
Jan. 31, 2016USD ($)shares | Sep. 30, 2016position | |
Schedule Of Investments And Restricted Deposits By Type [Line Items] | ||
Investments recorded at fair value that carry rating of AA, weighted average (in years) | 3 years 3 months 18 days | |
Percentage of acquisition | 19.00% | |
New stock issued (in shares) | shares | 1,144,462 | |
Common stock issued for acquisition | $ | $ 68 | |
Positions from which gross unrealized losses were generated | 569 | |
Total unrealized investment positions | 2,731 | |
Rated Securities | External Credit Rating, Investment Grade | ||
Schedule Of Investments And Restricted Deposits By Type [Line Items] | ||
Percentage of investments in rated securities carry an investment grade rating by S&P and Moody's | 95.00% |
Short term and Long term Inve36
Short term and Long term Investments, Restricted Deposits (Fair Value of Available-For-Sale Investments with Gross Unrealized Losses by Investment Type and Length of Time) (Details) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Unrealized Losses | ||
Less Than 12 Months | $ (4) | $ (10) |
12 Months or More | (1) | (2) |
Fair Value | ||
Less Than 12 Months | 737 | 1,248 |
12 Months or More | 136 | 68 |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | ||
Unrealized Losses | ||
Less Than 12 Months | 0 | (2) |
12 Months or More | 0 | 0 |
Fair Value | ||
Less Than 12 Months | 4 | 294 |
12 Months or More | 2 | 14 |
Corporate securities | ||
Unrealized Losses | ||
Less Than 12 Months | (1) | (6) |
12 Months or More | (1) | (2) |
Fair Value | ||
Less Than 12 Months | 309 | 561 |
12 Months or More | 80 | 41 |
Municipal securities | ||
Unrealized Losses | ||
Less Than 12 Months | (1) | (1) |
12 Months or More | 0 | 0 |
Fair Value | ||
Less Than 12 Months | 231 | 208 |
12 Months or More | 32 | 5 |
Asset-backed securities | ||
Unrealized Losses | ||
Less Than 12 Months | 0 | (1) |
12 Months or More | 0 | 0 |
Fair Value | ||
Less Than 12 Months | 29 | 121 |
12 Months or More | 21 | 8 |
Residential mortgage-backed securities | ||
Unrealized Losses | ||
Less Than 12 Months | (1) | 0 |
12 Months or More | 0 | 0 |
Fair Value | ||
Less Than 12 Months | 45 | 30 |
12 Months or More | 0 | 0 |
Commercial mortgage-backed securities | ||
Unrealized Losses | ||
Less Than 12 Months | (1) | 0 |
12 Months or More | 0 | 0 |
Fair Value | ||
Less Than 12 Months | 119 | 34 |
12 Months or More | $ 1 | $ 0 |
Short term and Long term Inve37
Short term and Long term Investments, Restricted Deposits (Contractual Maturities of Short-Term and Long-Term Investments and Restricted Deposits) (Details) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Investments | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized cost, one year or less | $ 406 | $ 176 |
Amortized cost, one year through five years | 1,978 | 1,662 |
Amortized cost, five years through ten years | 1,098 | 267 |
Amortized cost, greater than ten years | 577 | 5 |
Amortized cost, asset-backed securities | 845 | 0 |
Amortized cost, total | 4,904 | 2,110 |
Fair value, one year or less | 406 | 176 |
Fair value, one year through five years | 2,000 | 1,654 |
Fair value, five years through ten years | 1,116 | 268 |
Fair value, greater than ten years | 589 | 5 |
Fair value, asset-backed securities | 863 | 0 |
Fair value, total | 4,974 | 2,103 |
Restricted Deposits | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized cost, one year or less | 122 | 93 |
Amortized cost, one year through five years | 14 | 22 |
Amortized cost, five years through ten years | 0 | 0 |
Amortized cost, greater than ten years | 0 | 0 |
Amortized cost, asset-backed securities | 0 | 0 |
Amortized cost, total | 136 | 115 |
Fair value, one year or less | 123 | 93 |
Fair value, one year through five years | 14 | 22 |
Fair value, five years through ten years | 0 | 0 |
Fair value, greater than ten years | 0 | 0 |
Fair value, asset-backed securities | 0 | 0 |
Fair value, total | $ 137 | $ 115 |
Fair Value Measurements (Fair V
Fair Value Measurements (Fair Value Measurements by Level for Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | $ 2,982 | $ 1,760 |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 229 | 397 |
Corporate securities | 1,943 | 853 |
Municipal securities | 1,661 | 497 |
Asset-backed securities | 291 | 162 |
Total investments | 4,696 | 2,016 |
Cash and cash equivalents | 70 | 78 |
Certificates of deposit | 6 | 5 |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 61 | 32 |
Total restricted deposits | 137 | 115 |
Interest rate swap agreements | 25 | 11 |
Total assets at fair value | 7,840 | 3,902 |
Interest rate swap agreements | 2 | |
Total liabilities at fair value | 2 | |
Residential mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage-backed securities | 217 | 67 |
Commercial mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage-backed securities | 355 | 40 |
Level I | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | 2,982 | 1,760 |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 215 | 325 |
Corporate securities | 0 | 0 |
Municipal securities | 0 | 0 |
Asset-backed securities | 0 | 0 |
Total investments | 215 | 325 |
Cash and cash equivalents | 70 | 78 |
Certificates of deposit | 6 | 5 |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 61 | 32 |
Total restricted deposits | 137 | 115 |
Interest rate swap agreements | 0 | 0 |
Total assets at fair value | 3,334 | 2,200 |
Interest rate swap agreements | 0 | |
Total liabilities at fair value | 0 | |
Level I | Residential mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage-backed securities | 0 | 0 |
Level I | Commercial mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage-backed securities | 0 | 0 |
Level II | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | 0 | 0 |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 14 | 72 |
Corporate securities | 1,943 | 853 |
Municipal securities | 1,661 | 497 |
Asset-backed securities | 291 | 162 |
Total investments | 4,481 | 1,691 |
Cash and cash equivalents | 0 | 0 |
Certificates of deposit | 0 | 0 |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 0 | 0 |
Total restricted deposits | 0 | 0 |
Interest rate swap agreements | 25 | 11 |
Total assets at fair value | 4,506 | 1,702 |
Interest rate swap agreements | 2 | |
Total liabilities at fair value | 2 | |
Level II | Residential mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage-backed securities | 217 | 67 |
Level II | Commercial mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage-backed securities | 355 | 40 |
Level III | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | 0 | 0 |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 0 | 0 |
Corporate securities | 0 | 0 |
Municipal securities | 0 | 0 |
Asset-backed securities | 0 | 0 |
Total investments | 0 | 0 |
Cash and cash equivalents | 0 | 0 |
Certificates of deposit | 0 | 0 |
U.S. Treasury securities and obligations of U.S. government corporations and agencies | 0 | 0 |
Total restricted deposits | 0 | 0 |
Interest rate swap agreements | 0 | 0 |
Total assets at fair value | 0 | 0 |
Interest rate swap agreements | 0 | |
Total liabilities at fair value | 0 | |
Level III | Residential mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage-backed securities | 0 | 0 |
Level III | Commercial mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage-backed securities | $ 0 | $ 0 |
Fair Value Measurements (Narrat
Fair Value Measurements (Narrative) (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Fair Value Disclosures [Abstract] | ||
Transfers from Level I to Level II | $ 0 | |
Transfers from Level II to Level I | 46,000,000 | |
Life insurance contracts and other non-majority owned investments, fair value | $ 278,000,000 | $ 87,000,000 |
Affordable Care Act (Details)
Affordable Care Act (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Sep. 30, 2016 | Jun. 30, 2016 | Dec. 31, 2015 | |
Affordable Care Act [Abstract] | |||
Pre-tax benefit | $ 70 | ||
Reduction in pre-tax benefit | $ 19 | ||
Risk adjustment | (294) | $ (108) | |
Reinsurance | 101 | 24 | |
Risk corridor | 0 | (4) | |
Minimum medical loss ratio | $ (18) | $ (15) |
Debt (Schedule of Debt) (Detail
Debt (Schedule of Debt) (Details) - USD ($) | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 24, 2016 | Feb. 29, 2016 | Dec. 31, 2015 | Apr. 30, 2014 |
Debt Instrument [Line Items] | ||||||
Fair value of interest rate swap agreements | $ 25,000,000 | $ 9,000,000 | ||||
Total senior notes | 4,270,000,000 | 937,000,000 | ||||
Mortgage notes payable | 65,000,000 | 67,000,000 | ||||
Capital leases and other | 18,000,000 | 6,000,000 | ||||
Debt issuance costs | (64,000,000) | (14,000,000) | ||||
Total debt | 4,589,000,000 | 1,221,000,000 | ||||
Less current portion | (845,000,000) | (5,000,000) | ||||
Long term debt | 3,744,000,000 | 1,216,000,000 | ||||
Revolving credit agreement | ||||||
Debt Instrument [Line Items] | ||||||
Revolving credit agreement | 300,000,000 | 225,000,000 | ||||
Senior Notes | $425 million 5.75% Senior notes, due June 1, 2017 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, face amount | $ 425,000,000 | |||||
Interest rate, stated | 5.75% | |||||
Senior notes | $ 426,000,000 | 428,000,000 | ||||
Senior Notes | $400 million 6.375% Senior notes, due June 1, 2017 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, face amount | $ 400,000,000 | $ 400,000,000 | ||||
Interest rate, stated | 6.375% | 6.375% | ||||
Senior notes | $ 411,000,000 | 0 | ||||
Senior Notes | $1,400 million 5.625% Senior notes, due February 15, 2021 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, face amount | $ 1,400,000,000 | $ 1,400,000,000 | ||||
Interest rate, stated | 5.625% | 5.625% | ||||
Senior notes | $ 1,400,000,000 | 0 | ||||
Senior Notes | $1,000 million 4.75% Senior notes, due May 15, 2022 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, face amount | $ 1,000,000,000 | $ 500,000,000 | ||||
Interest rate, stated | 4.75% | 4.75% | 4.75% | |||
Senior notes | $ 1,008,000,000 | 500,000,000 | ||||
Senior Notes | $1,000 million 6.125% Senior notes, due February 15, 2024 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, face amount | $ 1,000,000,000 | $ 1,000,000,000 | ||||
Interest rate, stated | 6.125% | 6.125% | ||||
Senior notes | $ 1,000,000,000 | $ 0 |
Debt (Senior Notes) (Details)
Debt (Senior Notes) (Details) - USD ($) | 1 Months Ended | |||||
Jun. 30, 2016 | Sep. 30, 2016 | Mar. 24, 2016 | Mar. 23, 2016 | Feb. 29, 2016 | Apr. 30, 2014 | |
Health Net, Inc. | ||||||
Debt Instrument [Line Items] | ||||||
Long term debt | $ 418,000,000 | |||||
LIBOR plus 4.22%, Interest Rate Swap | ||||||
Debt Instrument [Line Items] | ||||||
Derivative, notional amount | $ 600,000,000 | |||||
Variable rate of swap (percent) | 4.22% | |||||
LIBOR plus 4.44%, Interest Rate Swap | ||||||
Debt Instrument [Line Items] | ||||||
Derivative, notional amount | $ 1,000,000,000 | |||||
Variable rate of swap (percent) | 4.44% | |||||
Revolving credit agreement | ||||||
Debt Instrument [Line Items] | ||||||
Maximum borrowing capacity | 1,000,000,000 | $ 500,000,000 | ||||
Senior Notes | Health Net, Inc. | ||||||
Debt Instrument [Line Items] | ||||||
Long term debt | 418,000,000 | |||||
Senior Notes | $1,400 million 5.625% Senior notes, due February 15, 2021 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, face amount | $ 1,400,000,000 | $ 1,400,000,000 | ||||
Interest rate, stated | 5.625% | 5.625% | ||||
Senior Notes | $1,000 million 6.125% Senior notes, due February 15, 2024 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, face amount | $ 1,000,000,000 | $ 1,000,000,000 | ||||
Interest rate, stated | 6.125% | 6.125% | ||||
Senior Notes | $400 million 6.375% Senior notes, due June 1, 2017 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, face amount | $ 400,000,000 | $ 400,000,000 | ||||
Interest rate, stated | 6.375% | 6.375% | ||||
Senior Notes | $1,000 million 4.75% Senior notes, due May 15, 2022 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, face amount | $ 1,000,000,000 | $ 500,000,000 | ||||
Interest rate, stated | 4.75% | 4.75% | 4.75% | |||
Effective yield on add-on notes (percent) | 4.41% | |||||
Add-on notes, face amount | $ 500,000,000 | |||||
Senior Notes | $425 million 5.75% Senior notes, due June 1, 2017 | ||||||
Debt Instrument [Line Items] | ||||||
Debt, face amount | $ 425,000,000 | |||||
Interest rate, stated | 5.75% |
Debt (Interest Rate Swaps) (Det
Debt (Interest Rate Swaps) (Details) - USD ($) | Sep. 30, 2016 | Feb. 29, 2016 |
Interest Rate Swap | ||
Debt Instrument [Line Items] | ||
Notional amount of interest rate swap agreements | $ 2,350,000,000 | |
Average variable rate, interest rate swap agreements (percent) | 3.88% | |
Weighted average rate, interest rate swap agreements (percent) | 4.69% | |
June 1, 2017 Expiration, Interest Rate Swap | ||
Debt Instrument [Line Items] | ||
Notional amount of interest rate swap agreements | $ 250,000,000 | |
LIBOR plus 4.22%, Interest Rate Swap | ||
Debt Instrument [Line Items] | ||
Notional amount of interest rate swap agreements | $ 600,000,000 | |
May 15, 2022 Expiration, Interest Rate Swap | ||
Debt Instrument [Line Items] | ||
Notional amount of interest rate swap agreements | $ 500,000,000 | |
LIBOR plus 4.44%, Interest Rate Swap | ||
Debt Instrument [Line Items] | ||
Notional amount of interest rate swap agreements | $ 1,000,000,000 |
Debt (Revolving Credit Agreemen
Debt (Revolving Credit Agreement) (Details) - Revolving credit agreement | Mar. 24, 2016USD ($) | Sep. 30, 2016USD ($) | Mar. 23, 2016USD ($) | Dec. 31, 2015USD ($) |
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity | $ 1,000,000,000 | $ 500,000,000 | ||
Revolving credit agreement | $ 300,000,000 | $ 225,000,000 | ||
Weighted average interest rate (percent) | 4.25% | |||
Ratio of debt to EBITDA, current year | 3.5 | |||
Ratio of debt to EBITDA, after current year | 3 | |||
Line of Credit | ||||
Debt Instrument [Line Items] | ||||
Termination of revolving credit facility | $ 285,000,000 |
Debt (Letters of Credit & Suret
Debt (Letters of Credit & Surety Bonds) (Details) € in Millions, $ in Millions | Sep. 30, 2016USD ($) | Sep. 30, 2016EUR (€) |
Surety Bond | ||
Debt Instrument [Line Items] | ||
Surety bonds | $ 370 | |
Letter of Credit | ||
Debt Instrument [Line Items] | ||
Borrowings outstanding | $ 43 | |
Letters of credit, effective yield (percent) | 1.44% | 1.44% |
Letter of Credit | Ribera Salud | ||
Debt Instrument [Line Items] | ||
Borrowings outstanding | $ 48 | € 42 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) $ in Millions | Mar. 24, 2016 | Jan. 31, 2016 |
Business Acquisition [Line Items] | ||
Percentage of acquisition | 19.00% | |
New stock issued (in shares) | 1,144,462 | |
Health Net, Inc. | ||
Business Acquisition [Line Items] | ||
Common stock issued for acquisitions (in shares) | 48,449,444 | |
Common stock issued for acquisition | $ 3,038 | |
Payments to acquire business | 2,247 | |
Fair value adjustment to stock based compensation | $ 2 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Earnings attributable to Centene Corporation: | ||||
Earnings from continuing operations, net of tax | $ 146 | $ 92 | $ 300 | $ 244 |
Discontinued operations, net of tax | (1) | 1 | (3) | 0 |
Net earnings | $ 145 | $ 93 | $ 297 | $ 244 |
Shares used in computing per share amounts: | ||||
Weighted average number of common shares outstanding (in shares) | 170,774,587 | 119,121,524 | 155,680,769 | 118,970,853 |
Common stock equivalents (as determined by applying the treasury stock method) (in shares) | 3,537,829 | 4,010,286 | 3,279,299 | 3,933,623 |
Weighted average number of common shares and potential dilutive common shares outstanding (in shares) | 174,312,416 | 123,131,810 | 158,960,068 | 122,904,476 |
Basic: | ||||
Continuing operations (in dollars per share) | $ 0.85 | $ 0.77 | $ 1.93 | $ 2.05 |
Discontinued operations (in dollars per share) | 0 | 0.01 | (0.02) | 0 |
Basic earnings per common share (in dollars per share) | 0.85 | 0.78 | 1.91 | 2.05 |
Diluted: | ||||
Continuing operations (in dollars per share) | 0.84 | 0.75 | 1.89 | 1.99 |
Discontinued operations (in dollars per share) | (0.01) | 0.01 | (0.02) | 0 |
Diluted earnings per common share (in dollars per share) | $ 0.83 | $ 0.76 | $ 1.87 | $ 1.99 |
Anti-dilutive restricted stock and restricted stock units excluded from the calculation of diluted earnings per common share (in shares) | 51,593 | 28,716 | 48,380 | 84,644 |
Segment Information (Details)
Segment Information (Details) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($)segment | Sep. 30, 2015USD ($) | |
Segment Reporting [Abstract] | ||||
Number of operating segments | segment | 2 | |||
Segment Reporting Information [Line Items] | ||||
Total revenues | $ 10,846 | $ 5,821 | $ 28,696 | $ 16,458 |
Earnings from operations | 342 | 183 | 739 | 485 |
Managed Care | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 10,010 | 5,278 | 26,439 | 14,857 |
Earnings from operations | 304 | 138 | 618 | 358 |
Specialty Services | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 836 | 543 | 2,257 | 1,601 |
Earnings from operations | 38 | 45 | 121 | 127 |
Operating Segments | Managed Care | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 10,065 | 5,301 | 26,582 | 14,930 |
Operating Segments | Specialty Services | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 2,361 | 1,817 | 6,641 | 5,126 |
Eliminations | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | (1,580) | (1,297) | (4,527) | (3,598) |
Eliminations | Managed Care | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | 55 | 23 | 143 | 73 |
Eliminations | Specialty Services | ||||
Segment Reporting Information [Line Items] | ||||
Total revenues | $ 1,525 | $ 1,274 | $ 4,384 | $ 3,525 |
Contingencies (Details)
Contingencies (Details) - USD ($) $ in Millions | Mar. 09, 2015 | Sep. 30, 2016 |
Commitments and Contingencies Disclosure [Abstract] | ||
Kentucky Spirit performance bond | $ 25 | |
Loss Contingencies [Line Items] | ||
Commonwealth of Kentucky alleged increased program costs | $ 40 | |
Secretary of the Kentucky Cabinet for Health and Family Services determination letter damages prejudgment interest rate (percent) | 8.00% | |
Commonwealth of Kentucky, expenditures due to departure | Minimum | ||
Loss Contingencies [Line Items] | ||
Commonwealth of Kentucky alleged increased program costs | 28 | |
Commonwealth of Kentucky, expenditures due to departure | Maximum | ||
Loss Contingencies [Line Items] | ||
Commonwealth of Kentucky alleged increased program costs | 40 | |
Commonwealth of Kentucky, CMS expenditures | Minimum | ||
Loss Contingencies [Line Items] | ||
Commonwealth of Kentucky alleged increased program costs | 92 | |
Commonwealth of Kentucky, CMS expenditures | Maximum | ||
Loss Contingencies [Line Items] | ||
Commonwealth of Kentucky alleged increased program costs | $ 134 |