Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Oct. 29, 2018 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | WELLCARE HEALTH PLANS, INC. | |
Entity Central Index Key | 1,279,363 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding (in shares) | 49,991,867 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 | |
Entity Emerging Growth Company | false | |
Entity Small Business | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenues: | ||||
Premium | $ 4,988.8 | $ 4,390.9 | $ 14,227.7 | $ 12,631.5 |
Products and services | 34.6 | 0 | 34.6 | 0 |
Investment and other income | 34.7 | 12 | 81 | 30.6 |
Total revenues | 5,058.1 | 4,402.9 | 14,343.3 | 12,662.1 |
Expenses: | ||||
Medical benefits | 4,195 | 3,740.7 | 12,023 | 10,938.3 |
Costs of products and services | 33.5 | 0 | 33.5 | 0 |
Selling, general and administrative | 433.2 | 372.3 | 1,167 | 1,040.2 |
ACA industry fee | 86.5 | 0 | 247 | 0 |
Medicaid premium taxes | 31.5 | 29.5 | 94.2 | 90.6 |
Depreciation and amortization | 46.2 | 31.4 | 117.1 | 84.6 |
Interest | 23.6 | 17.1 | 57.8 | 51.4 |
Total expenses | 4,849.5 | 4,191 | 13,739.6 | 12,205.1 |
Income from operations | 208.6 | 211.9 | 603.7 | 457 |
Loss on extinguishment of debt | 0 | 0 | 0 | 26.1 |
Income before income taxes and equity in losses of unconsolidated subsidiaries | 208.6 | 211.9 | 603.7 | 430.9 |
Equity in earnings (losses) of unconsolidated subsidiaries | 6.6 | 23.2 | (0.1) | 22.1 |
Income before income taxes | 215.2 | 235.1 | 603.6 | 453 |
Income tax expense | 84.6 | 63.5 | 219.7 | 140 |
Net income | 130.6 | 171.6 | 383.9 | 313 |
Other comprehensive income (loss): | ||||
Change in net unrealized gains and losses on available-for-sale securities, before tax | (1.1) | 0.4 | (11.4) | 1.7 |
Income tax expense (benefit) related to other comprehensive income | (0.3) | 0.2 | (2.7) | 0.6 |
Other comprehensive (loss) income, net of tax | (0.8) | 0.2 | (8.7) | 1.1 |
Comprehensive income | $ 129.8 | $ 171.8 | $ 375.2 | $ 314.1 |
Earnings per common share: | ||||
Basic (in USD per share) | $ 2.74 | $ 3.86 | $ 8.40 | $ 7.04 |
Diluted (in USD per share) | $ 2.70 | $ 3.82 | $ 8.29 | $ 6.97 |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 47,712,712 | 44,509,692 | 45,692,804 | 44,458,096 |
Diluted (in shares) | 48,384,427 | 44,969,033 | 46,287,616 | 44,909,916 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash and cash equivalents | $ 4,306.6 | $ 4,198.6 |
Short-term investments | 1,034.4 | 469.5 |
Premiums receivable, net | 969.6 | 453.4 |
Pharmacy rebates receivable, net | 494.6 | 335 |
Funds receivable for the benefit of members | 268.1 | 27.5 |
Prepaid expenses and other current assets, net | 608.9 | 335.2 |
Total current assets | 7,682.2 | 5,819.2 |
Property, equipment and capitalized software, net | 384.1 | 319.5 |
Goodwill | 1,753.5 | 660.7 |
Other intangible assets, net | 1,326.6 | 367.9 |
Long-term investments | 844.4 | 766.2 |
Restricted cash, cash equivalents and investments | 234.8 | 211 |
Other assets | 17.8 | 4.9 |
Assets of discontinued operations | 215.1 | 215.2 |
Total Assets | 12,458.5 | 8,364.6 |
Current Liabilities: | ||
Medical benefits payable | 2,901.4 | 2,146.3 |
Unearned premiums | 20.8 | 65.9 |
Accounts payable and accrued expenses | 868.8 | 788.1 |
Funds payable for the benefit of members | 1,569.2 | 1,075.9 |
Other payables to government partners | 444.2 | 367 |
Total current liabilities | 5,804.4 | 4,443.2 |
Deferred income tax liability, net | 117.2 | 93.4 |
Long-term debt, net | 2,125.4 | 1,182.4 |
Other liabilities | 34 | 13.7 |
Liabilities of discontinued operations | 215.1 | 215.2 |
Total Liabilities | 8,296.1 | 5,947.9 |
Commitments and contingencies (see Note 13) | 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, 49,979,666 and 44,522,988 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively) | 0.5 | 0.4 |
Paid-in capital | 1,961.9 | 591.5 |
Retained earnings | 2,211.4 | 1,827.5 |
Accumulated other comprehensive loss | (11.4) | (2.7) |
Total Stockholders' Equity | 4,162.4 | 2,416.7 |
Total Liabilities and Stockholders' Equity | $ 12,458.5 | $ 8,364.6 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Stockholders' Equity: | ||
Preferred stock, par value (in USD 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 USD per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, issued (in shares) | 49,979,666 | 44,522,988 |
Common stock, outstanding (in shares) | 49,979,666 | 44,522,988 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Millions | Total | Common Stock | Paid in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) |
Beginning balance (in shares) at Dec. 31, 2016 | 44,293,881 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Common stock issued for vested stock-based compensation awards (in shares) | 315,391 | ||||
Repurchase and retirement of shares to satisfy tax withholding requirements (in shares) | (96,795) | ||||
Ending balance (in shares) at Sep. 30, 2017 | 44,512,477 | ||||
Beginning balance at Dec. 31, 2016 | $ 2,000.1 | $ 0.4 | $ 546.9 | $ 1,453.8 | $ (1) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of common stock, net of issuance costs | 0 | ||||
Repurchase and retirement of shares to satisfy tax withholding requirements | (13.6) | (13.6) | |||
Stock-based compensation expense, net of forfeitures | 32.8 | 32.8 | |||
Comprehensive income | 314.1 | 313 | 1.1 | ||
Ending balance at Sep. 30, 2017 | $ 2,333.4 | $ 0.4 | 566.1 | 1,766.8 | 0.1 |
Beginning balance (in shares) at Dec. 31, 2017 | 44,522,988 | 44,522,988 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Common stock, issued (in shares) | 5,207,547 | ||||
Common stock issued for vested stock-based compensation awards (in shares) | 356,491 | ||||
Repurchase and retirement of shares to satisfy tax withholding requirements (in shares) | (107,360) | ||||
Ending balance (in shares) at Sep. 30, 2018 | 49,979,666 | 49,979,666 | |||
Beginning balance at Dec. 31, 2017 | $ 2,416.7 | $ 0.4 | 591.5 | 1,827.5 | (2.7) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of common stock, net of issuance costs | 1,342.3 | 0.1 | 1,342.2 | ||
Repurchase and retirement of shares to satisfy tax withholding requirements | (23.3) | (23.3) | |||
Stock-based compensation expense, net of forfeitures | 51.5 | 51.5 | |||
Comprehensive income | 375.2 | 383.9 | (8.7) | ||
Ending balance at Sep. 30, 2018 | $ 4,162.4 | $ 0.5 | $ 1,961.9 | $ 2,211.4 | $ (11.4) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | ||
Cash flows from operating activities: | |||
Net income | $ 383.9 | $ 313 | |
Adjustments to reconcile net income to cash flows from operating activities: | |||
Depreciation and amortization | 117.1 | 84.6 | |
Loss on extinguishment of debt | 0 | 26.1 | |
Stock-based compensation expense | 51.5 | 32.8 | |
Deferred taxes, net | (9.8) | (39) | |
Other, net | 13.1 | 13.4 | |
Changes in operating accounts, net of effects from acquisitions: | |||
Premiums receivable, net | (144.1) | 58.4 | |
Pharmacy rebates receivable, net | (138.7) | (52.7) | |
Medical benefits payable | 227.1 | 258.8 | |
Unearned premiums | (74.7) | 574.4 | |
Other payables to government partners | 64.8 | 36.6 | |
Accrued liabilities and other, net | (292.2) | (60.9) | |
Net cash provided by operating activities | 198 | 1,245.5 | |
Cash flows from investing activities: | |||
Acquisitions and acquisition-related settlements, net of cash acquired | (2,035.7) | (728.5) | |
Purchases of investments | (1,322.6) | (1,062.2) | |
Proceeds from sales and maturities of investments | 822.8 | 324.1 | |
Additions to property, equipment and capitalized software, net | (87.5) | (92.6) | |
Net cash used in investing activities | (2,623) | (1,559.2) | |
Cash flows from financing activities: | |||
Proceeds from issuance of debt, net of financing costs paid | 739 | 1,182.2 | |
Borrowings on Revolving Credit Facility, net of financing costs paid | 221.3 | ||
Payments on debt | (25) | (1,026.1) | |
Proceeds from issuance of common stock, net of issuance fees paid | 1,342.3 | 0 | |
Repurchase and retirement of shares to satisfy employee tax withholding requirements | (23.3) | (13.6) | |
Funds received for the benefit of members, net | 250.8 | 978 | |
Other, net | 29.5 | 13.4 | |
Net cash provided by financing activities | 2,534.6 | 1,133.9 | |
Increase in cash, cash equivalents and restricted cash and cash equivalents | 109.6 | 820.2 | |
Balance at beginning of period | [1] | 4,263 | 4,121.3 |
Balance at end of period | [1] | 4,372.6 | 4,941.5 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |||
Cash paid for taxes, net of refunds | 174.6 | 149.5 | |
Cash paid for interest | 65.5 | 56.3 | |
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS: | |||
Non-cash additions to property, equipment, and capitalized software | $ 3.7 | $ 11.3 | |
[1] | Beginning and ending cash, cash equivalents and restricted cash and cash equivalents balances have been retrospectively adjusted to reflect the adoption of ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" effective January 1, 2018. See Note 1 - Organization, Basis of Presentation and Significant Accounting Policies for further discussion. |
ORGANIZATION, BASIS OF PRESENTA
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES WellCare Health Plans, Inc. (the "Company," "we," "us," or "our") focuses primarily on providing government-sponsored managed care services to families, children, seniors and individuals with complex medical needs primarily through Medicaid, Medicare Advantage ("MA") and Medicare Prescription Drug Plans ("PDP"), as well as individuals in the Health Insurance Marketplace. As of September 30, 2018 , we served approximately 5.5 million members nationwide. We estimate that we are among the largest managed care organizations providing Medicaid managed care services plans, MA Plans and PDPs, as measured by membership. Our broad range of experience and government focus allows us to effectively serve our members, partner with our providers, government clients and communities we serve, and efficiently manage our ongoing operations. As of September 30, 2018 , we operated Medicaid health plans, including states where we receive Medicaid premium revenues associated with dually eligible special needs plans, in Arizona, Florida, Georgia, Hawaii, Illinois, Kentucky, Michigan, Missouri, Nebraska, New Jersey, New York, South Carolina and Texas. In addition, as of September 30, 2018 , we also operated MA coordinated care plans ("CCPs") in Arizona, Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kentucky, Louisiana, Maine, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, South Carolina, Tennessee and Texas. We also offered stand-alone Medicare PDPs in 50 states and the District of Columbia. In September 2018, we completed the acquisition of Meridian Health Plan of Michigan, Inc., Meridian Health Plan of Illinois, Inc., and MeridianRx, a pharmacy benefit manager ("PBM") (collectively, “Meridian”). As a result of the acquisition, we expanded our Medicaid portfolio through the addition of Michigan, where Meridian has the leading market position; expanded our Medicaid presence in Illinois; and acquired an integrated PBM platform. Meridian also serves MA members in Illinois, Indiana, Michigan, and Ohio, as well as Health Insurance Marketplace members in Michigan. Basis of Presentation The accompanying unaudited condensed consolidated balance sheets and statements of comprehensive income, changes in stockholder's equity, and cash flows include our accounts and the accounts of our subsidiaries over which we have control or are the primary beneficiary. We eliminated all intercompany accounts and transactions. The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Accordingly, certain financial information and footnote disclosures normally included in financial statements prepared in accordance with GAAP, but that are not required for interim reporting purposes, 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, 2017 , included in our Annual Report on Form 10-K ("2017 Form 10-K"), which was filed with the U.S. Securities and Exchange Commission ("SEC") in February 2018. 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 unaudited condensed consolidated 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, including assumptions as to the annualized tax rate, 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. Certain reclassifications were made to 2017 financial information to conform to the 2018 presentation. As previously discussed, we acquired an integrated PBM platform in connection with the Meridian acquisition. The external revenues and costs for our PBM business are reported within "Products and Services" and "Cost of Products and Services", respectively, on the statements of comprehensive income. Products and services revenues from our PBM consist of the prescription price (ingredient cost plus dispensing fee) negotiated with the retail pharmacies with which we have contracted, plus any associated administrative fees. This revenue is recognized when the claim is processed. We have the contractual obligation to pay network pharmacies for benefits provided to participating members and, therefore, act as principal in the arrangement and reflect the total prescription price as revenue, on a gross basis, in accordance with applicable accounting guidance. Costs of products and services is recognized at the time prescriptions are dispensed by pharmacies in the PBM's network to eligible members and consists primarily of ingredient costs and dispensing fees paid to retail pharmacies with which we have contracted. The overall results of our PBM business are immaterial. Unconsolidated Subsidiaries In April 2017, in connection with the acquisition of Universal American Corp. (“Universal American”), we acquired a wholly-owned subsidiary, which works with physicians and other health care professionals to operate Accountable Care Organizations ("ACOs") under the Medicare Shared Saving Program ("MSSP") and Next Generation ACO Models. ACOs were established by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the "ACA") to reward integrated, efficient care and allow providers to share in any savings they achieve as a result of improved quality and operational efficiency. These ACOs are generally formed as limited liability companies. The ACOs are considered variable interest entities ("VIEs") under GAAP as these entities do not have sufficient equity to finance their own operations without additional financial support. We own a majority interest in our ACOs; however, we share the power to direct the activities that most significantly affect the ACOs with health care providers that are minority owners in the ACOs. This power is shared pursuant to the structure of the management committee of each of the ACOs. Accordingly, we have determined that we are not the primary beneficiary of the ACOs; therefore, we cannot consolidate their results. We perform an ongoing qualitative assessment of our variable interests in VIEs to determine whether we have a controlling financial interest and would therefore be considered the primary beneficiary of the VIE. We account for our participation in the ACOs using the equity method. Gains and losses are immaterial and are reported on the face of our condensed consolidated statements of comprehensive income as equity in earnings (losses) of unconsolidated subsidiaries. Significant Accounting Policies Below is a discussion of our significant accounting policies, which affected the comparability of our consolidated results of operations, financial condition or cash flows for the periods presented. Refer to Note 2 - Summary of Significant Accounting Policies to the Consolidated Financial Statements included in our 2017 Form 10-K for a complete discussion of all of our significant accounting policies. Premium Receivables and Unearned Premiums 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 our condensed consolidated balance sheets. A complete discussion of premiums receivable and unearned premiums is included in Note 2 - Summary of Significant Accounting Policies to the Consolidated Financial Statements included in our 2017 Form 10-K. The premium receivable balance at September 30, 2018 is primarily related to Medicaid contracts with our state partners of approximately $771.8 million , as well as net risk-adjusted premiums receivable under our MA and PDP contracts of approximately $181.3 million . Medicaid Risk-Adjusted Premiums and Retroactive Rate Changes As discussed further in Note 2 - Summary of Significant Accounting Policies to the Consolidated Financial Statements included in our 2017 Form 10-K, Medicaid premium rate changes are recognized in the period the change becomes effective, when the effect of the change in the rate is reasonably estimable and collection is assured. In some instances, our Medicaid premiums are subject to risk score adjustments based on the health profile of our membership. Generally, the risk score is determined by the state agency's analysis of encounter submissions of processed claims data to determine the acuity of our membership relative to the entire state's Medicaid membership. The frequency of when states adjust premiums varies, but is usually done quarterly or semi-annually on a retrospective basis. We recognize periodic changes to risk-adjusted premiums as revenue when the amounts are determinable and collection is reasonably assured. As of September 30, 2018 , our condensed consolidated balance sheet included a net receivable from our Medicaid state partners of $17.9 million related to retroactive rate changes and risk score adjustments, compared with a net payable to our Medicaid state partners of $50.7 million as of December 31, 2017. Medicare Part D Settlements We receive certain Part D prospective subsidy payments from the Centers for Medicare & Medicaid Services ("CMS") for our MA and PDP members as a fixed monthly per member amount, based on the estimated costs of providing prescription drug benefits over the plan year, as reflected in our bids. A discussion of the subsidy components under Part D is included in Note 2 - Summary of Significant Accounting Policies to the Consolidated Financial Statements included in our 2017 Form 10-K. CMS will fully reimburse these subsidies, or recoup overpaid subsidies made during the plan year, as part of its annual settlement process that typically occurs in the fourth quarter of the subsequent year and, accordingly, there is no insurance risk to us. Therefore, amounts received for these subsidies are not considered premium revenue, and are reported, net of the subsidy benefits paid, as Funds receivable (payable) for the benefit of members in the condensed consolidated balance sheets. As of September 30, 2018 , our condensed consolidated balance sheet includes CMS Part D payables for the 2018, 2017 and 2016 plan years, and a net receivable relating to the 2015 plan year. As of December 31, 2017, our condensed consolidated balance sheet included CMS Part D payables primarily related to the 2017 and 2016 plan years, as well as a net receivable relating to the 2015 plan year. The 2017 net payable is expected to be settled during the fourth quarter of 2018. ACA Industry Fee The ACA imposed certain new taxes and fees, including an annual premium-based health insurance industry assessment (the "ACA industry fee") on health insurers, which began in 2014. In December 2015, President Obama signed the Consolidated Appropriations Act, 2016 which, among other provisions, included a one-year moratorium on the ACA industry fee for 2017, which also eliminated the associated Medicaid ACA industry fee reimbursements from our state government partners for 2017. Accordingly, we did not incur ACA industry fee expense nor recognize any Medicaid ACA industry fee reimbursement revenue for the three and nine months ended September 30, 2017 . During September 2018, we remitted a total of $388.5 million to the Internal Revenue Service ("IRS") for our portion of the ACA Industry fee assessed for 2018, including $66.5 million remitted for the recently acquired Meridian business. We incurred $86.5 million and $247.0 million of such amortization as ACA industry fee expense for the three and nine months ended September 30, 2018 , respectively. Additionally, we recognized $71.5 million and $199.0 million of Medicaid ACA industry fee reimbursement revenue for the three and nine months ended September 30, 2018 , respectively. While the ACA industry fee is being assessed in 2018, the continuing spending resolution passed into law in January 2018 provides for an additional one-year moratorium for the ACA industry fee in 2019. Recently Adopted Accounting Standards In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-09, " Compensation-Stock Compensation (Topic 718) - Scope of Modification Accounting ". This guidance addresses which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting pursuant to Topic 718. An entity should account for the effects of a modification unless (a) the fair value of the modified award is the same as the fair value of the original award, (b) the vesting conditions of the modified award are the same as the vesting conditions of the original award and (c) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments in this guidance should be applied prospectively for public business entities effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. We adopted this guidance prospectively on January 1, 2018. The adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 . In January 2017, the FASB issued ASU 2017-04, " Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ". This update eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. As a result, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. We adopted this guidance prospectively on January 1, 2018. The adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 . In January 2017, the FASB issued ASU 2017-01, “ Business Combinations (Topic 805): Clarifying the Definition of a Business ”. The amendments in this update provide guidance to assist entities with evaluating when a group of transferred assets and activities (collectively referred to as a "set") is a business. This new guidance provides for a "screen", which requires a determination that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. If the screen's threshold is not met, a set cannot be considered a business unless it includes an input and a substantive process that together significantly contribute to the ability to create output, eliminating the evaluation of whether a market participant could replace missing elements. This guidance is effective for prospective business combinations for public entities for interim and annual periods beginning after December 15, 2017. We adopted this guidance prospectively on January 1, 2018. The adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 . In November 2016, the FASB issued ASU 2016-18, “ Statement of Cash Flows (Topic 230) Restricted Cash; a consensus of the FASB Emerging Issues Task Force ”. This update requires entities to reconcile, on the statement of cash flows, changes in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. We adopted this guidance retrospectively on January 1, 2018. The adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 and 2017 , respectively. The following table provides a reconciliation of cash, cash equivalents and restricted cash and cash equivalents as reported within the condensed consolidated balance sheets to the total of the same such amounts shown within the condensed consolidated statements of cash flows: As of September 30, 2018 December 31, 2017 Cash and cash equivalents $ 4,306.6 $ 4,198.6 Restricted cash and cash equivalents (1) 66.0 64.4 Total cash, cash equivalents, and restricted cash and cash equivalents $ 4,372.6 $ 4,263.0 (1) Restricted cash and cash equivalents consist of restricted cash and restricted money market funds and are included in Restricted cash, cash equivalents and investments within noncurrent assets of our condensed consolidated balance sheets. Refer to Note 6 - Restricted Cash, Cash Equivalents and Investments for further detail. In August 2016, the FASB issued ASU 2016-15, " Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments (Topic 230) ". This update targets eight specific areas to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance is effective for public entities for interim and annual periods beginning after December 15, 2017, with early adoption permitted. We adopted this guidance on January 1, 2018. The adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 . In January 2016, the FASB issued ASU 2016-01, " Financial Instrument - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. " ASU 2016-01 requires entities to measure equity securities that are not consolidated or accounted for under the equity method at fair value through net income. This amendment also simplifies the impairment test of equity investments without readily determinable fair values. In February 2018, the FASB issued ASU 2018-03, " Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, " which clarifies that an entity that uses the measurement alternative for equity securities without readily determinable fair values can change its measurement approach to fair value. This guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We adopted this guidance prospectively on January 1, 2018. The adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 . In May 2014, the FASB issued ASU 2014-09, " Revenue from Contracts with Customers (Topic 606) ". ASU 2014-09 supersedes existing revenue recognition standards with a single model unless those contracts are within the scope of other standards (e.g., an insurance entity’s insurance contracts). The revenue recognition principle in ASU 2014-09 requires that an entity recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, new and enhanced disclosures are required. We adopted this guidance on January 1, 2018 using the modified retrospective approach. Given that substantially all of our revenues are derived from insurance contracts accounted for in accordance with ASC 944, Financial Services-Insurance , which are specifically excluded from the scope of ASU 2014-09, the adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 . Accounting Standards Pending Adoption In August 2018, the FASB issued ASU 2018-15, " Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract", which requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software, and deferred over the noncancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. The guidance is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. We are currently assessing the effect this guidance will have on our consolidated results of operations, financial condition or cash flows. In February 2018, the FASB issued ASU 2018-02 " Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income", which allows entities to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 from accumulated other comprehensive income to retained earnings. The guidance is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We are currently assessing the effect this guidance will have on our consolidated results of operations, financial condition or cash flows. In March 2017, the FASB issued ASU 2017-08, " Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities ". This update shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Currently, entities generally amortize the premium as a yield adjustment over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount. This guidance is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We are currently assessing the effect this guidance will have on our consolidated results of operations, financial condition or cash flows. In June 2016, the FASB issued ASU 2016-13, " Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, " which requires entities to use a current expected credit loss model, which is a new impairment model based on expected losses rather than incurred losses. Under this model, an entity would recognize an impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect from financial assets measured at amortized cost. The entity's estimate would consider relevant information about past events, current conditions, and reasonable and supportable forecasts, which will result in recognition of lifetime expected credit losses upon loan origination. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted for annual reporting periods beginning after December 15, 2018. We are currently assessing the effect this guidance will have on our consolidated results of operations, financial condition or cash flows. In February 2016, the FASB issued ASU 2016-02, " Leases (Topic 842)", which for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments in its balance sheet. This standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. Additionally, in July 2018, the FASB issued ASU No. 2018-10, " Codification Improvements to Topic 842, Leases" and ASU 2018-11, " Leases (Topic 842), Targeted Improvements" . ASU 2018-10 provides certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 provides an additional transition method option to adopt the new lease standard. Under the new transition method, a lessee would initially apply the new lease requirements in the period of adoption and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without adjustment to the financial statements for periods prior to adoption. This guidance is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. We plan to elect the practical expedients permitted within the new standard, which among other things, allows us to carryforward the historical lease classification. In addition, we will also elect the new transition method and apply the new lease requirements in the period of adoption without adjustment to the financial statement for periods prior to adoption. We do not expect the adoption of this guidance to have a material effect on our consolidated results of operations or cash flows. The effect of ASU 2016-02 and related amendments on our consolidated financial position will be based on leases outstanding at the time of adoption. |
ACQUISITIONS
ACQUISITIONS | 9 Months Ended |
Sep. 30, 2018 | |
Business Combinations [Abstract] | |
ACQUISITIONS | ACQUISITIONS Meridian Acquisition On September 1, 2018 (the "Effective Date"), we acquired Meridian for an estimated purchase price of approximately $2.5 billion in cash, subject to certain purchase price adjustments, as described in the purchase agreement. The Meridian acquisition was funded through a combination of cash on hand, $225.0 million drawn on our revolving credit facility, net proceeds of $739.0 million from the August 2018 issuance of $750.0 million aggregate principal amount of 5.375% of Senior Notes due 2026 ("2026 Notes") and net proceeds of approximately $ 1.3 billion from an issuance of 5,207,547 shares of our common stock (after deducting underwriting discounts, commissions and offering expenses of approximately $37.7 million ). As a result of the Meridian acquisition, we expanded our Medicaid portfolio through the addition of Michigan, where Meridian has the leading market position; expanded our Medicaid presence in Illinois; and acquired an integrated PBM platform. Meridian also serves MA members in Illinois, Indiana, Michigan, and Ohio, as well as Health Insurance Marketplace members in Michigan. The following table summarizes the estimated fair values of major classes of assets acquired and liabilities assumed at the Effective Date, based on our valuation assumptions, reconciled to the total consideration transferred. Assets (in millions) Cash, cash equivalents and restricted cash $ 484.4 Investments, including restricted investments 180.4 Premiums receivable, net 379.6 Other current assets 196.5 Property, equipment and capitalized software, net 49.3 Goodwill 1,086.5 Other intangible assets, net 1,000.0 Fair value of total assets acquired $ 3,376.7 Liabilities Medical benefits payable $ 528.0 ACA Fee liability 66.5 Other liabilities 262.1 Fair value of liabilities assumed 856.6 Fair value of net assets acquired $ 2,520.1 The fair value results from judgments about future events, which reflect certain uncertainties and rely on estimates and assumptions. The judgments used to determine the fair value assigned to each class of assets acquired and liabilities assumed, as well as intangible asset lives, can materially affect our operating results. As of the Effective Date, the expected fair value of all current assets and liabilities approximated their historical cost. We have not yet completed our evaluation and determination of certain assets acquired and liabilities assumed, primarily (i) the final valuation of intangible assets related to memberships and trade names, (ii) the final assessment and valuation of certain other assets acquired and liabilities assumed, including premiums receivable, property, equipment and capitalized software, medical benefits payable and other liabilities and (iii) the final assessment and valuation of certain income tax amounts. Therefore, the final fair values of the assets acquired and liabilities assumed may vary significantly from our preliminary estimates. Identifiable intangible assets acquired Under the Hart-Scott-Rodino Antitrust Improvements Act and other relevant laws and regulations, there were significant limitations on our ability to obtain specific information about Meridian's intangible assets prior to completion of the acquisition in September 2018. At this time, we do not have sufficient information as to the amount, timing and risk of cash flows of all of Meridian's identifiable intangible assets to determine their fair value. Some of the more significant assumptions inherent in the development of intangible asset values, from the perspective of a market participant, include: the amount and timing of projected future cash flows (including revenue and profitability); the discount rate selected to measure the risks inherent in the future cash flows; and the assessment of the asset’s life cycle and the competitive trends impacting the asset. Therefore, using publicly available information, such as historical revenues, Meridian's cost structure, industry information for comparable intangible assets and certain other high-level assumptions, the estimated fair value of identifiable intangible assets and their weighted-average useful lives have been estimated at $1.0 billion and 11 years , respectively. These preliminary estimates of fair value and weighted-average useful life may be different from the final acquisition accounting, and the difference could have a material impact on the condensed consolidated financial statements. The identifiable intangible assets resulting from our acquisitions typically include membership, provider networks, broker networks, trademarks, state contracts, and licenses. The fair value of certain identifiable intangible assets is determined primarily using variations of the “income approach,” which is based on the present value of the future after-tax cash flows attributable to each identified intangible asset. Other valuation methods, including the market approach and cost approach, are also considered in estimating the fair value. We amortize other intangible assets over their estimated useful lives ranging from approximately one to 15 years . The recorded other intangible assets related to the acquisition are not deductible for tax purposes. We recorded $1.1 billion for the valuation of goodwill for the excess of the purchase price over the estimated fair value of the net assets acquired. The assignment of goodwill to our respective segments has not been completed at this time. The recorded goodwill related to the acquisition is deductible for tax purposes. The Meridian acquisition included taxable and nontaxable components resulting in differences in amounts recognized for GAAP and tax purposes. In both taxable and nontaxable business combinations, the amounts assigned to the individual assets acquired and liabilities assumed for financial statement purposes are often different from the amounts assigned or carried forward for tax purposes. We recorded a $38.1 million deferred tax liability based on the estimated bases differences of $156.0 million . Condensed Consolidated Statements of Comprehensive Income We included the results of Meridian's operations since the Effective Date in our condensed consolidated financial statements. The amount of total revenues attributable to Meridian included in our condensed consolidated statement of comprehensive income for the three and nine months ended September 30, 2018 was $416.4 million . Total pre-tax net losses in our condensed consolidated statement of comprehensive income for the three and nine months ended September 30, 2018 was $15.2 million and $23.7 million , respectively, including transaction and integration-related costs discussed below. We incurred transaction and integration-related costs of $12.5 million and $21.0 million during the three and nine months ended September 30, 2018 , respectively, related to the acquisition of Meridian. These costs include severance payments to former executives, advisory, legal and other professional fees that are reflected in selling, general and administrative ("SG&A") expense in our condensed consolidated statement of comprehensive income. Universal American Acquisition On April 28, 2017, we acquired all of the issued and outstanding shares of Universal American. The transaction was valued at approximately $770.0 million , including the cash purchase price of $10.00 per outstanding share ("Per Share Merger Consideration") of Universal American's common stock, the assumption of $145.3 million fair value of Universal American's convertible debt, the cash settlement of Universal American's $40.0 million par value of Series A Mandatorily Redeemable Preferred Shares (the "Preferred Shares") and the cash settlement of outstanding vested and unvested stock-based compensation awards. The fair value of the consideration transferred in the Universal American acquisition consisted of the following: (in millions) Number of shares of Universal American common stock outstanding on April 28, 2017 (57.1 million) multiplied by the Per Share Merger Consideration $ 570.8 Assumed debt (a) 145.3 Repurchase of Preferred Shares (b) 41.0 Stock-based award cash consideration (c) 12.9 Total consideration transferred $ 770.0 (a) Following the consummation of the Universal American transaction, all of the holders of Universal American's 4.00% convertible senior notes (the "Convertible Notes") elected to convert their notes into the right to receive cash equal to the par value of the notes plus a make whole premium. We paid the noteholders the amounts due and all of the Convertible Notes were redeemed in the second quarter of 2017. The fair value of the Convertible Notes was determined based on quoted market prices; therefore, have been classified within Level 1 of the fair value hierarchy. Refer to Note 3 - Acquisitions to the consolidated financial statements included in our 2017 Form 10-K for further discussion of the repurchase of the Convertible Notes. (b) We redeemed an aggregate of $40.0 million of Universal American's Preferred Shares, which became redeemable by the holders on April 28, 2017, due to certain change in control provisions for the Preferred Shares. We redeemed the Preferred Shares for $41.0 million, which includes the $40.0 million par value of the Preferred Shares and $1.0 million of accrued dividends. Refer to Note 3 - Acquisitions to the consolidated financial statements included in our 2017 Form 10-K for further discussion of the redemption of the Preferred Shares. (c) Pursuant to the terms of the Universal American acquisition, outstanding vested and unvested stock-based compensation awards as of April 28, 2017 converted to the right to receive cash. We estimated the fair value of these awards on April 28, 2017 and attributed that fair value to pre-acquisition and post-acquisition services in accordance with GAAP. Accordingly, $12.9 million of the fair value of these awards was attributed to pre-acquisition services and is included in the estimated consideration transferred, and approximately $20.0 million has been, or will be, included in our post-acquisition financial statements as compensation costs and reflected as a selling, general and administrative expense in our condensed consolidated statements of comprehensive income. The final allocation of the purchase price to assets acquired and liabilities assumed at the acquisition date included total tangible net assets of $189.8 million , primarily comprised of cash and cash equivalents, investments, premiums receivable and medical benefits payable. In addition, we recorded $298.2 million for the final valuation of identified intangible assets, primarily associated with acquired membership, tradenames and Universal American's provider networks. We valued the acquired membership and tradename intangible assets using an income approach (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 comparable companies within our industry. We valued the acquired provider network using a cost approach, which utilizes cost assumptions applicable at the valuation date to determine the cost of constructing a similar asset. Our other intangible assets include acquired operating licenses, certain non-compete agreements and acquired technology, which were valued using a combination of income and cost approaches. We amortize the intangible assets over the period we expect these assets to contribute directly or indirectly to our future cash flows on a straight-line basis, which approximates the expected pattern of economic consumption over their estimated useful lives. The weighted average amortization period for these intangible assets is 10.5 years . We recorded $282.0 million for the valuation of goodwill, assigned to our Medicare Health Plans reportable segment, for the excess of the purchase price over the estimated fair value of the net assets acquired. The recorded goodwill and other intangible assets related to the acquisition are not deductible for tax purposes. Condensed Consolidated Statement of Comprehensive Income We included the results of Universal American's operations after the acquisition in our condensed consolidated financial statements. The amount of premium revenue attributable to Universal American included in our condensed consolidated statement of comprehensive income, for the three and nine months ended September 30, 2018 , was $378.6 million and $1.2 billion , respectively. Additionally, our condensed consolidated statement of comprehensive income for the three and nine months ended September 30, 2018 included pretax income of $21.8 million and $53.5 million , respectively, attributable to Universal American's operations, which includes transaction and integration-related costs of $0.6 million and $4.5 million , respectively, related to the ongoing integration of the operations. These costs include severance payments, and advisory, legal and other professional fees that are reflected in SG&A expense in our condensed consolidated statement of comprehensive income. During the three and nine months ended September 30, 2017, the amount of revenue attributable to Universal American included in our condensed consolidated statements of comprehensive income was $ 355.4 million and $590.5 million , respectively. Pretax net income (loss) attributable to Universal American included in our condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2017 was $23.9 million and $(7.8) million , respectively. These results include transaction and integration-related costs of approximately $ 6.6 million and $33.3 million incurred during the three and nine months ended September 30, 2017, respectively. These costs include severance payments, and advisory, legal and other professional fees that are reflected in SG&A expense in our condensed consolidated statement of comprehensive income. Goodwill A summary of changes in our goodwill by reportable segment is as follows for the nine months ended September 30, 2018: Medicaid Health Plans Medicare Health Plans Not assigned (1) Total Balance as of December 31, 2017 $ 274.7 $ 386.0 $ — $ 660.7 Acquisitions (1) — — 1,086.5 1,086.5 Acquisition related adjustments — 6.3 — 6.3 Balance as of September 30, 2018 (1) $ 274.7 $ 392.3 $ 1,086.5 $ 1,753.5 (1) Goodwill related to our September 1, 2018 Meridian acquisition is considered preliminary, pending the final allocation of the applicable purchase price. The assignment of goodwill to our respective segments has not been completed at this time. Unaudited Pro Forma Financial Information The results of operations and financial condition for our 2018 and 2017 acquisitions have been included in our condensed consolidated financial statements since the respective acquisition dates. The unaudited pro forma financial information presented below reflects our 2018 acquisition of Meridian and 2017 acquisitions, including Universal American, assuming the acquisitions occurred as of January 1, 2017. These pro forma results are based on estimates and assumptions and do not reflect any anticipated synergies, efficiencies or other cost savings that we expect to realize from the acquisitions. 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 actually consummated at January 1, 2017, or project the future results of the combined company. Pro Forma - Unaudited Three Months ended September 30, Nine Months Ended September 30, (in millions, except per share data) 2018 2017 2018 2017 Total revenues $ 5,869.8 $ 5,284.6 $ 17,337.8 $ 15,399.8 Net income $ 106.9 $ 164.2 $ 355.2 $ 305.8 Earnings per common share: Basic $ 2.14 $ 3.30 $ 7.12 $ 6.16 Diluted $ 2.11 $ 3.27 $ 7.03 $ 6.10 Weighted average common shares outstanding: Basic 49,976,863 49,717,239 49,949,219 47,665,643 Diluted 50,648,578 50,176,580 50,514,031 50,117,463 The pro forma results presented in the schedule above include adjustments related to the following purchase accounting and other acquisition-related costs: • Elimination of historical intangible asset amortization expense and addition of amortization expense based on the current preliminary values of identified intangible assets; • Elimination of interest expense associated with retired obligations and addition of interest expense based on debt incurred to finance the Meridian transaction; • Elimination of results for Meridian operations not acquired; • Elimination of transaction and integration-related costs; • Elimination of Universal American discontinued operations; • Include 5,207,547 shares of our common stock issued to finance the Meridian transaction; • Adjustments to align the acquisitions to our accounting policies; and • Tax effects of the adjustments noted above. Pending Acquisition In September 2018, we entered into an asset purchase agreement with Aetna Inc. ("Aetna") to acquire Aetna's entire standalone Medicare Part D prescription drug plan business ("Aetna Part D business"), which Aetna plans to divest as part of CVS Health Corporation's proposed acquisition of Aetna ("CVS Health Transaction"). The closing of the acquisition is subject to the closing of the CVS Health Transaction and other customary closing conditions. The Aetna Part D business had an aggregate of approximately 2.2 million members as of June 30, 2018. Per the terms of the agreements, Aetna will provide administrative services to, and retain financial risk of, the Aetna Part D business through 2019. |
SEGMENT REPORTING
SEGMENT REPORTING | 9 Months Ended |
Sep. 30, 2018 | |
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. In addition, the Corporate and Other category includes businesses that are not individually reportable because they do not meet the quantitative thresholds required by generally accepted accounting principles. We allocate premium revenue, medical benefits expense, Medicaid premium taxes, the ACA industry fee incurred in 2018 and goodwill to our reportable segments. We do not allocate to our reportable segments any other assets and liabilities, investment and other income, selling, general and administrative expenses, depreciation and amortization, or interest expense. The Company's decision-makers primarily use premium revenue, medical benefits expense and gross margin to evaluate the performance of our reportable segments. Our Corporate and Other category includes net investment and other income, SG&A expenses, depreciation, amortization and interest. Also included in this category are results for operating segments that are not individually reportable because they do not meet the quantitative thresholds required by generally accepted accounting principles. 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") and Long-Term Services and Supports ("LTSS") 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 provides assistance to qualifying families who are not eligible for Medicaid because their income exceeds the applicable income thresholds. The LTSS 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 Kentucky and Florida 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 For the Nine Months Ended 2018 2017 2018 2017 Kentucky 13% 15% 14% 15% Florida 13% 15% 13% 15% In July 2018, we received a Notice of Intent to Award a five -year contract from the Florida Department of Health to provide statewide-managed care services to more than 60,000 children with medically complex conditions through the Children's Medical Services Managed Care Plan ("CMS Plan") intended to begin on January 1, 2019 . Additionally, in April 2018, we received a Notice of Agency Decision from the Florida Agency for Health Care Administration (“AHCA”) that it intends to award our subsidiary, Staywell, a new five -year contract to provide managed care services to Medicaid-eligible beneficiaries, including Managed Medical Assistance and Long-Term Care beneficiaries in 10 of 11 regions. As part of the Medicaid Managed Care program, we expect to provide statewide managed care services to beneficiaries in the Serious Mental Illness Specialty Plan, which currently has more than 75,000 beneficiaries statewide. The new statewide Medicaid Managed Care program is expected to begin implementation on December 1, 2018. These contract awards are subject to the outcome of a protest and appeal process. Medicare Health Plans 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. 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 Reportable operating segments are defined as components of an enterprise for which discrete financial information is available and evaluated on a regular basis by the enterprise's decision-makers to determine how resources should be allocated to an individual segment and to assess performance of those segments. Accordingly, we have three reportable segments: Medicaid Health Plans, Medicare Health Plans and Medicare PDPs. A summary of financial information for our reportable segments through the gross margin level and reconciliation to income from operations is presented in the table below. Medicaid Health Plan Medicare Health Plan Medicare PDP Corporate & Other Consolidated For the Three Months Ended September 30, 2018 (in millions) Premium $ 3,223.3 $ 1,582.0 $ 182.3 $ 1.2 $ 4,988.8 Products and services — — — 34.6 34.6 Total premium and products and services revenues 3,223.3 1,582.0 182.3 35.8 5,023.4 Medical benefits 2,738.1 1,340.8 115.1 1.0 4,195.0 Costs of products and services — — — 33.5 33.5 ACA industry fee 54.4 27.5 4.6 — 86.5 Medicaid premium taxes 31.5 — — — 31.5 Total gross margin expenses 2,824.0 1,368.3 119.7 34.5 4,346.5 Gross margin (1) 399.3 213.7 62.6 1.3 676.9 Investment and other income — — — 34.7 34.7 Other expenses (2) — — — (503.0 ) (503.0 ) Income from operations $ 399.3 $ 213.7 $ 62.6 $ (467.0 ) $ 208.6 For the Three Months Ended September 30, 2017 Premium $ 2,722.7 $ 1,466.3 $ 201.9 $ — $ 4,390.9 Products and services — — — — — Total premium and products and services revenues 2,722.7 1,466.3 201.9 — 4,390.9 Medical benefits 2,341.7 1,256.3 142.7 — 3,740.7 Costs of products and services — — — — — ACA industry fee — — — — — Medicaid premium taxes 29.5 — — — 29.5 Total gross margin expenses 2,371.2 1,256.3 142.7 — 3,770.2 Gross margin (1) 351.5 210.0 59.2 — 620.7 Investment and other income — — — 12.0 12.0 Other expenses (2) — — — (420.8 ) (420.8 ) Income from operations $ 351.5 $ 210.0 $ 59.2 $ (408.8 ) $ 211.9 Medicaid Health Plan Medicare Health Plan Medicare PDP Corporate & Other Consolidated For the Nine Months Ended September 30, 2018 (in millions) Premium $ 8,899.4 $ 4,684.9 $ 642.2 $ 1.2 $ 14,227.7 Products and services — — — 34.6 34.6 Total premium and products and services revenues 8,899.4 4,684.9 642.2 35.8 14,262.3 Medical benefits 7,601.1 3,929.8 491.1 1.0 12,023.0 Costs of products and services — — — 33.5 33.5 ACA industry fee 151.5 81.8 13.7 — 247.0 Medicaid premium taxes 94.2 — — — 94.2 Total gross margin expenses 7,846.8 4,011.6 504.8 34.5 12,397.7 Gross margin (1) 1,052.6 673.3 137.4 1.3 1,864.6 Investment and other income — — — 81.0 81.0 Other expenses (2) — — — (1,341.9 ) (1,341.9 ) Income from operations $ 1,052.6 $ 673.3 $ 137.4 $ (1,259.6 ) $ 603.7 For the Nine Months Ended September 30, 2017 Premium $ 8,058.3 $ 3,877.6 $ 695.6 $ — $ 12,631.5 Products and services — — — — — Total premium and products and services revenues 8,058.3 3,877.6 695.6 — 12,631.5 Medical benefits 7,039.2 3,301.4 597.7 — 10,938.3 Costs of products and services — — — — — ACA industry fee — — — — — Medicaid premium taxes 90.6 — — — 90.6 Total gross margin expenses 7,129.8 3,301.4 597.7 — 11,028.9 Gross margin (1) 928.5 576.2 97.9 — 1,602.6 Investment and other income — — — 30.6 30.6 Other expenses (2) — — — (1,176.2 ) (1,176.2 ) Income from operations $ 928.5 $ 576.2 $ 97.9 $ (1,145.6 ) $ 457.0 (1) Effective July 1, 2018, the Company redefined gross margin as total revenues less investment and other income, medical expenses, cost of products and services, the ACA industry fee expense, and Medicaid premium tax expense. Accordingly, results for the three and nine months ended September 30, 2017 were adjusted to include Medicaid premium taxes, which decreased gross margin by $ 29.5 million and $ 90.6 million , respectively. (2) Effective July 1, 2018, other expenses include SG&A expenses, depreciation, amortization and interest. Accordingly, results for the three and nine months ended September 30, 2017 were adjusted to exclude Medicaid premium taxes, which decreased other expenses by $ 29.5 million and $ 90.6 million , respectively. |
EQUITY AND EARNINGS PER SHARE
EQUITY AND EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
EQUITY AND EARNINGS PER SHARE | EQUITY AND EARNINGS PER SHARE Issuance of Common Stock In August 2018, we completed a public offering of our common stock and issued 5,207,547 shares of our common stock, at an offering price of $265.00 per share. The net proceeds from the offering were approximately $1.3 billion , after deducting underwriting discounts and offering costs of approximately $37.7 million . We used the net proceeds to fund the acquisition of Meridian. Earnings per Common Share We compute basic earnings per common share on the basis of the weighted-average number of unrestricted common shares outstanding. We compute diluted earnings per common share on the basis of the weighted-average number of unrestricted common shares outstanding plus the dilutive effect of our stock-based compensation awards using the treasury stock method. The calculation of the weighted-average common shares outstanding — diluted is as follows: For the Three Months Ended For the Nine Months Ended 2018 2017 2018 2017 Weighted-average common shares outstanding — basic 47,712,712 44,509,692 45,692,804 44,458,096 Dilutive effect of outstanding stock-based compensation awards 671,715 459,341 594,812 451,820 Weighted-average common shares outstanding — diluted 48,384,427 44,969,033 46,287,616 44,909,916 Anti-dilutive stock-based compensation awards excluded from computation 136,428 147,141 184,964 51,475 |
INVESTMENTS
INVESTMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Investments, Debt and Equity Securities [Abstract] | |
INVESTMENTS | INVESTMENTS The Company considers all of its investments as available-for-sale securities. Excluding restricted cash, cash equivalents and 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 Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value September 30, 2018 Asset-backed securities $ 127.3 $ — $ (0.6 ) $ 126.7 Corporate debt securities 941.0 0.3 (9.4 ) 931.9 Municipal securities 266.0 0.1 (3.2 ) 262.9 Residential mortgage-backed securities 36.7 — (0.5 ) 36.2 Short-term time deposits 341.6 — — 341.6 Government and agency obligations 98.3 — (1.0 ) 97.3 Other securities 82.3 — (0.1 ) 82.2 Total $ 1,893.2 $ 0.4 $ (14.9 ) $ 1,878.8 December 31, 2017 Asset-backed securities $ 88.9 $ — $ (0.2 ) $ 88.7 Corporate debt securities 400.6 0.7 (1.2 ) 400.1 Municipal securities 223.7 1.0 (1.9 ) 222.8 Residential mortgage-backed securities 11.2 — — 11.2 Short-term time deposits 300.4 — — 300.4 Government and agency obligations 148.7 — (1.2 ) 147.5 Other securities 65.2 — (0.2 ) 65.0 Total $ 1,238.7 $ 1.7 $ (4.7 ) $ 1,235.7 Contractual maturities of available-for-sale securities at September 30, 2018 are as follows: Total Within 1 Year 1 Through 5 Years 5 Through 10 Years Thereafter Asset-backed securities $ 126.7 $ 51.1 $ 71.6 $ 1.2 $ 2.8 Corporate debt securities 931.9 525.6 319.8 75.8 10.7 Municipal securities 262.9 12.6 146.4 79.5 24.4 Residential mortgage-backed securities 36.2 — 0.4 0.3 35.5 Short-term time deposits 341.6 341.6 — — — Government and agency obligations 97.3 53.7 39.3 4.3 — Other securities 82.2 49.8 — 3.0 29.4 Total $ 1,878.8 $ 1,034.4 $ 577.5 $ 164.1 $ 102.8 Actual maturities may differ from contractual maturities due to the exercise of pre-payment options. We sold available-for-sale investments totaling $252.4 million and $141.9 million during the three months ended September 30, 2018 and 2017, respectively, and $471.2 million and $224.8 million during the nine months ended September 30, 2018 and 2017, respectively. Realized gains and losses resulting from sales and redemptions of our available-for-sale investments were immaterial for all periods presented. Additionally, we did not realize any other-than-temporary impairment during any of these periods. |
RESTRICTED CASH, CASH EQUIVALEN
RESTRICTED CASH, CASH EQUIVALENTS AND INVESTMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Restricted Investments Note [Abstract] | |
RESTRICTED CASH, CASH EQUIVALENTS AND INVESTMENTS | RESTRICTED CASH, CASH EQUIVALENTS AND INVESTMENTS As a condition for licensure, we are required to maintain certain funds on deposit or pledged to various state agencies. Certain of our state contracts require the issuance of surety bonds. We classify restricted cash, cash equivalents and investments as long-term regardless of the contractual maturity date of the securities held, due to the nature of the states' requirements. The amortized cost, gross unrealized gains, gross unrealized losses and fair value of our restricted cash, cash equivalents and investment securities are as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value September 30, 2018 Cash $ 4.9 $ — $ — $ 4.9 Money market funds 61.1 — — 61.1 U.S. government securities and other 169.6 — (0.8 ) 168.8 Total $ 235.6 $ — $ (0.8 ) $ 234.8 December 31, 2017 Cash $ 5.7 $ — $ — $ 5.7 Money market funds 58.7 — — 58.7 U.S. government securities and other 147.4 — (0.8 ) 146.6 Total $ 211.8 $ — $ (0.8 ) $ 211.0 Realized gains and losses on sales and redemptions of our restricted cash, cash equivalents and investments were not material for all periods presented. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION Our Compensation Committee awards certain equity-based compensation under our stock plans, including restricted stock units ("RSUs"), performance stock units ("PSUs") and, through 2015, market stock units ("MSUs"). Compensation expense related to our stock-based compensation awards was $21.4 million and $9.3 million for the three months ended September 30, 2018 and 2017, respectively, and $51.5 million and $32.8 million for the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018 , there was $91.0 million of unrecognized compensation cost related to unvested stock-based compensation arrangements that is expected to be recognized over a weighted-average period of 1.9 years . The unrecognized compensation cost for certain of our PSUs, which are subject to variable accounting, was determined based on our closing common stock price of $320.49 as of September 28, 2018 and amounted to approximately $33.3 million of the total unrecognized compensation cost. 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 RSU, PSU and MSU award activity, at target, for the nine months ended September 30, 2018 , is presented in the table below. For our PSUs and MSUs, shares attained over target upon vesting are reflected as awards granted during the period, while shares canceled due to vesting below target are reflected as awards forfeited during the period. RSUs PSUs MSUs Total Outstanding as of January 1, 2018 274,643 552,618 45,230 872,491 Granted 121,902 256,679 45,075 423,656 Vested (128,210 ) (154,055 ) (90,150 ) (372,415 ) Forfeited (15,251 ) (33,361 ) (155 ) (48,767 ) Outstanding as of September 30, 2018 253,084 621,881 — 874,965 The weighted-average grant-date fair value of all equity awards granted during the nine months ended September 30, 2018 was $199.39 . Refer to Note 2 - Summary of Significant Accounting Policies and Note 15 - Stock-based Compensation to the Consolidated Financial Statements included in our 2017 Form 10-K for additional information regarding our equity-compensation awards and related compensation cost measurement. |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT The following table summarizes our outstanding debt obligations and their classification in the accompanying condensed consolidated balance sheets (in millions): September 30, 2018 December 31, 2017 Long-term debt, net: 5.25% Senior Notes, due April 1, 2025 $ 1,200.0 $ 1,200.0 5.375% Senior Notes, due August 15, 2026 750.0 — Revolving Credit Facility 200.0 — Debt issuance costs (24.6 ) (17.6 ) Total long-term debt, net $ 2,125.4 $ 1,182.4 5.375% Senior Notes due 2026 On August 13, 2018, we completed the offering and sale of 5.375% unsecured senior notes due 2026 in the aggregate principal amount of $ 750.0 million (the “2026 Notes”). The aggregate net proceeds from the issuance of the 2026 Notes were $739.0 million , which were used to fund a portion of the cash consideration for our acquisition of Meridian. The 2026 Notes will mature on August 15, 2026, and bear interest at a rate of 5.375% per annum, payable semi-annually on February 15 and August 15 of each year, commencing on February 15, 2019. The 2026 Notes were issued under an indenture, dated as of August 13, 2018 (the “Indenture”), between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee. The Indenture contains covenants that, among other things, limit our ability and the ability of our subsidiaries under certain circumstances 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 our subsidiaries, guarantee indebtedness; • engage in transactions with affiliates; and • create unrestricted subsidiaries. In addition, the Indenture requires that for the Company to merge, consolidate or sell all or substantially all of its assets, (i) either the Company must be the surviving entity, or the surviving entity or purchaser must be a U.S. entity; (ii) the surviving entity or purchaser must assume all the obligations of the Company under the notes and the indenture; (iii) no default or event of default (as defined under the Indenture) exits and (iv) the surviving entity, after giving pro forma effect to the transaction, (x) may incur at least $1.00 of additional indebtedness pursuant to the fixed charge coverage ratio or (y) have a fixed charge coverage ratio that is no worse than the fixed charge coverage ratio of the Company without giving pro forma effect to the transactions. Ranking and Optional Redemption The 2026 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 2026 Notes will be structurally subordinated to all indebtedness and other liabilities of our subsidiaries (unless our subsidiaries become guarantors of the 2026 Notes). At any time prior to August 15, 2021, we may, on any one or more occasions redeem up to 40% of the aggregate principal amount of 2026 Notes at a redemption price equal to 105.375% of the principal amount of the 2026 Notes redeemed, plus accrued and unpaid interest, if any, with the net cash proceeds of an equity offering by the Company; provided that: (1) at least 50% of the aggregate principal amount of the 2026 Notes issued under the Indenture (including any additional 2026 Notes, but excluding 2026 Notes held by the Company or its subsidiaries) remains outstanding immediately after the occurrence of such redemption, unless all such 2026 Notes are redeemed substantially concurrently with the redemption of 2026 Notes; and (2) the redemption occurs within 180 days of the date of the closing of such equity offering. At any time prior to August 15, 2021, we may on any one or more occasions redeem all or a part of the 2026 Notes, at a redemption price equal to 100% of the principal amount of the 2026 Notes redeemed, plus the Applicable Premium, as defined in the Indenture. Except pursuant to the preceding two paragraphs, the 2026 Notes will not be redeemable at our option prior to August 15, 2021. On or after August 15, 2021, we may on any one or more occasions redeem all or a part of the 2026 Notes, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, on the 2026 Notes redeemed, to, but not including, the applicable date of redemption, if redeemed during the twelve-month period beginning on August 15 of the years indicated below, subject to the rights of holders of 2026 Notes on the relevant record date to receive interest due on the relevant interest payment date: Period Redemption Price 2021 104.031% 2022 102.688% 2023 101.344% 2024 and thereafter 100.000% The 2026 Notes are classified as long-term debt in our condensed consolidated balance sheet at September 30, 2018 based on their August 2026 maturity date. 5.25% Senior Notes due 2025 On March 22, 2017, we completed the offering and sale of 5.25% unsecured senior notes due 2025 in the aggregate principal amount of $1,200.0 million (the “2025 Notes”). The aggregate net proceeds from the issuance of the 2025 Notes were $1,182.2 million , with a portion of the net proceeds from the offering used to repay the $100.0 million outstanding under our credit agreement dated January 8, 2016 (the "Credit Agreement", discussed further below) and to redeem the full $900.0 million aggregate principal amount of our 5.75% unsecured senior notes (the "2020 Notes") on April 7, 2017, which is discussed further below. The remaining net proceeds from the offering of the 2025 Notes were used for general corporate purposes, including organic growth and working capital. The 2025 Notes are classified as long-term debt in our condensed consolidated balance sheet at September 30, 2018 , based on their April 2025 maturity date. Refer to Note 10 - Debt to the consolidated financial statements included in our 2017 Form 10-K for additional information regarding these 2025 Notes, including applicable covenants. 5.75% Senior Notes due 2020 In November 2013, we issued $600.0 million in aggregate principal amount of our 2020 Notes. In June 2015, we issued an additional $300.0 million aggregate principal amount of our 2020 Notes pursuant to a reopening of our existing series of such notes. The offering was completed at an issue price of 104.50% , plus accrued interest. On April 7, 2017, we redeemed the full $900.0 million in aggregate principal amount outstanding of our 2020 Notes at a redemption price of 102.875% of the principal amount, plus accrued and unpaid interest. Our obligations under the related base indenture and supplemental indenture, each dated as of November 14, 2013, by and among us and The Bank of New York Trust Company, N.A., as trustee, were satisfied and discharged on April 7, 2017. In connection with the redemption of the 2020 Notes, we incurred a one-time loss on extinguishment of debt related to the redemption premium, the write-off of associated deferred financing costs and the write-off of the unamortized portion of associated premiums paid on the 2020 Notes. The loss on extinguishment of debt was reflected in our consolidated statements of comprehensive income upon redemption. Revolving Credit Facility In January 2016, we entered into the Credit Agreement, which provides for a senior unsecured revolving loan facility (the "Revolving Credit Facility"), which had an initial aggregate principal amount at any time outstanding not to exceed $850.0 million . On March 22, 2017, we increased the aggregate principal amount available under our Credit Agreement from $850.0 million to $1.0 billion . On July 23, 2018, we entered into an amended and restated Credit Agreement (“Amended and Restated Credit Agreement”) which increased the aggregate principle amount available under our Revolving Credit Facility from $1.0 billion to $1.3 billion . Additionally, in July 2018, we extended the maturity date under the Revolving Credit Facility from January 2021 to July 2023 and decreased the applicable margins for borrowings under the Revolving Credit Facility to a range of (A) 0.375% to 1.00% per annum for ABR Loans (as defined in the Amended and Restated Credit Agreement) and (B) 1.375% to 2.00% per annum for Eurodollar Loans (as defined in the Amended and Restated Credit Agreement), in each case depending on our ratio of total debt to consolidated EBITDA, as calculated in accordance with the Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement also includes an accordion feature which allows the Company to increase the total commitments under the revolving credit facility by up to an additional $500 million , subject to certain conditions. Unutilized commitments under the Amended and Restated Credit Agreement are subject to a fee of 0.20% to 0.30% depending upon our ratio of total debt to consolidated EBITDA, as calculated in accordance with the Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement includes negative and financial covenants that limit certain of our and our subsidiaries’ activities, including (i) restrictions on our and our subsidiaries’ ability to incur additional indebtedness; and (ii) financial covenants that require (a) the ratio of total debt to consolidated EBITDA not to exceed a maximum and (b) a minimum interest expense and principal payment coverage ratio. The Amended and Restated 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 Amended and Restated 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 Amended and Restated Credit Agreement. Lenders holding greater than 50% of the loans and commitments under the Amended and Restated Credit Agreement may elect to accelerate the maturity of the loans. In August 2018, $225.0 million was drawn on our Revolving Credit Facility to partially fund the Meridian acquisition, of which $25.0 million was repaid during September 2018. As of September 30, 2018 , $200.0 million was outstanding under the Revolving Credit Facility, and was classified as long-term in accordance with the contractual terms of the Amended and Restated Credit Agreement. As of September 30, 2018 , and the date of this filing, we were in compliance with all covenants under the 2026 Notes, the 2025 Notes and the Amended and Restated Credit Agreement. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2018 | |
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, including any current portion of 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. Certain assets and liabilities are measured at fair value on a recurring basis and are disclosed below. These assets and liabilities are classified into one of three levels of a hierarchy defined by GAAP. For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see the consolidated financial statements and notes thereto included in our 2017 Form 10-K. Recurring Fair Value Measurements Assets and liabilities measured at fair value on a recurring basis at September 30, 2018 are as follows: Fair Value Measurements Using Carrying Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Investments: Asset-backed securities $ 126.7 $ — $ 126.7 $ — Corporate debt securities 931.9 — 931.9 — Municipal securities 262.9 — 262.9 — Residential mortgage-backed securities 36.2 — 36.2 — Short-term time deposits 341.6 — 341.6 — Government and agency obligations 97.3 97.3 — — Other securities 82.2 49.8 32.4 — Total investments $ 1,878.8 $ 147.1 $ 1,731.7 $ — Restricted cash, cash equivalents and investments: Cash $ 4.9 $ 4.9 $ — $ — Money market funds 61.1 61.1 — — U.S. government securities and other 168.8 168.6 0.2 — Total restricted cash, cash equivalents and investments $ 234.8 $ 234.6 $ 0.2 $ — Assets and liabilities measured at fair value on a recurring basis at December 31, 2017 are as follows: Fair Value Measurements Using Carrying Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Investments: Asset-backed securities $ 88.7 $ — $ 88.7 $ — Corporate debt securities 400.1 — 400.1 — Municipal securities 222.8 — 210.5 12.3 Residential mortgage-backed securities 11.2 — 11.2 — Short-term time deposits 300.4 — 300.4 — Government and agency obligations 147.5 147.5 — — Other securities 65.0 52.8 12.2 — Total Investments $ 1,235.7 $ 200.3 $ 1,023.1 $ 12.3 Restricted cash, cash equivalents and investments: Cash $ 5.7 $ 5.7 $ — $ — Money market funds 58.7 58.7 — — U.S. government securities and other 146.6 146.4 0.2 — Total restricted cash, cash equivalents and investments $ 211.0 $ 210.8 $ 0.2 $ — The following table presents the carrying value and fair value of our long-term debt outstanding as of September 30, 2018 and December 31, 2017 : Fair Value Measurements Using Carrying Value Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Long-term debt - September 30, 2018 2,125.4 1,985.8 200.0 — Long-term debt - December 31, 2017 1,182.4 1,274.3 — — The fair value of our 2026 Notes and 2025 Notes were determined based on quoted market prices; therefore, would be classified within Level 1 of the fair value hierarchy. The fair value of obligations outstanding under our Revolving Credit Facility as of September 30, 2018, approximated carrying value and would be classified within Level 2 of the fair value hierarchy. There were no borrowings outstanding under our Revolving Credit Facility as of December 31, 2017. During June 2018, we sold the remaining auction rate securities in our portfolio. The sale resulted in a loss of $1.2 million that was included within investment and other income in the condensed consolidated statements of comprehensive income for the nine months ended September 30, 2018. There was no activity recorded during the three months ended September 30, 2018. The following table presents the changes in the fair value of our Level 3 auction rate securities for the nine months ended September 30, 2018 and the three and nine months ended September 30, 2017. For the Three Months Ended September 30, For the Nine Months Ended 2017 2018 2017 Balance at beginning of period $ 12.3 $ 12.3 $ 12.4 Realized gains (losses) in earnings — (1.2 ) — Changes in unrealized gains (losses) in other comprehensive income — 1.4 Purchases, sales and redemptions — (12.5 ) (0.1 ) Net transfers in or (out) of Level 3 — — — Balance at end of period $ 12.3 $ — $ 12.3 |
MEDICAL BENEFITS PAYABLE
MEDICAL BENEFITS PAYABLE | 9 Months Ended |
Sep. 30, 2018 | |
MEDICAL BENEFITS PAYABLE [Abstract] | |
MEDICAL BENEFITS PAYABLE | MEDICAL BENEFITS PAYABLE A reconciliation of the beginning and ending balances of medical benefits payable, by segment, is as follows: For the nine months ended September 30, 2018 Medicaid Health Plans Medicare Health Plans Medicare PDPs Corporate and other (2) Consolidated Beginning balance (1) $ 1,373.2 $ 722.5 $ 50.6 $ — $ 2,146.3 Acquisitions 478.2 47.1 — 2.7 528.0 Medical benefits incurred related to: Current year 7,803.2 4,051.6 560.4 1.0 12,416.2 Prior years (202.1 ) (121.8 ) (69.3 ) — (393.2 ) Total 7,601.1 3,929.8 491.1 1.0 12,023.0 Medical benefits paid related to: Current year (6,562.2 ) (3,382.3 ) (502.9 ) (0.8 ) (10,448.2 ) Prior years (889.3 ) (488.3 ) 30.0 (0.1 ) (1,347.7 ) Total (7,451.5 ) (3,870.6 ) (472.9 ) (0.9 ) (11,795.9 ) Ending balance (1) $ 2,001.0 $ 828.8 $ 68.8 $ 2.8 $ 2,901.4 (1) The Medicaid Health Plans and Consolidated beginning and ending balances for 2018 include a premium deficiency reserve for our Illinois Medicaid programs ("Illinois PDR"), which amounted to $20.6 million and $45.6 million at September 30, 2018 and December 31, 2017, respectively. See Note 2 - Summary of Significant Accounting Policies in our 2017 Form 10-K for further discussion. (2) The Corporate and Other category includes operating segments that are not individually reportable because they do not meet the quantitative thresholds required by generally accepted accounting principles. For the nine months ended September 30, 2017 Medicaid Health Plans Medicare Health Plans Medicare PDPs Corporate and other (2) Consolidated Beginning balance $ 1,135.8 $ 510.0 $ 44.7 $ — $ 1,690.5 Acquisitions — 128.1 — — 128.1 Medical benefits incurred related to: Current year 7,229.9 3,397.4 662.7 — 11,290.0 Prior years (190.7 ) (96.0 ) (65.0 ) — (351.7 ) Total 7,039.2 3,301.4 597.7 — 10,938.3 — Medical benefits paid related to: Current year (6,104.3 ) (2,905.4 ) (633.7 ) — (9,643.4 ) Prior years (749.6 ) (308.6 ) 21.5 — (1,036.7 ) Total (6,853.9 ) (3,214.0 ) (612.2 ) — (10,680.1 ) Ending balance $ 1,321.1 $ 725.5 $ 30.2 $ — $ 2,076.8 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. We evaluate our estimates of medical benefits payable as we obtain more complete claims information and medical expense trend data over time. We record differences between actual experience and estimates used to establish the liability, which we refer to as favorable and unfavorable prior year reserve developments, as increases or decreases to medical benefits expense in the period we identify the differences. Our consolidated medical benefits payable developed favorably by approximately $393.2 million and $351.7 million for the nine months ended September 30, 2018 and 2017, respectively. The release of the provision for moderately adverse conditions included in our prior year estimates was substantially offset by the provision for moderately adverse conditions established for claims incurred in the current year. Accordingly, the favorable development in our estimate of medical benefits payable related to claims incurred in prior years does not directly correspond to a decrease in medical benefits expense recognized during the period in which the favorable development is recognized. Excluding the prior year development related to the release of the provision for moderately adverse conditions, our estimates of consolidated medical benefits payable developed favorably by approximately $215.2 million and $205.0 million for the nine months ended September 30, 2018 and 2017 , respectively. Such amounts are net of the development relating to refunds due to government customers with minimum loss ratio provisions. The net favorable development recognized in both 2018 and 2017 was primarily in our Medicaid Health Plans segment and, to the lesser extent, in our Medicare Health Plans segment. The net favorable development resulted primarily due to a number of operational and clinical initiatives planned and executed, throughout both 2016 and 2017, that contributed to lower than expected pharmacy and medical trends, and actual claim submission time being faster than we originally assumed (i.e., our completion factors were higher than we originally assumed) in establishing our medical benefits payable in the prior years. This development does not directly correspond to an increase in our current year operating results as these reductions were offset by estimated current period medical benefits expense when we established our estimate of the current year medical benefits payable. Both completion factor and medical trend assumptions are influenced by utilization levels, unit costs, mix of business, provider reimbursement levels, processing system conversions and changes, claim inventory levels, claim processing patterns, our ability and practices to manage medical and pharmaceutical costs, claim submission patterns and operational changes resulting from business combinations, among others. Our actual costs were ultimately less than expected. Our Meridian acquisition in September 2018 and our Universal American acquisition in April 2017 resulted in an increase to medical benefits payable as of the respective acquisition dates. See Note 2- Acquisitions , for additional information on the Meridian and Universal American acquisitions. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Our effective income tax rate on pre-tax income was 39.3% and 36.4% for the three and nine months ended September 30, 2018 , respectively, compared with 27.0% and 30.9% fo r the three and nine months ended September 30, 2017 , respectively. The increases in our effective rate was primarily driven by the expiration of the 2017 ACA industry fee moratorium and reestablishment of the ACA industry fee for 2018, which is nondeductible for tax purposes, an increase in the company’s state tax rate resulting from the Meridian acquisition and increased apportionment to states with higher tax rates, and the recognition of certain previously unrecognized tax benefits during the three and nine months ended September 30, 2017. This increase was partially offset by the federal income tax rate decrease resulting from the enactment of the Tax Cuts and Jobs Act of 2017 (“TCJA”) (discussed in Note 14 - Income Taxes to the consolidated financial statements in the 2017 Form 10-K). There were no significant changes to unrecognized tax benefits for the three and nine months ended September 30, 2018 . Our unrecognized tax benefits are not expected to change significantly during the next 12 months. The TCJA was enacted on December 22, 2017. The TCJA, in part, reduced the U.S. federal statutory corporate income tax rate from 35% to 21% effective January 1, 2018. Staff Accounting Bulletin No. 118 allows filers one year subsequent to the end of the tax year to finalize the valuation of deferred tax assets and liabilities. At September 30, 2018 , we had not completed our accounting for the tax effects resulting from enactment of TCJA with respect to valuation of our deferred tax assets and liabilities. We will continue to make and refine our calculations as additional analysis is completed. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 9 Months Ended |
Sep. 30, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS On August 3, 2016, our subsidiary, Universal American, completed the sale of its Traditional Insurance business prior to our acquisition of Universal American. This was accomplished by selling two life insurance subsidiaries, while retaining ownership of a third life insurance subsidiary, American Progressive Life & Health Insurance of New York ("Progressive"). The sale of the Traditional Insurance business underwritten by Progressive was accomplished through a 100% quota-share reinsurance treaty with a wholly-owned subsidiary of Nassau Re, that, when considered in combination with other reinsurance transactions previously entered into, resulted in the reinsurance of all of the Traditional Insurance policies that were underwritten by Progressive. Accordingly, the discontinued Traditional Insurance business did not materially affect our condensed consolidated statements of comprehensive income for any of the periods presented. In accordance with ASC 360-10, Property, Plant and Equipment and ASC 205-20, Presentation of Financial Statements—Discontinued Operations , the Traditional Insurance business has been reported in discontinued operations in this Form 10-Q. The following table summarizes the total assets and liabilities of our discontinued operations: September 30, 2018 December 31, 2017 (in millions) Assets Cash and cash equivalents $ 1.9 $ 1.3 Investments 43.3 46.5 Reinsurance recoverables 169.4 166.9 Other assets 0.5 0.5 Total Assets $ 215.1 $ 215.2 Liabilities Reserves and other policy liabilities $ 149.4 $ 148.6 Other liabilities 65.7 66.6 Total liabilities $ 215.1 $ 215.2 Progressive's traditional insurance products are reinsured under quota share coinsurance treaties with unaffiliated insurers, while the life insurance risks are reinsured under either quota share coinsurance or yearly-renewable term treaties with unaffiliated insurers. Under quota share coinsurance treaties, we pay the reinsurer an agreed upon percentage of all premiums and the reinsurer reimburses us that same percentage of any losses. In addition, the reinsurer pays us certain allowances to cover commissions, the cost of administering the policies and premium taxes. Under yearly-renewable term treaties, the reinsurer receives premiums at an agreed upon rate for its share of the risk on a yearly-renewable term basis. We also use excess of loss reinsurance agreements for certain policies whereby we limit our loss in excess of specified thresholds. We evaluate the financial condition of our Traditional Insurance reinsurers and monitor concentrations of credit risk to minimize our exposure to significant losses from reinsurer insolvencies. We are obligated to pay claims in the event that a reinsurer to whom we have ceded an insured claim fails to meet its obligations under the reinsurance agreement. We are not aware of any instances where any of our reinsurers have been unable to pay any policy claims on any reinsured business. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES 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 note. 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 a witness or other participant in any proceeding by reason of any event or occurrence related to the indemnitee's status as a director, officer, associate, agent or fiduciary of the Company or any of our subsidiaries. The indemnification agreements require us to indemnify an indemnitee against 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 associate 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 an indemnitee if the 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 legal fees and related expenses to three former officers and two additional 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 federal 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 filed notices of appeal and the government filed notices of cross appeal on three of the four individuals, which the government has subsequently voluntarily dismissed. The appellate court affirmed the convictions in August 2016. Mr. Farha filed a petition for a writ of certiorari to the United States Supreme Court in January 2017. In April 2017, the United States Supreme Court declined to hear the appeal by Mr. Farha. The fifth individual, Mr. Bereday, entered a guilty plea in June 2017 in connection with the federal criminal charges, which was accepted by the court in July 2017. Mr. Bereday was sentenced in November 2017. We have also previously advanced legal fees and related expenses to these five individuals regarding: a dispute in Delaware Chancery Court related to whether we were legally obligated to advance fees or indemnify certain of these individuals; 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"); an action by the Commission filed in January 2012 against three of the five individuals, Messrs. Farha, Behrens and Bereday, and a qui tam action against Messrs. Farha, Behrens and Bereday in federal court. 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. Pursuant to the settlement agreements described below, Messrs. Farha, Behrens and Bereday were dismissed from the federal court and state derivative actions. Pursuant to the settlement agreement with Mr. Bereday described below, Mr. Bereday was dismissed from the fee advancement case in Delaware Chancery Court. The Commission action was closed in May 2018. The qui tam action is currently stayed and the stay is subject to being lifted at any time. In April 2017, the Commission and Mr. Farha entered into a consent judgment to pay $12.5 million to the Commission and $7.5 million to us. In April 2017, the Commission and Mr. Behrens also entered into a consent judgment to pay $4.5 million to the Commission and $1.5 million to us. In May 2018, the Commission and Mr. Bereday entered into a consent judgment to pay $4.5 million to the Commission and the case was closed. In addition, we have advanced a portion of the legal fees and related expenses to Mr. Farha in connection with lawsuits he filed in Delaware and Florida state court to have certain restrictions lifted on WellCare stock purportedly awarded to him during his employment with us. The Delaware and Florida state court matters have been dismissed. In September 2016, we entered into a settlement agreement with Mr. Farha pursuant to which he paid us $7.5 million , as referenced in the April 2017 consent judgment with the Commission, and we agreed that we would not seek to recover additional legal fees previously advanced related to these matters, and that our obligation to continue advancing fees would be limited to no more than an additional $7.5 million . We also have advanced a portion of the legal fees and related expenses to Mr. Behrens in connection with his lawsuit in Delaware state court to have certain restrictions lifted on WellCare stock purportedly awarded to him during his employment with WellCare, which the court dismissed. In October 2016, we also entered into a settlement agreement with Mr. Behrens pursuant to which he paid us $1.5 million , as referenced in the April 2017 consent judgment with the Commission, and we agreed that we would not seek to recover additional legal fees previously advanced in connection with these matters, and that our obligation to continue advancing fees would be limited to no more than an additional $1.5 million . In June 2017, we entered into a settlement agreement with Mr. Bereday that became effective in July 2017, pursuant to which we agreed that we would not seek to recover legal fees previously advanced in connection with these matters, and that our obligation to continue advancing fees would be limited to no more than an additional $2.5 million . In connection with these matters, we have advanced to the five individuals cumulative legal fees and related expenses of approximately $237.0 million from the inception of the investigations through September 30, 2018 . We incurred $ 0.1 million and $ 0.8 million of these fees and related expenses during the three and nine months ended September 30, 2018 , respectively, compared with $1.2 million and $6.7 million , respectively, for the same periods in 2017. These fees are not inclusive of the amounts recovered from Mr. Farha and Mr. Behrens discussed above. 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 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. 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, protests and appeals related to Medicaid procurement awards, wage and hour claims and other employment claims, claims for indemnification under purchase agreements, vendor disputes 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 these 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 of these 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 PRESEN_2
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | The accompanying unaudited condensed consolidated balance sheets and statements of comprehensive income, changes in stockholder's equity, and cash flows include our accounts and the accounts of our subsidiaries over which we have control or are the primary beneficiary. We eliminated all intercompany accounts and transactions. The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Accordingly, certain financial information and footnote disclosures normally included in financial statements prepared in accordance with GAAP, but that are not required for interim reporting purposes, 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, 2017 , included in our Annual Report on Form 10-K ("2017 Form 10-K"), which was filed with the U.S. Securities and Exchange Commission ("SEC") in February 2018. 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 unaudited condensed consolidated 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, including assumptions as to the annualized tax rate, 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. Certain reclassifications were made to 2017 financial information to conform to the 2018 presentation. As previously discussed, we acquired an integrated PBM platform in connection with the Meridian acquisition. The external revenues and costs for our PBM business are reported within "Products and Services" and "Cost of Products and Services", respectively, on the statements of comprehensive income. Products and services revenues from our PBM consist of the prescription price (ingredient cost plus dispensing fee) negotiated with the retail pharmacies with which we have contracted, plus any associated administrative fees. This revenue is recognized when the claim is processed. We have the contractual obligation to pay network pharmacies for benefits provided to participating members and, therefore, act as principal in the arrangement and reflect the total prescription price as revenue, on a gross basis, in accordance with applicable accounting guidance. Costs of products and services is recognized at the time prescriptions are dispensed by pharmacies in the PBM's network to eligible members and consists primarily of ingredient costs and dispensing fees paid to retail pharmacies with which we have contracted. The overall results of our PBM business are immaterial |
Use of Estimates | In the opinion of management, the unaudited condensed consolidated 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, including assumptions as to the annualized tax rate, 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. |
Reclassifications | Certain reclassifications were made to 2017 financial information to conform to the 2018 presentation. |
Premium Receivable and Unearned Premiums | 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 our condensed consolidated balance sheets. A complete discussion of premiums receivable and unearned premiums is included in Note 2 - Summary of Significant Accounting Policies to the Consolidated Financial Statements included in our 2017 Form 10-K. The premium receivable balance at September 30, 2018 is primarily related to Medicaid contracts with our state partners of approximately $771.8 million , as well as net risk-adjusted premiums receivable under our MA and PDP contracts of approximately $181.3 million . Medicaid Risk-Adjusted Premiums and Retroactive Rate Changes As discussed further in Note 2 - Summary of Significant Accounting Policies to the Consolidated Financial Statements included in our 2017 Form 10-K, Medicaid premium rate changes are recognized in the period the change becomes effective, when the effect of the change in the rate is reasonably estimable and collection is assured. In some instances, our Medicaid premiums are subject to risk score adjustments based on the health profile of our membership. Generally, the risk score is determined by the state agency's analysis of encounter submissions of processed claims data to determine the acuity of our membership relative to the entire state's Medicaid membership. The frequency of when states adjust premiums varies, but is usually done quarterly or semi-annually on a retrospective basis. We recognize periodic changes to risk-adjusted premiums as revenue when the amounts are determinable and collection is reasonably assured |
Medicare Part D Settlements | We receive certain Part D prospective subsidy payments from the Centers for Medicare & Medicaid Services ("CMS") for our MA and PDP members as a fixed monthly per member amount, based on the estimated costs of providing prescription drug benefits over the plan year, as reflected in our bids. A discussion of the subsidy components under Part D is included in Note 2 - Summary of Significant Accounting Policies to the Consolidated Financial Statements included in our 2017 Form 10-K. CMS will fully reimburse these subsidies, or recoup overpaid subsidies made during the plan year, as part of its annual settlement process that typically occurs in the fourth quarter of the subsequent year and, accordingly, there is no insurance risk to us. Therefore, amounts received for these subsidies are not considered premium revenue, and are reported, net of the subsidy benefits paid, as Funds receivable (payable) for the benefit of members in the condensed consolidated balance sheets. |
ACA Industry Fee | The ACA imposed certain new taxes and fees, including an annual premium-based health insurance industry assessment (the "ACA industry fee") on health insurers, which began in 2014. In December 2015, President Obama signed the Consolidated Appropriations Act, 2016 which, among other provisions, included a one-year moratorium on the ACA industry fee for 2017, which also eliminated the associated Medicaid ACA industry fee reimbursements from our state government partners for 2017. |
Accounting Standards Recently Adopted and Pending Adoption | Recently Adopted Accounting Standards In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-09, " Compensation-Stock Compensation (Topic 718) - Scope of Modification Accounting ". This guidance addresses which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting pursuant to Topic 718. An entity should account for the effects of a modification unless (a) the fair value of the modified award is the same as the fair value of the original award, (b) the vesting conditions of the modified award are the same as the vesting conditions of the original award and (c) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments in this guidance should be applied prospectively for public business entities effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. We adopted this guidance prospectively on January 1, 2018. The adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 . In January 2017, the FASB issued ASU 2017-04, " Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ". This update eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. As a result, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. We adopted this guidance prospectively on January 1, 2018. The adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 . In January 2017, the FASB issued ASU 2017-01, “ Business Combinations (Topic 805): Clarifying the Definition of a Business ”. The amendments in this update provide guidance to assist entities with evaluating when a group of transferred assets and activities (collectively referred to as a "set") is a business. This new guidance provides for a "screen", which requires a determination that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. If the screen's threshold is not met, a set cannot be considered a business unless it includes an input and a substantive process that together significantly contribute to the ability to create output, eliminating the evaluation of whether a market participant could replace missing elements. This guidance is effective for prospective business combinations for public entities for interim and annual periods beginning after December 15, 2017. We adopted this guidance prospectively on January 1, 2018. The adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 . In November 2016, the FASB issued ASU 2016-18, “ Statement of Cash Flows (Topic 230) Restricted Cash; a consensus of the FASB Emerging Issues Task Force ”. This update requires entities to reconcile, on the statement of cash flows, changes in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. We adopted this guidance retrospectively on January 1, 2018. The adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 and 2017 , respectively. The following table provides a reconciliation of cash, cash equivalents and restricted cash and cash equivalents as reported within the condensed consolidated balance sheets to the total of the same such amounts shown within the condensed consolidated statements of cash flows: As of September 30, 2018 December 31, 2017 Cash and cash equivalents $ 4,306.6 $ 4,198.6 Restricted cash and cash equivalents (1) 66.0 64.4 Total cash, cash equivalents, and restricted cash and cash equivalents $ 4,372.6 $ 4,263.0 (1) Restricted cash and cash equivalents consist of restricted cash and restricted money market funds and are included in Restricted cash, cash equivalents and investments within noncurrent assets of our condensed consolidated balance sheets. Refer to Note 6 - Restricted Cash, Cash Equivalents and Investments for further detail. In August 2016, the FASB issued ASU 2016-15, " Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments (Topic 230) ". This update targets eight specific areas to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance is effective for public entities for interim and annual periods beginning after December 15, 2017, with early adoption permitted. We adopted this guidance on January 1, 2018. The adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 . In January 2016, the FASB issued ASU 2016-01, " Financial Instrument - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. " ASU 2016-01 requires entities to measure equity securities that are not consolidated or accounted for under the equity method at fair value through net income. This amendment also simplifies the impairment test of equity investments without readily determinable fair values. In February 2018, the FASB issued ASU 2018-03, " Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, " which clarifies that an entity that uses the measurement alternative for equity securities without readily determinable fair values can change its measurement approach to fair value. This guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We adopted this guidance prospectively on January 1, 2018. The adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 . In May 2014, the FASB issued ASU 2014-09, " Revenue from Contracts with Customers (Topic 606) ". ASU 2014-09 supersedes existing revenue recognition standards with a single model unless those contracts are within the scope of other standards (e.g., an insurance entity’s insurance contracts). The revenue recognition principle in ASU 2014-09 requires that an entity recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, new and enhanced disclosures are required. We adopted this guidance on January 1, 2018 using the modified retrospective approach. Given that substantially all of our revenues are derived from insurance contracts accounted for in accordance with ASC 944, Financial Services-Insurance , which are specifically excluded from the scope of ASU 2014-09, the adoption of this guidance did not have a material effect on our consolidated results of operations, financial condition or cash flows for the three and nine months ended September 30, 2018 . Accounting Standards Pending Adoption In August 2018, the FASB issued ASU 2018-15, " Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract", which requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software, and deferred over the noncancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. The guidance is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. We are currently assessing the effect this guidance will have on our consolidated results of operations, financial condition or cash flows. In February 2018, the FASB issued ASU 2018-02 " Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income", which allows entities to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 from accumulated other comprehensive income to retained earnings. The guidance is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We are currently assessing the effect this guidance will have on our consolidated results of operations, financial condition or cash flows. In March 2017, the FASB issued ASU 2017-08, " Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities ". This update shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. Currently, entities generally amortize the premium as a yield adjustment over the contractual life of the security. The new guidance does not change the accounting for purchased callable debt securities held at a discount. This guidance is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. We are currently assessing the effect this guidance will have on our consolidated results of operations, financial condition or cash flows. In June 2016, the FASB issued ASU 2016-13, " Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, " which requires entities to use a current expected credit loss model, which is a new impairment model based on expected losses rather than incurred losses. Under this model, an entity would recognize an impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect from financial assets measured at amortized cost. The entity's estimate would consider relevant information about past events, current conditions, and reasonable and supportable forecasts, which will result in recognition of lifetime expected credit losses upon loan origination. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted for annual reporting periods beginning after December 15, 2018. We are currently assessing the effect this guidance will have on our consolidated results of operations, financial condition or cash flows. In February 2016, the FASB issued ASU 2016-02, " Leases (Topic 842)", which for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments in its balance sheet. This standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. Additionally, in July 2018, the FASB issued ASU No. 2018-10, " Codification Improvements to Topic 842, Leases" and ASU 2018-11, " Leases (Topic 842), Targeted Improvements" . ASU 2018-10 provides certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 provides an additional transition method option to adopt the new lease standard. Under the new transition method, a lessee would initially apply the new lease requirements in the period of adoption and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without adjustment to the financial statements for periods prior to adoption. This guidance is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. We plan to elect the practical expedients permitted within the new standard, which among other things, allows us to carryforward the historical lease classification. In addition, we will also elect the new transition method and apply the new lease requirements in the period of adoption without adjustment to the financial statement for periods prior to adoption. We do not expect the adoption of this guidance to have a material effect on our consolidated results of operations or cash flows. The effect of ASU 2016-02 and related amendments on our consolidated financial position will be based on leases outstanding at the time of adoption. |
ORGANIZATION, BASIS OF PRESEN_3
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Reconciliation of Cash, Cash Equivalents and Restricted Cash | The following table provides a reconciliation of cash, cash equivalents and restricted cash and cash equivalents as reported within the condensed consolidated balance sheets to the total of the same such amounts shown within the condensed consolidated statements of cash flows: As of September 30, 2018 December 31, 2017 Cash and cash equivalents $ 4,306.6 $ 4,198.6 Restricted cash and cash equivalents (1) 66.0 64.4 Total cash, cash equivalents, and restricted cash and cash equivalents $ 4,372.6 $ 4,263.0 (1) Restricted cash and cash equivalents consist of restricted cash and restricted money market funds and are included in Restricted cash, cash equivalents and investments within noncurrent assets of our condensed consolidated balance sheets. Refer to Note 6 - Restricted Cash, Cash Equivalents and Investments for further detail. |
Reconciliation of Cash, Cash Equivalents and Restricted Cash | The following table provides a reconciliation of cash, cash equivalents and restricted cash and cash equivalents as reported within the condensed consolidated balance sheets to the total of the same such amounts shown within the condensed consolidated statements of cash flows: As of September 30, 2018 December 31, 2017 Cash and cash equivalents $ 4,306.6 $ 4,198.6 Restricted cash and cash equivalents (1) 66.0 64.4 Total cash, cash equivalents, and restricted cash and cash equivalents $ 4,372.6 $ 4,263.0 (1) Restricted cash and cash equivalents consist of restricted cash and restricted money market funds and are included in Restricted cash, cash equivalents and investments within noncurrent assets of our condensed consolidated balance sheets. Refer to Note 6 - Restricted Cash, Cash Equivalents and Investments for further detail. |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Business Combinations [Abstract] | |
Fair Values of Assets Acquired and Liabilities Assumed | The following table summarizes the estimated fair values of major classes of assets acquired and liabilities assumed at the Effective Date, based on our valuation assumptions, reconciled to the total consideration transferred. Assets (in millions) Cash, cash equivalents and restricted cash $ 484.4 Investments, including restricted investments 180.4 Premiums receivable, net 379.6 Other current assets 196.5 Property, equipment and capitalized software, net 49.3 Goodwill 1,086.5 Other intangible assets, net 1,000.0 Fair value of total assets acquired $ 3,376.7 Liabilities Medical benefits payable $ 528.0 ACA Fee liability 66.5 Other liabilities 262.1 Fair value of liabilities assumed 856.6 Fair value of net assets acquired $ 2,520.1 |
Fair Value of Consideration Transferred in Acquisition | The fair value of the consideration transferred in the Universal American acquisition consisted of the following: (in millions) Number of shares of Universal American common stock outstanding on April 28, 2017 (57.1 million) multiplied by the Per Share Merger Consideration $ 570.8 Assumed debt (a) 145.3 Repurchase of Preferred Shares (b) 41.0 Stock-based award cash consideration (c) 12.9 Total consideration transferred $ 770.0 (a) Following the consummation of the Universal American transaction, all of the holders of Universal American's 4.00% convertible senior notes (the "Convertible Notes") elected to convert their notes into the right to receive cash equal to the par value of the notes plus a make whole premium. We paid the noteholders the amounts due and all of the Convertible Notes were redeemed in the second quarter of 2017. The fair value of the Convertible Notes was determined based on quoted market prices; therefore, have been classified within Level 1 of the fair value hierarchy. Refer to Note 3 - Acquisitions to the consolidated financial statements included in our 2017 Form 10-K for further discussion of the repurchase of the Convertible Notes. (b) We redeemed an aggregate of $40.0 million of Universal American's Preferred Shares, which became redeemable by the holders on April 28, 2017, due to certain change in control provisions for the Preferred Shares. We redeemed the Preferred Shares for $41.0 million, which includes the $40.0 million par value of the Preferred Shares and $1.0 million of accrued dividends. Refer to Note 3 - Acquisitions to the consolidated financial statements included in our 2017 Form 10-K for further discussion of the redemption of the Preferred Shares. (c) Pursuant to the terms of the Universal American acquisition, outstanding vested and unvested stock-based compensation awards as of April 28, 2017 converted to the right to receive cash. We estimated the fair value of these awards on April 28, 2017 and attributed that fair value to pre-acquisition and post-acquisition services in accordance with GAAP. Accordingly, $12.9 million of the fair value of these awards was attributed to pre-acquisition services and is included in the estimated consideration transferred, and approximately $20.0 million has been, or will be, included in our post-acquisition financial statements as compensation costs and reflected as a selling, general and administrative expense in our condensed consolidated statements of comprehensive income. |
Final Fair Values and Weighted Average Useful Lives for Identifiable Intangible Assets Acquired | A summary of changes in our goodwill by reportable segment is as follows for the nine months ended September 30, 2018: Medicaid Health Plans Medicare Health Plans Not assigned (1) Total Balance as of December 31, 2017 $ 274.7 $ 386.0 $ — $ 660.7 Acquisitions (1) — — 1,086.5 1,086.5 Acquisition related adjustments — 6.3 — 6.3 Balance as of September 30, 2018 (1) $ 274.7 $ 392.3 $ 1,086.5 $ 1,753.5 (1) Goodwill related to our September 1, 2018 Meridian acquisition is considered preliminary, pending the final allocation of the applicable purchase price. The assignment of goodwill to our respective segments has not been completed at this time. |
Unaudited Pro Forma Results | 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 actually consummated at January 1, 2017, or project the future results of the combined company. Pro Forma - Unaudited Three Months ended September 30, Nine Months Ended September 30, (in millions, except per share data) 2018 2017 2018 2017 Total revenues $ 5,869.8 $ 5,284.6 $ 17,337.8 $ 15,399.8 Net income $ 106.9 $ 164.2 $ 355.2 $ 305.8 Earnings per common share: Basic $ 2.14 $ 3.30 $ 7.12 $ 6.16 Diluted $ 2.11 $ 3.27 $ 7.03 $ 6.10 Weighted average common shares outstanding: Basic 49,976,863 49,717,239 49,949,219 47,665,643 Diluted 50,648,578 50,176,580 50,514,031 50,117,463 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Revenue by Geographic Location | Those states and the respective Medicaid premium revenue as a percentage of total consolidated premium revenue are as follows: For the Three Months Ended For the Nine Months Ended 2018 2017 2018 2017 Kentucky 13% 15% 14% 15% Florida 13% 15% 13% 15% |
Segment Results | A summary of financial information for our reportable segments through the gross margin level and reconciliation to income from operations is presented in the table below. Medicaid Health Plan Medicare Health Plan Medicare PDP Corporate & Other Consolidated For the Three Months Ended September 30, 2018 (in millions) Premium $ 3,223.3 $ 1,582.0 $ 182.3 $ 1.2 $ 4,988.8 Products and services — — — 34.6 34.6 Total premium and products and services revenues 3,223.3 1,582.0 182.3 35.8 5,023.4 Medical benefits 2,738.1 1,340.8 115.1 1.0 4,195.0 Costs of products and services — — — 33.5 33.5 ACA industry fee 54.4 27.5 4.6 — 86.5 Medicaid premium taxes 31.5 — — — 31.5 Total gross margin expenses 2,824.0 1,368.3 119.7 34.5 4,346.5 Gross margin (1) 399.3 213.7 62.6 1.3 676.9 Investment and other income — — — 34.7 34.7 Other expenses (2) — — — (503.0 ) (503.0 ) Income from operations $ 399.3 $ 213.7 $ 62.6 $ (467.0 ) $ 208.6 For the Three Months Ended September 30, 2017 Premium $ 2,722.7 $ 1,466.3 $ 201.9 $ — $ 4,390.9 Products and services — — — — — Total premium and products and services revenues 2,722.7 1,466.3 201.9 — 4,390.9 Medical benefits 2,341.7 1,256.3 142.7 — 3,740.7 Costs of products and services — — — — — ACA industry fee — — — — — Medicaid premium taxes 29.5 — — — 29.5 Total gross margin expenses 2,371.2 1,256.3 142.7 — 3,770.2 Gross margin (1) 351.5 210.0 59.2 — 620.7 Investment and other income — — — 12.0 12.0 Other expenses (2) — — — (420.8 ) (420.8 ) Income from operations $ 351.5 $ 210.0 $ 59.2 $ (408.8 ) $ 211.9 Medicaid Health Plan Medicare Health Plan Medicare PDP Corporate & Other Consolidated For the Nine Months Ended September 30, 2018 (in millions) Premium $ 8,899.4 $ 4,684.9 $ 642.2 $ 1.2 $ 14,227.7 Products and services — — — 34.6 34.6 Total premium and products and services revenues 8,899.4 4,684.9 642.2 35.8 14,262.3 Medical benefits 7,601.1 3,929.8 491.1 1.0 12,023.0 Costs of products and services — — — 33.5 33.5 ACA industry fee 151.5 81.8 13.7 — 247.0 Medicaid premium taxes 94.2 — — — 94.2 Total gross margin expenses 7,846.8 4,011.6 504.8 34.5 12,397.7 Gross margin (1) 1,052.6 673.3 137.4 1.3 1,864.6 Investment and other income — — — 81.0 81.0 Other expenses (2) — — — (1,341.9 ) (1,341.9 ) Income from operations $ 1,052.6 $ 673.3 $ 137.4 $ (1,259.6 ) $ 603.7 For the Nine Months Ended September 30, 2017 Premium $ 8,058.3 $ 3,877.6 $ 695.6 $ — $ 12,631.5 Products and services — — — — — Total premium and products and services revenues 8,058.3 3,877.6 695.6 — 12,631.5 Medical benefits 7,039.2 3,301.4 597.7 — 10,938.3 Costs of products and services — — — — — ACA industry fee — — — — — Medicaid premium taxes 90.6 — — — 90.6 Total gross margin expenses 7,129.8 3,301.4 597.7 — 11,028.9 Gross margin (1) 928.5 576.2 97.9 — 1,602.6 Investment and other income — — — 30.6 30.6 Other expenses (2) — — — (1,176.2 ) (1,176.2 ) Income from operations $ 928.5 $ 576.2 $ 97.9 $ (1,145.6 ) $ 457.0 (1) Effective July 1, 2018, the Company redefined gross margin as total revenues less investment and other income, medical expenses, cost of products and services, the ACA industry fee expense, and Medicaid premium tax expense. Accordingly, results for the three and nine months ended September 30, 2017 were adjusted to include Medicaid premium taxes, which decreased gross margin by $ 29.5 million and $ 90.6 million , respectively. (2) Effective July 1, 2018, other expenses include SG&A expenses, depreciation, amortization and interest. Accordingly, results for the three and nine months ended September 30, 2017 were adjusted to exclude Medicaid premium taxes, which decreased other expenses by $ 29.5 million and $ 90.6 million , respectively. |
EQUITY AND EARNINGS PER SHARE (
EQUITY AND EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Calculation of the Weighted-Average Common Shares Outstanding - Diluted | The calculation of the weighted-average common shares outstanding — diluted is as follows: For the Three Months Ended For the Nine Months Ended 2018 2017 2018 2017 Weighted-average common shares outstanding — basic 47,712,712 44,509,692 45,692,804 44,458,096 Dilutive effect of outstanding stock-based compensation awards 671,715 459,341 594,812 451,820 Weighted-average common shares outstanding — diluted 48,384,427 44,969,033 46,287,616 44,909,916 Anti-dilutive stock-based compensation awards excluded from computation 136,428 147,141 184,964 51,475 |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Investments, Debt and Equity Securities [Abstract] | |
Short-term and Long-term Investments by Security Type | Excluding restricted cash, cash equivalents and 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 Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value September 30, 2018 Asset-backed securities $ 127.3 $ — $ (0.6 ) $ 126.7 Corporate debt securities 941.0 0.3 (9.4 ) 931.9 Municipal securities 266.0 0.1 (3.2 ) 262.9 Residential mortgage-backed securities 36.7 — (0.5 ) 36.2 Short-term time deposits 341.6 — — 341.6 Government and agency obligations 98.3 — (1.0 ) 97.3 Other securities 82.3 — (0.1 ) 82.2 Total $ 1,893.2 $ 0.4 $ (14.9 ) $ 1,878.8 December 31, 2017 Asset-backed securities $ 88.9 $ — $ (0.2 ) $ 88.7 Corporate debt securities 400.6 0.7 (1.2 ) 400.1 Municipal securities 223.7 1.0 (1.9 ) 222.8 Residential mortgage-backed securities 11.2 — — 11.2 Short-term time deposits 300.4 — — 300.4 Government and agency obligations 148.7 — (1.2 ) 147.5 Other securities 65.2 — (0.2 ) 65.0 Total $ 1,238.7 $ 1.7 $ (4.7 ) $ 1,235.7 |
Contractual Maturities of Available-for-sale Securities | Contractual maturities of available-for-sale securities at September 30, 2018 are as follows: Total Within 1 Year 1 Through 5 Years 5 Through 10 Years Thereafter Asset-backed securities $ 126.7 $ 51.1 $ 71.6 $ 1.2 $ 2.8 Corporate debt securities 931.9 525.6 319.8 75.8 10.7 Municipal securities 262.9 12.6 146.4 79.5 24.4 Residential mortgage-backed securities 36.2 — 0.4 0.3 35.5 Short-term time deposits 341.6 341.6 — — — Government and agency obligations 97.3 53.7 39.3 4.3 — Other securities 82.2 49.8 — 3.0 29.4 Total $ 1,878.8 $ 1,034.4 $ 577.5 $ 164.1 $ 102.8 |
RESTRICTED CASH, CASH EQUIVAL_2
RESTRICTED CASH, CASH EQUIVALENTS AND INVESTMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Restricted Investments Note [Abstract] | |
Schedule of Restricted Investments | The amortized cost, gross unrealized gains, gross unrealized losses and fair value of our restricted cash, cash equivalents and investment securities are as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value September 30, 2018 Cash $ 4.9 $ — $ — $ 4.9 Money market funds 61.1 — — 61.1 U.S. government securities and other 169.6 — (0.8 ) 168.8 Total $ 235.6 $ — $ (0.8 ) $ 234.8 December 31, 2017 Cash $ 5.7 $ — $ — $ 5.7 Money market funds 58.7 — — 58.7 U.S. government securities and other 147.4 — (0.8 ) 146.6 Total $ 211.8 $ — $ (0.8 ) $ 211.0 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Stock Unit Award Activity | A summary of RSU, PSU and MSU award activity, at target, for the nine months ended September 30, 2018 , is presented in the table below. For our PSUs and MSUs, shares attained over target upon vesting are reflected as awards granted during the period, while shares canceled due to vesting below target are reflected as awards forfeited during the period. RSUs PSUs MSUs Total Outstanding as of January 1, 2018 274,643 552,618 45,230 872,491 Granted 121,902 256,679 45,075 423,656 Vested (128,210 ) (154,055 ) (90,150 ) (372,415 ) Forfeited (15,251 ) (33,361 ) (155 ) (48,767 ) Outstanding as of September 30, 2018 253,084 621,881 — 874,965 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Outstanding Debt Obligations | The following table summarizes our outstanding debt obligations and their classification in the accompanying condensed consolidated balance sheets (in millions): September 30, 2018 December 31, 2017 Long-term debt, net: 5.25% Senior Notes, due April 1, 2025 $ 1,200.0 $ 1,200.0 5.375% Senior Notes, due August 15, 2026 750.0 — Revolving Credit Facility 200.0 — Debt issuance costs (24.6 ) (17.6 ) Total long-term debt, net $ 2,125.4 $ 1,182.4 |
Debt Instrument Redemption | On or after August 15, 2021, we may on any one or more occasions redeem all or a part of the 2026 Notes, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, on the 2026 Notes redeemed, to, but not including, the applicable date of redemption, if redeemed during the twelve-month period beginning on August 15 of the years indicated below, subject to the rights of holders of 2026 Notes on the relevant record date to receive interest due on the relevant interest payment date: Period Redemption Price 2021 104.031% 2022 102.688% 2023 101.344% 2024 and thereafter 100.000% |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | Assets and liabilities measured at fair value on a recurring basis at September 30, 2018 are as follows: Fair Value Measurements Using Carrying Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Investments: Asset-backed securities $ 126.7 $ — $ 126.7 $ — Corporate debt securities 931.9 — 931.9 — Municipal securities 262.9 — 262.9 — Residential mortgage-backed securities 36.2 — 36.2 — Short-term time deposits 341.6 — 341.6 — Government and agency obligations 97.3 97.3 — — Other securities 82.2 49.8 32.4 — Total investments $ 1,878.8 $ 147.1 $ 1,731.7 $ — Restricted cash, cash equivalents and investments: Cash $ 4.9 $ 4.9 $ — $ — Money market funds 61.1 61.1 — — U.S. government securities and other 168.8 168.6 0.2 — Total restricted cash, cash equivalents and investments $ 234.8 $ 234.6 $ 0.2 $ — Assets and liabilities measured at fair value on a recurring basis at December 31, 2017 are as follows: Fair Value Measurements Using Carrying Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Investments: Asset-backed securities $ 88.7 $ — $ 88.7 $ — Corporate debt securities 400.1 — 400.1 — Municipal securities 222.8 — 210.5 12.3 Residential mortgage-backed securities 11.2 — 11.2 — Short-term time deposits 300.4 — 300.4 — Government and agency obligations 147.5 147.5 — — Other securities 65.0 52.8 12.2 — Total Investments $ 1,235.7 $ 200.3 $ 1,023.1 $ 12.3 Restricted cash, cash equivalents and investments: Cash $ 5.7 $ 5.7 $ — $ — Money market funds 58.7 58.7 — — U.S. government securities and other 146.6 146.4 0.2 — Total restricted cash, cash equivalents and investments $ 211.0 $ 210.8 $ 0.2 $ — |
Carrying Value and Fair Value of Long-term Debt | The following table presents the carrying value and fair value of our long-term debt outstanding as of September 30, 2018 and December 31, 2017 : Fair Value Measurements Using Carrying Value Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Long-term debt - September 30, 2018 2,125.4 1,985.8 200.0 — Long-term debt - December 31, 2017 1,182.4 1,274.3 — — |
Changes in the Fair Value of Auction Rate Securities | During June 2018, we sold the remaining auction rate securities in our portfolio. The sale resulted in a loss of $1.2 million that was included within investment and other income in the condensed consolidated statements of comprehensive income for the nine months ended September 30, 2018. There was no activity recorded during the three months ended September 30, 2018. The following table presents the changes in the fair value of our Level 3 auction rate securities for the nine months ended September 30, 2018 and the three and nine months ended September 30, 2017. For the Three Months Ended September 30, For the Nine Months Ended 2017 2018 2017 Balance at beginning of period $ 12.3 $ 12.3 $ 12.4 Realized gains (losses) in earnings — (1.2 ) — Changes in unrealized gains (losses) in other comprehensive income — 1.4 Purchases, sales and redemptions — (12.5 ) (0.1 ) Net transfers in or (out) of Level 3 — — — Balance at end of period $ 12.3 $ — $ 12.3 |
MEDICAL BENEFITS PAYABLE (Table
MEDICAL BENEFITS PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
MEDICAL BENEFITS PAYABLE [Abstract] | |
Reconciliation of the Beginning and Ending Balances of Medical Benefits Payable, by Segment | A reconciliation of the beginning and ending balances of medical benefits payable, by segment, is as follows: For the nine months ended September 30, 2018 Medicaid Health Plans Medicare Health Plans Medicare PDPs Corporate and other (2) Consolidated Beginning balance (1) $ 1,373.2 $ 722.5 $ 50.6 $ — $ 2,146.3 Acquisitions 478.2 47.1 — 2.7 528.0 Medical benefits incurred related to: Current year 7,803.2 4,051.6 560.4 1.0 12,416.2 Prior years (202.1 ) (121.8 ) (69.3 ) — (393.2 ) Total 7,601.1 3,929.8 491.1 1.0 12,023.0 Medical benefits paid related to: Current year (6,562.2 ) (3,382.3 ) (502.9 ) (0.8 ) (10,448.2 ) Prior years (889.3 ) (488.3 ) 30.0 (0.1 ) (1,347.7 ) Total (7,451.5 ) (3,870.6 ) (472.9 ) (0.9 ) (11,795.9 ) Ending balance (1) $ 2,001.0 $ 828.8 $ 68.8 $ 2.8 $ 2,901.4 (1) The Medicaid Health Plans and Consolidated beginning and ending balances for 2018 include a premium deficiency reserve for our Illinois Medicaid programs ("Illinois PDR"), which amounted to $20.6 million and $45.6 million at September 30, 2018 and December 31, 2017, respectively. See Note 2 - Summary of Significant Accounting Policies in our 2017 Form 10-K for further discussion. (2) The Corporate and Other category includes operating segments that are not individually reportable because they do not meet the quantitative thresholds required by generally accepted accounting principles. For the nine months ended September 30, 2017 Medicaid Health Plans Medicare Health Plans Medicare PDPs Corporate and other (2) Consolidated Beginning balance $ 1,135.8 $ 510.0 $ 44.7 $ — $ 1,690.5 Acquisitions — 128.1 — — 128.1 Medical benefits incurred related to: Current year 7,229.9 3,397.4 662.7 — 11,290.0 Prior years (190.7 ) (96.0 ) (65.0 ) — (351.7 ) Total 7,039.2 3,301.4 597.7 — 10,938.3 — Medical benefits paid related to: Current year (6,104.3 ) (2,905.4 ) (633.7 ) — (9,643.4 ) Prior years (749.6 ) (308.6 ) 21.5 — (1,036.7 ) Total (6,853.9 ) (3,214.0 ) (612.2 ) — (10,680.1 ) Ending balance $ 1,321.1 $ 725.5 $ 30.2 $ — $ 2,076.8 |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Total Assets and Liabilities of Discontinued Operations | The following table summarizes the total assets and liabilities of our discontinued operations: September 30, 2018 December 31, 2017 (in millions) Assets Cash and cash equivalents $ 1.9 $ 1.3 Investments 43.3 46.5 Reinsurance recoverables 169.4 166.9 Other assets 0.5 0.5 Total Assets $ 215.1 $ 215.2 Liabilities Reserves and other policy liabilities $ 149.4 $ 148.6 Other liabilities 65.7 66.6 Total liabilities $ 215.1 $ 215.2 |
ORGANIZATION, BASIS OF PRESEN_4
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details) member in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018USD ($)memberstate | Sep. 30, 2017USD ($) | Sep. 30, 2018USD ($)memberstate | Sep. 30, 2017USD ($) | Dec. 31, 2017USD ($) | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
Number of states the entity serves | state | 50 | 50 | |||
Number of members | member | 5.5 | 5.5 | |||
ACE Industry Fee [Line Items] | |||||
ACA industry fee remitted | $ 388.5 | $ 388.5 | |||
Medicaid ACA industry fee reimbursement revenue | 71.5 | $ 0 | 199 | $ 0 | |
Funds Receivable/Payable for the Benefit of Members [Line Items] | |||||
Premiums receivable, net | 969.6 | 969.6 | $ 453.4 | ||
ACA industry fee | 86.5 | $ 0 | 247 | $ 0 | |
State Partners | Medicaid Health Plan | |||||
Funds Receivable/Payable for the Benefit of Members [Line Items] | |||||
Premiums receivable, net | 771.8 | 771.8 | |||
Medicare Advantage and PDP | Medicare Advantage | |||||
Funds Receivable/Payable for the Benefit of Members [Line Items] | |||||
Premiums receivable, net | 181.3 | 181.3 | |||
Meridian | |||||
ACE Industry Fee [Line Items] | |||||
ACA industry fee remitted | 66.5 | 66.5 | |||
Premiums receivable, net | |||||
Funds Receivable/Payable for the Benefit of Members [Line Items] | |||||
Medicaid retroactive rate change and risk score adjustments | $ 17.9 | $ 17.9 | $ 50.7 |
ORGANIZATION, BASIS OF PRESEN_5
ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES- Reconciliation of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
Cash and cash equivalents | $ 4,306.6 | $ 4,198.6 | |||
Restricted cash and cash equivalents | 66 | 64.4 | |||
Total cash, cash equivalents, and restricted cash and cash equivalents | [1] | $ 4,372.6 | $ 4,263 | $ 4,941.5 | $ 4,121.3 |
[1] | Beginning and ending cash, cash equivalents and restricted cash and cash equivalents balances have been retrospectively adjusted to reflect the adoption of ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" effective January 1, 2018. See Note 1 - Organization, Basis of Presentation and Significant Accounting Policies for further discussion. |
ACQUISITIONS - Narrative (Detai
ACQUISITIONS - Narrative (Details) - USD ($) | Sep. 01, 2018 | Aug. 13, 2018 | Apr. 28, 2017 | Aug. 31, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 |
Business Acquisition [Line Items] | |||||||||
Issuance of common stock, net of issuance costs | $ 1,300,000,000 | $ 1,342,300,000 | $ 0 | ||||||
Investment banking, advisory, brokerage, and underwriting fees and commissions | $ 37,700,000 | ||||||||
Goodwill | $ 1,753,500,000 | 1,753,500,000 | $ 660,700,000 | ||||||
Revenue | 5,058,100,000 | $ 4,402,900,000 | 14,343,300,000 | 12,662,100,000 | |||||
Net income | 106,900,000 | 164,200,000 | 355,200,000 | 305,800,000 | |||||
Income before income taxes | $ 215,200,000 | 235,100,000 | $ 603,600,000 | 453,000,000 | |||||
Senior Notes | 5.25% Senior Notes, due April 1, 2025 | |||||||||
Business Acquisition [Line Items] | |||||||||
Aggregate principal amount | $ 750,000,000 | ||||||||
Interest rate | 5.375% | 5.375% | 5.375% | ||||||
Universal American | |||||||||
Business Acquisition [Line Items] | |||||||||
Revenue | $ 378,600,000 | 355,400,000 | $ 1,200,000,000 | 590,500,000 | |||||
Income before income taxes | 21,800,000 | 23,900,000 | 53,500,000 | (7,800,000) | |||||
Meridian | |||||||||
Business Acquisition [Line Items] | |||||||||
Acquisition consideration transferred | $ 2,500,000,000 | ||||||||
Proceeds from debt, net of issuance costs | $ 739,000,000 | ||||||||
Sale of stock, number of shares issued in transaction | 5,207,547 | ||||||||
Estimated fair value of identifiable intangible assets | $ 1,000,000,000 | ||||||||
Estimated weighted average useful live of identifiable intangible assets | 11 years | ||||||||
Goodwill | $ 1,086,500,000 | 1,086,500,000 | 1,086,500,000 | ||||||
Net deferred tax liabilities acquired | 38,100,000 | ||||||||
Estimated bases differences | 156,000,000 | ||||||||
Transaction and inegration related costs | 12,500,000 | 21,000,000 | |||||||
Expected tax deductible amount of goodwill and other intangible assets acquired | $ 0 | ||||||||
Meridian | Senior Notes | 5.25% Senior Notes, due April 1, 2025 | |||||||||
Business Acquisition [Line Items] | |||||||||
Aggregate principal amount | $ 750,000,000 | ||||||||
Interest rate | 5.375% | ||||||||
Universal American | |||||||||
Business Acquisition [Line Items] | |||||||||
Acquisition consideration transferred | $ 770,000,000 | ||||||||
Estimated fair value of identifiable intangible assets | $ 298,200,000 | ||||||||
Estimated weighted average useful live of identifiable intangible assets | 10 years 6 months | ||||||||
Goodwill | $ 282,000,000 | ||||||||
Cash purchase price (in USD per share) | $ 10 | ||||||||
Assumption of convertible debt | $ 145,300,000 | ||||||||
Payments for repurchase of preferred shares | 40,000,000 | ||||||||
Tangible net assets | $ 189,800,000 | ||||||||
Transaction and integration-related costs incurred | 600,000 | $ 6,600,000 | 4,500,000 | $ 33,300,000 | |||||
Minimum | Meridian | |||||||||
Business Acquisition [Line Items] | |||||||||
Amortization period of intangible assets, estimated useful life | 1 year | ||||||||
Maximum | Meridian | |||||||||
Business Acquisition [Line Items] | |||||||||
Amortization period of intangible assets, estimated useful life | 15 years | ||||||||
Revolving Credit Facility | Meridian | |||||||||
Business Acquisition [Line Items] | |||||||||
Proceeds from long-term lines of credit | $ 225,000,000 | $ 225,000,000 | |||||||
Other Comprehensive Income (Loss) | Meridian | |||||||||
Business Acquisition [Line Items] | |||||||||
Revenue | 416,400,000 | 416,400,000 | |||||||
Pre-tax net losses included in comprehensive income | $ 15,200,000 | $ 23,700,000 |
ACQUISITIONS - Consideration Tr
ACQUISITIONS - Consideration Transferred (Details) - USD ($) $ in Millions | Apr. 28, 2017 | Sep. 30, 2018 | Dec. 31, 2017 |
Business Combination, Consideration Transferred [Abstract] | |||
Common stock, outstanding (in shares) | 49,979,666 | 44,522,988 | |
Universal American | |||
Business Combination, Consideration Transferred [Abstract] | |||
Cash consideration transferred | $ 570.8 | ||
Assumed debt | 145.3 | ||
Total consideration transferred | 770 | ||
Payments for repurchase of preferred shares | 40 | ||
Payments for repurchase of preferred shares and accrued dividends | 41 | ||
Payments of accrued dividends | $ 1 | ||
Universal American | Senior Notes | 4.00% Convertible Senior Notes | |||
Business Combination, Consideration Transferred [Abstract] | |||
Interest rate | 4.00% | ||
Universal American | Stock-based Award | |||
Business Combination, Consideration Transferred [Abstract] | |||
Equity interests issued | $ 12.9 | ||
Unrecognized stock based compensation cost | 20 | ||
Expected tax deductible amount of goodwill and other intangible assets acquired | $ 0 | ||
Universal American | |||
Business Combination, Consideration Transferred [Abstract] | |||
Common stock, outstanding (in shares) | 57,100,000 | ||
Preferred Stock | Universal American | |||
Business Combination, Consideration Transferred [Abstract] | |||
Equity interests issued | $ 41 |
ACQUISITIONS - Assets Acquired
ACQUISITIONS - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Sep. 01, 2018 | Dec. 31, 2017 | Apr. 28, 2017 |
Assets | ||||
Goodwill | $ 1,753.5 | $ 660.7 | ||
Meridian | ||||
Assets | ||||
Cash, cash equivalents and restricted cash | $ 484.4 | |||
Investments, including restricted investments | 180.4 | |||
Premiums receivable, net | 379.6 | |||
Other current assets | 196.5 | |||
Property, equipment and capitalized software, net | 49.3 | |||
Goodwill | $ 1,086.5 | 1,086.5 | ||
Other intangible assets, net | 1,000 | |||
Fair Value of Assets Acquired | 3,376.7 | |||
Liabilities | ||||
Medical benefits payable | 528 | |||
ACA Fee liability | 66.5 | |||
Other liabilities | 262.1 | |||
Fair value of liabilities assumed | 856.6 | |||
Fair value of net assets acquired | $ 2,520.1 | |||
Universal American | ||||
Assets | ||||
Goodwill | $ 282 | |||
Other intangible assets, net | $ 298.2 |
ACQUISITIONS - Fair Values and
ACQUISITIONS - Fair Values and Useful Lives for Intangibles Acquired (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Changes in Goodwill | |
Goodwill | $ 660.7 |
Acquisitions | 1,086.5 |
Acquisition related adjustments | 6.3 |
Goodwill | 1,753.5 |
Medicaid Health Plan | |
Changes in Goodwill | |
Goodwill | 274.7 |
Acquisitions | 0 |
Acquisition related adjustments | 0 |
Goodwill | 274.7 |
Medicare Health Plan | |
Changes in Goodwill | |
Goodwill | 386 |
Acquisitions | 0 |
Acquisition related adjustments | 6.3 |
Goodwill | 392.3 |
Meridian | |
Changes in Goodwill | |
Acquisitions | 1,086.5 |
Goodwill | $ 1,086.5 |
ACQUISITIONS - Pro Forma Financ
ACQUISITIONS - Pro Forma Financial Information (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Pro Forma - Unaudited | ||||
Total revenues | $ 5,869.8 | $ 5,284.6 | $ 17,337.8 | $ 15,399.8 |
Net income | $ 106.9 | $ 164.2 | $ 355.2 | $ 305.8 |
Earnings per common share: | ||||
Earnings per common share, basic | $ 2.14 | $ 3.30 | $ 7.12 | $ 6.16 |
Earnings per common share, diluted | $ 2.11 | $ 3.27 | $ 7.03 | $ 6.10 |
Weighted average common shares outstanding, basic | 49,976,863 | 49,717,239 | 49,949,219 | 47,665,643 |
Weighted average common shares outstanding, diluted | 50,648,578 | 50,176,580 | 50,514,031 | 50,117,463 |
ACQUISITIONS - Pending Acquisit
ACQUISITIONS - Pending Acquisitions (Details) member in Millions | Jun. 30, 2018member |
Aetna Part D Business | |
Business Acquisition [Line Items] | |
Aggregate number of members in pending acquisition | 2.2 |
SEGMENT REPORTING - Narrative (
SEGMENT REPORTING - Narrative (Details) beneficiary in Thousands | 1 Months Ended | 9 Months Ended | |
Jul. 31, 2018beneficiary | Apr. 30, 2018beneficiary | Sep. 30, 2018segment | |
Segment Reporting Information [Line Items] | |||
Number of reportable segments | segment | 3 | ||
Medical Services Managed Care Plan | Florida | Medicaid Health Plan | |||
Segment Reporting Information [Line Items] | |||
Number of beneficiaries | 60 | ||
Term of agreement | 5 years | ||
Serious Mental Illness Specialty Plan | Florida | Medicaid Health Plan | |||
Segment Reporting Information [Line Items] | |||
Number of beneficiaries | 75 | ||
Term of agreement | 5 years |
SEGMENT REPORTING - Revenue by
SEGMENT REPORTING - Revenue by Geographic Location (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Kentucky | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Premium revenue as a percentage of total consolidated premium revenue | 13.00% | 15.00% | 14.00% | 15.00% |
Florida | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Premium revenue as a percentage of total consolidated premium revenue | 13.00% | 15.00% | 13.00% | 15.00% |
SEGMENT REPORTING - Segment Res
SEGMENT REPORTING - Segment Results (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Segment Reporting Information [Line Items] | ||||
Premium | $ 4,988.8 | $ 4,390.9 | $ 14,227.7 | $ 12,631.5 |
Products and services | 34.6 | 0 | 34.6 | 0 |
Medical benefits | 4,195 | 3,740.7 | 12,023 | 10,938.3 |
Costs of products and services | 33.5 | 0 | 33.5 | 0 |
ACA industry fee | 86.5 | 0 | 247 | 0 |
Investment and other income | 34.7 | 12 | 81 | 30.6 |
Income from operations | 208.6 | 211.9 | 603.7 | 457 |
Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Premium | 4,988.8 | 4,390.9 | 14,227.7 | 12,631.5 |
Products and services | 34.6 | 0 | 34.6 | 0 |
Total premium and products and services revenues | 5,023.4 | 4,390.9 | 14,262.3 | 12,631.5 |
Medical benefits | 4,195 | 3,740.7 | 12,023 | 10,938.3 |
Costs of products and services | 33.5 | 0 | 33.5 | 0 |
ACA industry fee | 86.5 | 0 | 247 | 0 |
Medicaid premium taxes | 31.5 | 29.5 | 94.2 | 90.6 |
Total gross margin expenses | 4,346.5 | 3,770.2 | 12,397.7 | 11,028.9 |
Gross margin | 676.9 | 620.7 | 1,864.6 | 1,602.6 |
Investment and other income | 34.7 | 12 | 81 | 30.6 |
Other expenses | (503) | (420.8) | (1,341.9) | (1,176.2) |
Income from operations | 208.6 | 211.9 | 603.7 | 457 |
Medicaid Health Plan | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Premium | 3,223.3 | 2,722.7 | 8,899.4 | 8,058.3 |
Products and services | 0 | 0 | 0 | 0 |
Total premium and products and services revenues | 3,223.3 | 2,722.7 | 8,899.4 | 8,058.3 |
Medical benefits | 2,738.1 | 2,341.7 | 7,601.1 | 7,039.2 |
Costs of products and services | 0 | 0 | 0 | 0 |
ACA industry fee | 54.4 | 0 | 151.5 | 0 |
Medicaid premium taxes | 31.5 | 29.5 | 94.2 | 90.6 |
Total gross margin expenses | 2,824 | 2,371.2 | 7,846.8 | 7,129.8 |
Gross margin | 399.3 | 351.5 | 1,052.6 | 928.5 |
Investment and other income | 0 | 0 | 0 | 0 |
Other expenses | 0 | 0 | 0 | 0 |
Income from operations | 399.3 | 351.5 | 1,052.6 | 928.5 |
Medicare Health Plan | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Premium | 1,582 | 1,466.3 | 4,684.9 | 3,877.6 |
Products and services | 0 | 0 | 0 | 0 |
Total premium and products and services revenues | 1,582 | 1,466.3 | 4,684.9 | 3,877.6 |
Medical benefits | 1,340.8 | 1,256.3 | 3,929.8 | 3,301.4 |
Costs of products and services | 0 | 0 | 0 | 0 |
ACA industry fee | 27.5 | 0 | 81.8 | 0 |
Medicaid premium taxes | 0 | 0 | 0 | 0 |
Total gross margin expenses | 1,368.3 | 1,256.3 | 4,011.6 | 3,301.4 |
Gross margin | 213.7 | 210 | 673.3 | 576.2 |
Investment and other income | 0 | 0 | 0 | 0 |
Other expenses | 0 | 0 | 0 | 0 |
Income from operations | 213.7 | 210 | 673.3 | 576.2 |
Medicare PDP | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Premium | 182.3 | 201.9 | 642.2 | 695.6 |
Products and services | 0 | 0 | 0 | 0 |
Total premium and products and services revenues | 182.3 | 201.9 | 642.2 | 695.6 |
Medical benefits | 115.1 | 142.7 | 491.1 | 597.7 |
Costs of products and services | 0 | 0 | 0 | 0 |
ACA industry fee | 4.6 | 0 | 13.7 | 0 |
Medicaid premium taxes | 0 | 0 | 0 | 0 |
Total gross margin expenses | 119.7 | 142.7 | 504.8 | 597.7 |
Gross margin | 62.6 | 59.2 | 137.4 | 97.9 |
Investment and other income | 0 | 0 | 0 | 0 |
Other expenses | 0 | 0 | 0 | 0 |
Income from operations | 62.6 | 59.2 | 137.4 | 97.9 |
Corporate & Other | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Premium | 1.2 | 0 | 1.2 | 0 |
Products and services | 34.6 | 0 | 34.6 | 0 |
Total premium and products and services revenues | 35.8 | 0 | 35.8 | 0 |
Medical benefits | 1 | 0 | 1 | 0 |
Costs of products and services | 33.5 | 0 | 33.5 | 0 |
ACA industry fee | 0 | 0 | 0 | 0 |
Medicaid premium taxes | 0 | 0 | 0 | 0 |
Total gross margin expenses | 34.5 | 0 | 34.5 | 0 |
Gross margin | 1.3 | 0 | 1.3 | 0 |
Investment and other income | 34.7 | 12 | 81 | 30.6 |
Other expenses | (503) | (420.8) | (1,341.9) | (1,176.2) |
Income from operations | $ (467) | $ (408.8) | $ (1,259.6) | $ (1,145.6) |
EQUITY AND EARNINGS PER SHARE E
EQUITY AND EARNINGS PER SHARE EQUITY AND EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | 9 Months Ended | |
Aug. 31, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
Subsidiary, Sale of Stock [Line Items] | |||
Shares Issued, Price Per Share | $ 265 | ||
Proceeds from issuance of common stock, net of issuance fees paid | $ 1,300 | $ 1,342.3 | $ 0 |
Investment banking, advisory, brokerage, and underwriting fees and commissions | $ (37.7) | ||
Meridian | |||
Subsidiary, Sale of Stock [Line Items] | |||
Sale of stock, number of shares issued in transaction | 5,207,547 |
EQUITY AND EARNINGS PER SHARE-
EQUITY AND EARNINGS PER SHARE- Calculation of Weighted-Average Common Shares Outstanding (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Earnings Per Share [Abstract] | ||||
Weighted-average common shares outstanding — basic (in shares) | 47,712,712 | 44,509,692 | 45,692,804 | 44,458,096 |
Dilutive effect of outstanding stock-based compensation awards (in shares) | 671,715 | 459,341 | 594,812 | 451,820 |
Weighted-average common shares outstanding — diluted (in shares) | 48,384,427 | 44,969,033 | 46,287,616 | 44,909,916 |
Anti-dilutive stock-based compensation awards excluded from computation (in shares) | 136,428 | 147,141 | 184,964 | 51,475 |
INVESTMENTS - Short-term and Lo
INVESTMENTS - Short-term and Long-term Investments by Security Type (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | $ 1,893.2 | $ 1,238.7 |
Gross Unrealized Gains | 0.4 | 1.7 |
Gross Unrealized Losses | (14.9) | (4.7) |
Estimated Fair Value | 1,878.8 | 1,235.7 |
Asset-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 127.3 | 88.9 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | (0.6) | (0.2) |
Estimated Fair Value | 126.7 | 88.7 |
Corporate debt securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 941 | 400.6 |
Gross Unrealized Gains | 0.3 | 0.7 |
Gross Unrealized Losses | (9.4) | (1.2) |
Estimated Fair Value | 931.9 | 400.1 |
Municipal securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 266 | 223.7 |
Gross Unrealized Gains | 0.1 | 1 |
Gross Unrealized Losses | (3.2) | (1.9) |
Estimated Fair Value | 262.9 | 222.8 |
Residential mortgage-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 36.7 | 11.2 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | (0.5) | 0 |
Estimated Fair Value | 36.2 | 11.2 |
Short-term time deposits | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 341.6 | 300.4 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | 0 | 0 |
Estimated Fair Value | 341.6 | 300.4 |
Government and agency obligations | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 98.3 | 148.7 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | (1) | (1.2) |
Estimated Fair Value | 97.3 | 147.5 |
Other securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 82.3 | 65.2 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | (0.1) | (0.2) |
Estimated Fair Value | $ 82.2 | $ 65 |
INVESTMENTS - Contractual Matur
INVESTMENTS - Contractual Maturities of Available-for-sale Securities (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Debt Securities, Available-for-sale [Line Items] | ||
Estimated Fair Value | $ 1,878.8 | $ 1,235.7 |
Asset-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Estimated Fair Value | 126.7 | 88.7 |
Within 1 Year | 51.1 | |
1 Through 5 Years | 71.6 | |
5 Through 10 Years | 1.2 | |
Thereafter | 2.8 | |
Corporate debt securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Estimated Fair Value | 931.9 | 400.1 |
Within 1 Year | 525.6 | |
1 Through 5 Years | 319.8 | |
5 Through 10 Years | 75.8 | |
Thereafter | 10.7 | |
Municipal securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Estimated Fair Value | 262.9 | 222.8 |
Within 1 Year | 12.6 | |
1 Through 5 Years | 146.4 | |
5 Through 10 Years | 79.5 | |
Thereafter | 24.4 | |
Residential mortgage-backed securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Estimated Fair Value | 36.2 | 11.2 |
Within 1 Year | 0 | |
1 Through 5 Years | 0.4 | |
5 Through 10 Years | 0.3 | |
Thereafter | 35.5 | |
Short-term time deposits | ||
Debt Securities, Available-for-sale [Line Items] | ||
Estimated Fair Value | 341.6 | 300.4 |
Within 1 Year | 341.6 | |
1 Through 5 Years | 0 | |
5 Through 10 Years | 0 | |
Thereafter | 0 | |
Government and agency obligations | ||
Debt Securities, Available-for-sale [Line Items] | ||
Estimated Fair Value | 97.3 | 147.5 |
Within 1 Year | 53.7 | |
1 Through 5 Years | 39.3 | |
5 Through 10 Years | 4.3 | |
Thereafter | 0 | |
Other securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Estimated Fair Value | 82.2 | $ 65 |
Within 1 Year | 49.8 | |
1 Through 5 Years | 0 | |
5 Through 10 Years | 3 | |
Thereafter | 29.4 | |
Debt securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Estimated Fair Value | 1,878.8 | |
Within 1 Year | 1,034.4 | |
1 Through 5 Years | 577.5 | |
5 Through 10 Years | 164.1 | |
Thereafter | $ 102.8 |
INVESTMENTS - Narrative (Detail
INVESTMENTS - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Investments, Debt and Equity Securities [Abstract] | ||||
Proceeds from sale of available-for-sale investments | $ 252,400 | $ 141,900 | $ 471,200 | $ 224,800 |
Realized gains and losses on sales and redemptions of investments | 0 | 0 | 0 | 0 |
Other than temporary impairment losses | $ 0 | $ 0 | $ 0 | $ 0 |
RESTRICTED CASH, CASH EQUIVAL_3
RESTRICTED CASH, CASH EQUIVALENTS AND INVESTMENTS - Schedule of Restricted Investments (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Amortized Cost | $ 235.6 | $ 211.8 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | (0.8) | (0.8) |
Estimated Fair Value | 234.8 | 211 |
Cash | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Amortized Cost | 4.9 | 5.7 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | 0 | 0 |
Estimated Fair Value | 4.9 | 5.7 |
Money market funds | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Amortized Cost | 61.1 | 58.7 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | 0 | 0 |
Estimated Fair Value | 61.1 | 58.7 |
U.S. government securities and other | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Amortized Cost | 169.6 | 147.4 |
Gross Unrealized Gains | 0 | 0 |
Gross Unrealized Losses | (0.8) | (0.8) |
Estimated Fair Value | $ 168.8 | $ 146.6 |
RESTRICTED CASH, CASH EQUIVAL_4
RESTRICTED CASH, CASH EQUIVALENTS AND INVESTMENTS - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Restricted Investments Note [Abstract] | ||||
Realized gains (losses) on restricted investments | $ 0 | $ 0 | $ 0 | $ 0 |
STOCK-BASED COMPENSATION - Narr
STOCK-BASED COMPENSATION - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Compensation expense | $ 21.4 | $ 9.3 | $ 51.5 | $ 32.8 |
Unrecognized compensation cost | $ 91 | $ 91 | ||
Weighted-average period over which compensation costs are expected to be recognized | 1 year 11 months | |||
Closing common stock price (in USD per share) | $ 320.49 | $ 320.49 | ||
Grants in period, weighted average grant date fair value (in USD per share) | $ 199.39 | |||
Performance Stock Units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Unrecognized compensation cost | $ 33.3 | $ 33.3 |
STOCK-BASED COMPENSATION - Summ
STOCK-BASED COMPENSATION - Summary of Stock Unit Award Activity (Details) | 9 Months Ended |
Sep. 30, 2018shares | |
Equity Instruments Other than Options [Roll Forward] | |
Outstanding as of beginning of period (in shares) | 872,491 |
Granted (in shares) | 423,656 |
Vested (in shares) | (372,415) |
Forfeited (in shares) | (48,767) |
Outstanding at end of period (in shares) | 874,965 |
RSUs | |
Equity Instruments Other than Options [Roll Forward] | |
Outstanding as of beginning of period (in shares) | 274,643 |
Granted (in shares) | 121,902 |
Vested (in shares) | (128,210) |
Forfeited (in shares) | (15,251) |
Outstanding at end of period (in shares) | 253,084 |
PSUs | |
Equity Instruments Other than Options [Roll Forward] | |
Outstanding as of beginning of period (in shares) | 552,618 |
Granted (in shares) | 256,679 |
Vested (in shares) | (154,055) |
Forfeited (in shares) | (33,361) |
Outstanding at end of period (in shares) | 621,881 |
MSUs | |
Equity Instruments Other than Options [Roll Forward] | |
Outstanding as of beginning of period (in shares) | 45,230 |
Granted (in shares) | 45,075 |
Vested (in shares) | (90,150) |
Forfeited (in shares) | (155) |
Outstanding at end of period (in shares) | 0 |
DEBT - Schedule of Outstanding
DEBT - Schedule of Outstanding Debt Obligations (Details) - USD ($) | Sep. 30, 2018 | Aug. 13, 2018 | Dec. 31, 2017 | Mar. 22, 2017 |
Long-term debt, net | ||||
Debt issuance costs | $ (24,600,000) | $ (17,600,000) | ||
Total long-term debt, net | 2,125,400,000 | 1,182,400,000 | ||
Revolving Credit Facility | ||||
Long-term debt, net | ||||
Revolving Credit Facility | $ 200,000,000 | 0 | $ 100,000,000 | |
Senior Notes | 5.25% Senior Notes, due April 1, 2025 | ||||
Long-term debt, net | ||||
Interest rate | 5.375% | 5.375% | ||
Senior notes | $ 750,000,000 | 0 | ||
Senior Notes | 5.375% Senior Notes, due August 15, 2026 | ||||
Long-term debt, net | ||||
Interest rate | 5.25% | 5.25% | ||
Senior notes | $ 1,200,000,000 | $ 1,200,000,000 |
DEBT - Redemption Prices as Per
DEBT - Redemption Prices as Percentage of Principal Amount (Details) - 5.25% Senior Notes, due April 1, 2025 | Aug. 13, 2018 | Sep. 30, 2018 |
2,021 | ||
Debt Instrument [Line Items] | ||
Debt Instrument, Redemption Price, Percentage | 104.031% | |
2,022 | ||
Debt Instrument [Line Items] | ||
Debt Instrument, Redemption Price, Percentage | 102.688% | |
2,023 | ||
Debt Instrument [Line Items] | ||
Debt Instrument, Redemption Price, Percentage | 101.344% | |
2024 and thereafter | ||
Debt Instrument [Line Items] | ||
Debt Instrument, Redemption Price, Percentage | 100.00% | |
Senior Notes | ||
Debt Instrument [Line Items] | ||
Debt Instrument, Redemption Price, Required Percentage Of Principal Amount Outstanding | 50.00% | |
Debt Instrument, Redemption Price, Percentage of Principal Amount Redeemed | 40.00% | |
Senior Notes | At any time prior to August 15, 2021 | ||
Debt Instrument [Line Items] | ||
Debt Instrument, Redemption Price, Percentage | 105.375% | |
Senior Notes | At any time prior to August 15, 2021 | ||
Debt Instrument [Line Items] | ||
Debt Instrument, Redemption Price, Percentage | 100.00% | |
Maximum | Senior Notes | ||
Debt Instrument [Line Items] | ||
Debt Instrument Redemption Period | 180 days |
DEBT - Narrative (Details)
DEBT - Narrative (Details) - USD ($) | Sep. 01, 2018 | Aug. 13, 2018 | Jul. 23, 2018 | Apr. 07, 2017 | Mar. 22, 2017 | Sep. 30, 2018 | Aug. 31, 2018 | Jun. 30, 2015 | Dec. 31, 2017 | Jan. 31, 2016 | Nov. 30, 2013 |
Revolving Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Repayments of Long-term Lines of Credit | $ 25,000,000 | ||||||||||
Borrowings outstanding | $ 100,000,000 | $ 200,000,000 | $ 0 | ||||||||
Credit facility, maximum borrowing capacity | $ 1,300,000,000 | $ 1,000,000,000 | $ 850,000,000 | ||||||||
Line of Credit Facility, Increase (Decrease), Net | $ 500,000,000 | ||||||||||
Senior Notes | 5.25% Senior Notes, due April 1, 2025 | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Interest rate | 5.375% | 5.375% | |||||||||
Debt Instrument, Redemption Price, Required Percentage Of Principal Amount Outstanding | 50.00% | ||||||||||
Aggregate principal amount | $ 750,000,000 | ||||||||||
Senior Notes | 5.375% Senior Notes, due August 15, 2026 | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Interest rate | 5.25% | 5.25% | |||||||||
Aggregate principal amount | $ 1,200,000,000 | ||||||||||
Aggregate net proceeds from the issuance of debt | $ 1,182,200,000 | ||||||||||
Senior Notes | 5.75% Senior Notes, due November 15, 2020 | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Interest rate | 5.75% | 5.75% | |||||||||
Aggregate principal amount | $ 300,000,000 | $ 600,000,000 | |||||||||
Issue price percentage | 104.50% | ||||||||||
Debt repurchase amount | $ 900,000,000 | ||||||||||
Redemption price | 102.875% | ||||||||||
Minimum | Revolving Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage | 0.20% | ||||||||||
Minimum | Base Rate | Revolving Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt Instrument, Basis Spread on Variable Rate | 0.375% | ||||||||||
Minimum | Eurodollar | Revolving Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt Instrument, Basis Spread on Variable Rate | 1.375% | ||||||||||
Maximum | Revolving Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage | 0.30% | ||||||||||
Maximum | Base Rate | Revolving Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt Instrument, Basis Spread on Variable Rate | 1.00% | ||||||||||
Maximum | Eurodollar | Revolving Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt Instrument, Basis Spread on Variable Rate | 2.00% | ||||||||||
At any time prior to August 15, 2021 | Senior Notes | 5.25% Senior Notes, due April 1, 2025 | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Redemption price | 105.375% | ||||||||||
At any time prior to August 15, 2021 | Senior Notes | 5.25% Senior Notes, due April 1, 2025 | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Redemption price | 100.00% | ||||||||||
Meridian | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Proceeds from debt, net of issuance costs | $ 739,000,000 | ||||||||||
Meridian | Revolving Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Proceeds from long-term lines of credit | $ 225,000,000 | $ 225,000,000 | |||||||||
Meridian | Senior Notes | 5.25% Senior Notes, due April 1, 2025 | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Interest rate | 5.375% | ||||||||||
Aggregate principal amount | $ 750,000,000 |
FAIR VALUE MEASUREMENTS - Asset
FAIR VALUE MEASUREMENTS - Assets and Liabilities Measured at Fair Value (Details) - Fair value, measurements, recurring - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | $ 1,878.8 | $ 1,235.7 |
Restricted cash, cash equivalents and investments | 234.8 | 211 |
Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 126.7 | 88.7 |
Corporate debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 931.9 | 400.1 |
Municipal securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 262.9 | 222.8 |
Residential mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 36.2 | 11.2 |
Short-term time deposits | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 341.6 | 300.4 |
Government and agency obligations | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 97.3 | 147.5 |
Other securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 82.2 | 65 |
Cash | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Restricted cash, cash equivalents and investments | 4.9 | 5.7 |
Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Restricted cash, cash equivalents and investments | 61.1 | 58.7 |
U.S. government securities and other | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Restricted cash, cash equivalents and investments | 168.8 | 146.6 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 147.1 | 200.3 |
Restricted cash, cash equivalents and investments | 234.6 | 210.8 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Municipal securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Residential mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Short-term time deposits | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Government and agency obligations | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 97.3 | 147.5 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Other securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 49.8 | 52.8 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Cash | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Restricted cash, cash equivalents and investments | 4.9 | 5.7 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Restricted cash, cash equivalents and investments | 61.1 | 58.7 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. government securities and other | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Restricted cash, cash equivalents and investments | 168.6 | 146.4 |
Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 1,731.7 | 1,023.1 |
Restricted cash, cash equivalents and investments | 0.2 | 0.2 |
Significant Other Observable Inputs (Level 2) | Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 126.7 | 88.7 |
Significant Other Observable Inputs (Level 2) | Corporate debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 931.9 | 400.1 |
Significant Other Observable Inputs (Level 2) | Municipal securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 262.9 | 210.5 |
Significant Other Observable Inputs (Level 2) | Residential mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 36.2 | 11.2 |
Significant Other Observable Inputs (Level 2) | Short-term time deposits | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 341.6 | 300.4 |
Significant Other Observable Inputs (Level 2) | Government and agency obligations | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Significant Other Observable Inputs (Level 2) | Other securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 32.4 | 12.2 |
Significant Other Observable Inputs (Level 2) | Cash | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Restricted cash, cash equivalents and investments | 0 | 0 |
Significant Other Observable Inputs (Level 2) | Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Restricted cash, cash equivalents and investments | 0 | 0 |
Significant Other Observable Inputs (Level 2) | U.S. government securities and other | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Restricted cash, cash equivalents and investments | 0.2 | 0.2 |
Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 12.3 |
Restricted cash, cash equivalents and investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) | Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) | Corporate debt securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) | Municipal securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 12.3 |
Significant Unobservable Inputs (Level 3) | Residential mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) | Short-term time deposits | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) | Government and agency obligations | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) | Other securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) | Cash | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Restricted cash, cash equivalents and investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) | Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Restricted cash, cash equivalents and investments | 0 | 0 |
Significant Unobservable Inputs (Level 3) | U.S. government securities and other | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Restricted cash, cash equivalents and investments | $ 0 | $ 0 |
FAIR VALUE MEASUREMENTS - Carry
FAIR VALUE MEASUREMENTS - Carrying Value and Fair Value of Long-term Debt (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Mar. 22, 2017 |
Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Borrowings outstanding | $ 200,000,000 | $ 0 | $ 100,000,000 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | |||
Debt Instrument [Line Items] | |||
Long-term debt, fair value | 1,985,800,000 | 1,274,300,000 | |
Significant Other Observable Inputs (Level 2) | |||
Debt Instrument [Line Items] | |||
Long-term debt, fair value | 200,000,000 | 0 | |
Significant Unobservable Inputs (Level 3) | |||
Debt Instrument [Line Items] | |||
Long-term debt, fair value | 0 | 0 | |
Carrying Value | |||
Debt Instrument [Line Items] | |||
Long-term debt, fair value | $ 2,125,400,000 | $ 1,182,400,000 |
FAIR VALUE MEASUREMENTS - Chang
FAIR VALUE MEASUREMENTS - Changes in the Fair Value of Auction Rate Securities (Details) - Significant Unobservable Inputs (Level 3) - Fair value, measurements, recurring - Asset backed securities - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |||
Beginning balance | $ 12.3 | $ 12.3 | $ 12.4 |
Realized gains (losses) in earnings | 0 | 1.2 | 0 |
Changes in unrealized gains (losses) in other comprehensive income | 0 | 1.4 | |
Purchases, sales and redemptions | 0 | (12.5) | (0.1) |
Net transfers in or (out) of Level 3 | 0 | 0 | 0 |
Ending balance | $ 12.3 | $ 0 | $ 12.3 |
MEDICAL BENEFITS PAYABLE - Reco
MEDICAL BENEFITS PAYABLE - Reconciliation of Beginning and Ending Balances, by Segment (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Reconciliation of the beginning and ending balance of medical benefits payable [Roll Forward] | |||
Beginning balance | $ 2,146.3 | $ 1,690.5 | |
Acquisitions | 528 | 128.1 | |
Medical benefits incurred related to | |||
Current year | 12,416.2 | 11,290 | |
Prior years | (393.2) | (351.7) | |
Total | 12,023 | 10,938.3 | |
Medical benefits paid related to | |||
Current year | (10,448.2) | (9,643.4) | |
Prior years | (1,347.7) | (1,036.7) | |
Total | (11,795.9) | (10,680.1) | |
Ending balance | 2,901.4 | 2,076.8 | |
Premium deficiency reserve | 20.6 | $ 45.6 | |
Medicaid Health Plan | |||
Reconciliation of the beginning and ending balance of medical benefits payable [Roll Forward] | |||
Beginning balance | 1,373.2 | 1,135.8 | |
Acquisitions | 478.2 | 0 | |
Medical benefits incurred related to | |||
Current year | 7,803.2 | 7,229.9 | |
Prior years | (202.1) | (190.7) | |
Total | 7,601.1 | 7,039.2 | |
Medical benefits paid related to | |||
Current year | (6,562.2) | (6,104.3) | |
Prior years | (889.3) | (749.6) | |
Total | (7,451.5) | (6,853.9) | |
Ending balance | 2,001 | 1,321.1 | |
Medicare Health Plan | |||
Reconciliation of the beginning and ending balance of medical benefits payable [Roll Forward] | |||
Beginning balance | 722.5 | 510 | |
Acquisitions | 47.1 | 128.1 | |
Medical benefits incurred related to | |||
Current year | 4,051.6 | 3,397.4 | |
Prior years | (121.8) | (96) | |
Total | 3,929.8 | 3,301.4 | |
Medical benefits paid related to | |||
Current year | (3,382.3) | (2,905.4) | |
Prior years | (488.3) | (308.6) | |
Total | (3,870.6) | (3,214) | |
Ending balance | 828.8 | 725.5 | |
Medicare PDP | |||
Reconciliation of the beginning and ending balance of medical benefits payable [Roll Forward] | |||
Beginning balance | 50.6 | 44.7 | |
Acquisitions | 0 | 0 | |
Medical benefits incurred related to | |||
Current year | 560.4 | 662.7 | |
Prior years | (69.3) | (65) | |
Total | 491.1 | 597.7 | |
Medical benefits paid related to | |||
Current year | (502.9) | (633.7) | |
Prior years | 30 | 21.5 | |
Total | (472.9) | (612.2) | |
Ending balance | 68.8 | $ 30.2 | |
Corporate and Other | |||
Reconciliation of the beginning and ending balance of medical benefits payable [Roll Forward] | |||
Beginning balance | 0 | ||
Acquisitions | 2.7 | ||
Medical benefits incurred related to | |||
Current year | 1 | ||
Prior years | 0 | ||
Total | 1 | ||
Medical benefits paid related to | |||
Current year | (0.8) | ||
Prior years | (0.1) | ||
Total | (0.9) | ||
Ending balance | $ 2.8 |
MEDICAL BENEFITS PAYABLE - Narr
MEDICAL BENEFITS PAYABLE - Narrative (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
MEDICAL BENEFITS PAYABLE [Abstract] | ||
Favorable development of medical benefits payable excluding the release of the provision for moderately adverse conditions | $ 215.2 | $ 205 |
Favorable development of medical benefits payable | $ 393.2 | $ 351.7 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||||
Effective income tax rate | 39.30% | 27.00% | 36.40% | 30.90% |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Liabilities | ||
Total liabilities | $ 215.1 | $ 215.2 |
Traditional Insurance Business | Discontinued operations, held-for-sale | ||
Assets | ||
Cash and cash equivalents | 1.9 | 1.3 |
Investments | 43.3 | 46.5 |
Reinsurance recoverables | 169.4 | 166.9 |
Other assets | 0.5 | 0.5 |
Total Assets | 215.1 | 215.2 |
Liabilities | ||
Reserves and other policy liabilities | 149.4 | 148.6 |
Other liabilities | 65.7 | 66.6 |
Total liabilities | $ 215.1 | $ 215.2 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||||||
May 31, 2018USD ($) | Jun. 30, 2017USD ($) | Apr. 30, 2017USD ($) | Oct. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2018USD ($)employeeassociateformer_officer | Sep. 30, 2017USD ($) | Sep. 30, 2018USD ($)employeeassociateformer_officer | Sep. 30, 2017USD ($) | Jun. 30, 2013officeremployee | Jan. 31, 2012employeeformer_officer | Jan. 31, 2008action | |
Loss Contingencies [Line Items] | ||||||||||||
Number of former officers receiving notices of cross appeal | officer | 3 | |||||||||||
Number of former employees found guilty and appealing | employee | 4 | |||||||||||
Legal fees | $ 0.1 | $ 1.2 | $ 0.8 | $ 6.7 | ||||||||
Derivative Lawsuits | ||||||||||||
Loss Contingencies [Line Items] | ||||||||||||
Number of former officers receiving notices of cross appeal | former_officer | 3 | 3 | ||||||||||
Number of former associates being pursued in action filed by entity | associate | 2 | 2 | ||||||||||
Number of former employees found guilty and appealing | employee | 4 | |||||||||||
Number of former employees being pursued in action filed by entity | 5 | 5 | 5 | |||||||||
Number of actions filed in the federal and state courts between October 2007 and January 2008 | action | 6 | |||||||||||
Number of former executives being pursued in action filed by entity | employee | 3 | |||||||||||
Legal fees | $ 237 | |||||||||||
Derivative Lawsuits | Mr. Farha Case | ||||||||||||
Loss Contingencies [Line Items] | ||||||||||||
Settlement agreement, amount awarded | $ 7.5 | $ 7.5 | ||||||||||
Maximum legal fee obligation | $ 7.5 | |||||||||||
Derivative Lawsuits | Mr. Farha Case | Securities and Exchange Commission (SEC) | ||||||||||||
Loss Contingencies [Line Items] | ||||||||||||
Settlement agreement, amount awarded | 12.5 | |||||||||||
Derivative Lawsuits | Mr. Behrens Case | ||||||||||||
Loss Contingencies [Line Items] | ||||||||||||
Settlement agreement, amount awarded | 1.5 | $ 1.5 | ||||||||||
Maximum legal fee obligation | $ 1.5 | |||||||||||
Derivative Lawsuits | Mr. Behrens Case | Securities and Exchange Commission (SEC) | ||||||||||||
Loss Contingencies [Line Items] | ||||||||||||
Settlement agreement, amount awarded | $ 4.5 | $ 4.5 | ||||||||||
Derivative Lawsuits | Mr. Bereday Case | ||||||||||||
Loss Contingencies [Line Items] | ||||||||||||
Maximum legal fee obligation | $ 2.5 |