Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Nov. 04, 2014 | |
Document and Entity Information [Abstract] | ' | ' |
Entity Registrant Name | 'WELLCARE HEALTH PLANS, INC. | ' |
Entity Central Index Key | '0001279363 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Well-known Seasoned Issuer | 'Yes | ' |
Entity Voluntary Filers | 'No | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 43,905,611 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 30-Sep-14 | ' |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, except Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Revenues: | ' | ' | ' | ' |
Premium | $3,396.30 | $2,495.60 | $9,511 | $7,075.30 |
Investment and other income | 11.2 | 4.8 | 34.1 | 13.9 |
Total revenues | 3,407.50 | 2,500.40 | 9,545.10 | 7,089.20 |
Expenses: | ' | ' | ' | ' |
Medical benefits | 2,996.60 | 2,144.70 | 8,460.80 | 6,147.90 |
Selling, general and administrative | 261.5 | 218.8 | 735.7 | 637.6 |
Deferred ACA industry fee amortization | 34.7 | 0 | 103.3 | 0 |
Medicaid premium taxes | 21.3 | 17 | 57 | 59.2 |
Depreciation and amortization | 14.4 | 11 | 44 | 31.8 |
Impairment and other charges | 0 | 0 | 24.1 | 0 |
Interest | 9.5 | 2.1 | 28 | 5.9 |
Total expenses | 3,338 | 2,393.60 | 9,452.90 | 6,882.40 |
Income from operations | 69.5 | 106.8 | 92.2 | 206.8 |
Business Combination, Bargain Purchase, Gain Recognized, Amount | -7.8 | 0 | 31.6 | 0 |
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest | 61.7 | 106.8 | 123.8 | 206.8 |
Income tax expense | 42.4 | 42.8 | 67.9 | 74.4 |
Net income | 19.3 | 64 | 55.9 | 132.4 |
Other comprehensive (loss) income, before tax: | ' | ' | ' | ' |
Change in net unrealized gains and losses on available-for-sale securities | -0.2 | 0 | 1 | -1 |
Income tax expense (benefit) related to other comprehensive income (loss) | -0.2 | 0 | 0 | -0.4 |
Other comprehensive income (loss), net of tax | 0 | 0 | 1 | -0.6 |
Comprehensive income | $19.30 | $64 | $56.90 | $131.80 |
Net income per common share: | ' | ' | ' | ' |
Basic net income per share (in dollars per share) | $0.44 | $1.47 | $1.27 | $3.05 |
Diluted net income per share (in dollars per share) | $0.44 | $1.45 | $1.27 | $3.01 |
Weighted average common shares outstanding: | ' | ' | ' | ' |
Basic (in shares) | 43,885,779 | 43,608,626 | 43,851,759 | 43,470,758 |
Diluted (in shares) | 44,186,034 | 44,037,922 | 44,144,045 | 43,972,446 |
CONSOLIDATED_BALANCE_SHEETS_Un
CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Current Assets: | ' | ' |
Cash and cash equivalents | $1,550,500,000 | $1,482,500,000 |
Investments | 192,000,000 | 314,700,000 |
Premiums receivable, net | 588,600,000 | 490,700,000 |
Pharmacy rebates receivable, net | 323,400,000 | 165,500,000 |
Receivables from government partners | 82,000,000 | 0 |
Funds receivable for the benefit of members | 548,300,000 | 93,500,000 |
Deferred ACA Industry Fee Asset | 34,400,000 | 0 |
Income taxes receivable | 15,600,000 | 7,100,000 |
Prepaid expenses and other current assets, net | 187,800,000 | 115,000,000 |
Deferred income tax asset | 27,600,000 | 23,700,000 |
Total current assets | 3,550,200,000 | 2,692,700,000 |
Property, equipment and capitalized software, net | 162,200,000 | 147,400,000 |
Goodwill | 263,200,000 | 236,800,000 |
Other intangible assets, net | 104,100,000 | 66,500,000 |
Long-term investments | 214,900,000 | 80,400,000 |
Restricted investments | 150,600,000 | 82,500,000 |
Other assets | 10,500,000 | 144,400,000 |
Total Assets | 4,455,700,000 | 3,450,700,000 |
Current Liabilities: | ' | ' |
Medical benefits payable | 1,471,100,000 | 953,400,000 |
Unearned premiums | 4,700,000 | 200,000 |
Accounts payable | 24,700,000 | 22,300,000 |
Other accrued expenses and liabilities | 357,500,000 | 187,700,000 |
Current portion of amount payable related to investigation resolution | 34,900,000 | 36,200,000 |
Other payables to government partners | 21,200,000 | 37,300,000 |
Total current liabilities | 1,914,100,000 | 1,237,100,000 |
Deferred income tax liability | 45,400,000 | 55,400,000 |
Amount payable related to investigation resolution | 0 | 34,100,000 |
Long-term debt | 900,000,000 | 600,000,000 |
Other liabilities | 14,100,000 | 6,200,000 |
Total liabilities | 2,873,600,000 | 1,932,800,000 |
Commitments and contingencies (see Note 11) | 0 | 0 |
Stockholders' Equity: | ' | ' |
Preferred stock, $0.01 par value (20,000,000 authorized, no shares issued or outstanding) | 0 | 0 |
Common stock, $0.01 par value (100,000,000 authorized, 43,886,382 and 43,766,645 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively) | 400,000 | 400,000 |
Paid-in capital | 496,700,000 | 489,400,000 |
Retained earnings | 1,085,300,000 | 1,029,400,000 |
Accumulated other comprehensive loss | -300,000 | -1,300,000 |
Total stockholders' equity | 1,582,100,000 | 1,517,900,000 |
Total Liabilities and Stockholders' Equity | $4,455,700,000 | $3,450,700,000 |
CONSOLIDATED_BALANCE_SHEETS_Un1
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Stockholders' Equity: | ' | ' |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, authorized (in shares) | 20,000,000 | 20,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $0.01 | $0.01 |
Common stock, authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, issued (in shares) | 43,886,382 | 43,766,645 |
Common stock, outstanding (in shares) | 43,886,382 | 43,766,645 |
CONSOLIDATED_STATEMENT_OF_CHAN
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) (USD $) | Total | Common Stock [Member] | Paid in Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Loss [Member] |
In Millions, except Share data, unless otherwise specified | |||||
Balance at Jun. 30, 2014 | ' | ' | ' | ' | ' |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ' | ' | ' | ' | ' |
Common stock issued for exercised stock options | $0.20 | $0 | $0.20 | $0 | $0 |
Common stock issued for exercised stock options (in shares) | ' | 12,567 | ' | ' | ' |
Common stock issued for vested restricted stock, restricted stock units and performance stock units | -2.4 | 0 | -2.4 | 0 | 0 |
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition | 9.2 | 0 | 9.2 | 0 | 0 |
Repurchase and retirement of shares to satisfy tax withholding requirements (shares) | ' | 40,757 | ' | ' | ' |
Repurchase and retirement of shares to satisfy tax withholding requirements | 0 | 0 | 0 | 0 | 0 |
Common stock issued for vested restricted stock, restricted stock units, performance stock units and market stock units (in shares) | ' | 147,927 | ' | ' | ' |
Incremental tax benefit from equity-based compensation | 0.3 | 0 | 0.3 | 0 | 0 |
Comprehensive income | 56.9 | 0 | 0 | 55.9 | 1 |
Balance at Sep. 30, 2014 | $1,582.10 | $0.40 | $496.70 | $1,085.30 | ($0.30) |
Balance (in shares) at Sep. 30, 2014 | 43,886,382 | 43,886,382 | ' | ' | ' |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 9 Months Ended | |
In Millions, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 |
Cash provided by operating activities: | ' | ' |
Net income | $55.90 | $132.40 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Depreciation and amortization | 44 | 31.8 |
Equity-based compensation expense | 9.2 | 12.4 |
Business Combination, Bargain Purchase, Gain Recognized, Amount | -31.6 | 0 |
Other Asset Impairment Charges | 24.1 | 9 |
Deferred ACA industry fee amortization | 103.3 | 0 |
Incremental tax benefit from equity-based compensation | -0.3 | -3 |
Deferred taxes, net | -1.4 | 9.1 |
Provision for doubtful receivables | 11.2 | 7 |
Changes in operating accounts, net of effects from acquisitions: | ' | ' |
Premiums receivable, net | -21.8 | -32.9 |
Pharmacy rebates receivable, net | -125.7 | -18.3 |
Prepaid expenses and other current assets, net | -49.1 | -10.6 |
Medical benefits payable | 406.8 | 160.4 |
Unearned premiums | 0.2 | 0 |
Accounts payable and other accrued expenses | -114.6 | -55 |
Other payables to government partners | -98.1 | -22.9 |
Amount payable related to investigation resolution | -35.4 | -35.7 |
Income taxes receivable/payable, net | -8.2 | 45.8 |
Other, net | 10.9 | 0.2 |
Net cash provided by operating activities | 179.4 | 229.7 |
Cash provided by (used in) investing activities: | ' | ' |
Acquisitions, net of cash acquired | 117 | -40.5 |
Purchases of investments | -290.4 | -354.6 |
Proceeds from sale and maturities of investments | 326.6 | 304 |
Purchases of restricted investments | -68.8 | -41.7 |
Proceeds from maturities of restricted investments | 7 | 28.4 |
Additions to property, equipment and capitalized software, net | -46.4 | -48.9 |
Net cash provided by (used in) investing activities | 45 | -153.3 |
Cash (used in) provided by financing activities: | ' | ' |
Proceeds from issuance of debt, net of financing costs paid | 298.6 | 228.5 |
Proceeds from exercises of stock options | 0.2 | 8.6 |
Incremental tax benefit from equity-based compensation | 0.3 | 3 |
Repurchase and retirement of shares to satisfy tax withholding requirements | -2.4 | -4.1 |
Payments on debt | 0 | -28.5 |
Payments on capital leases | -1.1 | -1 |
Funds receivable for the benefit of members, net | -452 | 7.2 |
Net cash (used in) provided by financing activities | -156.4 | 213.7 |
Increase in cash and cash equivalents | 68 | 290.1 |
Balance at beginning of period | 1,482.50 | 1,100.50 |
Balance at end of period | 1,550.50 | ' |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ' | ' |
Cash paid for taxes | 68.2 | 22.3 |
Cash paid for interest | 18.1 | 5.3 |
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS: | ' | ' |
Non-cash additions to property, equipment, and capitalized software | $2.30 | $2.40 |
ORGANIZATION_BASIS_OF_PRESENTA
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||||||
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||
1. ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | |||||||||
WellCare Health Plans, Inc. (the "Company," "we," "us," or "our"), provides managed care services for government-sponsored health care coverage with a focus on Medicaid and Medicare programs. The Company was formed as a Delaware limited liability company in May 2002 to acquire our Florida, New York and Connecticut health plans. We completed the acquisition of the health plans through two concurrent transactions in July 2002. In July 2004, immediately prior to the closing of our initial public offering, we merged the limited liability company into a Delaware corporation and changed our name to WellCare Health Plans, Inc. | |||||||||
As of September 30, 2014, we served approximately 4.0 million members. During the nine months ended September 30, 2014, we operated Medicaid health plans in Florida, Georgia, Hawaii, Illinois, Kentucky, Missouri, New Jersey, New York and South Carolina. In connection with our acquisitions of Medicaid plans in South Carolina and Missouri (see Note 2), our Medicaid operations in those states began in February 2013 and April 2013, respectively. | |||||||||
Our Medicaid contract in Ohio expired on June 30, 2012. We were not awarded a Medicaid contract in Ohio for the 2013 fiscal year; however, the state contracted with us to provide services to Ohio Medicaid beneficiaries through the transition period, which ended June 30, 2013. As of July 1, 2013, we no longer provided Medicaid services in Ohio. The Ohio Medicaid contract accounted for approximately $127.0 million, or 1.8%, of our consolidated premium revenue for the nine months ended September 30, 2013. | |||||||||
As of September 30, 2014, we also operated Medicare Advantage ("MA") coordinated care plans ("CCPs") in Arizona, Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Kentucky, Louisiana, Mississippi, Missouri, New Jersey, New York, Ohio, South Carolina, Tennessee and Texas, as well as stand-alone Medicare prescription drug plans ("PDP") in 49 states and the District of Columbia. Our MA plans in Arkansas, Mississippi, South Carolina and Tennessee are attributable to our acquisition of Windsor Health Group, Inc. ("Windsor") and our MA operations in those states began on January 1, 2014, as discussed below. | |||||||||
Acquisitions | |||||||||
On January 1, 2014, we acquired all of the outstanding stock of Windsor from Munich Health North America, Inc., a part of Munich Re Group. Through its subsidiaries, Windsor serves Medicare beneficiaries with MA, PDP and Medicare Supplement products. As of September 30, 2014, Windsor offered MA plans in 192 counties in the states of Arkansas, Mississippi, South Carolina and Tennessee, through which it served 37,000 members. In addition, one of Windsor’s subsidiaries offers Medicare Supplement insurance policies through which it served 45,000 members in 39 states as of September 30, 2014. Windsor also offers PDPs in 11 of the 34 CMS regions, through which it served approximately 105,000 beneficiaries as of September 30, 2014. We included the results of Windsor's operations from the date of acquisition in our condensed consolidated financial statements. | |||||||||
Effective January 1, 2014, we began offering Medicaid managed care in Essex, Hudson, Middlesex, Passaic and Union counties in New Jersey. In addition, effective July 1, 2014, our New Jersey subsidiary completed the acquisition of Medicaid assets from Healthfirst Health Plans of New Jersey, Inc., ("Healthfirst NJ"). The acquired assets primarily relate to approximately 42,000 Healthfirst NJ Medicaid members who were transferred to our Medicaid plan in New Jersey, as well as to certain provider agreements which transferred to us. As a result, effective July 1, 2014, we offer Medicaid managed care in 10 counties in New Jersey. | |||||||||
Basis of Presentation and Use of Estimates | |||||||||
The accompanying unaudited condensed consolidated balance sheets and statements of comprehensive income, changes in stockholders' equity, and cash flows include the accounts of the Company and all of its majority-owned subsidiaries. We eliminated all intercompany accounts and transactions. | |||||||||
The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended December 31, 2013 included in our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission in February 2014. Results for the interim periods presented are not necessarily indicative of results that may be expected for the entire year or any other interim period. | |||||||||
In the opinion of management, the interim financial statements reflect all normal recurring adjustments that we consider necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods presented. In accordance with GAAP, we make certain estimates and assumptions that affect the amounts reported in the condensed consolidated interim financial statements and accompanying notes. We base these estimates on our knowledge of current events and anticipated future events and evaluate and update our assumptions and estimates on an ongoing basis; however, actual results may differ from our estimates. We evaluated all material events subsequent to the date of these condensed consolidated interim financial statements. | |||||||||
Significant Accounting Policies | |||||||||
Revenue Recognition | |||||||||
We earn premium revenue through our participation in Medicaid, Medicaid-related and Medicare programs. | |||||||||
State governments individually operate and implement and, together with the federal government's Centers for Medicare & Medicaid Services ("CMS"), fund and regulate the Medicaid program. We provide benefits to low-income and disabled persons under the Medicaid program and are paid premiums based on contracts with government agencies in the states in which we operate health plans. Our Medicaid contracts are generally multi-year contracts subject to annual renewal provisions. Rate changes are typically made at the commencement of each new contract renewal period. In some instances, our fixed Medicaid premiums are subject to risk score adjustments based on the acuity of our membership. State agencies analyze encounter submissions of processed claims data to determine the acuity of our membership relative to the entire state's Medicaid membership. | |||||||||
We operate our MA plans under the Medicare Part C program and provide our eligible members with benefits comparable to those available under Medicare Parts A and B. Most of our MA plans and all of our PDPs offer prescription drug benefits to eligible members under the Medicare Part D program. Premiums for each MA member are based on our annual bids, although the rates vary according to a combination of factors, including upper payment limits established by CMS, the member's geographic location, age, gender, medical history or condition, or the services rendered to the member. Our MA contracts with CMS generally have terms of one year and expire at the end of each calendar year. PDP premiums are also based upon contracts with CMS that have a term of one year and expire at the end of each calendar year. We provide annual written bids to CMS for our PDPs, which reflect the estimated costs of providing prescription drug benefits over the plan year. Changes in MA and PDP members' health status also impact monthly premiums as described under "Risk-Adjusted Medicare Premiums" below. CMS pays all of the premium for Medicare Part C and substantially all of the premium for Medicare Part D coverage. We bill the remaining Medicare Part D premium to PDP and MA members with Part D benefits based on the plan year bid submitted to CMS. For qualifying low-income subsidy ("LIS") members, CMS pays for some or all of the LIS members' monthly premium. The CMS payment is dependent upon the member's income level as determined by the Social Security Administration. | |||||||||
We receive premiums from CMS and state agencies on a per member per month ("PMPM") basis for the members that are assigned to, or have selected, us to provide health care services under our Medicare and Medicaid contracts. We recognize premium revenue in the period in which we are obligated to provide services to our members. CMS and state agencies generally pay us in the month in which we provide services. We record premiums earned, but not received, as premiums receivable and record premiums received in advance of the period of service as unearned premiums in the condensed consolidated balance sheets. Unearned premiums are recognized as revenue when we provide the related services. On a monthly basis, we bill members for any premiums for which they are responsible according to their respective plan. Member premiums are recognized as revenue in the period of service. We reduce recorded premium revenue and member premiums receivable by the amount we estimate may not be collectible, based on our evaluation of historical trends. We also routinely monitor the collectability of premiums receivable from CMS and state agencies, including Medicaid receivables for obstetric deliveries and newborns and net receivables for member retroactivity. We reduce revenue and premiums receivable by the amounts we estimate may not be collectible. We report premiums receivable, net of an allowance for uncollectible premiums receivable, which was $22.2 million and $15.8 million, at September 30, 2014 and December 31, 2013, respectively. Historically, the allowance for member premiums receivable has not been material relative to consolidated premium revenue. | |||||||||
We record retroactive adjustments to revenues based on changes in the number and eligibility status of our members subsequent to when we recorded revenue related to those members and months of service. We receive premium payments based upon eligibility lists produced by CMS and state agencies. We verify these lists to determine whether we have been paid for the correct premium category and program. From time to time, CMS and state agencies require us to reimburse them for premiums that we received for individuals who were subsequently determined by us, or by CMS or state agencies, to be ineligible for any government-sponsored program or to belong to a plan other than ours. We receive additional premiums from CMS and state agencies for individuals who were subsequently determined to belong to our plan for periods in which we received no premium for those members. We estimate the amount of outstanding retroactivity adjustments and adjust premium revenue based on historical trends, premiums billed, the volume of member and contract renewal activity and other information. We record amounts receivable or payable in premiums receivable, net and other accrued expenses and liabilities in the condensed consolidated balance sheets. | |||||||||
Supplemental Medicaid Premiums | |||||||||
We earn, or earned, supplemental premium payments for eligible obstetric deliveries and newborns of our Medicaid members in Georgia, Illinois, Kentucky, Missouri, New York, South Carolina and, until June 30, 2013, in Ohio. Each state Medicaid contract specifies how and when these supplemental payments are earned and paid. Upon delivery of a newborn, we notify the state agency according to the contract terms. We also earn supplemental Medicaid premium payments in some states for high cost drugs and certain services such as early childhood prevention screenings. We recognize supplemental premium revenue in the period we provide related services to our members. | |||||||||
Risk-Adjusted Medicare Premiums | |||||||||
CMS employs a risk-adjustment model to determine the premium amount it pays for each MA and PDP member. This model apportions premiums paid to all plans according to the health status of each beneficiary enrolled, resulting in higher scores for members with predictably higher costs. The model uses diagnosis data from inpatient and ambulatory treatment settings to calculate each risk score. We collect claims and encounter data for our MA members and submit the necessary diagnosis data to CMS within prescribed deadlines. After reviewing the respective submissions, CMS establishes the premium payments to MA plans at the beginning of the plan year, and then adjusts premium levels on a retroactive basis. The first retroactive adjustment for a given plan year generally occurs during the third quarter of that year and represents the update of risk scores for the current plan year based on the severity of claims incurred in the prior plan year. CMS then issues a final retroactive risk-adjusted premium settlement for that plan year in the following year. | |||||||||
We develop our estimates for risk-adjusted premiums utilizing historical experience and predictive models as sufficient member risk score data becomes available over the course of each CMS plan year. We populate our models with available risk score data on our members and base risk premium adjustments on risk score data from the previous year. We are not privy to risk score data for members new to our plans in the current plan year; therefore we include assumptions regarding these members' risk scores. We periodically revise our estimates of risk-adjusted premiums as additional diagnosis code information is reported to CMS and adjust our estimates to actual amounts when the ultimate adjustment settlements are either received from CMS or we receive notification from CMS of such settlement amounts. As a result of the variability of factors that determine our estimates for risk-adjusted premiums, the actual amount of the CMS retroactive payment could be materially more or less than our estimates and could have a material effect on our results of operations, financial position and cash flows. We record any changes in estimates in current operations as adjustments to premium revenue. Historically, we have not experienced significant differences between our estimates and amounts ultimately received. However, in the third quarter of 2013, we recognized risk adjusted premium received as part of the 2012 final settlement that was higher than our original estimates, mainly related to members in our California MA plan that were new to Medicare in 2012. The data provided to CMS to determine members' risk scores is subject to audit by CMS even after the annual settlements occur. An audit may result in the refund of premiums to CMS. While our experience to date has not resulted in a material refund, future refunds could materially reduce premium revenue in the year in which CMS determines a refund is required and could be material to our results of operations, financial position and cash flows. Premiums receivable in the accompanying condensed consolidated balance sheets include risk-adjusted premiums receivable of $134.7 million and $107.2 million as of September 30, 2014 and December 31, 2013, respectively. | |||||||||
Minimum Medical Expense and Risk Corridor Provisions | |||||||||
We may be required to refund certain premium revenue to CMS and state government agencies under various contractual and plan arrangements. We estimate the impact of the following arrangements on a monthly basis and reflect any adjustments to premium revenues in current operations. We report the estimated net amounts due to CMS and state agencies in other payables to government partners in the condensed consolidated balance sheets. | |||||||||
Certain of our Medicaid contracts require us to expend a minimum percentage of premiums on eligible medical benefits expense. To the extent that we expend less than the minimum percentage of the premiums on eligible medical benefits, we are required to refund to the state all or some portion of the difference between the minimum and our actual allowable medical benefits expense. We estimate the amounts due to the state agencies as a return of premium based on the terms of our contracts with the applicable state agency. | |||||||||
Our MA and PDP prescription drug plan premiums are subject to risk sharing through the CMS Medicare Part D risk corridor provisions. The risk corridor calculation compares our actual experience to the target amount of prescription drug costs, limited to costs under the standard coverage as defined by CMS, less rebates included in our submitted plan year bid. We receive additional premium from CMS if our actual experience is more than 5% above the target amount. We refund premiums to CMS if our actual experience is more than 5% below the target amount. After the close of the annual plan year, CMS performs the risk corridor calculation and any differences are settled between CMS and our plans. We have not historically experienced material differences between the subsequent CMS settlement amount and our estimates. | |||||||||
Beginning in 2014, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the "ACA"), requires the establishment of a minimum medical loss ratio (“MLR”) for MA plans and Part D plans, requiring them to spend not less than 85% of premiums on medical benefits. The rules implementing the minimum MLR impose financial and other penalties for failing to achieve the minimum MLR, including requirements to refund to CMS shortfalls in amounts spent on medical benefits and termination of a plan’s MA contract for prolonged failure to achieve the minimum MLR. MLR is determined by adding a plan’s spending for clinical services, prescription drugs and other direct patient benefits, plus its total spending on quality improvement activities and dividing the total by earned premiums (after subtracting specific identified taxes and other fees). We do not expect these provisions to have a material impact to our results of operations in 2014. | |||||||||
Medicare Part D Settlements | |||||||||
We receive certain Part D prospective subsidy payments from CMS for our MA and PDP members based on the estimated costs of providing prescription drug benefits over the plan year, as reflected in our bids. After the close of the annual plan year, CMS reconciles our actual experience to the prospective payments we received and any differences are settled between CMS and our plans. As such, these subsidies represent funding from CMS for which we assume no risk. We do not recognize the receipt of these subsidies as premium revenue and we do not recognize the payments of related prescription drug benefits as medical benefits expense. We report the subsidies received and benefits paid on a net basis as funds receivable (held) for the benefit of members in the condensed consolidated balance sheets. We also report the net receipts and payments as a financing activity in our condensed consolidated statements of cash flows. CMS pays the following subsidies prospectively as a fixed PMPM amount based upon the plan year bid submitted by us: | |||||||||
Low-Income Cost Sharing Subsidy—CMS reimburses us for all or a portion of qualifying LIS members' deductible, coinsurance and co-payment amounts above the out-of-pocket threshold. | |||||||||
Catastrophic Reinsurance Subsidy—CMS reimburses us for 80% of the drug costs after a member reaches his or her out-of-pocket catastrophic threshold through a catastrophic reinsurance subsidy. | |||||||||
Coverage Gap Discount Subsidy—We advance the pharmaceutical manufacturers gap coverage discounts at the point of sale. On a periodic basis, CMS bills pharmaceutical manufacturers for discounts advanced by us. Pharmaceutical manufacturers remit payments for invoiced amounts directly to us. CMS reduces subsequent prospective payments made to us by the discount amounts billed to manufacturers. | |||||||||
CMS generally performs the Part D payment reconciliation in the fourth quarter of the following plan year based on prescription drug event data we submit to CMS within prescribed deadlines. After the Part D payment reconciliation for coverage gap discount subsidies, we may continue to report discounts to CMS for 37 months following the end of the plan year. CMS will invoice manufacturers for these discounts and we will be paid through the quarterly manufacturer payments. Historically, we have not experienced material adjustments related to the CMS annual reconciliation of prior plan year low-income cost sharing, catastrophic reinsurance, and coverage gap discount subsidies. | |||||||||
Medical Benefits and Medical Benefits Payable | |||||||||
We recognize the cost of medical benefits in the period in which services are provided, including an estimate of the cost of medical benefits incurred but not reported ("IBNR"). Medical benefits expense includes direct medical expenses and certain medically-related administrative costs. | |||||||||
Direct medical expenses include amounts paid or payable to hospitals, physicians and providers of ancillary services, such as laboratories and pharmacies. We also record direct medical expenses for estimated referral claims related to health care providers under contract with us who are financially troubled or insolvent and who may not be able to honor their obligations for the costs of medical services provided by others. In these instances, we may be required to honor these obligations for legal or business reasons. Based on our current assessment of providers under contract with us, such losses have not been, and are not expected to be, significant. We record direct medical expense for our estimates of provider settlement due to clarification of contract terms, out-of-network reimbursement, claims payment differences and amounts due to contracted providers under risk-sharing arrangements. We estimate pharmacy rebates earned based on historical utilization of specific pharmaceuticals, current utilization and contract terms and record amounts as a reduction of recorded direct medical expenses. | |||||||||
Consistent with the criteria specified and defined in guidance issued by the Department of Health and Human Services ("HHS") for costs that qualify to be reported as medical benefits under the minimum medical loss ratio provision of the ACA, we record certain medically-related administrative costs such as preventive health and wellness, care management, and other quality improvement costs, as medical benefits expense. All other medically-related administrative costs, such as utilization review services, network and provider credentialing and claims handling costs, are recorded in selling, general, and administrative expense. | |||||||||
Medical benefits payable represents amounts for claims fully adjudicated but not yet paid and estimates for IBNR. Our estimate of IBNR is the most significant estimate included in our condensed consolidated financial statements. We determine our best estimate of the base liability for IBNR utilizing consistent standard actuarial methodologies based upon key assumptions which vary by business segment. Our assumptions include current payment experience, trend factors and completion factors. Trend factors in our standard actuarial methodologies include contractual requirements, historic utilization trends, the interval between the date services are rendered and the date claims are paid, denied claims activity, disputed claims activity, benefit changes, expected health care cost inflation, seasonality patterns, maturity of lines of business, changes in membership and other factors. | |||||||||
After determining an estimate of the base liability for IBNR, we make an additional estimate, also using standard actuarial techniques, to account for adverse conditions that may cause actual claims to be higher than the estimated base reserve. We refer to this additional liability as the provision for moderately adverse conditions. Our estimate of the provision for moderately adverse conditions captures the potential adverse development from factors such as: | |||||||||
• | our entry into new geographical markets; | ||||||||
• | our provision of services related to new programs or populations such as the aged, blind and disabled; | ||||||||
• | variations in utilization of benefits and increasing medical costs, including high cost drugs; | ||||||||
• | changes in provider reimbursement arrangements; | ||||||||
• | variations in claims processing speed and patterns, claims payment and the severity of claims; and | ||||||||
• | health epidemics or outbreaks of disease such as the flu or enterovirus. | ||||||||
We consider the base actuarial model liability and the provision for moderately adverse conditions as part of our overall assessment of our IBNR estimate to properly reflect the complexity of our business, the number of states in which we operate, and the need to account for different health care benefit packages among those states. We evaluate our estimates of medical benefits payable as we obtain more complete claims information and medical expense trend data over time. Volatility in members' needs for medical services, provider claims submissions and our payment processes result in identifiable patterns emerging several months after the causes of deviations from our assumed trends occur. Changes in our estimates of medical benefits payable cannot typically be explained by any single factor, but are the result of a number of interrelated variables, all of which influence the resulting medical cost trend. We record differences between actual experience and estimates used to establish the liability, which we refer to as favorable and unfavorable prior period reserve developments, as increases or decreases to medical benefits expense in the period we identify the differences. The cumulative effect of prior period reserve development in 2013 was a favorable $3.0 million; however, we recognized unfavorable prior period reserve development in three of four quarters in 2013, and in the first and second quarters of 2014. Based on the unfavorable prior period reserve development experience in these quarters, we have refined certain of these assumptions, resulting in increased current period medical benefits costs incurred. | |||||||||
Favorable prior period reserve development amounted to $16.6 million for the three months ended September 30, 2014, which includes $15.4 million of favorable development related to prior fiscal years and $1.2 million of favorable development related to the first and second quarters of 2014. For the three months ended September 30, 2013, unfavorable prior period reserve development impacted medical benefits expense by approximately $47.5 million, which includes $16.3 million of unfavorable development related to prior fiscal years and $31.2 million of unfavorable development related to the first and second quarters of 2013. The favorable development recognized in the three months ended September 30, 2014 was due mainly to lower than projected medical costs, mainly in our Medicaid Health Plans segment. For the nine months ended September 30, 2014, unfavorable development related to prior fiscal years impacted medical benefits expense by approximately $46.2 million, mainly related to the Medicaid Health Plans and Medicare Health Plans segments, compared to unfavorable development of $7.1 million recognized during the corresponding period in 2013. | |||||||||
Reinsurance | |||||||||
We cede certain premiums and medical benefits to other insurance companies under various reinsurance agreements in order to increase our capacity to write larger risks and maintain our exposure to loss within our capital resources. We are contingently liable in the event the reinsurance companies do not meet their contractual obligations. We evaluate the financial condition of the reinsurance companies on a regular basis and only contract with well-known, well-established reinsurance companies that are supported by strong financial ratings. We account for reinsurance premiums and medical expense recoveries according to the terms of the underlying reinsurance contracts. | |||||||||
ACA Industry Fee | |||||||||
The ACA imposes an annual premium-based health insurance industry assessment (the "ACA industry fee") on health insurers beginning in 2014. The total ACA industry fee levied on the health insurance industry is $8 billion in 2014, with increasing annual amounts thereafter and growing to $14.3 billion by 2018. After 2018, the ACA industry fee increases according to an index based on net premium growth. The assessment is being levied on certain health insurers that provide insurance in the assessment year, and is allocated to health insurers based on each health insurer's share of net premiums for all U.S. health insurers in the year preceding the assessment. The ACA industry fee is not deductible for income tax purposes, which has significantly increased our effective income tax rate. We paid our total $137.7 million obligation for such fees to the Internal Revenue Services ("IRS") in September 2014, which is consistent with our previous estimate. The initial estimated liability of $129.0 million was accrued as of January 1, 2014, with an additional $8.2 million and $0.5 million recorded at June 30, 2014 and September 30, 2014, respectively, with a corresponding deferred expense asset that is being amortized to expense on a straight line basis. We have recognized approximately $34.7 million and $103.3 million of such amortization as ACA industry fee expense in the three and nine months ended September 30, 2014, respectively. The deferred expense asset amounted to $34.4 million at September 30, 2014 and is reported as 'Deferred ACA industry fee' on the condensed consolidated balance sheet. | |||||||||
We have received amendments, written agreements or other documentation from all our Medicaid state customers, that commit them to reimburse us for the portion of the ACA industry fee attributable to the Medicaid programs in these states, including the related state and federal income tax gross-ups. Consequently, we recognized $37.1 million and $93.9 million of reimbursement for the ACA industry fee as premium revenue in the three and nine months ended September 30, 2014, respectively. MA and PDP premiums will not be adjusted to offset the impact of the ACA industry fee. | |||||||||
Equity-Based Employee Compensation | |||||||||
During the second quarter of 2013, our stockholders approved the WellCare Health Plans, Inc. 2013 Incentive Compensation Plan (the "2013 Plan"). Upon approval of the 2013 Plan, a total of 2,500,000 shares of our common stock were available for issuance pursuant to the 2013 Plan, minus any shares subject to outstanding awards granted on or after January 1, 2013 under our 2004 Equity Incentive Plan (the "Prior Plan"). In addition, shares subject to awards forfeited under the Prior Plan will become available for issuance under the 2013 Plan. No further awards are permitted to be granted under our Prior Plan. The Compensation Committee of our Board of Directors (the "Compensation Committee") awards certain equity-based compensation under our stock plans, including stock options, restricted stock, restricted stock units ("RSUs"), performance stock units ("PSUs") and market stock units ("MSUs"). We estimate equity-based compensation expense based on awards ultimately expected to vest. We make assumptions of forfeiture rates at the time of grant and continuously reassess our assumptions based on actual forfeiture experience. | |||||||||
We estimate compensation cost for stock options, restricted stock, RSUs and MSUs based on the fair value at the time of grant and recognize expense over the vesting period of the award. For stock options, the grant date fair value is measured using the Black-Scholes options-pricing model. For restricted stock and RSUs, the grant date fair value is based on the closing price of our common stock on the grant date. For MSUs, the fair value at the grant date is measured using a Monte Carlo simulation approach, which estimates the fair value of awards based on randomly generated simulated stock-price paths through a lattice-type structure. MSUs expected to vest are recognized as expense on a straight-line basis over the vesting period, which is generally three years. The number of shares of common stock earned upon vesting is determined based on the ratio of the Company's common stock price during the last 30 market trading days of the calendar year immediately preceding the vesting date to the comparable common stock price as of the grant date, applied to the base units granted. The performance ratio is capped at 150% or 200%, depending on the grant date. If our common stock price declines by more than 50% over the performance period, no shares are earned by the recipient. | |||||||||
At its sole discretion, the Compensation Committee sets certain financial and quality-based performance goals and a target award amount for each award of PSUs. PSUs generally cliff-vest three years from the grant date based on the achievement of the performance goals and are conditioned on the employee's continued service through the vesting date. The actual number of common stock shares earned upon vesting will range from zero shares up to 100%, 150% or 200% of the target award, depending on the award date. PSUs do not have a grant date or grant date fair value for accounting purposes as the subjective nature of the terms of the PSUs precludes a mutual understanding of the key terms and conditions. We recognize expense for PSUs ultimately expected to vest over the requisite service period based on our estimates of progress made towards the achievement of the predetermined performance measures and changes in the market price of our common stock. | |||||||||
Medicaid Premium Taxes | |||||||||
Premium rates established in the Medicaid contracts with Georgia, Hawaii, New Jersey and New York, and, until June 30, 2013, Ohio, include, or included, an assessment or tax on Medicaid premiums. We recognize the premium tax assessment as expense in the period during which we earn the related premium revenue and remit the taxes back to the state agencies on a periodic basis. | |||||||||
Property, Equipment and Capitalized Software, net | |||||||||
Property, equipment and capitalized software are stated at historical cost, net of accumulated depreciation. We capitalize certain costs incurred in the development of internal-use software, including external direct costs of materials and services and payroll costs of employees devoted to specific software development. We expense other software development costs, such as training and data conversion costs, as incurred. We capitalize the costs of improvements that extend the useful lives of the related assets. | |||||||||
We record depreciation expense using the straight-line method over the estimated useful lives of the related assets, which ranges from three to ten years for leasehold improvements, five years for furniture and equipment, and three to five years for computer equipment and software. We include amortization of equipment under capital leases in depreciation expense. We record maintenance and repair costs as selling, general and administrative expense when incurred. | |||||||||
On an ongoing basis, we review events or changes in circumstances that may indicate that the carrying value of an asset may not be recoverable. If the carrying value of an asset exceeds the sum of estimated undiscounted future cash flows, we recognize an impairment loss in the current period for the difference between estimated fair value and carrying value. If assets are determined to be recoverable but the useful lives are shorter than we originally estimated, we depreciate the remaining net book value of the asset over the newly determined remaining useful lives. | |||||||||
Goodwill and Other Intangible Assets | |||||||||
Our acquisitions have resulted in goodwill, which represents the excess of the acquisition cost over the fair value of net assets acquired. Goodwill is assigned to reporting units, which we determined to be the same as our operating segments. Goodwill recorded at September 30, 2014 was $263.2 million, which consisted of $152.8 million and $110.4 million attributable to our Medicaid and Medicare Advantage Health Plans reporting units, respectively. Goodwill recorded at December 31, 2013 was $236.8 million, which consisted of $126.8 million and $110.0 million attributable to our Medicaid and Medicare Advantage Health Plans reporting units, respectively. | |||||||||
We test goodwill for impairment at the reporting unit level at least annually, or more frequently if events or circumstances indicate that it would be more likely than not that the fair value of a reporting unit is below its carrying value. Such events or circumstances could include a significant adverse change in business climate, an adverse action or assessment by a regulator, unanticipated competition and the testing for recoverability of a significant asset group within a reporting unit, among others. To determine whether goodwill is impaired, we compare an estimate of the fair value of the applicable reporting unit to its carrying value, including goodwill. If the carrying value exceeds the estimated fair value, we compare the implied fair value of the applicable goodwill to its carrying value to measure the amount of goodwill impairment, if any. We perform our annual goodwill impairment test based on our financial position and results of operations as of June 30 of each year, which generally coincides with the finalization of federal and state contract negotiations and our initial budgeting and planning process. The annual impairment tests are based on an evaluation of estimated future discounted cash flows. The estimated discounted cash flows are based on the best information available to us at the time, including supportable assumptions and | |||||||||
projections we believe are reasonable. Our discounted cash flow estimates use discount rates that correspond to a weighted-average cost of capital consistent with a market-participant view. The discount rates are consistent with those used for investment decisions and take into account the operating plans and strategies of our operating segments. Certain other key assumptions utilized, including changes in membership, premium, health care costs, operating expenses, fees, assessments and taxes and effective tax rates, are based on estimates consistent with those utilized in our annual budgeting and planning process that we believe are reasonable. However, if we do not achieve the results reflected in the assumptions and estimates, our goodwill impairment evaluations could be adversely affected, and we may impair a portion of our goodwill, | |||||||||
which would adversely affect our operating results in the period of impairment. Impairments, if any, would be classified as an operating expense. Based on the results of our annual impairment testing in 2014, we determined that the fair value of each reporting unit substantially exceeded its carrying value and no goodwill impairment losses were recognized. | |||||||||
Other intangible assets resulting from our previous acquisitions include provider networks, broker networks, trademarks, state contracts, non-compete agreements, licenses and permits. We amortize other intangible assets over their estimated useful lives ranging from approximately one to 15 years. These assets are allocated to reporting segments for impairment testing purposes. We review our other intangible assets for impairment when events or changes in circumstances occur, which may potentially affect the estimated useful life or recoverability of the remaining balances of our intangible assets. Such events and changes in circumstances would include significant changes in membership, state funding, federal and state government contracts and provider networks. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to current forecasts of undiscounted future net cash flows expected to be generated by the assets. Identifiable cash flows are measured at the lowest level for which they are largely independent of the cash flows of other groups of assets and liabilities. If these assets are determined to be impaired, the amount of impairment recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. | |||||||||
During the second quarter of 2014, we recognized approximately $24.1 million in impairment and other charges, approximately $18.0 million of which related to the partial impairment of certain intangible assets recorded in connection with the 2012 acquisition of Easy Choice Health Plan, Inc. (“Easy Choice”). During the second quarter of 2014, our Easy Choice MA health plan continued to underperform, mainly reflecting an inability to improve the medical cost structure to the degree that was previously estimated, and the inability to achieve certain administrative cost savings. As a result, we performed an updated assessment of the recoverability of these intangible assets. The current projections of undiscounted future net cash flows expected to be generated by the Easy Choice health plan reflect a significant decline in the anticipated long-term profitability of this business relative to projections we completed in prior periods. The decline in projected profitability is resulting from the factors noted above, as well the continuing margin compression that is impacting the MA business as a whole. We compared the carrying value of the underlying intangible assets to the projected, undiscounted future net cash flows and determined that the undiscounted future net cash flows were insufficient to recover the carrying value of the assets. We measured the fair value of these assets at June 30, 2014 using an income-based valuation approach, and decreased the carrying value of the intangible assets to this estimated fair value, which resulted in an impairment charge of approximately $18.0 million. We believe the assumptions used in the income approach, including the projected cash flows associated with the assets, as well as other key factors and assumptions, including the selection of an appropriate discount rate, were consistent with those that likely marketplace participants would experience when operating in the same market, with the same membership. The remaining charges for the quarter also include a charge for the full impairment of intangible assets associated with the purchase of our Arizona MA plan after we concluded during the three months ended June 30, 2014, to exit the Arizona MA market in 2015, and charges resulting from the resolution of certain matters related to the purchase price of our 2013 acquisitions. We are no longer able to recognize such charges as adjustments to acquired assets, since we are beyond the measurement period established in the accounting rules for business combinations. | |||||||||
Income Taxes | |||||||||
We record income tax expense as incurred based on enacted tax rates, estimates of book-to-tax differences in income, and projections of income that will be earned in each taxing jurisdiction. We recognize deferred tax assets and liabilities for the estimated future tax consequences of differences between the carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using tax rates applicable to taxable income in the years in which we expect to recover or settle those temporary differences. We record a valuation allowance on deferred taxes if we determine it is more likely than not that we will not fully realize the future benefit of deferred tax assets. We file tax returns after the close of our fiscal year end and adjust our estimated tax receivable or liability to the actual tax receivable or due per the filed state and federal tax returns. Historically, we have not experienced significant differences between our estimates of income tax expense and actual amounts incurred. | |||||||||
State and federal taxing authorities may challenge the positions we take on our filed tax returns. We evaluate our tax positions and only recognize a tax benefit if it is more likely than not that a tax audit will sustain our conclusion. Based on our evaluation of tax positions, we believe that potential tax exposures have been recorded appropriately. State and federal taxing authorities may propose additional tax assessments based on periodic audits of our tax returns. We believe our tax positions comply with applicable tax law in all material aspects and we will vigorously defend our positions on audit. The ultimate resolution of these audits may materially impact our financial position, results of operations or cash flows. We have not experienced material adjustments to our condensed consolidated financial statements as a result of these audits. | |||||||||
We participate in the IRS Compliance Assurance Process ("CAP"). The objective of CAP is to reduce taxpayer burden and uncertainty by working with the IRS to ensure tax return accuracy prior to filing, thereby reducing or eliminating the need for post-filing examinations. | |||||||||
Pro Forma Financial Information | |||||||||
The results of operations and financial condition for our 2014 and 2013 acquisitions have been included in our condensed consolidated financial statements since the respective acquisition dates. The unaudited pro forma financial information presented below assumes that the acquisitions occurred as of January 1, 2013. The pro forma adjustments include the pro forma effect of the amortization of finite-lived intangible assets arising from the purchase price allocations, adjustments necessary to align the acquired companies' accounting policies to our accounting policies and the associated income tax effects of the pro forma adjustments. The following unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that would have occurred had the acquisitions been consummated at the beginning of the periods presented. Only pro forma results for the three and nine months ended September 30, 2013 have been presented, as Windsor was acquired on January 1, 2014, and its results of operations have been included in our condensed consolidated financial statements from that date. | |||||||||
Pro forma - unaudited | |||||||||
For the Three Months Ended September 30, 2013 | For the Nine Months Ended September 30, 2013 | ||||||||
(in millions, except per share data) | |||||||||
Premium revenue | $ | 2,768.50 | $ | 7,960.10 | |||||
Net earnings | $ | 80.1 | $ | 147.9 | |||||
Earnings per share: | |||||||||
Basic | $ | 1.84 | $ | 3.4 | |||||
Diluted | $ | 1.82 | $ | 3.36 | |||||
Recently Adopted Accounting Standards | |||||||||
In July 2013, the Financial Accounting Standards Board ("FASB") issued ASU 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." This update addresses the diversity in practice regarding financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance requires an unrecognized tax benefit, or a portion thereof, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent the deferred tax asset is not available at the reporting date to settle any additional income taxes that would result from the disallowance of a tax position, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with the deferred tax asset. The amendments in this standard are effective for reporting periods beginning after December 15, 2013, with early adoption permitted. We adopted this standard effective January 1, 2014, without any material impact on our consolidated financial position, results of operations or cash flows. | |||||||||
In February 2013, the FASB issued ASU 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date." This update provides guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of the guidance is fixed at the reporting date. The guidance in this update also requires the entity to disclose the nature and amount of the obligation, as well as other information about such obligations. The guidance is effective for fiscal years beginning after December 15, 2013, with early adoption permitted. We adopted this standard effective January 1, 2014, without any material impact on our consolidated financial position, results of operations or cash flows. | |||||||||
In July 2011, the FASB issued ASU 2011-06, "Other Expenses – Fees Paid to the Federal Government by Health Insurers." This update addresses accounting for the annual fees mandated by the ACA. The ACA imposes an annual fee on health insurers, payable to the U.S. government, calculated on net premiums and third-party administrative agreement fees. The updated standard requires that the liability for the fee be estimated and accrued in full once the entity provides qualifying health insurance in the applicable calendar year in which the fee is payable with a corresponding deferred cost that is amortized to expense. The fees are initiated for calendar years beginning January 1, 2014, and the amendments provided by this update become effective for calendar years beginning after December 31, 2013. We adopted this standard effective January 1, 2014. See additional discussion in 'ACA Industry Fee'. |
ACQUISITIONS_Notes
ACQUISITIONS (Notes) | 9 Months Ended | |||
Sep. 30, 2014 | ||||
Business Combinations [Abstract] | ' | |||
ACQUISITIONS | ' | |||
ACQUISITIONS | ||||
Healthfirst NJ | ||||
On July 1, 2014, our New Jersey subsidiary completed the acquisition of Medicaid assets from Healthfirst NJ. The acquired assets primarily relate to approximately 42,000 Healthfirst NJ Medicaid members who were transferred to our Medicaid plan in New Jersey, as well as certain provider agreements. | ||||
Based on the preliminary purchase price allocation, we allocated $10.8 million of the purchase price to identified intangible assets and recorded the excess of purchase price over the aggregate fair values of $16.2 million as goodwill. The recorded goodwill and other intangible assets related to the Healthfirst NJ acquisition are deductible for income tax purposes. It is possible that further adjustments could be made to the purchase price and allocations depending on the resolution of certain matters related to the purchase price, although we are unable to estimate the impact at this time. | ||||
Windsor | ||||
On January 1, 2014, we acquired all of the outstanding stock of Windsor from Munich Health North America, Inc., a part of Munich Re Group. Through its subsidiaries, Windsor serves Medicare beneficiaries with MA, PDP and Medicare Supplement products. As of September 30, 2014, Windsor offered MA plans in 192 counties in the states of Arkansas, Mississippi, South Carolina and Tennessee, through which it served 37,000 members. In addition, one of Windsor’s subsidiaries offers Medicare Supplement insurance policies through which it served 45,000 members in 39 states as of September 30, 2014. Windsor also offers PDPs in 11 of the 34 CMS regions, through which it served approximately 105,000 beneficiaries as of September 30, 2014. We included the results of Windsor's operations from the date of acquisition in our condensed consolidated financial statements. Windsor’s operations contributed premium revenue of $148.8 million and pre-tax income of $4.6 million for the three months ended September 30, 2014 and premium revenue of $477.3 million and a net pre-tax loss of $5.7 million, including certain one-time costs for severance and integration, for the nine months ended September 30, 2014. We included the results of Windsor's operations from the date of acquisition in our condensed consolidated financial statements. | ||||
The following table summarizes the preliminary estimated fair values of tangible and intangible assets acquired and liabilities assumed at the acquisition date. | ||||
Cash and cash equivalents | $ | 169 | ||
Investments | 47.1 | |||
Premiums receivable, net | 87.4 | |||
Other intangible assets | 54.3 | |||
Pharmacy rebates receivable, net | 32.2 | |||
Other assets | 34 | |||
Deferred tax asset | 32.9 | |||
Total assets acquired | 456.9 | |||
Medical benefits payable | (110.9 | ) | ||
Accrued expenses and other payables | (76.9 | ) | ||
Deferred tax liability | (20.6 | ) | ||
Total liabilities assumed | (208.4 | ) | ||
Fair value of net assets acquired | $ | 248.5 | ||
As a result of the Windsor acquisition, the estimated fair value of the net tangible and intangible assets that we acquired exceeded the total consideration payable to the seller by approximately $31.6 million. When assessing this result from an accounting perspective, we considered: | ||||
▪ | the seller’s decision to divest Windsor following a review of its business strategy in the U.S. and focus on other types of health businesses; | |||
▪ | the value of net assets we acquired included the benefit of net operating losses and other tax benefits that the seller was not able to utilize given its tax position, and | |||
▪ | a credit reflected in the purchase price for certain transition costs we expected to incur after the transaction closed. | |||
After consideration of all relevant factors, including those cited above, and verifying that all assets acquired and liabilities assumed were identified, we concluded that the excess fair value of $31.6 million constituted a bargain purchase gain in accordance with accounting rules related to business combinations. Approximately $28.3 million of the gain was recorded during the first quarter of 2014. Subsequently, an $11.1 million increase was recognized during the second quarter of 2014 reflecting refined estimates of the fair value of certain tax benefits acquired as part of the transaction, and a $7.8 million decrease in the gain was recognized during the three months ended September 30, 2014 for additional changes in the estimate of tax benefits, as well as estimated additional purchase price settlements with the seller. It is possible that further adjustments could be made to the gain depending on the resolution of certain matters related to the purchase price, although we are unable to estimate the impact at this time. | ||||
As reflected in the table above, we recorded $54.3 million for the preliminary valuation of identified other intangible assets, including MA and Medicare Supplement membership bases of $20.1 million (15-year useful life), PDP membership bases of $17.5 million (8-year useful life), provider networks of $5.2 million (15-year useful life), broker networks of $3.3 million (10-year useful life) and aggregated other identified intangible assets of $8.2 million (9-year useful life). We valued the other intangible assets using a combination of income and cost approaches, where appropriate. Membership bases were valued based on the income approach using a discounted future cash flow analysis based on our consideration of historical financial results and expected industry and market trends. We discounted the future cash flows by a weighted-average cost of capital based on an analysis of the cost of capital for guideline companies within our industry. We amortize the intangible assets on a straight-line basis over the period we expect these assets to contribute directly or indirectly to the future cash flows. The weighted average amortization period for these intangibles was 11.5 years. The allocation of the purchase price is based on certain preliminary data and could change when final information is obtained. | ||||
WellCare of South Carolina | ||||
On January 31, 2013, we acquired all outstanding stock of WellCare of South Carolina, Inc. ("WCSC"), formerly UnitedHealthcare of South Carolina, Inc., a South Carolina Medicaid subsidiary of UnitedHealth Group Incorporated. We included the results of WCSC's operations from the date of acquisition in our condensed consolidated financial statements. | ||||
We completed certain aspects of the accounting for the WCSC acquisition during the first quarter of 2014, and based on the final purchase price allocation, we allocated $24.7 million of the purchase price to identified tangible net assets and $9.5 million of the purchase price to identified intangible assets. We recorded the excess of purchase price over the aggregate fair values of $12.7 million as goodwill. The recorded goodwill and other intangible assets related to the WCSC acquisition are deductible for tax purposes. | ||||
Missouri Care | ||||
On March 31, 2013, we acquired all outstanding stock of Missouri Care, Incorporated, a subsidiary of Aetna Inc. ("Missouri Care"), which participates in the Missouri HealthNet Medicaid program. We began serving Missouri Care members effective April 1, 2013 and we included the results of Missouri Care's operations from the date of acquisition in our condensed consolidated financial statements. As of September 30, 2014, Missouri Care membership approximated 101,000. | ||||
We completed certain aspects of the accounting for the Missouri Care acquisition during the first quarter of 2014, and based on the final purchase price allocation, we allocated $10.2 million of the purchase price to identified tangible net assets and $7.1 million of the purchase price to identified intangible assets. We recorded the excess of purchase price over the aggregate fair values of $10.7 million as goodwill, which reflects a $7.7 million increase recognized during the first quarter of 2014. The recorded goodwill and other intangible assets related to the Missouri Care acquisition are deductible for income tax purposes. |
SEGMENT_REPORTING
SEGMENT REPORTING | 9 Months Ended | |||||||||||||||
Sep. 30, 2014 | ||||||||||||||||
Segment Reporting [Abstract] | ' | |||||||||||||||
SEGMENT REPORTING | ' | |||||||||||||||
SEGMENT REPORTING | ||||||||||||||||
On a regular basis, we evaluate discrete financial information and assess the performance of our three reportable segments, Medicaid Health Plans, Medicare Health Plans and Medicare PDPs, to determine the most appropriate use and allocation of Company resources. Prior to the Windsor acquisition on January 1, 2014, we identified three operating segments for our company: Medicaid, MA and PDP. In conjunction with the Windsor acquisition, we began offering Medicare Supplement products and we reassessed our segment reporting practices and made revisions to reflect our current method of managing performance and determining resource allocation, which includes reviewing the results of Medicare Supplement and MA operations acquired as part of the Windsor acquisition together with our legacy MA plans. Accordingly, we include results for Medicare Supplement operations together with MA and renamed the segment as Medicare Health Plans. Similarly, we include the PDP operations acquired as part of the Windsor acquisition together with WellCare’s PDPs and renamed the segment as Medicare PDPs. In addition, we renamed the Medicaid segment Medicaid Health Plans; however, there were no changes to the composition of this segment. | ||||||||||||||||
Medicaid Health Plans | ||||||||||||||||
Our Medicaid Health Plans segment includes plans for beneficiaries of Temporary Assistance for Needy Families ("TANF"), Supplemental Security Income ("SSI"), Aged Blind and Disabled ("ABD") and other state-based programs that are not part of the Medicaid program, such as Children's Health Insurance Program ("CHIP"), Family Health Plus ("FHP"), and Managed Long-Term Care ("MLTC") programs. TANF generally provides assistance to low-income families with children. ABD and SSI generally provide assistance to low-income aged, blind or disabled individuals. CHIP and FHP programs provide assistance to qualifying families who are not eligible for Medicaid because their income exceeds the applicable income thresholds. The MLTC program is designed to help people with chronic illnesses or who have disabilities and need health and long-term care services, such as home care or adult day care, to enable them to stay in their homes and communities as long as possible. | ||||||||||||||||
Our Medicaid operations in certain states individually account for 10% or more of our consolidated premium revenue. Those states, and the respective Medicaid premium revenue as a percentage of total consolidated premium revenue, are as follows: | ||||||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Kentucky | 18% | 15% | 18% | 14% | ||||||||||||
Georgia | 13% | 17% | 13% | 16% | ||||||||||||
Florida | 15% | 12% | 13% | 12% | ||||||||||||
Our primary Kentucky contract commenced in July 2011 and has an initial three-year term and provides for four additional one-year option terms, exercisable upon mutual agreement of the parties, which potentially extends the total term until July 2018. The first option term, through June 30, 2015, has been exercised. | ||||||||||||||||
In March 2014, the Georgia Department of Community Health ("Georgia DCH") amended our Georgia Medicaid contract to include two additional one-year renewal options, exercisable by the Georgia DCH, which could potentially extend the contract term to June 30, 2016. The Georgia DCH exercised its option in June 2014 to extend the term of our Georgia Medicaid contract until June 30, 2015. | ||||||||||||||||
In February 2014, we executed a contract with the Florida Agency for Health Care Administration ("AHCA") to provide managed care services to Medicaid recipients in eight out of the state's 11 regions under the new program. The program commenced on May 1, 2014, with the implementation of three regions. Three additional regions were implemented in June, one in July and one in August. | ||||||||||||||||
Medicare Health Plans | ||||||||||||||||
Our Medicare Health Plans reportable segment includes the combined operations of both the MA and Medicare Supplement operating segments. Medicare is a federal program that provides eligible persons age 65 and over and some disabled persons with a variety of hospital, medical and prescription drug benefits. MA is Medicare's managed care alternative to the original Medicare program, which provides individuals standard Medicare benefits directly through CMS. Our MA CCPs generally require members to seek health care services and select a primary care physician from a network of health care providers. In addition, we offer coverage of prescription drug benefits under the Medicare Part D program as a component of most of our MA plans. We also offer Medicare Supplement policies in certain states. | ||||||||||||||||
Medicare PDPs | ||||||||||||||||
We offer stand-alone Medicare Part D coverage to Medicare-eligible beneficiaries in our Medicare PDPs segment. The Medicare Part D prescription drug benefit is supported by risk sharing with the federal government through risk corridors designed to limit the losses and gains of the participating drug plans and by reinsurance for catastrophic drug costs. The government subsidy is based on the national weighted average monthly bid for this coverage, adjusted for risk factor payments. Additional subsidies are provided for dually-eligible beneficiaries and specified low-income beneficiaries. The Part D program offers national in-network prescription drug coverage that is subject to limitations in certain circumstances. | ||||||||||||||||
Summary of Financial Information | ||||||||||||||||
We allocate goodwill and other intangible assets to our reportable operating segments. We do not allocate any other assets and liabilities, investment and other income, or selling, general and administrative, depreciation and amortization, or interest expense to our reportable operating segments, with the exception of the ACA industry fee. The Company's decision-makers primarily use premium revenue, medical benefits expense and gross margin to evaluate the performance of our reportable operating segments. A summary of financial information for our reportable operating segments through the gross margin level and a reconciliation to income before income taxes is presented in the tables below. | ||||||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Premium revenue: | (in millions) | |||||||||||||||
Medicaid Health Plans | $ | 2,127.90 | $ | 1,492.40 | $ | 5,631.20 | $ | 4,184.80 | ||||||||
Medicare Health Plans | 1,012.20 | 807.3 | 2,953.50 | 2,286.20 | ||||||||||||
Medicare PDPs | 256.2 | 195.9 | 926.3 | 604.3 | ||||||||||||
Total premium revenue | 3,396.30 | 2,495.60 | 9,511.00 | 7,075.30 | ||||||||||||
Medical benefits expense: | ||||||||||||||||
Medicaid Health Plans | 1,849.00 | 1,314.60 | 4,933.50 | 3,636.30 | ||||||||||||
Medicare Health Plans | 918 | 685.7 | 2,633.50 | 1,968.60 | ||||||||||||
Medicare PDPs | 229.6 | 144.4 | 893.8 | 543 | ||||||||||||
Total medical benefits expense | 2,996.60 | 2,144.70 | 8,460.80 | 6,147.90 | ||||||||||||
ACA industry fee expense: | ||||||||||||||||
Medicaid Health Plans | 20.4 | — | 60.6 | — | ||||||||||||
Medicare Health Plans | 11.4 | — | 34 | — | ||||||||||||
Medicare PDPs | 2.9 | — | 8.7 | — | ||||||||||||
Total ACA industry fee expense | 34.7 | — | 103.3 | — | ||||||||||||
Gross margin | ||||||||||||||||
Medicaid Health Plans | 258.5 | 177.8 | 637.1 | 548.5 | ||||||||||||
Medicare Health Plans | 82.8 | 121.6 | 286 | 317.6 | ||||||||||||
Medicare PDPs | 23.7 | 51.5 | 23.8 | 61.3 | ||||||||||||
Total gross margin | 365 | 350.9 | 946.9 | 927.4 | ||||||||||||
Investment and other income | 11.2 | 4.8 | 34.1 | 13.9 | ||||||||||||
Other expenses | (306.7 | ) | (248.9 | ) | (888.8 | ) | (734.5 | ) | ||||||||
Income from operations | $ | 69.5 | $ | 106.8 | $ | 92.2 | $ | 206.8 | ||||||||
NET_INCOME_PER_COMMON_SHARE
NET INCOME PER COMMON SHARE | 9 Months Ended | |||||||||||
Sep. 30, 2014 | ||||||||||||
Earnings Per Share [Abstract] | ' | |||||||||||
NET INCOME PER COMMON SHARE | ' | |||||||||||
NET INCOME PER COMMON SHARE | ||||||||||||
We compute basic net income per common share on the basis of the weighted-average number of unrestricted common shares outstanding. We compute diluted net income per common share on the basis of the weighted-average number of unrestricted common shares outstanding plus the dilutive effect of outstanding stock options, restricted stock, RSUs, MSUs and PSUs using the treasury stock method. | ||||||||||||
The calculation of the weighted-average common shares outstanding — diluted is as follows: | ||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||
Weighted-average common shares outstanding — basic | 43,885,779 | 43,608,626 | 43,851,759 | 43,470,758 | ||||||||
Dilutive effect of: | ||||||||||||
Unvested restricted stock, restricted stock units, market stock and performance stock units | 293,316 | 330,283 | 282,535 | 352,161 | ||||||||
Stock options | 6,939 | 99,013 | 9,751 | 149,527 | ||||||||
Weighted-average common shares outstanding — diluted | 44,186,034 | 44,037,922 | 44,144,045 | 43,972,446 | ||||||||
Anti-dilutive stock options, restricted stock and performance based awards excluded from computation | 12,951 | 64,862 | 38,703 | 102,988 | ||||||||
INVESTMENTS
INVESTMENTS | 9 Months Ended | |||||||||||||||||||
Sep. 30, 2014 | ||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ' | |||||||||||||||||||
INVESTMENTS | ' | |||||||||||||||||||
INVESTMENTS | ||||||||||||||||||||
The Company considers all of its investments as available-for-sale securities. The amortized cost, gross unrealized gains or losses and estimated fair value of short-term and long term investments by security type are summarized in the following tables. | ||||||||||||||||||||
Amortized | Gross | Gross | Estimated | |||||||||||||||||
Cost | Unrealized | Unrealized | Fair Value | |||||||||||||||||
Gains | Losses | |||||||||||||||||||
September 30, 2014 | ||||||||||||||||||||
Auction rate securities | $ | 34.1 | $ | — | $ | (1.8 | ) | $ | 32.3 | |||||||||||
Certificates of deposit | 0.5 | — | — | 0.5 | ||||||||||||||||
Corporate debt and other securities | 112.7 | 0.2 | (0.3 | ) | 112.6 | |||||||||||||||
Money market funds | 41.4 | — | — | 41.4 | ||||||||||||||||
Municipal securities | 84 | 0.5 | — | 84.5 | ||||||||||||||||
Variable rate bond fund | 110.1 | 0.3 | — | 110.4 | ||||||||||||||||
U.S. government securities | 25.2 | 0.1 | (0.1 | ) | 25.2 | |||||||||||||||
$ | 408 | $ | 1.1 | $ | (2.2 | ) | $ | 406.9 | ||||||||||||
December 31, 2013 | ||||||||||||||||||||
Auction rate securities | $ | 34.2 | $ | — | $ | (2.4 | ) | $ | 31.8 | |||||||||||
Certificates of deposit | 1.6 | — | — | 1.6 | ||||||||||||||||
Corporate debt and other securities | 104.5 | 0.1 | (0.1 | ) | 104.5 | |||||||||||||||
Money market funds | 43.4 | — | — | 43.4 | ||||||||||||||||
Municipal securities | 108.9 | — | — | 108.9 | ||||||||||||||||
Variable rate bond fund | 84.9 | 0.4 | — | 85.3 | ||||||||||||||||
U.S. government securities | 19.5 | 0.1 | — | 19.6 | ||||||||||||||||
$ | 397 | $ | 0.6 | $ | (2.5 | ) | $ | 395.1 | ||||||||||||
Realized gains and losses on sales and redemptions of investments were not material for the three and nine months ended September 30, 2014 and 2013. | ||||||||||||||||||||
Contractual maturities of available-for-sale investments at September 30, 2014 are as follows: | ||||||||||||||||||||
Total | Within | 1 Through 5 | 5 Through 10 | Thereafter | ||||||||||||||||
1 Year | Years | Years | ||||||||||||||||||
Auction rate securities | $ | 32.3 | $ | — | $ | — | $ | — | $ | 32.3 | ||||||||||
Certificates of deposit | 0.5 | 0.5 | — | — | — | |||||||||||||||
Corporate debt and other securities | 112.6 | 12.9 | 94.3 | 4.5 | 0.9 | |||||||||||||||
Money market funds | 41.4 | 41.4 | — | — | — | |||||||||||||||
Municipal securities | 84.5 | 23.7 | 54 | 6.8 | — | |||||||||||||||
Variable rate bond fund | 110.4 | 110.4 | — | — | — | |||||||||||||||
U.S. government securities | 25.2 | 3.1 | 22 | — | 0.1 | |||||||||||||||
$ | 406.9 | $ | 192 | $ | 170.3 | $ | 11.3 | $ | 33.3 | |||||||||||
Actual maturities may differ from contractual maturities due to the exercise of pre-payment options. | ||||||||||||||||||||
Excluding investments in U.S. government securities, we are not exposed to any significant concentration of credit risk in our fixed maturities portfolio. Our long-term investments include $32.3 million estimated fair value of municipal note securities with an auction reset feature ("auction rate securities"), which were issued by various state and local municipal entities for the purpose of financing student loans, public projects and other activities. Liquidity for these auction rate securities is typically provided by an auction process, which allows holders to sell their notes and resets the applicable interest rate at pre-determined intervals, usually every seven or 35 days. We consider our auction rate securities to be in an inactive market as auctions have continued to fail in 2014. Our auction rate securities have been in an unrealized loss position for more than twelve months. Two auction rate securities with an aggregate par value of $22.5 million have investment grade security credit ratings and one auction rate security with a par value of $11.6 million has a credit rating below investment grade. Our auction rate securities are covered by government guarantees or municipal bond insurance and we have the ability and intent to hold these securities until maturity or market stability is restored. Accordingly, we do not believe our auction rate securities are impaired and have not recorded any other-than-temporary impairment as of September 30, 2014. | ||||||||||||||||||||
There were no material redemptions or sales of our auction rate securities during the three and nine months ended September 30, 2014 and September 30, 2013, and accordingly, gains and losses associated with our auction rate securities were not material during any of those periods. |
RESTRICTED_INVESTMENTS
RESTRICTED INVESTMENTS | 9 Months Ended | |||||||||||||||
Sep. 30, 2014 | ||||||||||||||||
Restricted Investments Note [Abstract] | ' | |||||||||||||||
RESTRICTED INVESTMENTS | ' | |||||||||||||||
RESTRICTED INVESTMENTS | ||||||||||||||||
The amortized cost, gross unrealized gains, gross unrealized losses and fair value of our restricted investment securities are as follows: | ||||||||||||||||
Amortized | Gross | Gross | Estimated | |||||||||||||
Cost | Unrealized | Unrealized | Fair Value | |||||||||||||
Gains | Losses | |||||||||||||||
September 30, 2014 | ||||||||||||||||
Cash | $ | 54.4 | $ | — | $ | — | $ | 54.4 | ||||||||
Certificates of deposit | 1 | — | — | 1 | ||||||||||||
Money market funds | 66 | — | — | 66 | ||||||||||||
U.S. government securities | 29.2 | 0.1 | (0.1 | ) | 29.2 | |||||||||||
$ | 150.6 | $ | 0.1 | $ | (0.1 | ) | $ | 150.6 | ||||||||
December 31, 2013 | ||||||||||||||||
Cash | $ | 40.2 | $ | — | $ | — | $ | 40.2 | ||||||||
Certificates of deposit | 1.4 | — | — | 1.4 | ||||||||||||
Money market funds | 19 | — | — | 19 | ||||||||||||
U.S. government securities | 22 | — | (0.1 | ) | 21.9 | |||||||||||
$ | 82.6 | $ | — | $ | (0.1 | ) | $ | 82.5 | ||||||||
Realized gains and losses on restricted investments were immaterial for the three and nine months ended September 30, 2014 and September 30, 2013. |
EQUITYBASED_COMPENSATION
EQUITY-BASED COMPENSATION | 9 Months Ended | ||||||||||||
Sep. 30, 2014 | |||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||||
EQUITY-BASED COMPENSATION | ' | ||||||||||||
EQUITY-BASED COMPENSATION | |||||||||||||
Compensation expense related to our equity-based compensation awards was $3.0 million and $5.4 million for the three months ended September 30, 2014 and September 30, 2013, respectively, and $9.2 million and $12.4 million for the nine months ended September 30, 2014 and September 30, 2013, respectively. As of September 30, 2014, there was $28.4 million of unrecognized compensation cost related to non-vested equity-based compensation arrangements that is expected to be recognized over a weighted-average period of 1.9 years. The unrecognized compensation cost for our PSUs, which are subject to variable accounting, was determined based on the closing common stock price of $60.34 as of September 30, 2014 and amounted to approximately $9.8 million of the total unrecognized compensation. Due to the nature of the accounting for these awards, future compensation cost will fluctuate based on changes in our common stock price. | |||||||||||||
A summary of stock option activity for the nine months ended September 30, 2014, and the aggregate intrinsic value and weighted average remaining contractual term for stock options as of September 30, 2014, is presented in the table below. | |||||||||||||
Shares | Weighted | Aggregate | Weighted | ||||||||||
Average | Intrinsic | Average | |||||||||||
Exercise | Value | Remaining | |||||||||||
Price | Contractual | ||||||||||||
Term (Years) | |||||||||||||
Outstanding as of January 1, 2014 | 31,381 | $ | 29.47 | ||||||||||
Granted | — | — | |||||||||||
Exercised | (13,896 | ) | 21.47 | ||||||||||
Forfeited and expired | (1,407 | ) | 14.49 | ||||||||||
Outstanding as of September 30, 2014 (1) | 16,078 | $ | 37.7 | $ | 0.4 | 1.1 | |||||||
(1) All of the Company's outstanding stock options were vested and exercisable as of September 30, 2014. | |||||||||||||
A summary of RSU activity for the nine months ended September 30, 2014 is presented in the table below. | |||||||||||||
RSUs | Weighted | ||||||||||||
Average | |||||||||||||
Grant-Date | |||||||||||||
Fair Value | |||||||||||||
Outstanding as of January 1, 2014 | 259,836 | $ | 56.51 | ||||||||||
Granted | 316,815 | 64.79 | |||||||||||
Vested | (85,287 | ) | 54.42 | ||||||||||
Forfeited and expired | (44,488 | ) | 59.76 | ||||||||||
Outstanding as of September 30, 2014 | 446,876 | 62.46 | |||||||||||
A summary of our MSU activity for the nine months ended September 30, 2014 is presented in the table below. | |||||||||||||
MSUs | Weighted | ||||||||||||
Average | |||||||||||||
Grant-Date | |||||||||||||
Fair Value | |||||||||||||
Outstanding as of January 1, 2014 | 83,889 | $ | 79.38 | ||||||||||
Granted | 69,704 | 71.74 | |||||||||||
Vested | — | — | |||||||||||
Forfeited and expired | (28,161 | ) | 77.89 | ||||||||||
Outstanding as of September 30, 2014 | 125,432 | 75.47 | |||||||||||
A summary of the activity for our PSU awards, which are subject to variable accounting, for the nine months ended September 30, 2014 is presented in the table below. | |||||||||||||
PSUs | Weighted | ||||||||||||
Average | |||||||||||||
Grant-Date | |||||||||||||
Fair Value | |||||||||||||
Outstanding as of January 1, 2014 | 288,487 | $ | 55.3 | ||||||||||
Granted | 258,679 | 62.58 | |||||||||||
Vested | (62,640 | ) | 40.57 | ||||||||||
Forfeited and expired | (67,821 | ) | 60.72 | ||||||||||
Outstanding as of September 30, 2014 | 416,705 | 61.16 | |||||||||||
DEBT
DEBT | 9 Months Ended | ||
Sep. 30, 2014 | |||
Debt Disclosure [Abstract] | ' | ||
DEBT | ' | ||
DEBT | |||
Credit Agreement | |||
In September 2014, we amended and restated our existing credit agreement (as amended and restated, the "Credit Agreement") to provide for a $300.0 million term loan (the “Term Loan”) in addition to the previously-existing senior unsecured revolving loan facility (the “Revolving Credit Facility”) of up to $300.0 million, which may be used for general corporate purposes of the Company and its subsidiaries. The Revolving Credit Facility provides that up to $75.0 million may be used for letters of credit. The Credit Agreement also provides that we may, at our option, increase the aggregate amount of the Revolving Credit Facility and/or obtain incremental term loans in an amount up to $75.0 million without the consent of any lenders not participating in such increase, subject to certain customary conditions and lenders committing to provide the increase in funding. The Term Loan matures in September 2016, with no amortization payments or prepayment penalties. We are not able to re-borrow amounts repaid under the Term Loan. The commitments under the Revolving Credit Facility expire on November 14, 2018 and any amounts outstanding under the facility will be payable in full at that time. Borrowings under the Credit Agreement bear interest at a rate of LIBOR plus a spread between 1.50% and 2.625%, or a rate equal to the Prime Rate plus a spread between 0.50% to 1.625%, depending upon our cash flow leverage ratio (which is defined as the ratio of our total debt to total consolidated EBITDA.) Unutilized commitments under the Credit Agreement are subject to a fee of 0.25% to 0.45% depending upon our cash flow leverage ratio. | |||
The Credit Agreement contains negative and financial covenants that limit certain activities of our company and its subsidiaries, including (i) restrictions on our ability to incur additional indebtedness; and (ii) financial covenants that require (a) the cash flow leverage ratio not to exceed a maximum; (b) a minimum interest expense and principal payment coverage ratio; and (c) a minimum level of statutory net worth for our health maintenance organization and insurance subsidiaries. The Credit Agreement also contains customary representations and warranties that must be accurate in order for us to borrow under the Revolving Credit Facility. In addition, the Credit Agreement contains customary events of default. If an event of default occurs and is continuing, we may be required immediately to repay all amounts outstanding under the Credit Agreement. Lenders holding at least 50% of the loans and commitments under the Credit Agreement may elect to accelerate the maturity of the loans and/or terminate the commitments under the Credit Agreement upon the occurrence and during the continuation of an event of default. | |||
We received net proceeds of $298.6 million in connection with the funding of the Term Loan and closing of the Credit Agreement in September 2014. The Term Loan is classified as long-term debt in the Company’s condensed consolidated balance sheet at September 30, 2014 based on its September 2016 maturity date. The interest rate on the Term Loan was 2.44% as of September 30, 2014. | |||
As of September 30, 2014 and as of the date of this filing, we have not drawn upon the Revolving Credit Facility and we remain in compliance with all covenants under both the Credit Agreement and the Senior Notes (defined below). | |||
Senior Notes due 2020 | |||
In November 2013, we completed the offering and sale of $600.0 million aggregate principal amount of 5.75% unsecured senior notes due 2020 (the “Senior Notes”). The aggregate net proceeds from the issuance of the Senior Notes were used to repay the full outstanding balance under our 2011 credit agreement, and the remaining net proceeds are being used for general corporate purposes, including organic growth opportunities and potential acquisitions. The Senior Notes will mature on November 15, 2020, and bear interest at a rate of 5.75% per annum. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. Interest on the Senior Notes is payable semi-annually on May 15 and November 15 of each year and commenced on May 15, 2014. | |||
The Senior Notes were issued under an indenture, dated as of November 14, 2013 (the “Base Indenture”), as supplemented by the First Supplemental Indenture, dated as of November 14, 2013 (together with the Base Indenture, the “Indenture”) each between us and The Bank of New York Mellon Trust Company, N.A., as trustee. The Indenture under which the notes were issued contains covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to: | |||
• | incur additional indebtedness and issue preferred stock; | ||
• | pay dividends or make other distributions; | ||
• | make other restricted payments and investments; | ||
• | sell assets, including capital stock of restricted subsidiaries; | ||
• | create certain liens; | ||
• | incur restrictions on the ability of restricted subsidiaries to pay dividends or make other payments, and in the case of the our subsidiaries, guarantee indebtedness; | ||
• | engage in transactions with affiliates; | ||
• | create unrestricted subsidiaries; and | ||
• | merge or consolidate with other entities. | ||
Ranking and Optional Redemption | |||
The Senior Notes are senior obligations of our company and rank equally in right of payment with all of our other existing and future unsecured and unsubordinated indebtedness. In addition, the Senior Notes are structurally subordinated to all indebtedness and other liabilities of our subsidiaries (unless our subsidiaries become guarantors of the Senior Notes). We may redeem up to 40% of the aggregate principal amount of the Senior Notes at any time prior to November 15, 2016, at a redemption price equal to 105.75% of the principal amount of the Senior Notes redeemed, plus accrued and unpaid interest. | |||
On or after November 15, 2016, we may on any one or more occasions redeem all or part of the Senior Notes, at the redemption prices (expressed as percentages of principal amount) set forth below, if redeemed during the twelve-month period beginning on November 15 of the years indicated below, subject to the rights of holders of Senior Notes on the relevant record date to receive interest due on the relevant interest payment date: | |||
Period | Redemption Price | ||
2016 | 102.875 | % | |
2017 | 101.438 | % | |
2018 and thereafter | 100 | % | |
The Senior Notes are classified as long-term debt in the Company’s condensed consolidated balance sheets at September 30, 2014 and December 31, 2013, respectively, based on their November 2020 maturity date. |
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended | |||||||||||||||
Sep. 30, 2014 | ||||||||||||||||
Fair Value Disclosures [Abstract] | ' | |||||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||||
FAIR VALUE MEASUREMENTS | ||||||||||||||||
Our condensed consolidated balance sheets include the following financial instruments: cash and cash equivalents, investments, receivables, accounts payable, medical benefits payable, long-term debt and other liabilities. We consider the carrying amounts of cash and cash equivalents, receivables, other current assets and current liabilities to approximate their fair value due to the short period of time between the origination of these instruments and the expected realization or payment. | ||||||||||||||||
Recurring Fair Value Measurements | ||||||||||||||||
Assets and liabilities measured at fair value on a recurring basis at September 30, 2014 are as follows: | ||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||
Carrying Value | Quoted Prices in | Significant Other | Significant | |||||||||||||
Active Markets | Observable | Unobservable | ||||||||||||||
for Identical | Inputs | Inputs | ||||||||||||||
Assets | (Level 2) | (Level 3) | ||||||||||||||
(Level 1) | ||||||||||||||||
Investments: | ||||||||||||||||
Asset backed securities | $ | 21.6 | $ | — | $ | 21.6 | $ | — | ||||||||
Auction rate securities | 32.3 | — | — | 32.3 | ||||||||||||
Certificates of deposit | 0.5 | — | 0.5 | — | ||||||||||||
Corporate debt securities | 91 | — | 91 | — | ||||||||||||
Money market funds | 41.4 | 41.4 | — | — | ||||||||||||
Municipal securities | 84.5 | — | 84.5 | — | ||||||||||||
U.S. government and agency obligations | 25.2 | 19.8 | 5.4 | — | ||||||||||||
Variable rate bond fund | 110.4 | 110.4 | — | — | ||||||||||||
Total investments | $ | 406.9 | $ | 171.6 | $ | 203 | $ | 32.3 | ||||||||
Restricted investments: | ||||||||||||||||
Cash | 54.4 | 54.4 | — | — | ||||||||||||
Certificates of deposit | 1 | — | 1 | — | ||||||||||||
Money market funds | 66 | 66 | — | — | ||||||||||||
U.S. government and agency obligations | 29.2 | 29.2 | — | — | ||||||||||||
Total restricted investments | $ | 150.6 | $ | 149.6 | $ | 1 | $ | — | ||||||||
Amounts accrued related to investigation resolution | $ | 34.9 | $ | — | $ | 34.9 | $ | — | ||||||||
Assets and liabilities measured at fair value on a recurring basis at December 31, 2013 are as follows: | ||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||
Carrying Value | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||||
Investments: | ||||||||||||||||
Asset backed securities | $ | 1.6 | $ | — | $ | 1.6 | $ | — | ||||||||
Auction rate securities | 31.8 | — | — | 31.8 | ||||||||||||
Certificates of deposit | 1.6 | — | 1.6 | — | ||||||||||||
Corporate debt securities | 102.9 | — | 102.9 | — | ||||||||||||
Money market funds | 43.4 | 43.4 | — | — | ||||||||||||
Municipal securities | 108.9 | — | 108.9 | — | ||||||||||||
U.S. government securities | 19.6 | 19.6 | — | — | ||||||||||||
Variable rate bond fund | 85.3 | 85.3 | — | — | ||||||||||||
Total investments | $ | 395.1 | $ | 148.3 | $ | 215 | $ | 31.8 | ||||||||
Restricted investments: | ||||||||||||||||
Cash | $ | 40.2 | $ | 40.2 | $ | — | $ | — | ||||||||
Certificates of deposit | 1.4 | — | 1.4 | — | ||||||||||||
Money market funds | 19 | 19 | — | — | ||||||||||||
U.S. government securities | 21.9 | 21.9 | — | — | ||||||||||||
Total restricted investments | $ | 82.5 | $ | 81.1 | $ | 1.4 | $ | — | ||||||||
Amounts accrued related to investigation resolution | $ | 70.3 | $ | — | $ | 70.3 | $ | — | ||||||||
The following table presents the carrying value and fair value of our Senior Notes and Term Loan as of September 30, 2014, and our senior notes as of December 31, 2013: | ||||||||||||||||
September 30, 2014 | December 31, 2013 | |||||||||||||||
Long term debt | $ | 900 | $ | 600 | ||||||||||||
Approximate fair value of our long-term debt | 907.7 | 615 | ||||||||||||||
The fair value of our Senior Notes was determined based on quoted market prices at September 30, 2014 and December 31, 2013, respectively, and therefore would be classified within Level 1 of the fair value hierarchy. The fair value of our Term Loan at September 30, 2014 was determined based on a discounted cash flow analysis, and would therefore be classified within Level 2 of the fair value hierarchy. | ||||||||||||||||
The following table presents the changes in the fair value of our Level 3 auction rate securities for the nine months ended September 30, 2014. | ||||||||||||||||
Balance as of January 1, 2014 | $ | 31.8 | ||||||||||||||
Realized gains (losses) in earnings | — | |||||||||||||||
Unrealized gains (losses) in other comprehensive income | 0.5 | |||||||||||||||
Purchases, sales and redemptions | — | |||||||||||||||
Net transfers in or (out) of Level 3 | — | |||||||||||||||
Balance as of September 30, 2014 | $ | 32.3 | ||||||||||||||
INCOME_TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2014 | |
Income Tax Disclosure [Abstract] | ' |
INCOME TAXES | ' |
INCOME TAXES | |
Our effective income tax rate for the three and nine months ended September 30, 2014 was 68.7% and 54.8%, respectively, compared to 40.1% and 36.0% for the corresponding periods in 2013. The higher 2014 effective rates reflect the impact of the non-deductible ACA industry fee, partially offset by the favorable impact of the Windsor bargain purchase gain. The effective tax rate was also lower in 2013 due to an issue resolution agreement reached with the IRS regarding the tax treatment of the investigation-related litigation and other resolution costs, resulting in approximately $7.6 million in additional tax benefit over what was recorded in prior periods. | |
In September 2014, the IRS issued final regulations on the ACA's $0.5 million limit on the deduction for compensation for health insurance providers under Code section 162(m)(6). As a result, we no longer believe the deduction limitations apply to WellCare, and we reversed $9.3 million of previously recorded tax expense from prior periods during the three months ended September 30, 2014. However, we are not able to conclude at this time that our tax position is more likely than not to be sustained upon IRS CAP review. Therefore, we recognized a liability for unrecognized tax benefits amounting to $9.3 million at September 30, 2014. The unrecognized tax benefit, if recognized, would reduce the effective tax rate. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
COMMITMENTS AND CONTINGENCIES | ' |
COMMITMENTS AND CONTINGENCIES | |
Government Investigations | |
Under the terms of settlement agreements entered into on April 26, 2011, and finalized on March 23, 2012, to resolve matters under investigation by the Civil Division of the U.S. Department of Justice ("Civil Division") and certain other federal and state enforcement agencies (the "Settlement"), we agreed to pay the Civil Division a total of $137.5 million in four annual installments of $34.4 million over 36 months, plus interest accrued at 3.125%. The estimated fair value of the discounted remaining liability, and related interest, was $34.9 million at September 30, 2014, all of which has been included in the current amounts payable related to the investigation resolution in the accompanying condensed consolidated balance sheet as of September 30, 2014. | |
The Settlement also provides for a contingent payment of an additional $35.0 million in the event that we are acquired or otherwise experience a change in control on or before April 30, 2015, provided that the change in control transaction exceeds certain minimum transaction value thresholds as specified in the Settlement. | |
Securities Class Action Complaint | |
In December 2010, we entered into a Stipulation and Agreement of Settlement (the "Stipulation Agreement") with the lead plaintiffs in the consolidated securities class action Eastwood Enterprises, L.L.C. v. Farha, et al., Case No. 8:07-cv-1940-VMC-EAJ. The Stipulation Agreement requires us to pay to the class 25% of any sums we recover from Todd Farha, Paul Behrens and/or Thaddeus Bereday related to the same facts and circumstances that gave rise to the consolidated securities class action. Messrs. Farha, Behrens and Bereday are three former executives that were implicated in the government investigations of the Company that commenced in 2007. | |
Corporate Integrity Agreement | |
We operate under a Corporate Integrity Agreement (the "Corporate Integrity Agreement") with the Office of Inspector General of the United States Department of Health and Human Services ("OIG-HHS"). The Corporate Integrity Agreement has a term of five years from its effective date of April 26, 2011 and mandates various ethics and compliance programs designed to help ensure our ongoing compliance with federal health care program requirements. The terms of the Corporate Integrity Agreement include certain organizational structure requirements, internal monitoring requirements, compliance training, screening processes for employees, reporting requirements to OIG-HHS, and the engagement of an independent review organization to review and prepare written reports regarding, among other things, our reporting practices and bid submissions to federal health care programs. If we do not comply with the terms of the Corporate Integrity Agreement, we may be subject to penalties or exclusion from participation in federal health care programs. | |
Indemnification Obligations | |
Under Delaware law, our charter and bylaws and certain indemnification agreements to which we are a party, we are obligated to indemnify, or we have otherwise agreed to indemnify, certain of our current and former directors, officers and associates with respect to current and future investigations and litigation, including the matters discussed in this footnote. The indemnification agreements for our directors and executive officers with respect to events occurring prior to May 2009 require us to indemnify an indemnitee to the fullest extent permitted by law if the indemnitee was or is or becomes a party to or witness or other participant in any proceeding by reason of any event or occurrence related to the indemnitee's status as a director, officer, employee, agent or fiduciary of the Company or any of our subsidiaries and all expenses, including attorney's fees, judgments, fines, settlement amounts and interest and other charges, and any taxes as a result of the receipt of payments under the indemnification agreement. We will not indemnify the indemnitee if not permitted under applicable law. We are required to advance all expenses incurred by the indemnitee. We are entitled to reimbursement by an indemnitee of expenses advanced if the indemnitee is not permitted to be reimbursed under applicable law after a final judicial determination is made and all rights of appeal have been exhausted or lapsed. | |
We amended and restated our indemnification agreements in May 2009. The revised agreements apply to our officers and directors with respect to events occurring after that time. Pursuant to the 2009 indemnification agreements, we will indemnify the indemnitee against all expenses, including attorney's fees, judgments, penalties, fines, settlement amounts and any taxes imposed as a result of payments made under the indemnification agreement incurred in connection with any proceedings that relate to the indemnitee's status as a director, officer or employee of the Company or any of our subsidiaries or any other enterprise that the indemnitee was serving at our request. We will also indemnify for expenses incurred by the indemnitee if an indemnitee, by reason of his or her corporate status, is a witness in any proceeding. Further, we are required to indemnify for expenses incurred by an indemnitee in defense of a proceeding to the extent the indemnitee has been successful on the merits or otherwise. Finally, if the indemnitee is involved in certain proceedings as a result of the indemnitee's corporate status, we are required to advance the indemnitee's reasonable expenses incurred in connection with such proceeding, subject to the requirement that the indemnitee repay the expenses if it is ultimately determined that the indemnitee is not entitled to be indemnified. We are not obligated to indemnify an indemnitee for losses incurred in connection with any proceeding if a determination has not been made by the Board of Directors, a committee of disinterested directors or independent legal counsel in the specific case that the indemnitee has satisfied any standards of conduct required as a condition to indemnification under Section 145 of the Delaware General Corporation Law. | |
Pursuant to our obligations, we have advanced, and will continue to advance, legal fees and related expenses to three former officers and two former associates who were criminally indicted in connection with the government investigations of the Company that commenced in 2007 related to federal criminal health care fraud charges including conspiracy to defraud the United States, false statements relating to health care matters, and health care fraud in connection with their defense of criminal charges. In June 2013, the jury in the criminal trial reached guilty verdicts on multiple charges for the four individuals that were tried in 2013. In May 2014, the individuals were sentenced and our request for restitution was denied. All four individuals have filed notices of appeal and the government has filed notices of cross appeal. The fifth individual is expected to be tried in 2015. | |
We have also previously advanced legal fees and related expenses to these five individuals regarding disputes in Delaware Chancery Court related to whether we were legally obligated to advance fees or indemnify certain of these executives; the class actions titled Eastwood Enterprises, L.L.C. v. Farha, et al. and Hutton v. WellCare Health Plans, Inc. et al. filed in federal court; six stockholder derivative actions filed in federal and state courts between October 2007 and January 2008; an investigation by the United States Securities & Exchange Commission (the "Commission"); and an action by the Commission filed in January 2012 against Messrs. Farha, Behrens and Bereday. The Delaware Chancery Court cases have concluded. We settled the class actions in May 2011. In 2010, we settled the stockholder derivative actions and we were realigned as the plaintiff to pursue our claims against Messrs. Farha, Behrens and Bereday. These actions, as well as the action by the Commission are currently stayed. | |
In connection with these matters, we have advanced, to the five individuals, cumulative legal fees and related expenses of approximately $179.4 million from the inception of the investigations to September 30, 2014. We incurred $8.6 million and $23.5 million of these legal fees and related expenses during the three and nine months ended September 30, 2014, respectively, and $5.7 million and $39.1 million for the same periods in 2013. We expense these costs as incurred and classify the costs as selling, general and administrative expense incurred in connection with the investigations and related matters. | |
We expect the continuing cost of our obligations to the five individuals in connection with their defense and appeal of criminal charges and related litigation to be significant and to continue for a number of years. We have exhausted our insurance policies related to reimbursement of our advancement of fees related to these matters. We are unable to estimate the total amount of these costs or a range of possible loss. Accordingly, we continue to expense these costs as incurred. Even if it is eventually determined that we are entitled to reimbursement of the advanced expenses, it is possible that we may not be able to recover all or any portion of our damages or advances. Our indemnification obligations and requirements to advance legal fees and expenses may continue to have a material adverse effect on our financial condition, results of operations and cash flows. | |
Other Lawsuits and Claims | |
Based on the nature of our business, we are subject to regulatory reviews or other investigations by various state insurance and health care regulatory authorities and other state and federal regulatory authorities. These authorities regularly scrutinize the business practices of health insurance and benefits companies and their reviews focus on numerous facets of our business, including claims payment practices, provider contracting, competitive practices, commission payments, privacy issues and utilization management practices, among others. Some of these reviews have historically resulted in fines imposed on us and some have required changes to our business practices. We continue to be subject to such reviews, which may result in additional fines and/or sanctions being imposed, premium refunds or additional changes in our business practices. | |
Separate and apart from the legal matters described above, we are also involved in other legal actions in the normal course of our business, including, without limitation, wage and hour claims and other employment claims and provider disputes regarding payment of claims. Some of these actions seek monetary damages including claims for liquidated or punitive damages, which are not covered by insurance. We review relevant information with respect to litigation matters and we update our estimates of reasonably possible losses and related disclosures. We accrue an estimate for contingent liabilities, including attorney's fees related to these matters, if a loss is probable and estimable. Currently, we do not expect that the resolution of any currently pending actions, either individually or in the aggregate, will differ materially from our current estimates or have a material adverse effect on our results of operations, financial condition and cash flows. However, the outcome of any legal actions cannot be predicted, and therefore, actual results may differ from those estimates. |
ORGANIZATION_BASIS_OF_PRESENTA1
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | |
Sep. 30, 2014 | ||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | |
Risk Adjusted Premiums [Policy Text Block] | ' | |
Risk-Adjusted Medicare Premiums | ||
CMS employs a risk-adjustment model to determine the premium amount it pays for each MA and PDP member. This model apportions premiums paid to all plans according to the health status of each beneficiary enrolled, resulting in higher scores for members with predictably higher costs. The model uses diagnosis data from inpatient and ambulatory treatment settings to calculate each risk score. We collect claims and encounter data for our MA members and submit the necessary diagnosis data to CMS within prescribed deadlines. After reviewing the respective submissions, CMS establishes the premium payments to MA plans at the beginning of the plan year, and then adjusts premium levels on a retroactive basis. The first retroactive adjustment for a given plan year generally occurs during the third quarter of that year and represents the update of risk scores for the current plan year based on the severity of claims incurred in the prior plan year. CMS then issues a final retroactive risk-adjusted premium settlement for that plan year in the following year. | ||
We develop our estimates for risk-adjusted premiums utilizing historical experience and predictive models as sufficient member risk score data becomes available over the course of each CMS plan year. We populate our models with available risk score data on our members and base risk premium adjustments on risk score data from the previous year. We are not privy to risk score data for members new to our plans in the current plan year; therefore we include assumptions regarding these members' risk scores. We periodically revise our estimates of risk-adjusted premiums as additional diagnosis code information is reported to CMS and adjust our estimates to actual amounts when the ultimate adjustment settlements are either received from CMS or we receive notification from CMS of such settlement amounts. As a result of the variability of factors that determine our estimates for risk-adjusted premiums, the actual amount of the CMS retroactive payment could be materially more or less than our estimates and could have a material effect on our results of operations, financial position and cash flows. We record any changes in estimates in current operations as adjustments to premium revenue. Historically, we have not experienced significant differences between our estimates and amounts ultimately received. However, in the third quarter of 2013, we recognized risk adjusted premium received as part of the 2012 final settlement that was higher than our original estimates, mainly related to members in our California MA plan that were new to Medicare in 2012. The data provided to CMS to determine members' risk scores is subject to audit by CMS even after the annual settlements occur. An audit may result in the refund of premiums to CMS. While our experience to date has not resulted in a material refund, future refunds could materially reduce premium revenue in the year in which CMS determines a refund is required and could be material to our results of operations, financial position and cash flows. Premiums receivable in the accompanying condensed consolidated balance sheets include risk-adjusted premiums receivable of $134.7 million and $107.2 million as of September 30, 2014 and December 31, 2013, respectively. | ||
Revenue Recognition | ' | |
Revenue Recognition | ||
We earn premium revenue through our participation in Medicaid, Medicaid-related and Medicare programs. | ||
State governments individually operate and implement and, together with the federal government's Centers for Medicare & Medicaid Services ("CMS"), fund and regulate the Medicaid program. We provide benefits to low-income and disabled persons under the Medicaid program and are paid premiums based on contracts with government agencies in the states in which we operate health plans. Our Medicaid contracts are generally multi-year contracts subject to annual renewal provisions. Rate changes are typically made at the commencement of each new contract renewal period. In some instances, our fixed Medicaid premiums are subject to risk score adjustments based on the acuity of our membership. State agencies analyze encounter submissions of processed claims data to determine the acuity of our membership relative to the entire state's Medicaid membership. | ||
We operate our MA plans under the Medicare Part C program and provide our eligible members with benefits comparable to those available under Medicare Parts A and B. Most of our MA plans and all of our PDPs offer prescription drug benefits to eligible members under the Medicare Part D program. Premiums for each MA member are based on our annual bids, although the rates vary according to a combination of factors, including upper payment limits established by CMS, the member's geographic location, age, gender, medical history or condition, or the services rendered to the member. Our MA contracts with CMS generally have terms of one year and expire at the end of each calendar year. PDP premiums are also based upon contracts with CMS that have a term of one year and expire at the end of each calendar year. We provide annual written bids to CMS for our PDPs, which reflect the estimated costs of providing prescription drug benefits over the plan year. Changes in MA and PDP members' health status also impact monthly premiums as described under "Risk-Adjusted Medicare Premiums" below. CMS pays all of the premium for Medicare Part C and substantially all of the premium for Medicare Part D coverage. We bill the remaining Medicare Part D premium to PDP and MA members with Part D benefits based on the plan year bid submitted to CMS. For qualifying low-income subsidy ("LIS") members, CMS pays for some or all of the LIS members' monthly premium. The CMS payment is dependent upon the member's income level as determined by the Social Security Administration. | ||
We receive premiums from CMS and state agencies on a per member per month ("PMPM") basis for the members that are assigned to, or have selected, us to provide health care services under our Medicare and Medicaid contracts. We recognize premium revenue in the period in which we are obligated to provide services to our members. CMS and state agencies generally pay us in the month in which we provide services. We record premiums earned, but not received, as premiums receivable and record premiums received in advance of the period of service as unearned premiums in the condensed consolidated balance sheets. Unearned premiums are recognized as revenue when we provide the related services. On a monthly basis, we bill members for any premiums for which they are responsible according to their respective plan. Member premiums are recognized as revenue in the period of service. We reduce recorded premium revenue and member premiums receivable by the amount we estimate may not be collectible, based on our evaluation of historical trends. We also routinely monitor the collectability of premiums receivable from CMS and state agencies, including Medicaid receivables for obstetric deliveries and newborns and net receivables for member retroactivity. We reduce revenue and premiums receivable by the amounts we estimate may not be collectible. We report premiums receivable, net of an allowance for uncollectible premiums receivable, which was $22.2 million and $15.8 million, at September 30, 2014 and December 31, 2013, respectively. Historically, the allowance for member premiums receivable has not been material relative to consolidated premium revenue. | ||
We record retroactive adjustments to revenues based on changes in the number and eligibility status of our members subsequent to when we recorded revenue related to those members and months of service. We receive premium payments based upon eligibility lists produced by CMS and state agencies. We verify these lists to determine whether we have been paid for the correct premium category and program. From time to time, CMS and state agencies require us to reimburse them for premiums that we received for individuals who were subsequently determined by us, or by CMS or state agencies, to be ineligible for any government-sponsored program or to belong to a plan other than ours. We receive additional premiums from CMS and state agencies for individuals who were subsequently determined to belong to our plan for periods in which we received no premium for those members. We estimate the amount of outstanding retroactivity adjustments and adjust premium revenue based on historical trends, premiums billed, the volume of member and contract renewal activity and other information. We record amounts receivable or payable in premiums receivable, net and other accrued expenses and liabilities in the condensed consolidated balance sheets. | ||
Supplemental Medicaid Premiums | ||
We earn, or earned, supplemental premium payments for eligible obstetric deliveries and newborns of our Medicaid members in Georgia, Illinois, Kentucky, Missouri, New York, South Carolina and, until June 30, 2013, in Ohio. Each state Medicaid contract specifies how and when these supplemental payments are earned and paid. Upon delivery of a newborn, we notify the state agency according to the contract terms. We also earn supplemental Medicaid premium payments in some states for high cost drugs and certain services such as early childhood prevention screenings. We recognize supplemental premium revenue in the period we provide related services to our members. | ||
Minimum Medical Expense and Risk Corridor Provisions | ' | |
Minimum Medical Expense and Risk Corridor Provisions | ||
We may be required to refund certain premium revenue to CMS and state government agencies under various contractual and plan arrangements. We estimate the impact of the following arrangements on a monthly basis and reflect any adjustments to premium revenues in current operations. We report the estimated net amounts due to CMS and state agencies in other payables to government partners in the condensed consolidated balance sheets. | ||
Certain of our Medicaid contracts require us to expend a minimum percentage of premiums on eligible medical benefits expense. To the extent that we expend less than the minimum percentage of the premiums on eligible medical benefits, we are required to refund to the state all or some portion of the difference between the minimum and our actual allowable medical benefits expense. We estimate the amounts due to the state agencies as a return of premium based on the terms of our contracts with the applicable state agency. | ||
Our MA and PDP prescription drug plan premiums are subject to risk sharing through the CMS Medicare Part D risk corridor provisions. The risk corridor calculation compares our actual experience to the target amount of prescription drug costs, limited to costs under the standard coverage as defined by CMS, less rebates included in our submitted plan year bid. We receive additional premium from CMS if our actual experience is more than 5% above the target amount. We refund premiums to CMS if our actual experience is more than 5% below the target amount. After the close of the annual plan year, CMS performs the risk corridor calculation and any differences are settled between CMS and our plans. We have not historically experienced material differences between the subsequent CMS settlement amount and our estimates. | ||
Beginning in 2014, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the "ACA"), requires the establishment of a minimum medical loss ratio (“MLR”) for MA plans and Part D plans, requiring them to spend not less than 85% of premiums on medical benefits. The rules implementing the minimum MLR impose financial and other penalties for failing to achieve the minimum MLR, including requirements to refund to CMS shortfalls in amounts spent on medical benefits and termination of a plan’s MA contract for prolonged failure to achieve the minimum MLR. MLR is determined by adding a plan’s spending for clinical services, prescription drugs and other direct patient benefits, plus its total spending on quality improvement activities and dividing the total by earned premiums (after subtracting specific identified taxes and other fees). We do not expect these provisions to have a material impact to our results of operations in 2014. | ||
Medicare Part D Settlements | ' | |
Medicare Part D Settlements | ||
We receive certain Part D prospective subsidy payments from CMS for our MA and PDP members based on the estimated costs of providing prescription drug benefits over the plan year, as reflected in our bids. After the close of the annual plan year, CMS reconciles our actual experience to the prospective payments we received and any differences are settled between CMS and our plans. As such, these subsidies represent funding from CMS for which we assume no risk. We do not recognize the receipt of these subsidies as premium revenue and we do not recognize the payments of related prescription drug benefits as medical benefits expense. We report the subsidies received and benefits paid on a net basis as funds receivable (held) for the benefit of members in the condensed consolidated balance sheets. We also report the net receipts and payments as a financing activity in our condensed consolidated statements of cash flows. CMS pays the following subsidies prospectively as a fixed PMPM amount based upon the plan year bid submitted by us: | ||
Low-Income Cost Sharing Subsidy—CMS reimburses us for all or a portion of qualifying LIS members' deductible, coinsurance and co-payment amounts above the out-of-pocket threshold. | ||
Catastrophic Reinsurance Subsidy—CMS reimburses us for 80% of the drug costs after a member reaches his or her out-of-pocket catastrophic threshold through a catastrophic reinsurance subsidy. | ||
Coverage Gap Discount Subsidy—We advance the pharmaceutical manufacturers gap coverage discounts at the point of sale. On a periodic basis, CMS bills pharmaceutical manufacturers for discounts advanced by us. Pharmaceutical manufacturers remit payments for invoiced amounts directly to us. CMS reduces subsequent prospective payments made to us by the discount amounts billed to manufacturers. | ||
CMS generally performs the Part D payment reconciliation in the fourth quarter of the following plan year based on prescription drug event data we submit to CMS within prescribed deadlines. After the Part D payment reconciliation for coverage gap discount subsidies, we may continue to report discounts to CMS for 37 months following the end of the plan year. CMS will invoice manufacturers for these discounts and we will be paid through the quarterly manufacturer payments. Historically, we have not experienced material adjustments related to the CMS annual reconciliation of prior plan year low-income cost sharing, catastrophic reinsurance, and coverage gap discount subsidies. | ||
Medical Benefits and Medical Benefits Payable | ' | |
Medical Benefits and Medical Benefits Payable | ||
We recognize the cost of medical benefits in the period in which services are provided, including an estimate of the cost of medical benefits incurred but not reported ("IBNR"). Medical benefits expense includes direct medical expenses and certain medically-related administrative costs. | ||
Direct medical expenses include amounts paid or payable to hospitals, physicians and providers of ancillary services, such as laboratories and pharmacies. We also record direct medical expenses for estimated referral claims related to health care providers under contract with us who are financially troubled or insolvent and who may not be able to honor their obligations for the costs of medical services provided by others. In these instances, we may be required to honor these obligations for legal or business reasons. Based on our current assessment of providers under contract with us, such losses have not been, and are not expected to be, significant. We record direct medical expense for our estimates of provider settlement due to clarification of contract terms, out-of-network reimbursement, claims payment differences and amounts due to contracted providers under risk-sharing arrangements. We estimate pharmacy rebates earned based on historical utilization of specific pharmaceuticals, current utilization and contract terms and record amounts as a reduction of recorded direct medical expenses. | ||
Consistent with the criteria specified and defined in guidance issued by the Department of Health and Human Services ("HHS") for costs that qualify to be reported as medical benefits under the minimum medical loss ratio provision of the ACA, we record certain medically-related administrative costs such as preventive health and wellness, care management, and other quality improvement costs, as medical benefits expense. All other medically-related administrative costs, such as utilization review services, network and provider credentialing and claims handling costs, are recorded in selling, general, and administrative expense. | ||
Medical benefits payable represents amounts for claims fully adjudicated but not yet paid and estimates for IBNR. Our estimate of IBNR is the most significant estimate included in our condensed consolidated financial statements. We determine our best estimate of the base liability for IBNR utilizing consistent standard actuarial methodologies based upon key assumptions which vary by business segment. Our assumptions include current payment experience, trend factors and completion factors. Trend factors in our standard actuarial methodologies include contractual requirements, historic utilization trends, the interval between the date services are rendered and the date claims are paid, denied claims activity, disputed claims activity, benefit changes, expected health care cost inflation, seasonality patterns, maturity of lines of business, changes in membership and other factors. | ||
After determining an estimate of the base liability for IBNR, we make an additional estimate, also using standard actuarial techniques, to account for adverse conditions that may cause actual claims to be higher than the estimated base reserve. We refer to this additional liability as the provision for moderately adverse conditions. Our estimate of the provision for moderately adverse conditions captures the potential adverse development from factors such as: | ||
• | our entry into new geographical markets; | |
• | our provision of services related to new programs or populations such as the aged, blind and disabled; | |
• | variations in utilization of benefits and increasing medical costs, including high cost drugs; | |
• | changes in provider reimbursement arrangements; | |
• | variations in claims processing speed and patterns, claims payment and the severity of claims; and | |
• | health epidemics or outbreaks of disease such as the flu or enterovirus. | |
We consider the base actuarial model liability and the provision for moderately adverse conditions as part of our overall assessment of our IBNR estimate to properly reflect the complexity of our business, the number of states in which we operate, and the need to account for different health care benefit packages among those states. We evaluate our estimates of medical benefits payable as we obtain more complete claims information and medical expense trend data over time. Volatility in members' needs for medical services, provider claims submissions and our payment processes result in identifiable patterns emerging several months after the causes of deviations from our assumed trends occur. Changes in our estimates of medical benefits payable cannot typically be explained by any single factor, but are the result of a number of interrelated variables, all of which influence the resulting medical cost trend. We record differences between actual experience and estimates used to establish the liability, which we refer to as favorable and unfavorable prior period reserve developments, as increases or decreases to medical benefits expense in the period we identify the differences. The cumulative effect of prior period reserve development in 2013 was a favorable $3.0 million; however, we recognized unfavorable prior period reserve development in three of four quarters in 2013, and in the first and second quarters of 2014. Based on the unfavorable prior period reserve development experience in these quarters, we have refined certain of these assumptions, resulting in increased current period medical benefits costs incurred. | ||
Favorable prior period reserve development amounted to $16.6 million for the three months ended September 30, 2014, which includes $15.4 million of favorable development related to prior fiscal years and $1.2 million of favorable development related to the first and second quarters of 2014. For the three months ended September 30, 2013, unfavorable prior period reserve development impacted medical benefits expense by approximately $47.5 million, which includes $16.3 million of unfavorable development related to prior fiscal years and $31.2 million of unfavorable development related to the first and second quarters of 2013. The favorable development recognized in the three months ended September 30, 2014 was due mainly to lower than projected medical costs, mainly in our Medicaid Health Plans segment. For the nine months ended September 30, 2014, unfavorable development related to prior fiscal years impacted medical benefits expense by approximately $46.2 million, mainly related to the Medicaid Health Plans and Medicare Health Plans segments, compared to unfavorable development of $7.1 million recognized during the corresponding period in 2013. | ||
Reinsurance | ' | |
Reinsurance | ||
We cede certain premiums and medical benefits to other insurance companies under various reinsurance agreements in order to increase our capacity to write larger risks and maintain our exposure to loss within our capital resources. We are contingently liable in the event the reinsurance companies do not meet their contractual obligations. We evaluate the financial condition of the reinsurance companies on a regular basis and only contract with well-known, well-established reinsurance companies that are supported by strong financial ratings. We account for reinsurance premiums and medical expense recoveries according to the terms of the underlying reinsurance contracts. | ||
ACA Industry Fee [Policy Text Block] | ' | |
ACA Industry Fee | ||
The ACA imposes an annual premium-based health insurance industry assessment (the "ACA industry fee") on health insurers beginning in 2014. The total ACA industry fee levied on the health insurance industry is $8 billion in 2014, with increasing annual amounts thereafter and growing to $14.3 billion by 2018. After 2018, the ACA industry fee increases according to an index based on net premium growth. The assessment is being levied on certain health insurers that provide insurance in the assessment year, and is allocated to health insurers based on each health insurer's share of net premiums for all U.S. health insurers in the year preceding the assessment. The ACA industry fee is not deductible for income tax purposes, which has significantly increased our effective income tax rate. We paid our total $137.7 million obligation for such fees to the Internal Revenue Services ("IRS") in September 2014, which is consistent with our previous estimate. The initial estimated liability of $129.0 million was accrued as of January 1, 2014, with an additional $8.2 million and $0.5 million recorded at June 30, 2014 and September 30, 2014, respectively, with a corresponding deferred expense asset that is being amortized to expense on a straight line basis. We have recognized approximately $34.7 million and $103.3 million of such amortization as ACA industry fee expense in the three and nine months ended September 30, 2014, respectively. The deferred expense asset amounted to $34.4 million at September 30, 2014 and is reported as 'Deferred ACA industry fee' on the condensed consolidated balance sheet. | ||
We have received amendments, written agreements or other documentation from all our Medicaid state customers, that commit them to reimburse us for the portion of the ACA industry fee attributable to the Medicaid programs in these states, including the related state and federal income tax gross-ups. Consequently, we recognized $37.1 million and $93.9 million of reimbursement for the ACA industry fee as premium revenue in the three and nine months ended September 30, 2014, respectively. MA and PDP premiums will not be adjusted to offset the impact of the ACA industry fee. | ||
Equity-Based Employee Compensation | ' | |
Equity-Based Employee Compensation | ||
During the second quarter of 2013, our stockholders approved the WellCare Health Plans, Inc. 2013 Incentive Compensation Plan (the "2013 Plan"). Upon approval of the 2013 Plan, a total of 2,500,000 shares of our common stock were available for issuance pursuant to the 2013 Plan, minus any shares subject to outstanding awards granted on or after January 1, 2013 under our 2004 Equity Incentive Plan (the "Prior Plan"). In addition, shares subject to awards forfeited under the Prior Plan will become available for issuance under the 2013 Plan. No further awards are permitted to be granted under our Prior Plan. The Compensation Committee of our Board of Directors (the "Compensation Committee") awards certain equity-based compensation under our stock plans, including stock options, restricted stock, restricted stock units ("RSUs"), performance stock units ("PSUs") and market stock units ("MSUs"). We estimate equity-based compensation expense based on awards ultimately expected to vest. We make assumptions of forfeiture rates at the time of grant and continuously reassess our assumptions based on actual forfeiture experience. | ||
We estimate compensation cost for stock options, restricted stock, RSUs and MSUs based on the fair value at the time of grant and recognize expense over the vesting period of the award. For stock options, the grant date fair value is measured using the Black-Scholes options-pricing model. For restricted stock and RSUs, the grant date fair value is based on the closing price of our common stock on the grant date. For MSUs, the fair value at the grant date is measured using a Monte Carlo simulation approach, which estimates the fair value of awards based on randomly generated simulated stock-price paths through a lattice-type structure. MSUs expected to vest are recognized as expense on a straight-line basis over the vesting period, which is generally three years. The number of shares of common stock earned upon vesting is determined based on the ratio of the Company's common stock price during the last 30 market trading days of the calendar year immediately preceding the vesting date to the comparable common stock price as of the grant date, applied to the base units granted. The performance ratio is capped at 150% or 200%, depending on the grant date. If our common stock price declines by more than 50% over the performance period, no shares are earned by the recipient. | ||
At its sole discretion, the Compensation Committee sets certain financial and quality-based performance goals and a target award amount for each award of PSUs. PSUs generally cliff-vest three years from the grant date based on the achievement of the performance goals and are conditioned on the employee's continued service through the vesting date. The actual number of common stock shares earned upon vesting will range from zero shares up to 100%, 150% or 200% of the target award, depending on the award date. PSUs do not have a grant date or grant date fair value for accounting purposes as the subjective nature of the terms of the PSUs precludes a mutual understanding of the key terms and conditions. We recognize expense for PSUs ultimately expected to vest over the requisite service period based on our estimates of progress made towards the achievement of the predetermined performance measures and changes in the market price of our common stock. | ||
Medicaid Premium Taxes | ' | |
Medicaid Premium Taxes | ||
Premium rates established in the Medicaid contracts with Georgia, Hawaii, New Jersey and New York, and, until June 30, 2013, Ohio, include, or included, an assessment or tax on Medicaid premiums. We recognize the premium tax assessment as expense in the period during which we earn the related premium revenue and remit the taxes back to the state agencies on a periodic basis. | ||
Property, Equipment and Capitalized Software, net | ' | |
Property, Equipment and Capitalized Software, net | ||
Property, equipment and capitalized software are stated at historical cost, net of accumulated depreciation. We capitalize certain costs incurred in the development of internal-use software, including external direct costs of materials and services and payroll costs of employees devoted to specific software development. We expense other software development costs, such as training and data conversion costs, as incurred. We capitalize the costs of improvements that extend the useful lives of the related assets. | ||
We record depreciation expense using the straight-line method over the estimated useful lives of the related assets, which ranges from three to ten years for leasehold improvements, five years for furniture and equipment, and three to five years for computer equipment and software. We include amortization of equipment under capital leases in depreciation expense. We record maintenance and repair costs as selling, general and administrative expense when incurred. | ||
On an ongoing basis, we review events or changes in circumstances that may indicate that the carrying value of an asset may not be recoverable. If the carrying value of an asset exceeds the sum of estimated undiscounted future cash flows, we recognize an impairment loss in the current period for the difference between estimated fair value and carrying value. If assets are determined to be recoverable but the useful lives are shorter than we originally estimated, we depreciate the remaining net book value of the asset over the newly determined remaining useful lives. | ||
Goodwill and Intangible Assets | ' | |
Goodwill and Other Intangible Assets | ||
Our acquisitions have resulted in goodwill, which represents the excess of the acquisition cost over the fair value of net assets acquired. Goodwill is assigned to reporting units, which we determined to be the same as our operating segments. Goodwill recorded at September 30, 2014 was $263.2 million, which consisted of $152.8 million and $110.4 million attributable to our Medicaid and Medicare Advantage Health Plans reporting units, respectively. Goodwill recorded at December 31, 2013 was $236.8 million, which consisted of $126.8 million and $110.0 million attributable to our Medicaid and Medicare Advantage Health Plans reporting units, respectively. | ||
We test goodwill for impairment at the reporting unit level at least annually, or more frequently if events or circumstances indicate that it would be more likely than not that the fair value of a reporting unit is below its carrying value. Such events or circumstances could include a significant adverse change in business climate, an adverse action or assessment by a regulator, unanticipated competition and the testing for recoverability of a significant asset group within a reporting unit, among others. To determine whether goodwill is impaired, we compare an estimate of the fair value of the applicable reporting unit to its carrying value, including goodwill. If the carrying value exceeds the estimated fair value, we compare the implied fair value of the applicable goodwill to its carrying value to measure the amount of goodwill impairment, if any. We perform our annual goodwill impairment test based on our financial position and results of operations as of June 30 of each year, which generally coincides with the finalization of federal and state contract negotiations and our initial budgeting and planning process. The annual impairment tests are based on an evaluation of estimated future discounted cash flows. The estimated discounted cash flows are based on the best information available to us at the time, including supportable assumptions and | ||
projections we believe are reasonable. Our discounted cash flow estimates use discount rates that correspond to a weighted-average cost of capital consistent with a market-participant view. The discount rates are consistent with those used for investment decisions and take into account the operating plans and strategies of our operating segments. Certain other key assumptions utilized, including changes in membership, premium, health care costs, operating expenses, fees, assessments and taxes and effective tax rates, are based on estimates consistent with those utilized in our annual budgeting and planning process that we believe are reasonable. However, if we do not achieve the results reflected in the assumptions and estimates, our goodwill impairment evaluations could be adversely affected, and we may impair a portion of our goodwill, | ||
which would adversely affect our operating results in the period of impairment. Impairments, if any, would be classified as an operating expense. Based on the results of our annual impairment testing in 2014, we determined that the fair value of each reporting unit substantially exceeded its carrying value and no goodwill impairment losses were recognized. | ||
Other intangible assets resulting from our previous acquisitions include provider networks, broker networks, trademarks, state contracts, non-compete agreements, licenses and permits. We amortize other intangible assets over their estimated useful lives ranging from approximately one to 15 years. These assets are allocated to reporting segments for impairment testing purposes. We review our other intangible assets for impairment when events or changes in circumstances occur, which may potentially affect the estimated useful life or recoverability of the remaining balances of our intangible assets. Such events and changes in circumstances would include significant changes in membership, state funding, federal and state government contracts and provider networks. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to current forecasts of undiscounted future net cash flows expected to be generated by the assets. Identifiable cash flows are measured at the lowest level for which they are largely independent of the cash flows of other groups of assets and liabilities. If these assets are determined to be impaired, the amount of impairment recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. | ||
During the second quarter of 2014, we recognized approximately $24.1 million in impairment and other charges, approximately $18.0 million of which related to the partial impairment of certain intangible assets recorded in connection with the 2012 acquisition of Easy Choice Health Plan, Inc. (“Easy Choice”). During the second quarter of 2014, our Easy Choice MA health plan continued to underperform, mainly reflecting an inability to improve the medical cost structure to the degree that was previously estimated, and the inability to achieve certain administrative cost savings. As a result, we performed an updated assessment of the recoverability of these intangible assets. The current projections of undiscounted future net cash flows expected to be generated by the Easy Choice health plan reflect a significant decline in the anticipated long-term profitability of this business relative to projections we completed in prior periods. The decline in projected profitability is resulting from the factors noted above, as well the continuing margin compression that is impacting the MA business as a whole. We compared the carrying value of the underlying intangible assets to the projected, undiscounted future net cash flows and determined that the undiscounted future net cash flows were insufficient to recover the carrying value of the assets. We measured the fair value of these assets at June 30, 2014 using an income-based valuation approach, and decreased the carrying value of the intangible assets to this estimated fair value, which resulted in an impairment charge of approximately $18.0 million. We believe the assumptions used in the income approach, including the projected cash flows associated with the assets, as well as other key factors and assumptions, including the selection of an appropriate discount rate, were consistent with those that likely marketplace participants would experience when operating in the same market, with the same membership. The remaining charges for the quarter also include a charge for the full impairment of intangible assets associated with the purchase of our Arizona MA plan after we concluded during the three months ended June 30, 2014, to exit the Arizona MA market in 2015, and charges resulting from the resolution of certain matters related to the purchase price of our 2013 acquisitions. We are no longer able to recognize such charges as adjustments to acquired assets, since we are beyond the measurement period established in the accounting rules for business combinations. | ||
Income Taxes | ' | |
Income Taxes | ||
We record income tax expense as incurred based on enacted tax rates, estimates of book-to-tax differences in income, and projections of income that will be earned in each taxing jurisdiction. We recognize deferred tax assets and liabilities for the estimated future tax consequences of differences between the carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using tax rates applicable to taxable income in the years in which we expect to recover or settle those temporary differences. We record a valuation allowance on deferred taxes if we determine it is more likely than not that we will not fully realize the future benefit of deferred tax assets. We file tax returns after the close of our fiscal year end and adjust our estimated tax receivable or liability to the actual tax receivable or due per the filed state and federal tax returns. Historically, we have not experienced significant differences between our estimates of income tax expense and actual amounts incurred. | ||
State and federal taxing authorities may challenge the positions we take on our filed tax returns. We evaluate our tax positions and only recognize a tax benefit if it is more likely than not that a tax audit will sustain our conclusion. Based on our evaluation of tax positions, we believe that potential tax exposures have been recorded appropriately. State and federal taxing authorities may propose additional tax assessments based on periodic audits of our tax returns. We believe our tax positions comply with applicable tax law in all material aspects and we will vigorously defend our positions on audit. The ultimate resolution of these audits may materially impact our financial position, results of operations or cash flows. We have not experienced material adjustments to our condensed consolidated financial statements as a result of these audits. | ||
We participate in the IRS Compliance Assurance Process ("CAP"). The objective of CAP is to reduce taxpayer burden and uncertainty by working with the IRS to ensure tax return accuracy prior to filing, thereby reducing or eliminating the need for post-filing examinations. |
ORGANIZATION_BASIS_OF_PRESENTA2
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Proforma Financial Information (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||||||
Business Acquisition, Pro Forma Information [Table Text Block] | ' | ||||||||
Pro Forma Financial Information | |||||||||
The results of operations and financial condition for our 2014 and 2013 acquisitions have been included in our condensed consolidated financial statements since the respective acquisition dates. The unaudited pro forma financial information presented below assumes that the acquisitions occurred as of January 1, 2013. The pro forma adjustments include the pro forma effect of the amortization of finite-lived intangible assets arising from the purchase price allocations, adjustments necessary to align the acquired companies' accounting policies to our accounting policies and the associated income tax effects of the pro forma adjustments. The following unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that would have occurred had the acquisitions been consummated at the beginning of the periods presented. Only pro forma results for the three and nine months ended September 30, 2013 have been presented, as Windsor was acquired on January 1, 2014, and its results of operations have been included in our condensed consolidated financial statements from that date. | |||||||||
Pro forma - unaudited | |||||||||
For the Three Months Ended September 30, 2013 | For the Nine Months Ended September 30, 2013 | ||||||||
(in millions, except per share data) | |||||||||
Premium revenue | $ | 2,768.50 | $ | 7,960.10 | |||||
Net earnings | $ | 80.1 | $ | 147.9 | |||||
Earnings per share: | |||||||||
Basic | $ | 1.84 | $ | 3.4 | |||||
Diluted | $ | 1.82 | $ | 3.36 | |||||
ACQUISITIONS_Tables
ACQUISITIONS (Tables) (Windsor Health Plans, Inc. [Member]) | 9 Months Ended | |||
Sep. 30, 2014 | ||||
Windsor Health Plans, Inc. [Member] | ' | |||
Business Acquisition [Line Items] | ' | |||
Summary of fair values of assets acquired and liabilities assumed | ' | |||
The following table summarizes the preliminary estimated fair values of tangible and intangible assets acquired and liabilities assumed at the acquisition date. | ||||
Cash and cash equivalents | $ | 169 | ||
Investments | 47.1 | |||
Premiums receivable, net | 87.4 | |||
Other intangible assets | 54.3 | |||
Pharmacy rebates receivable, net | 32.2 | |||
Other assets | 34 | |||
Deferred tax asset | 32.9 | |||
Total assets acquired | 456.9 | |||
Medical benefits payable | (110.9 | ) | ||
Accrued expenses and other payables | (76.9 | ) | ||
Deferred tax liability | (20.6 | ) | ||
Total liabilities assumed | (208.4 | ) | ||
Fair value of net assets acquired | $ | 248.5 | ||
SEGMENT_REPORTING_Tables
SEGMENT REPORTING (Tables) | 9 Months Ended | |||||||||||||||
Sep. 30, 2014 | ||||||||||||||||
Segment Reporting [Abstract] | ' | |||||||||||||||
Revenue by geographic location | ' | |||||||||||||||
Our Medicaid operations in certain states individually account for 10% or more of our consolidated premium revenue. Those states, and the respective Medicaid premium revenue as a percentage of total consolidated premium revenue, are as follows: | ||||||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Kentucky | 18% | 15% | 18% | 14% | ||||||||||||
Georgia | 13% | 17% | 13% | 16% | ||||||||||||
Florida | 15% | 12% | 13% | 12% | ||||||||||||
Segment results | ' | |||||||||||||||
A summary of financial information for our reportable operating segments through the gross margin level and a reconciliation to income before income taxes is presented in the tables below. | ||||||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Premium revenue: | (in millions) | |||||||||||||||
Medicaid Health Plans | $ | 2,127.90 | $ | 1,492.40 | $ | 5,631.20 | $ | 4,184.80 | ||||||||
Medicare Health Plans | 1,012.20 | 807.3 | 2,953.50 | 2,286.20 | ||||||||||||
Medicare PDPs | 256.2 | 195.9 | 926.3 | 604.3 | ||||||||||||
Total premium revenue | 3,396.30 | 2,495.60 | 9,511.00 | 7,075.30 | ||||||||||||
Medical benefits expense: | ||||||||||||||||
Medicaid Health Plans | 1,849.00 | 1,314.60 | 4,933.50 | 3,636.30 | ||||||||||||
Medicare Health Plans | 918 | 685.7 | 2,633.50 | 1,968.60 | ||||||||||||
Medicare PDPs | 229.6 | 144.4 | 893.8 | 543 | ||||||||||||
Total medical benefits expense | 2,996.60 | 2,144.70 | 8,460.80 | 6,147.90 | ||||||||||||
ACA industry fee expense: | ||||||||||||||||
Medicaid Health Plans | 20.4 | — | 60.6 | — | ||||||||||||
Medicare Health Plans | 11.4 | — | 34 | — | ||||||||||||
Medicare PDPs | 2.9 | — | 8.7 | — | ||||||||||||
Total ACA industry fee expense | 34.7 | — | 103.3 | — | ||||||||||||
Gross margin | ||||||||||||||||
Medicaid Health Plans | 258.5 | 177.8 | 637.1 | 548.5 | ||||||||||||
Medicare Health Plans | 82.8 | 121.6 | 286 | 317.6 | ||||||||||||
Medicare PDPs | 23.7 | 51.5 | 23.8 | 61.3 | ||||||||||||
Total gross margin | 365 | 350.9 | 946.9 | 927.4 | ||||||||||||
Investment and other income | 11.2 | 4.8 | 34.1 | 13.9 | ||||||||||||
Other expenses | (306.7 | ) | (248.9 | ) | (888.8 | ) | (734.5 | ) | ||||||||
Income from operations | $ | 69.5 | $ | 106.8 | $ | 92.2 | $ | 206.8 | ||||||||
NET_INCOME_PER_COMMON_SHARE_Ta
NET INCOME PER COMMON SHARE (Tables) | 9 Months Ended | |||||||||||
Sep. 30, 2014 | ||||||||||||
Earnings Per Share [Abstract] | ' | |||||||||||
Schedule of net income per share | ' | |||||||||||
The calculation of the weighted-average common shares outstanding — diluted is as follows: | ||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||
Weighted-average common shares outstanding — basic | 43,885,779 | 43,608,626 | 43,851,759 | 43,470,758 | ||||||||
Dilutive effect of: | ||||||||||||
Unvested restricted stock, restricted stock units, market stock and performance stock units | 293,316 | 330,283 | 282,535 | 352,161 | ||||||||
Stock options | 6,939 | 99,013 | 9,751 | 149,527 | ||||||||
Weighted-average common shares outstanding — diluted | 44,186,034 | 44,037,922 | 44,144,045 | 43,972,446 | ||||||||
Anti-dilutive stock options, restricted stock and performance based awards excluded from computation | 12,951 | 64,862 | 38,703 | 102,988 | ||||||||
INVESTMENTS_Tables
INVESTMENTS (Tables) | 9 Months Ended | |||||||||||||||||||
Sep. 30, 2014 | ||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ' | |||||||||||||||||||
Available-for-sale investments | ' | |||||||||||||||||||
The amortized cost, gross unrealized gains or losses and estimated fair value of short-term and long term investments by security type are summarized in the following tables. | ||||||||||||||||||||
Amortized | Gross | Gross | Estimated | |||||||||||||||||
Cost | Unrealized | Unrealized | Fair Value | |||||||||||||||||
Gains | Losses | |||||||||||||||||||
September 30, 2014 | ||||||||||||||||||||
Auction rate securities | $ | 34.1 | $ | — | $ | (1.8 | ) | $ | 32.3 | |||||||||||
Certificates of deposit | 0.5 | — | — | 0.5 | ||||||||||||||||
Corporate debt and other securities | 112.7 | 0.2 | (0.3 | ) | 112.6 | |||||||||||||||
Money market funds | 41.4 | — | — | 41.4 | ||||||||||||||||
Municipal securities | 84 | 0.5 | — | 84.5 | ||||||||||||||||
Variable rate bond fund | 110.1 | 0.3 | — | 110.4 | ||||||||||||||||
U.S. government securities | 25.2 | 0.1 | (0.1 | ) | 25.2 | |||||||||||||||
$ | 408 | $ | 1.1 | $ | (2.2 | ) | $ | 406.9 | ||||||||||||
December 31, 2013 | ||||||||||||||||||||
Auction rate securities | $ | 34.2 | $ | — | $ | (2.4 | ) | $ | 31.8 | |||||||||||
Certificates of deposit | 1.6 | — | — | 1.6 | ||||||||||||||||
Corporate debt and other securities | 104.5 | 0.1 | (0.1 | ) | 104.5 | |||||||||||||||
Money market funds | 43.4 | — | — | 43.4 | ||||||||||||||||
Municipal securities | 108.9 | — | — | 108.9 | ||||||||||||||||
Variable rate bond fund | 84.9 | 0.4 | — | 85.3 | ||||||||||||||||
U.S. government securities | 19.5 | 0.1 | — | 19.6 | ||||||||||||||||
$ | 397 | $ | 0.6 | $ | (2.5 | ) | $ | 395.1 | ||||||||||||
Contractual maturities of available-for-sale investments | ' | |||||||||||||||||||
Contractual maturities of available-for-sale investments at September 30, 2014 are as follows: | ||||||||||||||||||||
Total | Within | 1 Through 5 | 5 Through 10 | Thereafter | ||||||||||||||||
1 Year | Years | Years | ||||||||||||||||||
Auction rate securities | $ | 32.3 | $ | — | $ | — | $ | — | $ | 32.3 | ||||||||||
Certificates of deposit | 0.5 | 0.5 | — | — | — | |||||||||||||||
Corporate debt and other securities | 112.6 | 12.9 | 94.3 | 4.5 | 0.9 | |||||||||||||||
Money market funds | 41.4 | 41.4 | — | — | — | |||||||||||||||
Municipal securities | 84.5 | 23.7 | 54 | 6.8 | — | |||||||||||||||
Variable rate bond fund | 110.4 | 110.4 | — | — | — | |||||||||||||||
U.S. government securities | 25.2 | 3.1 | 22 | — | 0.1 | |||||||||||||||
$ | 406.9 | $ | 192 | $ | 170.3 | $ | 11.3 | $ | 33.3 | |||||||||||
RESTRICTED_INVESTMENTS_Tables
RESTRICTED INVESTMENTS (Tables) | 9 Months Ended | |||||||||||||||
Sep. 30, 2014 | ||||||||||||||||
Restricted Investments Note [Abstract] | ' | |||||||||||||||
Schedule of Restricted Investments | ' | |||||||||||||||
The amortized cost, gross unrealized gains, gross unrealized losses and fair value of our restricted investment securities are as follows: | ||||||||||||||||
Amortized | Gross | Gross | Estimated | |||||||||||||
Cost | Unrealized | Unrealized | Fair Value | |||||||||||||
Gains | Losses | |||||||||||||||
September 30, 2014 | ||||||||||||||||
Cash | $ | 54.4 | $ | — | $ | — | $ | 54.4 | ||||||||
Certificates of deposit | 1 | — | — | 1 | ||||||||||||
Money market funds | 66 | — | — | 66 | ||||||||||||
U.S. government securities | 29.2 | 0.1 | (0.1 | ) | 29.2 | |||||||||||
$ | 150.6 | $ | 0.1 | $ | (0.1 | ) | $ | 150.6 | ||||||||
December 31, 2013 | ||||||||||||||||
Cash | $ | 40.2 | $ | — | $ | — | $ | 40.2 | ||||||||
Certificates of deposit | 1.4 | — | — | 1.4 | ||||||||||||
Money market funds | 19 | — | — | 19 | ||||||||||||
U.S. government securities | 22 | — | (0.1 | ) | 21.9 | |||||||||||
$ | 82.6 | $ | — | $ | (0.1 | ) | $ | 82.5 | ||||||||
EQUITYBASED_COMPENSATION_Table
EQUITY-BASED COMPENSATION (Tables) | 9 Months Ended | ||||||||||||
Sep. 30, 2014 | |||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||||
Summary of stock option activity | ' | ||||||||||||
A summary of stock option activity for the nine months ended September 30, 2014, and the aggregate intrinsic value and weighted average remaining contractual term for stock options as of September 30, 2014, is presented in the table below. | |||||||||||||
Shares | Weighted | Aggregate | Weighted | ||||||||||
Average | Intrinsic | Average | |||||||||||
Exercise | Value | Remaining | |||||||||||
Price | Contractual | ||||||||||||
Term (Years) | |||||||||||||
Outstanding as of January 1, 2014 | 31,381 | $ | 29.47 | ||||||||||
Granted | — | — | |||||||||||
Exercised | (13,896 | ) | 21.47 | ||||||||||
Forfeited and expired | (1,407 | ) | 14.49 | ||||||||||
Outstanding as of September 30, 2014 (1) | 16,078 | $ | 37.7 | $ | 0.4 | 1.1 | |||||||
(1) All of the Company's outstanding stock options were vested and exercisable as of September 30, 2014. | |||||||||||||
Summary of restricted stock and restricted stock unit activity | ' | ||||||||||||
A summary of RSU activity for the nine months ended September 30, 2014 is presented in the table below. | |||||||||||||
RSUs | Weighted | ||||||||||||
Average | |||||||||||||
Grant-Date | |||||||||||||
Fair Value | |||||||||||||
Outstanding as of January 1, 2014 | 259,836 | $ | 56.51 | ||||||||||
Granted | 316,815 | 64.79 | |||||||||||
Vested | (85,287 | ) | 54.42 | ||||||||||
Forfeited and expired | (44,488 | ) | 59.76 | ||||||||||
Outstanding as of September 30, 2014 | 446,876 | 62.46 | |||||||||||
A summary of our MSU activity for the nine months ended September 30, 2014 is presented in the table below. | |||||||||||||
MSUs | Weighted | ||||||||||||
Average | |||||||||||||
Grant-Date | |||||||||||||
Fair Value | |||||||||||||
Outstanding as of January 1, 2014 | 83,889 | $ | 79.38 | ||||||||||
Granted | 69,704 | 71.74 | |||||||||||
Vested | — | — | |||||||||||
Forfeited and expired | (28,161 | ) | 77.89 | ||||||||||
Outstanding as of September 30, 2014 | 125,432 | 75.47 | |||||||||||
Summary of performance stock unit activity | ' | ||||||||||||
EQUITY-BASED COMPENSATION | |||||||||||||
Compensation expense related to our equity-based compensation awards was $3.0 million and $5.4 million for the three months ended September 30, 2014 and September 30, 2013, respectively, and $9.2 million and $12.4 million for the nine months ended September 30, 2014 and September 30, 2013, respectively. As of September 30, 2014, there was $28.4 million of unrecognized compensation cost related to non-vested equity-based compensation arrangements that is expected to be recognized over a weighted-average period of 1.9 years. The unrecognized compensation cost for our PSUs, which are subject to variable accounting, was determined based on the closing common stock price of $60.34 as of September 30, 2014 and amounted to approximately $9.8 million of the total unrecognized compensation. Due to the nature of the accounting for these awards, future compensation cost will fluctuate based on changes in our common stock price. | |||||||||||||
A summary of stock option activity for the nine months ended September 30, 2014, and the aggregate intrinsic value and weighted average remaining contractual term for stock options as of September 30, 2014, is presented in the table below. | |||||||||||||
Shares | Weighted | Aggregate | Weighted | ||||||||||
Average | Intrinsic | Average | |||||||||||
Exercise | Value | Remaining | |||||||||||
Price | Contractual | ||||||||||||
Term (Years) | |||||||||||||
Outstanding as of January 1, 2014 | 31,381 | $ | 29.47 | ||||||||||
Granted | — | — | |||||||||||
Exercised | (13,896 | ) | 21.47 | ||||||||||
Forfeited and expired | (1,407 | ) | 14.49 | ||||||||||
Outstanding as of September 30, 2014 (1) | 16,078 | $ | 37.7 | $ | 0.4 | 1.1 | |||||||
(1) All of the Company's outstanding stock options were vested and exercisable as of September 30, 2014. | |||||||||||||
A summary of RSU activity for the nine months ended September 30, 2014 is presented in the table below. | |||||||||||||
RSUs | Weighted | ||||||||||||
Average | |||||||||||||
Grant-Date | |||||||||||||
Fair Value | |||||||||||||
Outstanding as of January 1, 2014 | 259,836 | $ | 56.51 | ||||||||||
Granted | 316,815 | 64.79 | |||||||||||
Vested | (85,287 | ) | 54.42 | ||||||||||
Forfeited and expired | (44,488 | ) | 59.76 | ||||||||||
Outstanding as of September 30, 2014 | 446,876 | 62.46 | |||||||||||
A summary of our MSU activity for the nine months ended September 30, 2014 is presented in the table below. | |||||||||||||
MSUs | Weighted | ||||||||||||
Average | |||||||||||||
Grant-Date | |||||||||||||
Fair Value | |||||||||||||
Outstanding as of January 1, 2014 | 83,889 | $ | 79.38 | ||||||||||
Granted | 69,704 | 71.74 | |||||||||||
Vested | — | — | |||||||||||
Forfeited and expired | (28,161 | ) | 77.89 | ||||||||||
Outstanding as of September 30, 2014 | 125,432 | 75.47 | |||||||||||
A summary of the activity for our PSU awards, which are subject to variable accounting, for the nine months ended September 30, 2014 is presented in the table below. | |||||||||||||
PSUs | Weighted | ||||||||||||
Average | |||||||||||||
Grant-Date | |||||||||||||
Fair Value | |||||||||||||
Outstanding as of January 1, 2014 | 288,487 | $ | 55.3 | ||||||||||
Granted | 258,679 | 62.58 | |||||||||||
Vested | (62,640 | ) | 40.57 | ||||||||||
Forfeited and expired | (67,821 | ) | 60.72 | ||||||||||
Outstanding as of September 30, 2014 | 416,705 | 61.16 | |||||||||||
DEBT_Debt_Tables
DEBT Debt (Tables) | 9 Months Ended | ||
Sep. 30, 2013 | |||
Debt Instrument, Redemption [Line Items] | ' | ||
Schedule of Redemption Prices as Percentage of Principal Amount [Table Text Block] | ' | ||
On or after November 15, 2016, we may on any one or more occasions redeem all or part of the Senior Notes, at the redemption prices (expressed as percentages of principal amount) set forth below, if redeemed during the twelve-month period beginning on November 15 of the years indicated below, subject to the rights of holders of Senior Notes on the relevant record date to receive interest due on the relevant interest payment date: | |||
Period | Redemption Price | ||
2016 | 102.875 | % | |
2017 | 101.438 | % | |
2018 and thereafter | 100 | % |
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended | |||||||||||||||
Sep. 30, 2014 | ||||||||||||||||
Fair Value Disclosures [Abstract] | ' | |||||||||||||||
Assets and liabilities measured at fair value | ' | |||||||||||||||
Assets and liabilities measured at fair value on a recurring basis at September 30, 2014 are as follows: | ||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||
Carrying Value | Quoted Prices in | Significant Other | Significant | |||||||||||||
Active Markets | Observable | Unobservable | ||||||||||||||
for Identical | Inputs | Inputs | ||||||||||||||
Assets | (Level 2) | (Level 3) | ||||||||||||||
(Level 1) | ||||||||||||||||
Investments: | ||||||||||||||||
Asset backed securities | $ | 21.6 | $ | — | $ | 21.6 | $ | — | ||||||||
Auction rate securities | 32.3 | — | — | 32.3 | ||||||||||||
Certificates of deposit | 0.5 | — | 0.5 | — | ||||||||||||
Corporate debt securities | 91 | — | 91 | — | ||||||||||||
Money market funds | 41.4 | 41.4 | — | — | ||||||||||||
Municipal securities | 84.5 | — | 84.5 | — | ||||||||||||
U.S. government and agency obligations | 25.2 | 19.8 | 5.4 | — | ||||||||||||
Variable rate bond fund | 110.4 | 110.4 | — | — | ||||||||||||
Total investments | $ | 406.9 | $ | 171.6 | $ | 203 | $ | 32.3 | ||||||||
Restricted investments: | ||||||||||||||||
Cash | 54.4 | 54.4 | — | — | ||||||||||||
Certificates of deposit | 1 | — | 1 | — | ||||||||||||
Money market funds | 66 | 66 | — | — | ||||||||||||
U.S. government and agency obligations | 29.2 | 29.2 | — | — | ||||||||||||
Total restricted investments | $ | 150.6 | $ | 149.6 | $ | 1 | $ | — | ||||||||
Amounts accrued related to investigation resolution | $ | 34.9 | $ | — | $ | 34.9 | $ | — | ||||||||
Assets and liabilities measured at fair value on a recurring basis at December 31, 2013 are as follows: | ||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||
Carrying Value | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||||
Investments: | ||||||||||||||||
Asset backed securities | $ | 1.6 | $ | — | $ | 1.6 | $ | — | ||||||||
Auction rate securities | 31.8 | — | — | 31.8 | ||||||||||||
Certificates of deposit | 1.6 | — | 1.6 | — | ||||||||||||
Corporate debt securities | 102.9 | — | 102.9 | — | ||||||||||||
Money market funds | 43.4 | 43.4 | — | — | ||||||||||||
Municipal securities | 108.9 | — | 108.9 | — | ||||||||||||
U.S. government securities | 19.6 | 19.6 | — | — | ||||||||||||
Variable rate bond fund | 85.3 | 85.3 | — | — | ||||||||||||
Total investments | $ | 395.1 | $ | 148.3 | $ | 215 | $ | 31.8 | ||||||||
Restricted investments: | ||||||||||||||||
Cash | $ | 40.2 | $ | 40.2 | $ | — | $ | — | ||||||||
Certificates of deposit | 1.4 | — | 1.4 | — | ||||||||||||
Money market funds | 19 | 19 | — | — | ||||||||||||
U.S. government securities | 21.9 | 21.9 | — | — | ||||||||||||
Total restricted investments | $ | 82.5 | $ | 81.1 | $ | 1.4 | $ | — | ||||||||
Amounts accrued related to investigation resolution | $ | 70.3 | $ | — | $ | 70.3 | $ | — | ||||||||
Schedule of Carrying Values and Estimated Fair Values of Debt Instruments [Table Text Block] | ' | |||||||||||||||
The following table presents the carrying value and fair value of our Senior Notes and Term Loan as of September 30, 2014, and our senior notes as of December 31, 2013: | ||||||||||||||||
September 30, 2014 | December 31, 2013 | |||||||||||||||
Long term debt | $ | 900 | $ | 600 | ||||||||||||
Approximate fair value of our long-term debt | 907.7 | 615 | ||||||||||||||
The fair value of our Senior Notes was determined based on quoted market prices at September 30, 2014 and December 31, 2013, respectively, and therefore would be classified within Level 1 of the fair value hierarchy. | ||||||||||||||||
Auction rate securities measured at fair value on a recurring basis using significant unobservable inputs | ' | |||||||||||||||
The following table presents the changes in the fair value of our Level 3 auction rate securities for the nine months ended September 30, 2014. | ||||||||||||||||
Balance as of January 1, 2014 | $ | 31.8 | ||||||||||||||
Realized gains (losses) in earnings | — | |||||||||||||||
Unrealized gains (losses) in other comprehensive income | 0.5 | |||||||||||||||
Purchases, sales and redemptions | — | |||||||||||||||
Net transfers in or (out) of Level 3 | — | |||||||||||||||
Balance as of September 30, 2014 | $ | 32.3 | ||||||||||||||
ORGANIZATION_BASIS_OF_PRESENTA3
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 1 Months Ended | 9 Months Ended | |
In Millions, unless otherwise specified | Jul. 31, 2002 | Sep. 30, 2014 | Sep. 30, 2013 |
Transaction | State | Ohio [Member] | |
Members | |||
Revenue, Expired Contracts [Line Items] | ' | ' | ' |
Business Acquisitions, Number of Transactions | 2 | ' | ' |
Number of members | ' | 4,000,000 | ' |
Consolidated premium revenue, net of taxes | ' | ' | $127 |
Percentage of consolidated premium revenue (in hundredths) | ' | ' | 1.80% |
Number of states | ' | 49 | ' |
ORGANIZATION_BASIS_OF_PRESENTA4
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Completed and Pending Acquisitions (Details) (USD $) | 9 Months Ended | ||||||||||||
In Millions, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Jul. 01, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Jul. 01, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 |
Members | Healthfirst Health Plan of New Jersey [Member] | Medicare Advantage [Member] | Medicare Supplement [Domain] | Prescription Drug Plans [Member] | Prescription Drug Plans [Member] | Medicaid [Member] | Medicaid [Member] | Medicaid [Member] | Medicare Health Plans [Member] | Medicare Health Plans [Member] | |||
County | County | Windsor Health Plans, Inc. [Member] | Windsor Health Plans, Inc. [Member] | County | Windsor Health Plans, Inc. [Member] | Healthfirst Health Plan of New Jersey [Member] | |||||||
County | State | Members | Members | ||||||||||
Members | |||||||||||||
Business Acquisition [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Goodwill | $263.20 | ' | $236.80 | $16.20 | ' | ' | ' | ' | ' | $152.80 | $126.80 | $110.40 | $110 |
Number of Counties of Operation | ' | ' | ' | 10 | 192 | ' | ' | ' | ' | ' | ' | ' | ' |
Number of members | 4,000,000 | ' | ' | ' | ' | 45,000 | ' | 105,000 | 42,000 | ' | ' | ' | ' |
Number of States in which Entity Operates | ' | ' | ' | ' | ' | 39 | ' | ' | ' | ' | ' | ' | ' |
Number of CMS Counties of Operation | ' | ' | ' | ' | ' | ' | 11 | ' | ' | ' | ' | ' | ' |
Total Number of CMS PDP Counties | 34 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Payments to Acquire Businesses, Net of Cash Acquired | ($117) | $40.50 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
ORGANIZATION_BASIS_OF_PRESENTA5
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition (Details) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Sep. 30, 2014 | Dec. 31, 2013 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' |
General term of MA contracts with CMS | '1 year | ' |
General term of PDP contracts with CMS | '1 year | ' |
Premiums Receivable, Allowance for Doubtful Accounts | $22.20 | $15.80 |
ORGANIZATION_BASIS_OF_PRESENTA6
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Risk Adjusted Premiums (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Segment Reporting Information [Line Items] | ' | ' |
Risk Adjusted Premiums | $134.70 | $107.20 |
ORGANIZATION_BASIS_OF_PRESENTA7
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Minimum Medical Expense and Risk Corridor Provisions (Details) | 3 Months Ended |
Sep. 30, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Minimum variance above target amount before CMS makes additional payments to plan sponsors | 5.00% |
Variance threshold below which the company must refund to CMS a portion of premiums received | 5.00% |
ORGANIZATION_BASIS_OF_PRESENTA8
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Medicare Part D Settlements (Details) | 3 Months Ended |
Sep. 30, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Drug costs reimbursed | 80.00% |
Number of Months Discounts are Reported | '37 months |
ORGANIZATION_BASIS_OF_PRESENTA9
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Medical Benefits and Medical Benefits Payable (Details) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' | ' | ' | ' |
Cumulative Favorable Prior Period Reserve Development | ' | ' | ' | ' | $3 |
Net favorable development, impact on medical expense | 16.6 | ' | ' | ' | ' |
Net Favorable Development Related To Prior Fiscal Years | 15.4 | ' | ' | ' | ' |
Deferred ACA industry fee amortization | 34.7 | 0 | 103.3 | 0 | ' |
Unfavorable development related to prior interim periods of same year | ' | -47.5 | -46.2 | -7.1 | ' |
Unfavorable Development Related To Prior Fiscal Years | ' | 16.3 | ' | ' | ' |
Favorable development related to prior interim periods of same year | 1.2 | ' | ' | ' | ' |
Unfavorable development related to prior interim periods of same year | ' | $31.20 | ' | ' | ' |
Equity_Based_Compensation_Prog
Equity Based Compensation Programs (Details) | 3 Months Ended | |
Sep. 30, 2014 | Jun. 30, 2013 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' |
Number of shares authorized (in shares) | ' | 2,500,000 |
Number of calendar days preceding the end of the fiscal year prior to the vesting date with the maximum quotient | '30 days | ' |
Minimum percentage multiplier of MSUs | 50.00% | ' |
Cliff vesting target range percentage minimum | 0.00% | ' |
Market Stock Units [Member] | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' |
Vesting period of certain equity-based compensation | '3 years | ' |
Performance Share Awards [Member] | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' |
Vesting period of certain equity-based compensation | '3 years | ' |
Performance Shares [Member] | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' |
Cliff vesting target range percentage maximum | 150.00% | ' |
Performance Shares [Member] | Minimum [Member] | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' |
Cliff vesting target range percentage maximum | 100.00% | ' |
Performance Shares [Member] | Maximum [Member] | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' |
Cliff vesting target range percentage maximum | 200.00% | ' |
Recovered_Sheet1
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Goodwill and Intangible Assets (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2014 | Jun. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Finite-Lived Intangible Assets [Line Items] | ' | ' | ' | ' | ' |
Goodwill impairment loss | $0 | ' | ' | ' | ' |
Impairment and other charges | 0 | 24,100,000 | 0 | 24,100,000 | 0 |
Minimum [Member] | ' | ' | ' | ' | ' |
Finite-Lived Intangible Assets [Line Items] | ' | ' | ' | ' | ' |
Finite-Lived Intangible Asset, Useful Life | '1 year | ' | ' | ' | ' |
Maximum [Member] | ' | ' | ' | ' | ' |
Finite-Lived Intangible Assets [Line Items] | ' | ' | ' | ' | ' |
Finite-Lived Intangible Asset, Useful Life | '15 years | ' | ' | ' | ' |
Easy Choice [Member] | ' | ' | ' | ' | ' |
Finite-Lived Intangible Assets [Line Items] | ' | ' | ' | ' | ' |
Impairment of Intangible Assets, Finite-lived | ' | $18,000,000 | ' | ' | ' |
Recovered_Sheet2
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Proforma Financial Information (Details) (USD $) | 3 Months Ended | 9 Months Ended |
In Millions, except Per Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2013 |
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items] | ' | ' |
Business Acquisitions, Pro Forma Premium Revenues | $2,768.50 | $7,960.10 |
Business Acquisition, Pro Forma Net Income (Loss) | $80.10 | $147.90 |
Business Acquisition, Pro Forma Earnings Per Share, Basic | $1.84 | $3.40 |
Business Acquisition, Pro Forma Earnings Per Share, Diluted | $1.82 | $3.36 |
Recovered_Sheet3
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Recently Adopted Accounting Standards (Details) (USD $) | 3 Months Ended | 9 Months Ended | |
In Millions, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2014 | Jan. 02, 2014 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' | ' |
Health Care Organization, Premium Revenue, Fee Reimbursement | $37.10 | $93.90 | ' |
ACA Industry Fee | $137.70 | $137.70 | $129 |
Recovered_Sheet4
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Organizational Details (Details) (USD $) | 1 Months Ended | 3 Months Ended | 9 Months Ended |
In Millions, unless otherwise specified | Jul. 31, 2002 | Sep. 30, 2014 | Sep. 30, 2014 |
Transaction | Members | Members | |
State | State | ||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' | ' |
Health Care Organization, Premium Revenue, Fee Reimbursement | ' | $37.10 | $93.90 |
Number of states | ' | 49 | 49 |
Business Acquisitions, Number of Transactions | 2 | ' | ' |
Number of members | ' | 4,000,000 | 4,000,000 |
Recovered_Sheet5
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES ACA Industry Fee (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||||
In Millions, unless otherwise specified | Sep. 30, 2014 | Jun. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Jan. 02, 2014 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' | ' | ' | ' | ' |
ACA Industry Fee | $137.70 | ' | ' | $137.70 | ' | $129 |
Increase in ACA Industry Fee | 0.5 | 8.2 | ' | ' | ' | ' |
Deferred ACA industry fee amortization | 34.7 | ' | 0 | 103.3 | 0 | ' |
Health Care Organization, Premium Revenue, Fee Reimbursement | $37.10 | ' | ' | $93.90 | ' | ' |
ACQUISITIONS_Details
ACQUISITIONS (Details) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | |||||||||||||||
In Millions, unless otherwise specified | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Jan. 02, 2014 | Jan. 31, 2013 | Sep. 30, 2014 | Mar. 31, 2013 | Jan. 31, 2013 | Mar. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 |
County | County | Windsor Health Plans, Inc. [Member] | Windsor Health Plans, Inc. [Member] | Windsor Health Plans, Inc. [Member] | WellCare of South Carolina [Member] | Missouri Care, Inc. [Member] | Missouri Care, Inc. [Member] | Tangible Assets and Liabilities [Member] | Tangible Assets and Liabilities [Member] | Medicare Advantage [Member] | Medicare Advantage [Member] | Prescription Drug Plans [Member] | Medicare Supplement [Domain] | ||||||
Members | Members | Members | WellCare of South Carolina [Member] | Missouri Care, Inc. [Member] | Windsor Health Plans, Inc. [Member] | Medicare Supplement [Domain] | County | Windsor Health Plans, Inc. [Member] | |||||||||||
County | State | State | |||||||||||||||||
Members | Members | ||||||||||||||||||
Business Acquisition [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Business Combination, Bargain Purchase, Gain Recognized, Amount | ($7.80) | $11.10 | $28.30 | $0 | $31.60 | $0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Business Combination, Bargain Purchase, Increase (Decrease) In Gain Recognized, Amount | -7.8 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of members | 4,000,000 | ' | ' | ' | 4,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 45,000 |
Assets acquired: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash and cash equivalents | ' | ' | ' | ' | ' | ' | ' | ' | ' | 169 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Investments | ' | ' | ' | ' | ' | ' | ' | ' | ' | 47.1 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Premiums receivable, net | ' | ' | ' | ' | ' | ' | ' | ' | ' | 87.4 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Receivables, Pharmacy Rebates, Net | ' | ' | ' | ' | ' | ' | ' | ' | ' | 32.2 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Other | ' | ' | ' | ' | ' | ' | ' | ' | ' | 34 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Other assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | 32.9 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total assets acquired | ' | ' | ' | ' | ' | ' | ' | ' | ' | 456.9 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Liabilities assumed: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Medical benefits payable | ' | ' | ' | ' | ' | ' | ' | ' | ' | -110.9 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Accrued expenses and other payables | ' | ' | ' | ' | ' | ' | ' | ' | ' | -76.9 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Deferred Tax Liabilities Noncurrent | ' | ' | ' | ' | ' | ' | ' | ' | ' | -20.6 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total liabilities assumed | ' | ' | ' | ' | ' | ' | ' | ' | ' | -208.4 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fair value of net tangible assets acquired | ' | ' | ' | ' | ' | ' | ' | ' | ' | 248.5 | ' | ' | ' | 24.7 | 10.2 | ' | ' | ' | ' |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | ' | ' | ' | ' | ' | ' | ' | ' | ' | 54.3 | 9.5 | ' | 7.1 | ' | ' | ' | ' | ' | ' |
Goodwill | 263.2 | ' | ' | ' | 263.2 | ' | 236.8 | ' | ' | ' | 12.7 | ' | 10.7 | ' | ' | ' | ' | ' | ' |
Membership | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 101,000 | ' | ' | ' | 37,000 | ' | ' | ' |
Number of Counties of Operation | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 192 | ' | ' | ' |
Business Acquisitions, Purchase Price Allocation, Subsequent Years, Remaining Adjustments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 7.7 | ' | ' | ' | ' | ' | ' | ' |
Number of States in which Entity Operates | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 39 | ' | 39 |
Number of CMS Counties of Operation | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 11 | ' |
Total Number of CMS PDP Counties | 34 | ' | ' | ' | 34 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Business Combination, Pro Forma Information, Revenue of Acquiree since Acquisition Date, Actual | ' | ' | ' | ' | ' | ' | ' | -477.3 | -148.8 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Business Combination, Pro Forma Information, Earnings or Loss of Acquiree since Acquisition Date, Actual | ' | ' | ' | ' | ' | ' | ' | $4.60 | ($5.70) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
ACQUISITIONS_Acquired_Intangib
ACQUISITIONS - Acquired Intangible Assets (Details) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 3 Months Ended | 3 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | |||||||||||||||
In Millions, unless otherwise specified | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Jul. 01, 2014 | Jan. 31, 2013 | Jan. 02, 2014 | Sep. 30, 2014 | Jan. 02, 2014 | Sep. 30, 2014 | Jan. 02, 2014 | Sep. 30, 2014 | Jan. 02, 2014 | Sep. 30, 2014 | Mar. 31, 2013 | Jan. 02, 2014 | Sep. 30, 2014 | Jan. 02, 2014 | Sep. 30, 2014 | Jul. 01, 2014 |
Members | Members | Healthfirst Health Plan of New Jersey [Member] | WellCare of South Carolina [Member] | Windsor Health Plans, Inc. [Member] | Windsor Health Plans, Inc. [Member] | Windsor Health Plans, Inc. [Member] | Windsor Health Plans, Inc. [Member] | Windsor Health Plans, Inc. [Member] | Windsor Health Plans, Inc. [Member] | Windsor Health Plans, Inc. [Member] | Windsor Health Plans, Inc. [Member] | Missouri Care, Inc. [Member] | Medicare Health Plans [Member] | Medicare Health Plans [Member] | Prescription Drug Plans [Member] | Prescription Drug Plans [Member] | Medicaid [Member] | ||||||
Weighted Average [Member] | Provider networks [Member] | Provider networks [Member] | Broker Network [Member] | Broker Network [Member] | Other Intangible Assets [Member] | Other Intangible Assets [Member] | Windsor Health Plans, Inc. [Member] | Windsor Health Plans, Inc. [Member] | Windsor Health Plans, Inc. [Member] | Windsor Health Plans, Inc. [Member] | Healthfirst Health Plan of New Jersey [Member] | ||||||||||||
Weighted Average [Member] | Weighted Average [Member] | Weighted Average [Member] | Membership Base [Member] | Membership Base [Member] | Membership Base [Member] | Membership Base [Member] | Members | ||||||||||||||||
Weighted Average [Member] | Weighted Average [Member] | ||||||||||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of members | 4,000,000 | ' | ' | ' | 4,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 42,000 |
Business Combination, Bargain Purchase, Gain Recognized, Amount | ($7.80) | $11.10 | $28.30 | $0 | $31.60 | $0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | ' | ' | ' | ' | ' | ' | ' | 10.8 | 9.5 | 54.3 | ' | 5.2 | ' | 3.3 | ' | 8.2 | ' | 7.1 | 20.1 | ' | 17.5 | ' | ' |
Finite-Lived Intangible Asset, Useful Life | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '11 years 6 months 0 days | ' | '15 years | ' | '10 years | ' | '9 years | ' | ' | '15 years | ' | '8 years | ' |
Goodwill | $263.20 | ' | ' | ' | $263.20 | ' | $236.80 | $16.20 | $12.70 | ' | ' | ' | ' | ' | ' | ' | ' | $10.70 | ' | ' | ' | ' | ' |
SEGMENT_REPORTING_Details
SEGMENT REPORTING (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Millions, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 |
Segment | OperatingSegment | ||||
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Number of reportable segments | 3 | ' | ' | ' | ' |
Premium revenue | $3,396.30 | $2,495.60 | $9,511 | $7,075.30 | ' |
Medical benefits expense | 2,996.60 | 2,144.70 | 8,460.80 | 6,147.90 | ' |
Deferred ACA industry fee amortization | 34.7 | 0 | 103.3 | 0 | ' |
Gross margin | 365 | 350.9 | 946.9 | 927.4 | ' |
Investment and other income | 11.2 | 4.8 | 34.1 | 13.9 | ' |
Other expenses | -306.7 | -248.9 | -888.8 | -734.5 | ' |
Income from operations | 69.5 | 106.8 | 92.2 | 206.8 | ' |
Number of operating segments prior to 1/1/2014 | ' | ' | ' | ' | 3 |
Medicaid [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Premium revenue | 2,127.90 | 1,492.40 | 5,631.20 | 4,184.80 | ' |
Medical benefits expense | 1,849 | 1,314.60 | 4,933.50 | 3,636.30 | ' |
Deferred ACA industry fee amortization | 20.4 | 0 | 60.6 | 0 | ' |
Gross margin | 258.5 | 177.8 | 637.1 | 548.5 | ' |
Medicare Health Plans [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Premium revenue | 1,012.20 | 807.3 | 2,953.50 | 2,286.20 | ' |
Medical benefits expense | 918 | 685.7 | 2,633.50 | 1,968.60 | ' |
Deferred ACA industry fee amortization | 11.4 | 0 | 34 | 0 | ' |
Gross margin | 82.8 | 121.6 | 286 | 317.6 | ' |
Prescription Drug Plans [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Premium revenue | 256.2 | 195.9 | 926.3 | 604.3 | ' |
Medical benefits expense | 229.6 | 144.4 | 893.8 | 543 | ' |
Deferred ACA industry fee amortization | 2.9 | 0 | 8.7 | 0 | ' |
Gross margin | $23.70 | $51.50 | $23.80 | $61.30 | ' |
Florida [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Premium revenue net of premium tax | 15.00% | 12.00% | 13.00% | 12.00% | ' |
Number of Regions executed contracts | ' | ' | 8 | ' | ' |
Total number of regions | 11 | ' | 11 | ' | ' |
Georgia [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Premium revenue net of premium tax | 13.00% | 17.00% | 13.00% | 16.00% | ' |
Number of renewal options | 2 | ' | 2 | ' | ' |
Term of optional renewals | '1 year | ' | ' | ' | ' |
Kentucky [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Premium revenue net of premium tax | 18.00% | 15.00% | 18.00% | 14.00% | ' |
Number of renewal options | 4 | ' | 4 | ' | ' |
Term of optional renewals | '1 year | ' | ' | ' | ' |
Initial term of short-term contracts | '3 years | ' | ' | ' | ' |
Missouri Care, Inc. [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Membership | 101,000 | ' | 101,000 | ' | ' |
Minimum [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Percentage of consolidated premium revenue (in hundredths) | ' | ' | 10.00% | ' | ' |
Finite-Lived Intangible Asset, Useful Life | '1 year | ' | ' | ' | ' |
Weighted Average [Member] | Windsor Health Plans, Inc. [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Finite-Lived Intangible Asset, Useful Life | '11 years 6 months 0 days | ' | ' | ' | ' |
Weighted Average [Member] | Broker Network [Member] | Windsor Health Plans, Inc. [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Finite-Lived Intangible Asset, Useful Life | '10 years | ' | ' | ' | ' |
NET_INCOME_PER_COMMON_SHARE_De
NET INCOME PER COMMON SHARE (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Earnings Per Share [Abstract] | ' | ' | ' | ' |
Weighted-average common shares outstanding - basic | 43,885,779 | 43,608,626 | 43,851,759 | 43,470,758 |
Dilutive effect of: | ' | ' | ' | ' |
Unvested restricted stock, restricted stock units, market stock units and performance stock units | 293,316 | 330,283 | 282,535 | 352,161 |
Stock options | 6,939 | 99,013 | 9,751 | 149,527 |
Weighted-average common shares outstanding - diluted | 44,186,034 | 44,037,922 | 44,144,045 | 43,972,446 |
Anti-dilutive stock options and restricted stock awards excluded from computation | 12,951 | 64,862 | 38,703 | 102,988 |
INVESTMENTS_Details
INVESTMENTS (Details) (USD $) | 3 Months Ended | |
Sep. 30, 2014 | Dec. 31, 2013 | |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Amortized Cost | $408,000,000 | $397,000,000 |
Gross Unrealized Gains | 1,100,000 | 600,000 |
Gross Unrealized Losses | -2,200,000 | -2,500,000 |
Estimated Fair Value | 406,900,000 | 395,100,000 |
Within 1 Year | 192,000,000 | ' |
1 Through 5 Years | 170,300,000 | ' |
5 Through 10 Years | 11,300,000 | ' |
Thereafter | 33,300,000 | ' |
Auction Rate Securities [Member] | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Amortized Cost | 34,100,000 | 34,200,000 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | -1,800,000 | -2,400,000 |
Estimated Fair Value | 32,300,000 | ' |
Within 1 Year | 0 | ' |
1 Through 5 Years | 0 | ' |
5 Through 10 Years | 0 | ' |
Thereafter | 32,300,000 | ' |
Estimated fair falue of municipal note security | 32,300,000 | 31,800,000 |
Redemptions or sales | 0 | ' |
Certificates of Deposit [Member] | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Amortized Cost | 500,000 | 1,600,000 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | 0 | 0 |
Estimated Fair Value | 500,000 | 1,600,000 |
Within 1 Year | 500,000 | ' |
1 Through 5 Years | 0 | ' |
5 Through 10 Years | 0 | ' |
Thereafter | 0 | ' |
Corporate Debt and Other Securities [Member] | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Amortized Cost | 112,700,000 | 104,500,000 |
Gross Unrealized Gains | 200,000 | 100,000 |
Gross Unrealized Losses | -300,000 | -100,000 |
Estimated Fair Value | 112,600,000 | 104,500,000 |
Within 1 Year | 12,900,000 | ' |
1 Through 5 Years | 94,300,000 | ' |
5 Through 10 Years | 4,500,000 | ' |
Thereafter | 900,000 | ' |
Money Market Funds [Member] | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Amortized Cost | 41,400,000 | 43,400,000 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | 0 | 0 |
Estimated Fair Value | 41,400,000 | 43,400,000 |
Within 1 Year | 41,400,000 | ' |
1 Through 5 Years | 0 | ' |
5 Through 10 Years | 0 | ' |
Thereafter | 0 | ' |
Municipal Securities [Member] | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Amortized Cost | 84,000,000 | 108,900,000 |
Gross Unrealized Gains | 500,000 | 0 |
Gross Unrealized Losses | 0 | 0 |
Estimated Fair Value | 84,500,000 | 108,900,000 |
Within 1 Year | 23,700,000 | ' |
1 Through 5 Years | 54,000,000 | ' |
5 Through 10 Years | 6,800,000 | ' |
Thereafter | 0 | ' |
Bonds [Member] | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Estimated Fair Value | 110,400,000 | ' |
Within 1 Year | 110,400,000 | ' |
1 Through 5 Years | 0 | ' |
5 Through 10 Years | 0 | ' |
Thereafter | 0 | ' |
Variable Rate Bond Fund [Member] | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Amortized Cost | 110,100,000 | 84,900,000 |
Gross Unrealized Gains | 300,000 | 400,000 |
Gross Unrealized Losses | 0 | 0 |
Estimated Fair Value | 110,400,000 | 85,300,000 |
US Government Securities [Member] | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Amortized Cost | 25,200,000 | 19,500,000 |
Gross Unrealized Gains | 100,000 | 100,000 |
Gross Unrealized Losses | -100,000 | 0 |
Estimated Fair Value | 25,200,000 | 19,600,000 |
Within 1 Year | 3,100,000 | ' |
1 Through 5 Years | 22,000,000 | ' |
5 Through 10 Years | 0 | ' |
Thereafter | 100,000 | ' |
External Credit Rating, Investment Grade [Member] | Auction Rate Securities [Member] | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Amortized Cost | 22,500,000 | ' |
Number of Securities | 2 | ' |
External Credit Rating, Non Investment Grade [Member] | Auction Rate Securities [Member] | ' | ' |
Schedule of Available-for-sale Securities [Line Items] | ' | ' |
Amortized Cost | $11,600,000 | ' |
Number of Securities | 1 | ' |
RESTRICTED_INVESTMENTS_Details
RESTRICTED INVESTMENTS (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ' | ' |
Amortized cost | $150.60 | $82.60 |
Gross unrealized gains | 0.1 | 0 |
Gross unrealized losses | -0.1 | -0.1 |
Estimated fair value | 150.6 | 82.5 |
Money Market Funds [Member] | ' | ' |
Restricted Cash and Cash Equivalents Items [Line Items] | ' | ' |
Amortized cost | 66 | 19 |
Gross unrealized gains | 0 | 0 |
Gross unrealized losses | 0 | 0 |
Estimated fair value | 66 | 19 |
Cash [Member] | ' | ' |
Restricted Cash and Cash Equivalents Items [Line Items] | ' | ' |
Amortized cost | 54.4 | 40.2 |
Gross unrealized gains | 0 | 0 |
Gross unrealized losses | 0 | 0 |
Estimated fair value | 54.4 | 40.2 |
Certificates of Deposit [Member] | ' | ' |
Restricted Cash and Cash Equivalents Items [Line Items] | ' | ' |
Amortized cost | 1 | 1.4 |
Gross unrealized gains | 0 | 0 |
Gross unrealized losses | 0 | 0 |
Estimated fair value | 1 | 1.4 |
US Government Securities [Member] | ' | ' |
Restricted Cash and Cash Equivalents Items [Line Items] | ' | ' |
Amortized cost | 29.2 | 22 |
Gross unrealized gains | 0.1 | 0 |
Gross unrealized losses | -0.1 | -0.1 |
Estimated fair value | $29.20 | $21.90 |
EQUITYBASED_COMPENSATION_Detai
EQUITY-BASED COMPENSATION (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||||
In Millions, except Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' | ||
Compensation expense | $3 | $5.40 | $9.20 | $12.40 | ||
Unrecognized compensation cost | 28.4 | ' | 28.4 | ' | ||
Weighted-average period over which compensation costs are expected to be recognized (in years) | '1 year 11 months | ' | ' | ' | ||
Share Price | $60.34 | ' | $60.34 | ' | ||
Restricted Stock Units (RSUs) [Member] | ' | ' | ' | ' | ||
Equity Instruments Other than Options [Roll Forward] | ' | ' | ' | ' | ||
Outstanding as of beginning of period (in shares) | ' | ' | 259,836 | ' | ||
Granted (in shares) | ' | ' | 316,815 | ' | ||
Vested (in shares) | ' | ' | -85,287 | ' | ||
Forfeited and expired (in shares) | ' | ' | -44,488 | ' | ||
Outstanding at end of period (in shares) | 446,876 | ' | 446,876 | ' | ||
Weighted Average Grant-Date Fair Value [Rollforward] | ' | ' | ' | ' | ||
Outstanding as of beginning of period (in dollars per share) | ' | ' | $56.51 | ' | ||
Granted (in dollars per share) | ' | ' | $64.79 | ' | ||
Vested (in dollars per share) | ' | ' | $54.42 | ' | ||
Forfeited and expired (in dollars per share) | ' | ' | $59.76 | ' | ||
Outstanding as of end of period (in dollars per share) | $62.46 | ' | $62.46 | ' | ||
Performance Share Awards [Member] | ' | ' | ' | ' | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' | ||
Unrecognized compensation cost | 9.8 | ' | 9.8 | ' | ||
Stock Options [Member] | ' | ' | ' | ' | ||
Stock Options [Rollforward] | ' | ' | ' | ' | ||
Outstanding as of beginning of period (in shares) | ' | ' | 31,381 | ' | ||
Granted (in shares) | ' | ' | 0 | ' | ||
Exercised (in shares) | ' | ' | -13,896 | ' | ||
Forfeited and expired (in shares) | ' | ' | -1,407 | ' | ||
Outstanding at end of period (in shares) | 16,078 | [1] | ' | 16,078 | [1] | ' |
Vested and exercisable (shares) | 16,078 | ' | 16,078 | ' | ||
Weighted Average Exercise Price [Rollforward] | ' | ' | ' | ' | ||
Outstanding as of beginning of period (in dollars per share) | ' | ' | $29.47 | ' | ||
Granted (in dollars per share) | ' | ' | $0 | ' | ||
Exercised (in dollars per share) | ' | ' | $21.47 | ' | ||
Forfeited and expired (in dollars per share) | ' | ' | $14.49 | ' | ||
Outstanding at end of period (in dollars per share) | $37.70 | ' | $37.70 | ' | ||
Aggregate Intrinsic Value [Abstract] | ' | ' | ' | ' | ||
Outstanding at end of period | $0.40 | ' | $0.40 | ' | ||
Weighted Average Remaining Contractual Term [Abstract] | ' | ' | ' | ' | ||
Outstanding at end of period (in years) | ' | ' | '1 year 1 month 6 days | ' | ||
Performance Shares [Member] | ' | ' | ' | ' | ||
Equity Instruments Other than Options [Roll Forward] | ' | ' | ' | ' | ||
Outstanding as of beginning of period (in shares) | ' | ' | 288,487 | ' | ||
Granted (in shares) | ' | ' | 258,679 | ' | ||
Vested (in shares) | ' | ' | -62,640 | ' | ||
Forfeited and expired (in shares) | ' | ' | -67,821 | ' | ||
Outstanding at end of period (in shares) | 416,705 | ' | 416,705 | ' | ||
Weighted Average Grant-Date Fair Value [Rollforward] | ' | ' | ' | ' | ||
Outstanding as of beginning of period (in dollars per share) | ' | ' | $55.30 | ' | ||
Granted (in dollars per share) | ' | ' | $62.58 | ' | ||
Vested (in dollars per share) | ' | ' | $40.57 | ' | ||
Forfeited and expired (in dollars per share) | ' | ' | $60.72 | ' | ||
Outstanding as of end of period (in dollars per share) | $61.16 | ' | $61.16 | ' | ||
Market Stock Units [Member] | ' | ' | ' | ' | ||
Equity Instruments Other than Options [Roll Forward] | ' | ' | ' | ' | ||
Outstanding as of beginning of period (in shares) | ' | ' | 83,889 | ' | ||
Granted (in shares) | ' | ' | 69,704 | ' | ||
Vested (in shares) | ' | ' | 0 | ' | ||
Forfeited and expired (in shares) | ' | ' | -28,161 | ' | ||
Outstanding at end of period (in shares) | 125,432 | ' | 125,432 | ' | ||
Weighted Average Grant-Date Fair Value [Rollforward] | ' | ' | ' | ' | ||
Outstanding as of beginning of period (in dollars per share) | ' | ' | $79.38 | ' | ||
Granted (in dollars per share) | ' | ' | $71.74 | ' | ||
Vested (in dollars per share) | ' | ' | $0 | ' | ||
Forfeited and expired (in dollars per share) | ' | ' | $77.89 | ' | ||
Outstanding as of end of period (in dollars per share) | $75.47 | ' | $75.47 | ' | ||
[1] | All of the Company's outstanding stock options were vested and exercisable as of SeptemberB 30, 2014. |
DEBT_Details
DEBT (Details) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | 9 Months Ended | 9 Months Ended | 12 Months Ended | 9 Months Ended | |||||||||||||
In Millions, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 |
Senior Notes [Member] | Senior Notes [Member] | Term Loan [Member] | Revolving Credit Facility [Member] | Revolving Credit Facility [Member] | Revolving Credit Facility [Member] | Credit Facility [Domain] | Letter of Credit [Member] | Debt Instrument, Redemption, Period Two [Member] | Debt Instrument, Redemption, Period One [Member] | Debt Instrument, Redemption, Period Three [Member] | Debt Instrument, Redemption, Period Four [Member] | London Interbank Offered Rate (LIBOR) [Member] | London Interbank Offered Rate (LIBOR) [Member] | Prime Rate [Member] | Prime Rate [Member] | |||||
Minimum [Member] | Maximum [Member] | Minimum [Member] | Maximum [Member] | Minimum [Member] | Maximum [Member] | |||||||||||||||
Debt Instrument [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Long-term Debt | ' | ' | ' | ' | ' | ' | $300 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Redemption Price, Percentage of Principal Amount Redeemed | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 40.00% | ' | ' | ' | ' | ' | ' |
Debt Instrument, Redemption Price, Percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 102.88% | 105.75% | 101.44% | 100.00% | ' | ' | ' | ' |
Debt Instrument, Face Amount | ' | ' | ' | ' | 900 | 600 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Interest Rate, Stated Percentage | ' | ' | ' | ' | ' | 5.75% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Revolving credit facility, maximum borrowing capacity | ' | ' | ' | ' | ' | ' | ' | 300 | ' | ' | ' | 75 | ' | ' | ' | ' | ' | ' | ' | ' |
Additional Debt Permitted | ' | ' | ' | ' | ' | ' | ' | 75 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Interest Rate, Stated Percentage Rate Range, Minimum | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1.50% | 2.63% | 0.50% | 1.63% |
Unutilized commitments fee, minimum (in hundredths) | ' | ' | ' | ' | ' | ' | ' | ' | 0.25% | 0.45% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Concentration Risk, Lender | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '0.5 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Proceeds from Debt, Net of Issuance Costs | 298.6 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Interest Rate at Period End | ' | ' | ' | ' | ' | ' | 2.44% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest expense | $9.50 | $2.10 | $28 | $5.90 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (Fair Value, Measurements, Recurring [Member], USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Sep. 30, 2014 | Dec. 31, 2013 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | ' | $395.10 |
Total restricted investments | 150.6 | 82.5 |
Certificates of Deposit [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total restricted investments | ' | 1.4 |
Variable Rate Bond Fund [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 110.4 | ' |
Cash [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total restricted investments | ' | 40.2 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 171.6 | 148.3 |
Total restricted investments | 149.6 | 81.1 |
Amounts payable related to investigation resolution | 0 | 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Asset-backed Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Auction Rate Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Certificates of Deposit [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Total restricted investments | 0 | 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Corporate Debt Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Money Market Funds [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 41.4 | 43.4 |
Total restricted investments | 66 | 19 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Municipal Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Variable Rate Bond Fund [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 110.4 | 85.3 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Government Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 19.8 | 19.6 |
Total restricted investments | 29.2 | 21.9 |
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Cash [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total restricted investments | 54.4 | 40.2 |
Fair Value, Inputs, Level 2 [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 203 | 215 |
Total restricted investments | 1 | 1.4 |
Amounts payable related to investigation resolution | 34.9 | 70.3 |
Fair Value, Inputs, Level 2 [Member] | Asset-backed Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 21.6 | 1.6 |
Fair Value, Inputs, Level 2 [Member] | Auction Rate Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | Certificates of Deposit [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0.5 | 1.6 |
Total restricted investments | 1 | 1.4 |
Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 91 | 102.9 |
Fair Value, Inputs, Level 2 [Member] | Money Market Funds [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Total restricted investments | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | Municipal Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 84.5 | 108.9 |
Fair Value, Inputs, Level 2 [Member] | Variable Rate Bond Fund [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | U.S. Government Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 5.4 | 0 |
Total restricted investments | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | Cash [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total restricted investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 32.3 | 31.8 |
Total restricted investments | 0 | 0 |
Amounts payable related to investigation resolution | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | Asset-backed Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | Auction Rate Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 32.3 | 31.8 |
Auction rate securities measured at fair value on a recurring basis using significant unobservable inputs [Rollforward] | ' | ' |
Beginning balance | ' | 31.8 |
Realized gains (losses) in earnings | 0 | ' |
Unrealized gains (losses) in other comprehensive income | 0.5 | ' |
Purchases, sales and redemptions | 0 | ' |
Net transfers in or (out) of Level 3 | 0 | ' |
Ending balance | 32.3 | 31.8 |
Significant Unobservable Inputs (Level 3) [Member] | Certificates of Deposit [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Total restricted investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | Corporate Debt Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | Money Market Funds [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Total restricted investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | Municipal Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | Variable Rate Bond Fund [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | U.S. Government Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0 | ' |
Total restricted investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | Cash [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total restricted investments | 0 | 0 |
Estimate of Fair Value Measurement [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 406.9 | ' |
Amounts payable related to investigation resolution | 34.9 | 70.3 |
Estimate of Fair Value Measurement [Member] | Asset-backed Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 21.6 | 1.6 |
Estimate of Fair Value Measurement [Member] | Auction Rate Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 32.3 | 31.8 |
Estimate of Fair Value Measurement [Member] | Certificates of Deposit [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 0.5 | 1.6 |
Total restricted investments | 1 | ' |
Estimate of Fair Value Measurement [Member] | Corporate Debt Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 91 | 102.9 |
Estimate of Fair Value Measurement [Member] | Money Market Funds [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 41.4 | 43.4 |
Total restricted investments | 66 | 19 |
Estimate of Fair Value Measurement [Member] | Municipal Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 84.5 | 108.9 |
Estimate of Fair Value Measurement [Member] | Variable Rate Bond Fund [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | ' | 85.3 |
Estimate of Fair Value Measurement [Member] | U.S. Government Securities [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total investments | 25.2 | 19.6 |
Total restricted investments | 29.2 | 21.9 |
Estimate of Fair Value Measurement [Member] | Cash [Member] | ' | ' |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' |
Total restricted investments | $54.40 | ' |
FAIR_VALUE_MEASUREMENTS_Fair_V
FAIR VALUE MEASUREMENTS Fair Value of Debt (Details) (Senior Notes [Member], USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Senior Notes [Member] | ' | ' |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ' | ' |
Debt Instrument, Face Amount | $900 | $600 |
Long-term Debt, Fair Value | $907.70 | $615 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Income Tax Disclosure [Abstract] | ' | ' | ' | ' |
Effective income tax rate (in hundredths) | 68.70% | 40.10% | 54.80% | 36.00% |
Increase in tax benefit from agreement with IRS | ' | $7.60 | ' | ' |
Unrecognized Tax Benefits | $9.30 | ' | $9.30 | ' |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | 3 Months Ended | 0 Months Ended | 3 Months Ended | 3 Months Ended | 9 Months Ended | 84 Months Ended | |||||
In Millions, unless otherwise specified | Sep. 30, 2014 | Dec. 31, 2013 | Mar. 23, 2012 | Sep. 30, 2014 | Dec. 31, 2011 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 |
associate | Civil Inquiry [Member] | Civil Inquiry [Member] | Class Action Complaints [Member] | Corporate Integrity Agreement [Member] | Derivative Lawsuits [Member] | Derivative Lawsuits [Member] | Derivative Lawsuits [Member] | Derivative Lawsuits [Member] | Derivative Lawsuits [Member] | ||
Installment | days | days | |||||||||
Employee | Employee | ||||||||||
Action | Action | ||||||||||
person | person | ||||||||||
Loss Contingencies [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Settlement agreement, amount | ' | ' | $137.50 | ' | ' | ' | ' | ' | ' | ' | ' |
Number of installments | ' | ' | 4 | ' | ' | ' | ' | ' | ' | ' | ' |
Settlement Agreement Amount Of Installment Payments | ' | ' | 34.4 | ' | ' | ' | ' | ' | ' | ' | ' |
Term of agreement | ' | ' | ' | '36 months | ' | '5 years | ' | ' | ' | ' | ' |
Settlement agreement, interest rate | ' | ' | 3.13% | ' | ' | ' | ' | ' | ' | ' | ' |
Amount of legal contingency accrual, current | 34.9 | 36.2 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount of legal contingency accrual, long-term | 0 | 34.1 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Settlement agreement, additional contingent amount | ' | ' | 35 | ' | ' | ' | ' | ' | ' | ' | ' |
Portion of sums recovered from former officers to be paid to class members | ' | ' | ' | ' | 25.00% | ' | ' | ' | ' | ' | ' |
Number of former officers being pursued in action filed by entity | ' | ' | ' | ' | ' | ' | 3 | ' | 3 | ' | ' |
Number of former associates being pursued in action filed by entity | ' | ' | ' | ' | ' | ' | 2 | ' | 2 | ' | ' |
Number of former associates tried in 2013 | 4 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of former employees being pursued in action filed by entity | ' | ' | ' | ' | ' | ' | 5 | ' | 5 | ' | ' |
Number of actions filed in the Federal Court | ' | ' | ' | ' | ' | ' | 6 | ' | 6 | ' | ' |
Legal fees | ' | ' | ' | ' | ' | ' | $8.60 | $5.70 | $23.50 | $39.10 | $179.40 |