Magellan Health (MGLN) 10-Q 26 Apr 17 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information	3 Months Ended
	Mar. 31, 2017shares
Document and Entity Information
Entity Registrant Name	MAGELLAN HEALTH INC
Entity Central Index Key	19,411
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	23,717,121
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q1

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Current Assets:
Cash and cash equivalents (restricted balances of $81,776 and $73,272 at December 31, 2016 and March 31, 2017, respectively)	$ 273,587	$ 304,508
Accounts receivable, less allowance for doubtful accounts of $5,644 and $6,171 at December 31, 2016 and March 31, 2017, respectively	634,102	606,764
Short-term investments (restricted balances of $227,795 and $220,284 at December 31, 2016 and March 31, 2017, respectively)	306,549	297,493
Pharmaceutical inventory	62,374	58,995
Other current assets (restricted balances of $38,785 and $34,002 at December 31, 2016 and March 31, 2017, respectively)	52,717	51,507
Total Current Assets	1,329,329	1,319,267
Property and equipment, net	166,536	172,524
Long-term investments (restricted balances of $6,306 and $5,699 at December 31, 2016 and March 31, 2017, respectively)	7,151	7,760
Deferred income taxes	4,507	3,125
Other long-term assets	15,709	12,725
Goodwill	742,775	742,054
Other intangible assets, net	177,054	186,232
Total Assets	2,443,061	2,443,687
Current Liabilities:
Accounts payable	82,385	95,635
Accrued liabilities	165,632	202,176
Short-term contingent consideration	9,761	9,354
Medical claims payable	174,302	184,136
Other medical liabilities	202,533	197,856
Current debt and capital lease obligations	428,795	403,693
Total Current Liabilities	1,063,408	1,092,850
Long-term debt and capital lease obligations	207,549	214,686
Tax contingencies	14,764	13,981
Long-term contingent consideration	1,343	1,799
Deferred credits and other long-term liabilities	20,032	15,882
Total Liabilities	1,307,096	1,339,198
Redeemable non-controlling interest	4,492	4,770
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share Authorized—10,000 shares at December 31, 2016 and March 31, 2017-Issued and outstanding-none
Other Stockholders' Equity:
Additional paid-in capital	1,200,309	1,186,283
Retained earnings	1,307,035	1,289,288
Accumulated other comprehensive loss	(196)	(175)
Ordinary common stock in treasury, at cost, 28,476 shares and 28,476 shares at December 31, 2016 and March 31, 2017, respectively	(1,376,197)	(1,376,197)
Total Stockholders' Equity	1,131,473	1,099,719
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders' Equity	2,443,061	2,443,687
Ordinary common stock
STOCKHOLDERS' EQUITY
Common stock	522	520
Multi-Vote common stock
STOCKHOLDERS' EQUITY
Common stock

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Restricted Cash and Cash Equivalents, Current	$ 73,272	$ 81,776
Accounts receivable, allowance for doubtful accounts (in dollars)	6,171	5,644
Short-term restricted investments (in dollars)	220,284	227,795
Other current assets, restricted deposits (in dollars)	34,002	38,785
Long term restricted investments (in dollars)	$ 5,699	$ 6,306
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, Authorized shares	10,000	10,000
Preferred stock, Issued shares	0	0
Preferred stock, outstanding shares	0	0
Ordinary common stock in treasury, shares	28,476	28,476
Ordinary common stock
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, Authorized shares	100,000	100,000
Common stock, Issued shares	52,193	51,993
Common stock, outstanding shares	23,717	23,517
Multi-Vote common stock
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, Authorized shares	40,000	40,000
Common stock, Issued shares	0	0
Common stock, outstanding shares	0	0

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME (LOSS) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Net revenue:
Managed care and other		$ 729,340	$ 676,461
PBM and dispensing		576,283	440,561
Total net revenue		1,305,623	1,117,022
Costs and expenses:
Cost of care		482,054	457,631
Cost of goods sold		542,633	415,459
Direct service costs and other operating expenses (1)(2)	[1],[2]	221,486	192,456
Depreciation and amortization		26,976	25,007
Interest expense		4,148	1,748
Interest and other income		(949)	(683)
Total costs and expenses		1,276,348	1,091,618
Income before income taxes		29,275	25,404
Provision for income taxes		11,806	12,013
Net income		17,469	13,391
Less: net income (loss) attributable to non-controlling interest		(278)	154
Net income attributable to Magellan Health, Inc.		$ 17,747	$ 13,237
Net income per common share attributable to Magellan Health, Inc.:
Basic (in dollars per share)		$ 0.77	$ 0.56
Diluted (in dollars per share)		$ 0.74	$ 0.54
[1]	Includes changes in fair value of contingent consideration of $(266) and $(49) for the three months ended March 31, 2016 and 2017, respectively.
[2]	Includes stock compensation expense of $8,887 and $10,140 for the three months ended March 31, 2016 and 2017, respectively.

CONSOLIDATED STATEMENTS OF INC5

CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Stock compensation expense	$ 10,140	$ 8,887
Changes in fair value of contingent consideration	$ (49)	$ (266)

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income		$ 17,469	$ 13,391
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale securities (1)	[1]	(21)	238
Comprehensive income		17,448	13,629
Less: comprehensive income (loss) attributable to non-controlling interest		(278)	154
Comprehensive income attributable to Magellan Health, Inc.		$ 17,726	$ 13,475
[1]	Net of income tax provision (benefit) of $146 and $(12) for the three months ended March 31, 2016 and 2017, respectively.

CONSOLIDATED STATEMENTS OF COM7

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net of income tax provision (benefit)	$ (12)	$ 146

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net income	$ 17,469	$ 13,391
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	26,976	25,007
Non-cash interest expense	253	102
Non-cash stock compensation expense	10,140	8,887
Non-cash income tax benefit	(1,010)	(538)
Non-cash amortization on investments	1,112	1,844
Cash flows from changes in assets and liabilities, net of effects from acquisitions of businesses:
Accounts receivable, net	(27,699)	(13,538)
Pharmaceutical inventory	(3,379)	(5,121)
Other assets	(1,172)	(35,839)
Accounts payable and accrued liabilities	(52,838)	11,406
Medical claims payable and other medical liabilities	(5,160)	(38,292)
Contingent consideration	(49)	734
Tax contingencies	506	289
Deferred credits and other long-term liabilities	4,150	(227)
Other	(421)	34
Net cash used in operating activities	(31,122)	(31,861)
Cash flows from investing activities:
Capital expenditures	(10,939)	(15,611)
Acquisitions and investments in businesses, net of cash acquired	(200)	(15,641)
Purchase of investments	(141,432)	(157,020)
Maturity of investments	131,840	144,902
Net cash used in investing activities	(20,731)	(43,370)
Cash flows from financing activities:
Proceeds from issuance of debt	200,000
Payments to acquire treasury stock		(7,992)
Proceeds from exercise of stock options and warrants	4,945	7,784
Payments on debt and capital lease obligations	(182,738)	(4,154)
Payments on contingent consideration		(2,000)
Other	(1,275)	(72)
Net cash (used in) provided by financing activities	20,932	(6,434)
Net decrease in cash and cash equivalents	(30,921)	(81,665)
Cash and cash equivalents at beginning of period	304,508	249,029
Cash and cash equivalents at end of period	273,587	167,364
Non-cash investing activities:
Property and equipment acquired under capital leases	$ 906	$ 1,293

General

General	3 Months Ended
	Mar. 31, 2017
General
General	NOTE A—General Basis of Presentation The accompanying unaudited consolidated financial statements of Magellan Health, Inc., a Delaware corporation (“Magellan”), include Magellan and its subsidiaries (together with Magellan, the “Company”). The financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the Securities and Exchange Commission’s (the “SEC”) instructions to Form 10-Q. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for the full year. All significant intercompany accounts and transactions have been eliminated in consolidation. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2016 and the notes thereto, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2017. Business Overview The Company is engaged in the healthcare management business, and is focused on managing the fastest growing, most complex areas of health, including special populations, complete pharmacy benefits and other specialty areas of healthcare. The Company develops innovative solutions that combine advanced analytics, agile technology and clinical excellence to drive better decision making, positively impact health outcomes and optimize the cost of care for the members we serve. The Company provides services to health plans and other managed care organizations (“MCOs”), employers, labor unions, various military and governmental agencies and third party administrators (“TPAs”). Healthcare Healthcare includes the Company’s: (i) management of behavioral healthcare services and employee assistance program (“EAP”) services, (ii) management of other specialty areas including diagnostic imaging and musculoskeletal management, and (iii) the integrated management of physical, behavioral and pharmaceutical healthcare for special populations, delivered through Magellan Complete Care (“MCC”). These special populations include individuals with serious mental illness (“SMI”), dual eligibles, long‑term services and supports and other populations with unique and often complex healthcare needs. The Company’s coordination and management of these healthcare services are provided through its comprehensive network of medical and behavioral health professionals, clinics, hospitals and ancillary service providers. This network of credentialed and privileged providers is integrated with clinical and quality improvement programs to improve access to care and enhance the healthcare experience for individuals in need of care, while at the same time making the cost of these services more affordable for our customers. The Company generally does not directly provide or own any provider of treatment services, although it does employ licensed behavioral health counselors to deliver non‑medical counseling under certain government contracts. The Healthcare segment’s commercial division serves a variety of customers, with services, inclusive of special population management, provided under contracts with health plans and accountable care organizations for some or all of their commercial, Medicaid and Medicare members, as well as with employers. The government division contracts with local, state and federal governmental agencies to provide services to recipients under Medicaid, Medicare and other government programs. The Company provides its management services primarily through: (i) risk‑based products, where the Company assumes all or a substantial portion of the responsibility for the cost of providing treatment services in exchange for a fixed per member per month fee and (ii) administrative services only (“ASO”) products, where the Company provides services such as utilization review, claims administration and/or provider network management, but does not assume responsibility for the cost of the treatment services. Pharmacy Management The Pharmacy Management segment (“Pharmacy Management”) comprises products and solutions that provide clinical and financial management of pharmaceuticals paid under medical and pharmacy benefit programs. Pharmacy Management’s services include: (i) pharmacy benefit management (“PBM”) services; (ii) pharmacy benefit administration (“PBA”) for state Medicaid and other government sponsored programs; (iii) pharmaceutical dispensing operations; (iv) clinical and formulary management programs; (v) medical pharmacy management programs; and (vi) programs for the integrated management of specialty drugs across both the medical and pharmacy benefit that treat complex conditions, regardless of site of service, method of delivery, or benefit reimbursement. Pharmacy Management’s services are provided under contracts with health plans, employers, MCOs, state Medicaid programs, Medicare Part D and other government agencies, and encompass risk‑based and fee‑for‑service (“FFS”) arrangements. In addition, Pharmacy Management has subcontract arrangements to provide PBM services for certain Healthcare customers. Corporate This segment of the Company is comprised primarily of amounts not allocated to the Healthcare and Pharmacy Management segments that are largely associated with costs related to being a publicly traded company. Summary of Significant Accounting Policies Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which is a new comprehensive revenue recognition standard that will supersede virtually all existing revenue guidance under GAAP. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” (“ASU 2016-08”), which clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”), which clarifies the performance obligations and licensing implementation guidance of ASU 2014-09. In July 2015, the FASB deferred the effective date of ASU 2014-09. In December 2016, the FASB issued ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” (“ASU 2016-20”), which amends various aspects of ASU 2014-09. The amendments in these ASUs are effective for annual and interim reporting periods of public entities beginning after December 15, 2017. The Company has identified its major revenue streams and is in the process of completing formal contract reviews. While the Company continues to assess all of the potential impacts of these ASUs, the Company does not expect implementation of these ASUs will have a significant impact on the Company’s consolidated results of operations, financial position and cash flows. The Company continues to assess the disclosure requirements prescribed by these ASUs and it may be required to expand its disclosures. The Company intends to adopt the new standard on a modified retrospective basis. In July 2015, the FASB issued ASU No. 2015‑11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015‑11”). The amendment under this ASU requires that an entity measure inventory at the lower of cost or net realizable value. This guidance is effective for annual and interim reporting periods of public entities beginning after December 15, 2016 and was adopted by the Company in the quarter ended March 31, 2017. The effect of this guidance was immaterial to the Company’s consolidated results of operations, financial position and cash flows. In February 2016, the FASB issued ASU No. 2016‑02, “Leases” (“ASU 2016‑02”). This ASU amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets. This guidance is effective for annual and interim reporting periods of public entities beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the impact of adoption, but believes the effect of this ASU will have a material effect on the Company’s consolidated balance sheets. The Company is currently assessing the potential impact this ASU will have on the Company’s consolidated results of operations, financial position and cash flows. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This ASU amends the accounting on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. This guidance is effective for annual and interim periods of public entities beginning after December 15, 2019, with early adoption permitted for fiscal years beginning after December 31, 2018. The Company is currently assessing the potential impact this ASU will have on the Company’s consolidated results of operation, financial position and cash flows. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). This ASU makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance is effective for annual and interim periods of public entities beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the potential impact this ASU will have on the Company’s consolidated results of operation, financial positions and cash flows. In December 2016, the FASB issued ASU 2016-19, “Technical Corrections and Improvements” (“ASU 2016-19”). The amendments in this ASU cover a wide range of Topics in the Accounting Standard Codification, including internal use software covered under Subtopic 350-40. This guidance is effective for annual and interim periods of public entities beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the potential impact this ASU will have on the Company’s consolidated results of operations, financial position and cash flows. In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”). The amendments in this ASU clarify whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance is effective for annual and interim periods of public entities beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the potential impact this ASU will have on the Company’s consolidated results of operations, financial position and cash flows. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). The amendments in this ASU eliminate the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. This guidance is effective for annual and interim periods of public entities beginning after December 15, 2019, with early adoption permitted for interim periods after January 1, 2017. The Company is currently assessing the potential impact this ASU will have on the Company’s consolidated results of operations, financial position and cash flows. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates of the Company include, among other things, accounts receivable realization, valuation allowances for deferred tax assets, valuation of goodwill and intangible assets, medical claims payable, other medical liabilities, contingent consideration, stock compensation assumptions, tax contingencies and legal liabilities. Actual results could differ from those estimates. Managed Care and Other Revenue Managed Care Revenue. Managed care revenue, inclusive of revenue from the Company’s risk, EAP and ASO contracts, is recognized over the applicable coverage period on a per member basis for covered members. The Company is paid a per member fee for all enrolled members, and this fee is recorded as revenue in the month in which members are entitled to service. The Company adjusts its revenue for retroactive membership terminations, additions and other changes, when such adjustments are identified, with the exception of retroactivity that can be reasonably estimated. The impact of retroactive rate amendments is generally recorded in the accounting period in which terms to the amendment are finalized, and that the amendment is executed. Any fees paid prior to the month of service are recorded as deferred revenue. Managed care revenues approximated $545.0 million and $559.1 million for the three months ended March 31, 2016 and 2017, respectively. Fee‑For‑Service, Fixed Fee and Cost‑Plus Contracts. The Company has certain contracts with customers under which the Company recognizes revenue as services are performed and as costs are incurred. This includes revenues received in relation to the Patient Protection and Affordable Care Act health insurer fee (“HIF fee”) billed on a cost reimbursement basis. The Consolidated Appropriations Act of 2016 imposed a one-year moratorium on the HIF fee, suspending its application for 2017. Revenues from these contracts approximated $103.0 million and $143.7 million for the three months ended March 31, 2016 and 2017, respectively. Rebate Revenue. The Company administers a rebate program for certain clients through which the Company coordinates the achievement, calculation and collection of rebates and administrative fees from pharmaceutical manufacturers on behalf of clients. Each period, the Company estimates the total rebates earned based on actual volumes of pharmaceutical purchases by the Company’s clients, as well as historical and/or anticipated sharing percentages. The Company earns fees based upon the volume of rebates generated for its clients. The Company does not record as rebate revenue any rebates that are passed through to its clients. Total rebate revenues approximated $19.8 million and $22.3 million for the three months ended March 31, 2016 and 2017, respectively. In relation to the Company’s PBM business, the Company administers rebate programs through which it receives rebates from pharmaceutical manufacturers that are shared with its customers. The Company recognizes rebates when the Company is entitled to them and when the amounts of the rebates are determinable. The amount recorded for rebates earned by the Company from the pharmaceutical manufacturers is recorded as a reduction of cost of goods sold. PBM and Dispensing Revenue Pharmacy Benefit Management Revenue. The Company recognizes PBM revenue, which consists of a negotiated prescription price (ingredient cost plus dispensing fee), co‑payments collected by the pharmacy and any associated administrative fees, when claims are adjudicated. The Company recognizes PBM revenue on a gross basis (i.e. including drug costs and co‑payments) as it is acting as the principal in the arrangement and is contractually obligated to its clients and network pharmacies, which is a primary indicator of gross reporting. In addition, the Company is solely responsible for the claims adjudication process, negotiating the prescription price for the pharmacy, collection of payments from the client for drugs dispensed by the pharmacy, and managing the total prescription drug relationship with the client’s members. If the Company enters into a contract where it is only an administrator, and does not assume any of the risks previously noted, revenue will be recognized on a net basis. PBM revenues approximated $344.5 million and $432.9 million for the three months ended March 31, 2016 and 2017, respectively. Dispensing Revenue. The Company recognizes dispensing revenue, which includes the co‑payments received from members of the health plans the Company serves, when the specialty pharmaceutical drugs are shipped. At the time of shipment, the earnings process is complete; the obligation of the Company’s customer to pay for the specialty pharmaceutical drugs is fixed, and, due to the nature of the product, the member may neither return the specialty pharmaceutical drugs nor receive a refund. Revenues from the dispensing of specialty pharmaceutical drugs on behalf of health plans were $55.3 million and $55.2 million for the three months ended March 31, 2016 and 2017, respectively. Medicare Part D. The Company is contracted with the Centers for Medicare and Medicaid (“CMS”) as a Prescription Drug Plan (“PDP”) to provide prescription drug benefits to Medicare beneficiaries. Net revenues include premiums earned by the PDP, which includes a direct premium paid by CMS and a beneficiary premium paid by the PDP member. In cases of low-income members, the beneficiary premium may be subsidized by CMS. The Company recognizes premium revenues on a monthly basis on a per member basis for covered members. In addition to these premiums, net revenue includes certain payments from the members based on the members’ actual prescription claims, including co-payments, coverage gap benefits, deductibles and co-insurance (collectively, “Member Responsibilities”). The Company receives a prospective subsidy payment from CMS each month to subsidize a portion of the Member Responsibilities for low-income members. If the prospective subsidy differs from actual prescription claims, the difference is recorded as either a receivable or payable on the consolidated balance sheets. The Company assumes no risk for the Member Responsibilities, including the portion subsidized by CMS. The Company recognizes revenues for Member Responsibilities, including the portion subsidized by CMS, on a gross basis as claims are adjudicated. CMS also provides an annual risk corridor adjustment which compares the Company’s actual drug costs incurred to the premiums received. Based on the risk corridor adjustment, the Company may receive additional premiums from CMS or may be required to refund CMS a portion of previously received premiums. The Company calculates the risk corridor adjustment on a quarterly basis and the amount is included in net revenues with a corresponding receivable or payable on the consolidated balance sheets. Medicare Part D revenues approximated $50.3 million and $111.6 million for the three months ended March 31, 2016 and 2017, respectively, including co-payments, which are included in PBM revenues above, of $9.5 million and $23.4 million for the three months ended March 31, 2016 and 2017, respectively. As of December 31, 2016 and March 31, 2017, the Company had $117.5 million and $126.7 million, respectively, in net receivables associated with Medicare Part D from CMS and other parties related to this business. Significant Customers Customers exceeding ten percent of the consolidated Company’s net revenues The Company has a contract with the State of Florida to provide integrated healthcare services to Medicaid enrollees in the state of Florida (“the Florida Contract”). The Florida Contract began on February 4, 2014 and extends through December 31, 2018, unless sooner terminated by the parties. The State of Florida has the right to terminate the Florida Contract with cause, as defined, upon 24 hour notice and upon 30 days notice for any reason or no reason at all. The Florida Contract generated net revenues of $130.8 million and $145.7 million for the three months ended March 31, 2016 and 2017, respectively. Customers exceeding ten percent of segment net revenues In addition to the Florida Contract, previously discussed, the following customers generated in excess of ten percent of net revenues for the respective segment for the three months ended March 31, 2016 and 2017 (in thousands): Segment Term Date 2016 2017 Healthcare None Pharmacy Management Customer A December 31, 2016 (1) $ 99,959 $ 1,730 * Customer B June 30, 2019 — 92,712 * Revenue amount did not exceed 10 percent of net revenues for the respective segment for the year presented. Amount is shown for comparative purposes only. (1) A vast majority of this customer’s revenues were generated from drug acquisition costs related to PBM services which terminated on September 1, 2016. The Company continues to provide specialty distribution services to the customer and is in negotiations with the customer to extend this contract. Concentration of Business The Company also has a significant concentration of business with various counties in the State of Pennsylvania (the “Pennsylvania Counties”) which are part of the Pennsylvania Medicaid program, with members under its contract with CMS and with various agencies and departments of the United States federal government. Net revenues from the Pennsylvania Counties in the aggregate totaled $110.0 million and $109.9 million for the three months ended March 31, 2016 and 2017, respectively. Net revenues from members in relation to its contract with CMS in aggregate totaled $50.3 million and $111.6 million for the three months ended March 31, 2016 and 2017, respectively. Net revenues from contracts with various agencies and departments of the United States federal government in aggregate totaled $42.5 million and $88.0 million for the three months ended March 31, 2016 and 2017, respectively. The Company’s contracts with customers typically have terms of one to three years, and in certain cases contain renewal provisions (at the customer’s option) for successive terms of between one and two years (unless terminated earlier). Substantially all of these contracts may be immediately terminated with cause and many of the Company’s contracts are terminable without cause by the customer or the Company either upon the giving of requisite notice and the passage of a specified period of time (typically between 60 and 180 days) or upon the occurrence of other specified events. In addition, the Company’s contracts with federal, state and local governmental agencies generally are conditioned on legislative appropriations. These contracts generally can be terminated or modified by the customer if such appropriations are not made. Fair Value Measurements The Company has certain assets and liabilities that are required to be measured at fair value on a recurring basis. These assets and liabilities are to be measured using inputs from the three levels of the fair value hierarchy, which are as follows: Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). Level 3—Unobservable inputs that reflect the Company’s assumptions about the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including the Company’s data. In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company’s assets and liabilities that are required to be measured at fair value as of December 31, 2016 and March 31, 2017 (in thousands): December 31, 2016 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ — $ 177,495 $ — $ 177,495 Investments: U.S. Government and agency securities 5,817 — — 5,817 Obligations of government-sponsored enterprises (2) — 25,767 — 25,767 Corporate debt securities — 272,219 — 272,219 Certificates of deposit — 1,450 — 1,450 Total assets held at fair value $ 5,817 $ 476,931 $ — $ 482,748 Liabilities Contingent consideration $ — $ — $ 11,153 $ 11,153 Total liabilities held at fair value $ — $ — $ 11,153 $ 11,153 March 31, 2017 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (3) $ — $ 112,980 $ — $ 112,980 Investments: U.S. Government and agency securities 5,704 — — 5,704 Obligations of government-sponsored enterprises (2) — 28,110 — 28,110 Corporate debt securities — 273,391 — 273,391 Taxable municipal bonds — 5,045 — 5,045 Certificates of deposit — 1,450 — 1,450 Total assets held at fair value $ 5,704 $ 420,976 $ — $ 426,680 Liabilities Contingent consideration $ — $ — $ 11,104 $ 11,104 Total liabilities held at fair value $ — $ — $ 11,104 $ 11,104 (1) Excludes $127.0 million of cash held in bank accounts by the Company. (2) Includes investments in notes issued by the Federal Home Loan Bank, Federal Farm Credit Banks and Federal National Mortgage Association. (3) Excludes $160.6 million of cash held in bank accounts by the Company. For the three months ended March 31, 2017, the Company has not transferred any assets between fair value measurement levels. The carrying values of financial instruments, including accounts receivable, accounts payable and revolving loan borrowings, approximate their fair values due to their short-term maturities. The estimated fair value of the Company’s term loans of $612.5 million as of March 31, 2017 was based on current interest rates for similar types of borrowings and is in Level 2 of the fair value hierarchy. The estimated fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future. All of the Company’s investments are classified as “available-for-sale” and are carried at fair value. The contingent consideration liability reflects the fair value of potential future payments related to the Cobalt Therapeutics, LLC (“Cobalt”), The Management Group, LLC (“TMG”) and Armed Forces Services Corporation (“AFSC”) acquisitions. The Cobalt, TMG and AFSC purchase agreements provide for potential contingent payments of up to a maximum of $6.0 million, $15.0 million and $10.0 million, respectively. As of March 31, 2017, there are remaining potential future payments of $5.0 million, $15.0 million and $10.0 million for Cobalt, TMG and AFSC, respectively. As of the balance sheet date, the fair value of contingent consideration is determined based on probabilities of payment, projected payment dates, discount rates, projected operating income, member engagement and new contract execution. The Company used a probability weighted discounted cash flow method to arrive at the fair value of the contingent consideration. As the fair value measurement for the contingent consideration is based on inputs not observed in the market, these measurements are classified as Level 3 measurements as defined by fair value measurement guidance. The unobservable inputs used in the fair value measurement include the discount rate, probabilities of payment and projected payment dates. As of December 31, 2016 and March 31, 2017, the Company estimated undiscounted future contingent payments of $12.7 million and $12.2 million, respectively. The net decrease was mainly due to changes in operational forecasts and probabilities of payment. As of March 31, 2017, the aggregate amounts and projected dates of future potential contingent consideration payments were $10.2 million in 2017 and $2.0 million in 2020. As of December 31, 2016, the fair value of the short-term and long-term contingent consideration was $9.4 million and $1.8 million, respectively, and is included in short-term contingent consideration and long-term contingent consideration, respectively, in the consolidated balance sheets. As of March 31, 2017, the fair value of the short-term and long-term contingent consideration was $9.8 million and $1.3 million, respectively, and is included in short-term contingent consideration and long-term contingent consideration, respectively, in the consolidated balance sheets. The change in the fair value of the contingent consideration was $(0.3) million and $(0.1) million for the three months ended March 31, 2016 and 2017, respectively, which were recorded as direct service costs and other operating expenses in the consolidated statements of income. The decreases were mainly a result of changes in present value and the estimated undiscounted liability. The following table summarizes the Company’s liability for contingent consideration for the three months ended March 31, 2017 (in thousands): March 31, 2017 Balance as of beginning of period $ 11,153 Changes in fair value (49) Payments — Balance as of end of period $ 11,104 Cash and Cash Equivalents Cash equivalents are short-term, highly liquid interest-bearing investments with maturity dates of three months or less when purchased, consisting primarily of money market instruments. At March 31, 2017, the Company’s excess capital and undistributed earnings for the Company’s regulated subsidiaries of $121.5 million are included in cash and cash equivalents. Investments If a debt security is in an unrealized loss position and the Company has the intent to sell the debt security, or it is more likely than not that the Company will have to sell the debt security before recovery of its amortized cost basis, the decline in value is deemed to be other‑than‑temporary and is recorded to other‑than‑temporary impairment losses recognized in income in the consolidated statements of income. For impaired debt securities that the Company does not intend to sell or it is more likely than not that the Company will not have to sell such securities, but the Company expects that it will not fully recover the amortized cost basis, the credit component of the other‑ than‑temporary impairment is recognized in other‑than‑temporary impairment losses recognized in income in the consolidated statements of income and the non‑credit component of the other‑than‑temporary impairment is recognized in other comprehensive income. As of December 31, 2016 and March 31, 2017, there were no unrealized losses that the Company determined to be other‑than‑temporary. No realized gains or losses were recorded for the three months ended March 31, 2016 or 2017. The following is a summary of short‑term and long‑term investments at December 31, 2016 and March 31, 2017 (in thousands): December 31, 2016 Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value U.S. Government and agency securities $ 5,832 $ — $ (15) $ 5,817 Obligations of government-sponsored enterprises (1) 25,779 2 (14) 25,767 Corporate debt securities 272,479 1 (261) 272,219 Certificates of deposit 1,450 — — 1,450 Total investments at December 31, 2016 $ 305,540 $ 3 $ (290) $ 305,253 March 31, 2017 Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value U.S. Government and agency securities $ 5,719 $ — $ (15) $ 5,704 Obligations of government-sponsored enterprises (1) 28,132 — (22) 28,110 Corporate debt securities 273,668 35 (312) 273,391 Taxable municipal bonds 5,051 — (6) 5,045 Certificates of deposit 1,450 — — 1,450 Total investments at March 31, 2017 $ 314,020 $ 35 $ (355) $ 313,700 (1) Includes investments in notes issued by the Federal Home Loan Bank, Federal National Mortgage Association and Federal Farm Credit Banks. The maturity dates of the Company’s investments as of March 31, 2017 are summarized below (in thousands): Amortized Estimated Cost Fair Value 2017 $ 237,361 $ 237,174 2018 76,253 76,120 2019 406 406 Total investments at March 31, 2017 $ 314,020 $ 313,700 Income Taxes The

Net Income per Common Share Att

Net Income per Common Share Attributable to Magellan Health, Inc.	3 Months Ended
	Mar. 31, 2017
Net Income per Common Share Attributable to Magellan Health, Inc.
Net Income per Common Share Attributable to Magellan Health, Inc.	NOTE B—Net Income per Common Share Attributable to Magellan Health, Inc. The following table reconciles income attributable to common shareholders (numerator) and shares (denominator) used in the computations of net income per share attributable to common shareholders (in thousands, except per share data): Three Months Ended March 31, 2016 2017 Numerator: Net income attributable to Magellan Health, Inc. $ 13,237 $ 17,747 Denominator: Weighted average number of common shares outstanding—basic 23,631 23,012 Common stock equivalents—stock options (1) 253 474 Common stock equivalents—RSAs (1) 563 402 Common stock equivalents—RSUs (1) 27 81 Common stock equivalents—PSUs (1) 35 66 Common stock equivalents—employee stock purchase plan 2 3 Weighted average number of common shares outstanding—diluted (1) 24,511 24,038 Net income attributable to Magellan Health, Inc. per common share—basic $ 0.56 $ 0.77 Net income attributable to Magellan Health, Inc. per common share—diluted $ 0.54 $ 0.74 1) During 2016, the Company early adopted ASU 2016-09. As a result, the common stock equivalents and diluted weighted average common shares outstanding as of March 31, 2016 have been adjusted. There was no impact to net income per common share – diluted. The weighted average number of common shares outstanding for the three months ended March 31, 2016 and 2017 were calculated using outstanding shares of the Company’s common stock. Common stock equivalents included in the calculation of diluted weighted average common shares outstanding for the three months ended March 31, 2016 and 2017 represent stock options to purchase shares of the Company’s common stock, RSAs, RSUs, PSUs and stock purchased under the Employee Stock Purchase Plan. The Company had additional potential dilutive securities outstanding representing 1.5 million and 0.6 million options for the three months ended March 31, 2016 and 2017, respectively, that were not included in the computation of dilutive securities because they were anti-dilutive for the period. Had these shares not been anti-dilutive, all of these shares would not have been included in the net income attributable to common shareholder per common share calculation as the Company uses the treasury stock method of calculating diluted shares.

Business Segment Information

Business Segment Information	3 Months Ended
	Mar. 31, 2017
Business Segment Information
Business Segment Information	NOTE C—Business Segment Information The accounting policies of the Company’s segments are the same as those described in Note A—“General.” The Company evaluates performance of its segments based on profit or loss from operations before stock compensation expense, depreciation and amortization, interest expense, interest and other income, changes in the fair value of contingent consideration recorded in relation to acquisitions, gain on sale of assets, special charges or benefits, and income taxes (“Segment Profit”). Management uses Segment Profit information for internal reporting and control purposes and considers it important in making decisions regarding the allocation of capital and other resources, risk assessment and employee compensation, among other matters. Healthcare subcontracts with Pharmacy Management to provide pharmacy benefits management services for certain of Healthcare’s customers. In addition, Pharmacy Management provides pharmacy benefits management for the Company’s employees covered under its medical plan. As such, revenue, cost of goods sold and direct service costs and other related to these arrangements are eliminated. The Company’s segments are defined in Note A—“General”. The following tables summarize, for the periods indicated, operating results by business segment (in thousands): Corporate Pharmacy and Healthcare Management Elimination Consolidated Three Months Ended March 31, 2016 Managed care and other revenue $ 618,928 $ 57,577 $ (44) $ 676,461 PBM and dispensing revenue — 470,234 (29,673) 440,561 Cost of care (457,631) — — (457,631) Cost of goods sold — (443,949) 28,490 (415,459) Direct service costs and other (125,617) (60,841) (5,998) (192,456) Stock compensation expense (1) 2,019 5,422 1,446 8,887 Changes in fair value of contingent consideration (1) (320) 54 — (266) Less: non-controlling interest segment profit (loss) (2) 169 — (4) 165 Segment profit (loss) $ 37,210 $ 28,497 $ (5,775) $ 59,932 Corporate Pharmacy and Healthcare Management Elimination Consolidated Three Months Ended March 31, 2017 Managed care and other revenue $ 665,376 $ 64,180 $ (216) $ 729,340 PBM and dispensing revenue — 606,746 (30,463) 576,283 Cost of care (482,054) — — (482,054) Cost of goods sold — (571,837) 29,204 (542,633) Direct service costs and other (138,968) (75,853) (6,665) (221,486) Stock compensation expense (1) 2,659 5,730 1,751 10,140 Changes in fair value of contingent consideration (1) (49) — — (49) Less: non-controlling interest segment profit (loss) (2) (277) — (1) (278) Segment profit (loss) $ 47,241 $ 28,966 $ (6,388) $ 69,819 (1) Stock compensation expense and changes in the fair value of contingent consideration recorded in relation to the acquisitions are included in direct service costs and other operating expenses; however, these amounts are excluded from the computation of Segment Profit. (2) The non‑controlling portion of AlphaCare’s segment profit (loss) is excluded from the computation of Segment Profit. The following table reconciles income before income taxes to Segment Profit (in thousands): Three Months Ended March 31, 2016 2017 Income before income taxes $ 25,404 $ 29,275 Stock compensation expense 8,887 10,140 Changes in fair value of contingent consideration (266) (49) Non-controlling interest segment profit (loss) (165) 278 Depreciation and amortization 25,007 26,976 Interest expense 1,748 4,148 Interest and other income (683) (949) Segment Profit $ 59,932 $ 69,819

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	Mar. 31, 2017
Commitments and Contingencies
Commitments and Contingencies	NOTE D—Commitments and Contingencies Legal The Company’s operating activities entail significant risks of liability. From time to time, the Company is subject to various actions and claims arising from the acts or omissions of its employees, network providers or other parties. In the normal course of business, the Company receives reports relating to deaths and other serious incidents involving patients whose care is being managed by the Company. Such incidents occasionally give rise to malpractice, professional negligence and other related actions and claims against the Company or its network providers. Many of these actions and claims received by the Company seek substantial damages and therefore require the Company to incur significant fees and costs related to their defense. The Company is also subject to or party to certain class actions and other litigation and claims relating to its operations or business practices. In the opinion of management, the Company has recorded reserves that are adequate to cover litigation, claims or assessments that have been or may be asserted against the Company, and for which the outcome is probable and reasonably estimable. Management believes that the resolution of such litigation and claims will not have a material adverse effect on the Company’s financial condition or results of operations; however, there can be no assurance in this regard. Stock Repurchases On October 26, 2015, the Company’s board of directors approved a stock repurchase plan which authorized the Company to purchase up to $200 million of its outstanding common stock through October 26, 2017 (the “2015 Repurchase Program”). Stock repurchases under the programs may be carried out from time to time in open market transactions (including blocks) or in privately negotiated transactions. The timing of repurchases and the actual amount purchased will depend on a variety of factors including the market price of the Company’s shares, general market and economic conditions, and other corporate considerations. Repurchases may be made pursuant to plans intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, which could allow the Company to purchase its shares during periods when it otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods. Repurchases are expected to be funded from working capital and anticipated cash from operations. The repurchase authorization does not require the purchase of a specific number of shares and is subject to suspension or termination by the Company’s board of directors at any time. Pursuant to the 2015 Stock Repurchase Program, the Company made purchases as follows (aggregate cost excludes broker commissions and is reflected in millions): Total Number Average of Shares Price Paid Aggregate Period Purchased per Share Cost October 26, 2015 - December 31, 2015 345,044 $ 53.46 $ 18.4 January 1, 2016 - December 31, 2016 1,828,183 58.40 106.8 2,173,227 $ 125.2 The Company made no repurchases from January 1, 2017 through April 21, 2017.

Acquisitions

Acquisitions	3 Months Ended
	Mar. 31, 2017
Acquisitions
Acquisitions	NOTE E—Acquisitions Acquisition of AFSC Pursuant to the May 15, 2016 share purchase agreement (the “AFSC Agreement”) with Armed Forces Services Corporation (“AFSC”), on July 1, 2016 the Company acquired all of the outstanding equity interests of AFSC (the “AFSC Acquisition”). AFSC has extensive experience providing and managing behavioral health and specialty services to various agencies of the federal government, including all five branches of the U.S. Armed Forces. The base purchase price for the AFSC Acquisition per the AFSC Agreement was $117.5 million, subject to working capital adjustments. Pursuant to the AFSC Agreement, certain members of AFSC’s management, who were also shareholders of AFSC, purchased a total of $4.0 million in Magellan restricted common stock, which will vest over a two-year period, conditioned upon continued employment with the Company. Consideration for the AFSC Acquisition includes a net payment for the net base purchase price of $113.5 million in cash, subject to working capital adjustments, including adjustments for cash acquired. Proceeds from the sale of restricted common stock are recorded as stock compensation expense over the requisite service period. In addition to the base purchase price, the AFSC Agreement provides for potential contingent payments up to a maximum aggregate amount of $10.0 million. The potential contingent payments are based on the retention of certain core business by AFSC. The Company’s estimated fair values of AFSC assets acquired and liabilities assumed at the date of acquisition are determined based on certain valuations and analyses that have yet to be finalized, and accordingly, the assets acquired and liabilities assumed, as detailed above, are subject to adjustment once the analyses are completed. The Company will make appropriate adjustments to the purchase price allocation prior to the completion of the measurement period as required. As of March 31, 2017, the Company established a working capital receivable of $3.2 million that was reflected as a reduction to the transaction price. Acquisition of Veridicus Holdings, LLC and Granite Alliance Insurance Company Pursuant to the November 19, 2016 purchase agreements (the “Veridicus Agreements”) with Veridicus Holdings, LLC and Granite Alliance Insurance Company (collectively “Veridicus”) and Veridicus Health, LLC, on December 13, 2016 and February 7, 2017 the Company acquired all of the outstanding equity interests of Veridicus (the “Veridicus Acquisition”). Veridicus is a PBM with a unique set of clinical services and capabilities. The base purchase price for the Veridicus Acquisition per the Veridicus Agreements was $74.5 million, subject to working capital adjustments. The Company reports the results of operations of Veridicus within its Pharmacy Management segment. The Company’s estimated fair values of Veridicus assets acquired and liabilities assumed at the date of acquisition are determined based on certain valuations and analyses that have yet to be finalized, and accordingly, the assets acquired and liabilities assumed are subject to adjustment once the analyses are completed. The Company will make appropriate adjustments to the purchase price allocation prior to the completion of the measurement period as required. During the three months ended March 31, 2017, the Company made measurement period adjustments of $0.8 million to decrease the goodwill related to the Veridicus acquisition. As of March 31, 2017, the Company established a working capital receivable of $0.2 million that was reflected as a reduction to the transaction price.

General (Policies)

General (Policies)	3 Months Ended
	Mar. 31, 2017
General.
Recent Accounting Pronouncements	Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which is a new comprehensive revenue recognition standard that will supersede virtually all existing revenue guidance under GAAP. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” (“ASU 2016-08”), which clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”), which clarifies the performance obligations and licensing implementation guidance of ASU 2014-09. In July 2015, the FASB deferred the effective date of ASU 2014-09. In December 2016, the FASB issued ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers” (“ASU 2016-20”), which amends various aspects of ASU 2014-09. The amendments in these ASUs are effective for annual and interim reporting periods of public entities beginning after December 15, 2017. The Company has identified its major revenue streams and is in the process of completing formal contract reviews. While the Company continues to assess all of the potential impacts of these ASUs, the Company does not expect implementation of these ASUs will have a significant impact on the Company’s consolidated results of operations, financial position and cash flows. The Company continues to assess the disclosure requirements prescribed by these ASUs and it may be required to expand its disclosures. The Company intends to adopt the new standard on a modified retrospective basis. In July 2015, the FASB issued ASU No. 2015‑11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015‑11”). The amendment under this ASU requires that an entity measure inventory at the lower of cost or net realizable value. This guidance is effective for annual and interim reporting periods of public entities beginning after December 15, 2016 and was adopted by the Company in the quarter ended March 31, 2017. The effect of this guidance was immaterial to the Company’s consolidated results of operations, financial position and cash flows. In February 2016, the FASB issued ASU No. 2016‑02, “Leases” (“ASU 2016‑02”). This ASU amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets. This guidance is effective for annual and interim reporting periods of public entities beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the impact of adoption, but believes the effect of this ASU will have a material effect on the Company’s consolidated balance sheets. The Company is currently assessing the potential impact this ASU will have on the Company’s consolidated results of operations, financial position and cash flows. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This ASU amends the accounting on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. This guidance is effective for annual and interim periods of public entities beginning after December 15, 2019, with early adoption permitted for fiscal years beginning after December 31, 2018. The Company is currently assessing the potential impact this ASU will have on the Company’s consolidated results of operation, financial position and cash flows. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). This ASU makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance is effective for annual and interim periods of public entities beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the potential impact this ASU will have on the Company’s consolidated results of operation, financial positions and cash flows. In December 2016, the FASB issued ASU 2016-19, “Technical Corrections and Improvements” (“ASU 2016-19”). The amendments in this ASU cover a wide range of Topics in the Accounting Standard Codification, including internal use software covered under Subtopic 350-40. This guidance is effective for annual and interim periods of public entities beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the potential impact this ASU will have on the Company’s consolidated results of operations, financial position and cash flows. In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”). The amendments in this ASU clarify whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance is effective for annual and interim periods of public entities beginning after December 15, 2017, with early adoption permitted. The Company is currently assessing the potential impact this ASU will have on the Company’s consolidated results of operations, financial position and cash flows. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). The amendments in this ASU eliminate the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. This guidance is effective for annual and interim periods of public entities beginning after December 15, 2019, with early adoption permitted for interim periods after January 1, 2017. The Company is currently assessing the potential impact this ASU will have on the Company’s consolidated results of operations, financial position and cash flows.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates of the Company include, among other things, accounts receivable realization, valuation allowances for deferred tax assets, valuation of goodwill and intangible assets, medical claims payable, other medical liabilities, contingent consideration, stock compensation assumptions, tax contingencies and legal liabilities. Actual results could differ from those estimates.
Revenue Recognition	Managed Care and Other Revenue Managed Care Revenue. Managed care revenue, inclusive of revenue from the Company’s risk, EAP and ASO contracts, is recognized over the applicable coverage period on a per member basis for covered members. The Company is paid a per member fee for all enrolled members, and this fee is recorded as revenue in the month in which members are entitled to service. The Company adjusts its revenue for retroactive membership terminations, additions and other changes, when such adjustments are identified, with the exception of retroactivity that can be reasonably estimated. The impact of retroactive rate amendments is generally recorded in the accounting period in which terms to the amendment are finalized, and that the amendment is executed. Any fees paid prior to the month of service are recorded as deferred revenue. Managed care revenues approximated $545.0 million and $559.1 million for the three months ended March 31, 2016 and 2017, respectively. Fee‑For‑Service, Fixed Fee and Cost‑Plus Contracts. The Company has certain contracts with customers under which the Company recognizes revenue as services are performed and as costs are incurred. This includes revenues received in relation to the Patient Protection and Affordable Care Act health insurer fee (“HIF fee”) billed on a cost reimbursement basis. The Consolidated Appropriations Act of 2016 imposed a one-year moratorium on the HIF fee, suspending its application for 2017. Revenues from these contracts approximated $103.0 million and $143.7 million for the three months ended March 31, 2016 and 2017, respectively. Rebate Revenue. The Company administers a rebate program for certain clients through which the Company coordinates the achievement, calculation and collection of rebates and administrative fees from pharmaceutical manufacturers on behalf of clients. Each period, the Company estimates the total rebates earned based on actual volumes of pharmaceutical purchases by the Company’s clients, as well as historical and/or anticipated sharing percentages. The Company earns fees based upon the volume of rebates generated for its clients. The Company does not record as rebate revenue any rebates that are passed through to its clients. Total rebate revenues approximated $19.8 million and $22.3 million for the three months ended March 31, 2016 and 2017, respectively. In relation to the Company’s PBM business, the Company administers rebate programs through which it receives rebates from pharmaceutical manufacturers that are shared with its customers. The Company recognizes rebates when the Company is entitled to them and when the amounts of the rebates are determinable. The amount recorded for rebates earned by the Company from the pharmaceutical manufacturers is recorded as a reduction of cost of goods sold. PBM and Dispensing Revenue Pharmacy Benefit Management Revenue. The Company recognizes PBM revenue, which consists of a negotiated prescription price (ingredient cost plus dispensing fee), co‑payments collected by the pharmacy and any associated administrative fees, when claims are adjudicated. The Company recognizes PBM revenue on a gross basis (i.e. including drug costs and co‑payments) as it is acting as the principal in the arrangement and is contractually obligated to its clients and network pharmacies, which is a primary indicator of gross reporting. In addition, the Company is solely responsible for the claims adjudication process, negotiating the prescription price for the pharmacy, collection of payments from the client for drugs dispensed by the pharmacy, and managing the total prescription drug relationship with the client’s members. If the Company enters into a contract where it is only an administrator, and does not assume any of the risks previously noted, revenue will be recognized on a net basis. PBM revenues approximated $344.5 million and $432.9 million for the three months ended March 31, 2016 and 2017, respectively. Dispensing Revenue. The Company recognizes dispensing revenue, which includes the co‑payments received from members of the health plans the Company serves, when the specialty pharmaceutical drugs are shipped. At the time of shipment, the earnings process is complete; the obligation of the Company’s customer to pay for the specialty pharmaceutical drugs is fixed, and, due to the nature of the product, the member may neither return the specialty pharmaceutical drugs nor receive a refund. Revenues from the dispensing of specialty pharmaceutical drugs on behalf of health plans were $55.3 million and $55.2 million for the three months ended March 31, 2016 and 2017, respectively. Medicare Part D. The Company is contracted with the Centers for Medicare and Medicaid (“CMS”) as a Prescription Drug Plan (“PDP”) to provide prescription drug benefits to Medicare beneficiaries. Net revenues include premiums earned by the PDP, which includes a direct premium paid by CMS and a beneficiary premium paid by the PDP member. In cases of low-income members, the beneficiary premium may be subsidized by CMS. The Company recognizes premium revenues on a monthly basis on a per member basis for covered members. In addition to these premiums, net revenue includes certain payments from the members based on the members’ actual prescription claims, including co-payments, coverage gap benefits, deductibles and co-insurance (collectively, “Member Responsibilities”). The Company receives a prospective subsidy payment from CMS each month to subsidize a portion of the Member Responsibilities for low-income members. If the prospective subsidy differs from actual prescription claims, the difference is recorded as either a receivable or payable on the consolidated balance sheets. The Company assumes no risk for the Member Responsibilities, including the portion subsidized by CMS. The Company recognizes revenues for Member Responsibilities, including the portion subsidized by CMS, on a gross basis as claims are adjudicated. CMS also provides an annual risk corridor adjustment which compares the Company’s actual drug costs incurred to the premiums received. Based on the risk corridor adjustment, the Company may receive additional premiums from CMS or may be required to refund CMS a portion of previously received premiums. The Company calculates the risk corridor adjustment on a quarterly basis and the amount is included in net revenues with a corresponding receivable or payable on the consolidated balance sheets. Medicare Part D revenues approximated $50.3 million and $111.6 million for the three months ended March 31, 2016 and 2017, respectively, including co-payments, which are included in PBM revenues above, of $9.5 million and $23.4 million for the three months ended March 31, 2016 and 2017, respectively. As of December 31, 2016 and March 31, 2017, the Company had $117.5 million and $126.7 million, respectively, in net receivables associated with Medicare Part D from CMS and other parties related to this business. Significant Customers Customers exceeding ten percent of the consolidated Company’s net revenues The Company has a contract with the State of Florida to provide integrated healthcare services to Medicaid enrollees in the state of Florida (“the Florida Contract”). The Florida Contract began on February 4, 2014 and extends through December 31, 2018, unless sooner terminated by the parties. The State of Florida has the right to terminate the Florida Contract with cause, as defined, upon 24 hour notice and upon 30 days notice for any reason or no reason at all. The Florida Contract generated net revenues of $130.8 million and $145.7 million for the three months ended March 31, 2016 and 2017, respectively. Customers exceeding ten percent of segment net revenues In addition to the Florida Contract, previously discussed, the following customers generated in excess of ten percent of net revenues for the respective segment for the three months ended March 31, 2016 and 2017 (in thousands): Segment Term Date 2016 2017 Healthcare None Pharmacy Management Customer A December 31, 2016 (1) $ 99,959 $ 1,730 * Customer B June 30, 2019 — 92,712 * Revenue amount did not exceed 10 percent of net revenues for the respective segment for the year presented. Amount is shown for comparative purposes only. (1) A vast majority of this customer’s revenues were generated from drug acquisition costs related to PBM services which terminated on September 1, 2016. The Company continues to provide specialty distribution services to the customer and is in negotiations with the customer to extend this contract. Concentration of Business The Company also has a significant concentration of business with various counties in the State of Pennsylvania (the “Pennsylvania Counties”) which are part of the Pennsylvania Medicaid program, with members under its contract with CMS and with various agencies and departments of the United States federal government. Net revenues from the Pennsylvania Counties in the aggregate totaled $110.0 million and $109.9 million for the three months ended March 31, 2016 and 2017, respectively. Net revenues from members in relation to its contract with CMS in aggregate totaled $50.3 million and $111.6 million for the three months ended March 31, 2016 and 2017, respectively. Net revenues from contracts with various agencies and departments of the United States federal government in aggregate totaled $42.5 million and $88.0 million for the three months ended March 31, 2016 and 2017, respectively. The Company’s contracts with customers typically have terms of one to three years, and in certain cases contain renewal provisions (at the customer’s option) for successive terms of between one and two years (unless terminated earlier). Substantially all of these contracts may be immediately terminated with cause and many of the Company’s contracts are terminable without cause by the customer or the Company either upon the giving of requisite notice and the passage of a specified period of time (typically between 60 and 180 days) or upon the occurrence of other specified events. In addition, the Company’s contracts with federal, state and local governmental agencies generally are conditioned on legislative appropriations. These contracts generally can be terminated or modified by the customer if such appropriations are not made.
Fair Value Measurements	Fair Value Measurements The Company has certain assets and liabilities that are required to be measured at fair value on a recurring basis. These assets and liabilities are to be measured using inputs from the three levels of the fair value hierarchy, which are as follows: Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). Level 3—Unobservable inputs that reflect the Company’s assumptions about the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including the Company’s data. In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company’s assets and liabilities that are required to be measured at fair value as of December 31, 2016 and March 31, 2017 (in thousands): December 31, 2016 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ — $ 177,495 $ — $ 177,495 Investments: U.S. Government and agency securities 5,817 — — 5,817 Obligations of government-sponsored enterprises (2) — 25,767 — 25,767 Corporate debt securities — 272,219 — 272,219 Certificates of deposit — 1,450 — 1,450 Total assets held at fair value $ 5,817 $ 476,931 $ — $ 482,748 Liabilities Contingent consideration $ — $ — $ 11,153 $ 11,153 Total liabilities held at fair value $ — $ — $ 11,153 $ 11,153 March 31, 2017 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (3) $ — $ 112,980 $ — $ 112,980 Investments: U.S. Government and agency securities 5,704 — — 5,704 Obligations of government-sponsored enterprises (2) — 28,110 — 28,110 Corporate debt securities — 273,391 — 273,391 Taxable municipal bonds — 5,045 — 5,045 Certificates of deposit — 1,450 — 1,450 Total assets held at fair value $ 5,704 $ 420,976 $ — $ 426,680 Liabilities Contingent consideration $ — $ — $ 11,104 $ 11,104 Total liabilities held at fair value $ — $ — $ 11,104 $ 11,104 (1) Excludes $127.0 million of cash held in bank accounts by the Company. (2) Includes investments in notes issued by the Federal Home Loan Bank, Federal Farm Credit Banks and Federal National Mortgage Association. (3) Excludes $160.6 million of cash held in bank accounts by the Company. For the three months ended March 31, 2017, the Company has not transferred any assets between fair value measurement levels. The carrying values of financial instruments, including accounts receivable, accounts payable and revolving loan borrowings, approximate their fair values due to their short-term maturities. The estimated fair value of the Company’s term loans of $612.5 million as of March 31, 2017 was based on current interest rates for similar types of borrowings and is in Level 2 of the fair value hierarchy. The estimated fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future. All of the Company’s investments are classified as “available-for-sale” and are carried at fair value. The contingent consideration liability reflects the fair value of potential future payments related to the Cobalt Therapeutics, LLC (“Cobalt”), The Management Group, LLC (“TMG”) and Armed Forces Services Corporation (“AFSC”) acquisitions. The Cobalt, TMG and AFSC purchase agreements provide for potential contingent payments of up to a maximum of $6.0 million, $15.0 million and $10.0 million, respectively. As of March 31, 2017, there are remaining potential future payments of $5.0 million, $15.0 million and $10.0 million for Cobalt, TMG and AFSC, respectively. As of the balance sheet date, the fair value of contingent consideration is determined based on probabilities of payment, projected payment dates, discount rates, projected operating income, member engagement and new contract execution. The Company used a probability weighted discounted cash flow method to arrive at the fair value of the contingent consideration. As the fair value measurement for the contingent consideration is based on inputs not observed in the market, these measurements are classified as Level 3 measurements as defined by fair value measurement guidance. The unobservable inputs used in the fair value measurement include the discount rate, probabilities of payment and projected payment dates. As of December 31, 2016 and March 31, 2017, the Company estimated undiscounted future contingent payments of $12.7 million and $12.2 million, respectively. The net decrease was mainly due to changes in operational forecasts and probabilities of payment. As of March 31, 2017, the aggregate amounts and projected dates of future potential contingent consideration payments were $10.2 million in 2017 and $2.0 million in 2020. As of December 31, 2016, the fair value of the short-term and long-term contingent consideration was $9.4 million and $1.8 million, respectively, and is included in short-term contingent consideration and long-term contingent consideration, respectively, in the consolidated balance sheets. As of March 31, 2017, the fair value of the short-term and long-term contingent consideration was $9.8 million and $1.3 million, respectively, and is included in short-term contingent consideration and long-term contingent consideration, respectively, in the consolidated balance sheets. The change in the fair value of the contingent consideration was $(0.3) million and $(0.1) million for the three months ended March 31, 2016 and 2017, respectively, which were recorded as direct service costs and other operating expenses in the consolidated statements of income. The decreases were mainly a result of changes in present value and the estimated undiscounted liability. The following table summarizes the Company’s liability for contingent consideration for the three months ended March 31, 2017 (in thousands): March 31, 2017 Balance as of beginning of period $ 11,153 Changes in fair value (49) Payments — Balance as of end of period $ 11,104
Cash and Cash Equivalents	Cash and Cash Equivalents Cash equivalents are short-term, highly liquid interest-bearing investments with maturity dates of three months or less when purchased, consisting primarily of money market instruments. At March 31, 2017, the Company’s excess capital and undistributed earnings for the Company’s regulated subsidiaries of $121.5 million are included in cash and cash equivalents.
Investments	Investments If a debt security is in an unrealized loss position and the Company has the intent to sell the debt security, or it is more likely than not that the Company will have to sell the debt security before recovery of its amortized cost basis, the decline in value is deemed to be other‑than‑temporary and is recorded to other‑than‑temporary impairment losses recognized in income in the consolidated statements of income. For impaired debt securities that the Company does not intend to sell or it is more likely than not that the Company will not have to sell such securities, but the Company expects that it will not fully recover the amortized cost basis, the credit component of the other‑ than‑temporary impairment is recognized in other‑than‑temporary impairment losses recognized in income in the consolidated statements of income and the non‑credit component of the other‑than‑temporary impairment is recognized in other comprehensive income. As of December 31, 2016 and March 31, 2017, there were no unrealized losses that the Company determined to be other‑than‑temporary. No realized gains or losses were recorded for the three months ended March 31, 2016 or 2017. The following is a summary of short‑term and long‑term investments at December 31, 2016 and March 31, 2017 (in thousands): December 31, 2016 Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value U.S. Government and agency securities $ 5,832 $ — $ (15) $ 5,817 Obligations of government-sponsored enterprises (1) 25,779 2 (14) 25,767 Corporate debt securities 272,479 1 (261) 272,219 Certificates of deposit 1,450 — — 1,450 Total investments at December 31, 2016 $ 305,540 $ 3 $ (290) $ 305,253 March 31, 2017 Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value U.S. Government and agency securities $ 5,719 $ — $ (15) $ 5,704 Obligations of government-sponsored enterprises (1) 28,132 — (22) 28,110 Corporate debt securities 273,668 35 (312) 273,391 Taxable municipal bonds 5,051 — (6) 5,045 Certificates of deposit 1,450 — — 1,450 Total investments at March 31, 2017 $ 314,020 $ 35 $ (355) $ 313,700 (1) Includes investments in notes issued by the Federal Home Loan Bank, Federal National Mortgage Association and Federal Farm Credit Banks. The maturity dates of the Company’s investments as of March 31, 2017 are summarized below (in thousands): Amortized Estimated Cost Fair Value 2017 $ 237,361 $ 237,174 2018 76,253 76,120 2019 406 406 Total investments at March 31, 2017 $ 314,020 $ 313,700
Income Taxes	Income Taxes The Company’s effective income tax rates were 47.3 percent and 40.3 percent for the three months ended March 31, 2016 and 2017, respectively. These rates differ from the federal statutory income tax rate primarily due to state income taxes, permanent differences between book and tax income, and changes to recorded tax contingencies and valuation allowances. The Company also accrues interest and penalties related to uncertain tax positions in its provision for income taxes. The effective income tax rate for the three months ended March 31, 2017 is lower than the effective rate for the three months ended March 31, 2016 mainly due to the suspension for 2017 of the non-deductible HIF Fees. The Company files a consolidated federal income tax return with most of its eighty-percent or more controlled subsidiaries. The Company files a separate consolidated federal income tax return for AlphaCare of New York, Inc. (“AlphaCare”) and its parent, AlphaCare Holdings, Inc. The Company and its subsidiaries also file income tax returns in various state and local jurisdictions. The Company is no longer subject to federal, state or local income tax assessments for years ended prior to 2013.
Net Operating Loss Carryforwards	Net Operating Loss Carryforwards The Company has $1.8 million of federal net operating loss carryforwards (“NOLs”) available to reduce its federal consolidated taxable income in 2017 and subsequent years. These NOLs will expire in 2018 and 2019 if not used and are subject to examination and adjustment by the Internal Revenue Service (“IRS”). AlphaCare has $41.0 million of federal NOLs available to reduce its consolidated taxable income in 2017 and subsequent years. These NOLs will expire in 2033 through 2036 if not used and are subject to examination and adjustment by the IRS. The Company and its subsidiaries also have $103.6 million of state NOLs available to reduce state taxable income at certain subsidiaries in 2017 and subsequent years. Most of these state NOLs will expire in 2017 through 2035 if not used and are subject to examination and adjustment by the respective state tax authorities. Deferred tax assets as of December 31, 2016 and March 31, 2017 are shown net of valuation allowances of $17.1 million and $17.7 million, respectively. These valuation allowances mostly relate to uncertainties regarding the eventual realization of the AlphaCare federal NOLs and certain state NOLs. Determination of the amount of deferred tax assets considered realizable requires significant judgment and estimation regarding the forecasts of future taxable income which are consistent with the plans and estimates the Company uses to manage the underlying businesses. Although consideration is also given to potential tax planning strategies which might be available to improve the realization of deferred tax assets, none were identified which were both prudent and reasonable. Future changes in the estimated realizable portion of deferred tax assets could materially affect the Company’s financial condition and results of operations.
Health Care Reform	Health Care Reform The Patient Protection and the Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Health Reform Law”), imposes a mandatory annual fee on health insurers for each calendar year beginning on or after January 1, 2014. The Company has obtained rate adjustments from customers which the Company expects will cover the direct costs of these fees and the impact from non‑deductibility of such fees for federal and state income tax purposes. To the extent the Company has such a customer that does not renew, there may be some impact due to taxes paid where the timing and amount of recoupment of these additional costs is uncertain. In the event the Company is unable to obtain rate adjustments to cover the financial impact of the annual fee, the fee may have a material impact on the Company. The Consolidated Appropriations Act of 2016 imposed a one-year moratorium on the HIF fee, suspending its application for 2017. The HIF fee is scheduled to go back into effect for 2018. For 2016 the HIF fees were $26.5 million which has been paid. Of this amount, $7.1 million was expensed in the three months ended March 31, 2016, which was included in direct service costs and other operating expenses in the consolidated statements of income. The Company recorded revenues of $11.3 million in the three months ended March 31, 2016, associated with the accrual for the reimbursement of the economic impact of the HIF fees from its customers. As of March 31, 2017, the Company has a $13.3 million receivable related to a terminated contract that the customer has expressed their unwillingness to pay, however the Company believes the amount is collectible and has not established a reserve.
Stock Compensation	Stock Compensation At December 31, 2016 and March 31, 2017, the Company had equity‑based employee incentive plans, which are described more fully in Note 6 in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2016, which was filed with the SEC on February 24, 2017. The Company recorded stock compensation expense of $8.9 million and $10.1 million for the three months ended March 31, 2016 and 2017, respectively. Stock compensation expense recognized in the consolidated statements of income for the three months ended March 31, 2016 and 2017 has been reduced for forfeitures, estimated at between zero and four percent for both periods. The weighted average grant date fair value of all stock options granted during the three months ended March 31, 2017 was $17.10 as estimated using the Black‑Scholes‑Merton option pricing model, which also assumed an expected volatility of 27.8 percent based on the historical volatility of the Company’s stock price. For the three months ended March 31, 2016, the benefit of tax deductions in excess of recognized stock compensation expense (net of deficiencies) was $0.3 million, which was reported as a change to additional paid‑in capital. For the three months ended March 31, 2017, the benefit of tax deductions in excess of recognized stock compensation expense (net of deficiencies) was $0.9 million. Due to the adoption of ASU 2016-09 in the 4 th quarter of 2016, this net benefit is reported as a reduction to income tax expense rather than as a change in additional paid-in-capital. Consistent with the adoption of this standard, the net tax benefit is reflected as an operating cash flow rather than a financing cash flow. Summarized information related to the Company’s stock options for the three months ended March 31, 2017 is as follows: Weighted Average Exercise Options Price Outstanding, beginning of period 2,843,177 $ 57.42 Granted 408,096 69.21 Forfeited (4,750) 61.85 Exercised (100,054) 50.81 Outstanding, end of period 3,146,469 $ 59.16 Vested and expected to vest at end of period 3,114,864 $ 59.09 Exercisable, end of period 2,016,716 $ 55.90 All of the Company’s options granted during the three months ended March 31, 2017 vest ratably on each anniversary date over the three years subsequent to grant and have a ten year life. Summarized information related to the Company’s nonvested restricted stock awards (“RSAs”) for the three months ended March 31, 2017 is as follows: Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 615,472 $ 58.71 Awarded — — Vested — — Forfeited — — Outstanding, ending of period 615,472 58.71 Summarized information related to the Company’s nonvested restricted stock units (“RSUs”) for the three months ended March 31, 2017 is as follows: Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 200,178 $ 61.65 Awarded 105,280 68.50 Vested (117,069) 60.52 Forfeited (3,295) 63.26 Outstanding, ending of period 185,094 66.23 The vesting period for RSAs ranges from 12 months to 42 months. In general, RSUs vest ratably on each anniversary over the three years subsequent to grant. Summarized information related to the Company’s nonvested restricted performance stock units (“PSUs”) for the three months ended March 31, 2017 is as follows: Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 102,977 $ Awarded 101,989 Vested — — Forfeited — — Outstanding, end of period 204,966 The weighted average estimated fair value of the PSUs granted in the three months ended March 31, 2017 was $76.24, which was derived from a Monte Carlo simulation. Significant assumptions utilized in estimating the value of the awards granted include an expected dividend yield of 0%, a risk free rate of 1.54%, and expected volatility of 18% to 61% (average of 33%). The PSUs granted in the three months ended March 31, 2017, will entitle the grantee to receive a number of shares of the Company’s common stock determined over a three-year performance period ending on December 31, 2019 and vesting on March 3, 2020, the settlement date, provided the grantee remains in the service of the Company on the settlement date. The Company expenses the cost of these awards ratably over the requisite service period. The number of shares for which the PSUs will be settled will be a percentage of shares for which the award is targeted and will depend on the Company’s total shareholder return (as defined below), expressed as a percentile ranking of the Company’s total shareholder return as compared to the Company’s peer group (as defined below). The number of shares for which the PSUs will be settled vary from zero to 200 percent of the shares specified in the grant. Total shareholder return is determined by dividing the average share value of the Company’s common stock over the 30 trading days preceding January 1, 2020 by the average share value of the Company’s common stock over the 30 trading days beginning on January 1, 2017, with a deemed reinvestment of any dividends declared during the performance period. The Company’s peer group includes 51 companies which comprise the S&P Health Care Services Industry Index, which was selected by the compensation committee of the Company’s board of directors and includes a range of healthcare companies operating in several business segments.
Long Term Debt and Capital Lease Obligations	Long Term Debt and Capital Lease Obligations On July 23, 2014, the Company entered into a $500.0 million Credit Agreement with various lenders that provides for Magellan Rx Management, Inc. (a wholly owned subsidiary of Magellan Health, Inc.) to borrow up to $250.0 million of revolving loans, with a sublimit of up to $70.0 million for the issuance of letters of credit for the account of the Company, and a term loan in an original aggregate principal amount of $250.0 million (the “2014 Credit Facility”). On December 2, 2015, the Company entered into an amendment to the 2014 Credit Facility under which Magellan Pharmacy Services, Inc. (a wholly owned subsidiary of Magellan Health, Inc.) became a party to the $500.0 million Credit Agreement as the borrower and assumed all of the obligations of Magellan Rx Management, Inc. The 2014 Credit Facility is guaranteed by substantially all of the non-regulated subsidiaries of the Company and will mature on July 23, 2019; however, the Company holds an option to extend the 2014 Credit Facility for an additional one year period. Under the 2014 Credit Facility, the annual interest rate on revolving and term loan borrowings is equal to (i) in the case of base rate loans, the sum of a borrowing margin ranging from 0.50 percent to 1.00 percent plus the higher of the prime rate, one-half of one percent in excess of the overnight “federal funds” rate, or the Eurodollar rate for one month plus 1.00 percent, or (ii) in the case of Eurodollar rate loans, the sum of a borrowing margin ranging from 1.50 percent to 2.00 percent plus the Eurodollar rate for the selected interest period. The Company has the option to borrow in base rate loans or Eurodollar rate loans at its discretion, with the borrowing margin for these loans adjusted from time to time based on the Company’s total leverage ratio. Letters of credit issued bear interest equal to the borrowing margin for Eurodollar loans that ranges from 1.50 percent to 2.00 percent, with the commitment commission on the unused revolving loan commitment ranging from 0.20 percent to 0.35 percent. These letter of credit and commitment commission rates are adjusted from time to time based on the Company’s total leverage ratio. Under the 2014 Credit Facility, on September 30, 2014, the Company completed a draw-down of the $250.0 million term loan (the “2014 Term Loan”). The borrowings have been maintained as a Eurodollar loan. The 2014 Term Loan is subject to certain quarterly amortization payments. As of March 31, 2017 the remaining balance on the 2014 Term Loan was $212.5 million. The 2014 Term Loan will mature on July 23, 2019. As of March 31, 2017, the 2014 Term Loan bore interest at a rate of 1.625 percent plus the London Interbank Offered Rate (“LIBOR”), which was equivalent to a total interest rate of approximately 2.607 percent. For the three months ended March 31, 2017, the weighted average interest rate was approximately 2.404 percent. On June 27, 2016, the Company entered into a $200.0 million Credit Agreement with various lenders that provides for a $200.0 million term loan (the “2016 Term Loan”) to Magellan Pharmacy Services, Inc. (the “2016 Credit Facility”). The 2016 Credit Facility is guaranteed by substantially all of the non-regulated subsidiaries of the Company and will mature on December 29, 2017. Under the 2016 Credit Facility, the annual interest rate on the term loan is equal to (i) in the case of base rate loans, the sum of a borrowing margin ranging from 0.25 percent to 0.75 percent plus the higher of the prime rate, one-half of one percent in excess of the overnight “federal funds” rate, or the Eurodollar rate for one month plus 1.00 percent, or (ii) in the case of Eurodollar rate loans, the sum of a borrowing margin ranging from 1.25 percent to 1.75 percent plus the Eurodollar rate for the selected interest period. The Company has the option to borrow in base rate loans or Eurodollar rate loans at its discretion, with the borrowing margin for these loans adjusted from time to time based on the Company’s total leverage ratio. The borrowings under the 2016 Term Loan have been maintained as a Eurodollar loan. As of March 31, 2017 the remaining balance on the 2016 Term Loan was $200.0 million and bore interest at a rate of approximately 1.375 percent plus the LIBOR, which was equivalent to a total interest rate of approximately 2.357 percent. For the three months ended March 31, 2017, the weighted average interest rate was approximately 2.154 percent. On January 10, 2017, the Company entered into a Credit Agreement with various lenders that provides for a $200.0 million delayed draw term loan (the “2017 Term Loan”) to Magellan Pharmacy Services, Inc. (the “2017 Credit Facility”). The 2017 Credit Facility is guaranteed by substantially all of the non-regulated subsidiaries of the Company and will mature on December 29, 2017. Under the 2017 Credit Facility, the annual interest rate on the term loan borrowing is equal to (i) in the case of base rate loans, the sum of an initial borrowing margin of 0.625 percent plus the higher of the prime rate, one-half of one percent in excess of the overnight “federal funds” rate, or the Eurodollar rate for one month plus 1.00 percent, or (ii) in the case of Eurodollar rate loans, the sum of an initial borrowing margin of 1.625 percent plus the Eurodollar rate for the selected interest period. The borrowing margin is subject to adjustment based on the leverage ratio of the Company. The Company has the option to borrow in base rate loans or Eurodollar rate loans at its discretion. The commitment commission on the 2017 Credit Facility is 0.25 percent of the unused commitment, which rate shall be adjusted from time to time based on the Company's total leverage ratio. On January 10, 2017, the Company completed a $100.0 million draw of its available $200.0 million delayed draw term loan under the 2017 Credit Facility. An additional $100.0 million draw under the 2017 Credit Facility was completed on March 14, 2017. As of March 31, 2017 the remaining balance on the 2017 Term Loan was $200.0 million and bore interest at a rate of approximately 1.625 percent plus the LIBOR, which was equivalent to a total interest rate of approximately 2.516 percent. During the period the term loan was outstanding, from January 10, 2017 through March 31, 2017, the weighted average interest rate was approximately 2.436 percent. As of March 31, 2017, the contractual maturities of the term loans under the 2014 Credit Facility, 2016 Credit Facility and the 2017 Credit Facility (collectively, the “Credit Facilities”) were as follows: 2017—$418.8 million; 2018—$25.0 million; and 2019—$168.7 million. The Company had $33.7 million and $27.7 million of letters of credit outstanding at December 31, 2016 and March 31, 2017, respectively. Beginning in April 2016, due to the timing of working capital needs, the Company has periodically borrowed from the revolving loan under the 2014 Credit Facility. The revolving loan borrowings have been in the form of Eurodollar rate loans and totaled $175.0 million at December 31, 2016. At March 31, 2017, the Company had no revolving loan borrowings, resulting in a borrowing capacity of $222.3 million under the 2014 credit facility. There were $26.0 million and $25.4 million of capital lease obligations at December 31, 2016 and March 31, 2017, respectively. The Company’s capital lease obligations represent amounts due under leases for certain properties, computer software and equipment. Included in long-term debt and capital lease obligations as of December 31, 2016 and March 31, 2017 are deferred loan issuance costs of $1.4 million and $1.6 million, respectively.
Redeemable Non-Controlling Interest	Redeemable Non‑Controlling Interest As of March 31, 2017, the Company held an equity interest of approximately 84% in AlphaCare Holdings. The other shareholders of AlphaCare Holdings have the right to exercise put options requiring the Company to purchase all or any portion of the remaining shares. In addition, the Company has the right to purchase all remaining shares. Non‑controlling interests with redemption features, such as put options, that are not solely within the Company’s control are considered redeemable non‑controlling interests. Redeemable non‑controlling interest is considered to be temporary and is therefore reported in a mezzanine level between liabilities and stockholders’ equity on the Company’s consolidated balance sheet at the greater of the initial carrying amount adjusted for the non‑controlling interest’s share of net income or loss or its redemption value. The carrying value of the non‑controlling interest as of December 31, 2016 and March 31, 2017 was $4.8 million and $4.5 million, respectively. The $(0.3) million decrease in carrying value is a result of operating losses. The Company evaluates the redemption value on a quarterly basis. If the redemption value is greater than the carrying value, the Company adjusts the carrying amount of the non‑controlling interest to equal the redemption value at the end of each reporting period. Under this method, this is viewed at the end of the reporting period as if it were also the redemption date for the non‑controlling interest. The Company will reflect redemption value adjustments in the earnings per share (“EPS”) calculation if redemption value is in excess of the carrying value of the non‑controlling interest. As of March 31, 2017, the carrying value of the non‑controlling interest exceeded the redemption value and therefore no adjustment to the carrying value was required.
Reclassifications	Reclassifications Certain prior year amounts have been reclassified to conform with the current year presentation. The Company elected to early adopt ASUs 2016-09 and 2016-18 effective for the fiscal year ended December 31, 2016 and applied them retrospectively. Adoption of these standards resulted in a net reduction to the Company’s cash flows of $52.7 million for the three months ended March 31, 2016. In addition, as a result of the adoption of ASU 2016-09, the diluted weighted average shares outstanding as of March 31, 2016 have been adjusted. There was no impact to the net income per common share – diluted.

General (Tables)

General (Tables)	3 Months Ended
	Mar. 31, 2017
General
Schedule of customers generating in excess of ten percent of net revenues for respective segment	In addition to the Florida Contract, previously discussed, the following customers generated in excess of ten percent of net revenues for the respective segment for the three months ended March 31, 2016 and 2017 (in thousands): Segment Term Date 2016 2017 Healthcare None Pharmacy Management Customer A December 31, 2016 (1) $ 99,959 $ 1,730 * Customer B June 30, 2019 — 92,712 * Revenue amount did not exceed 10 percent of net revenues for the respective segment for the year presented. Amount is shown for comparative purposes only. (1) A vast majority of this customer’s revenues were generated from drug acquisition costs related to PBM services which terminated on September 1, 2016. The Company continues to provide specialty distribution services to the customer and is in negotiations with the customer to extend this contract.
Schedule of fair value of financial assets and liabilities	In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company’s assets and liabilities that are required to be measured at fair value as of December 31, 2016 and March 31, 2017 (in thousands): December 31, 2016 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (1) $ — $ 177,495 $ — $ 177,495 Investments: U.S. Government and agency securities 5,817 — — 5,817 Obligations of government-sponsored enterprises (2) — 25,767 — 25,767 Corporate debt securities — 272,219 — 272,219 Certificates of deposit — 1,450 — 1,450 Total assets held at fair value $ 5,817 $ 476,931 $ — $ 482,748 Liabilities Contingent consideration $ — $ — $ 11,153 $ 11,153 Total liabilities held at fair value $ — $ — $ 11,153 $ 11,153 March 31, 2017 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents (3) $ — $ 112,980 $ — $ 112,980 Investments: U.S. Government and agency securities 5,704 — — 5,704 Obligations of government-sponsored enterprises (2) — 28,110 — 28,110 Corporate debt securities — 273,391 — 273,391 Taxable municipal bonds — 5,045 — 5,045 Certificates of deposit — 1,450 — 1,450 Total assets held at fair value $ 5,704 $ 420,976 $ — $ 426,680 Liabilities Contingent consideration $ — $ — $ 11,104 $ 11,104 Total liabilities held at fair value $ — $ — $ 11,104 $ 11,104 (1) Excludes $127.0 million of cash held in bank accounts by the Company. (2) Includes investments in notes issued by the Federal Home Loan Bank, Federal Farm Credit Banks and Federal National Mortgage Association. (3) Excludes $160.6 million of cash held in bank accounts by the Company.
Summary of the Company's liability for contingent consideration	The following table summarizes the Company’s liability for contingent consideration for the three months ended March 31, 2017 (in thousands): March 31, 2017 Balance as of beginning of period $ 11,153 Changes in fair value (49) Payments — Balance as of end of period $ 11,104
Summary of short-term and long-term investments	The following is a summary of short‑term and long‑term investments at December 31, 2016 and March 31, 2017 (in thousands): December 31, 2016 Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value U.S. Government and agency securities $ 5,832 $ — $ (15) $ 5,817 Obligations of government-sponsored enterprises (1) 25,779 2 (14) 25,767 Corporate debt securities 272,479 1 (261) 272,219 Certificates of deposit 1,450 — — 1,450 Total investments at December 31, 2016 $ 305,540 $ 3 $ (290) $ 305,253 March 31, 2017 Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value U.S. Government and agency securities $ 5,719 $ — $ (15) $ 5,704 Obligations of government-sponsored enterprises (1) 28,132 — (22) 28,110 Corporate debt securities 273,668 35 (312) 273,391 Taxable municipal bonds 5,051 — (6) 5,045 Certificates of deposit 1,450 — — 1,450 Total investments at March 31, 2017 $ 314,020 $ 35 $ (355) $ 313,700 (1) Includes investments in notes issued by the Federal Home Loan Bank, Federal National Mortgage Association and Federal Farm Credit Banks.
Summary of maturity dates of investments	The maturity dates of the Company’s investments as of March 31, 2017 are summarized below (in thousands): Amortized Estimated Cost Fair Value 2017 $ 237,361 $ 237,174 2018 76,253 76,120 2019 406 406 Total investments at March 31, 2017 $ 314,020 $ 313,700
Schedule of stock option activity	Summarized information related to the Company’s stock options for the three months ended March 31, 2017 is as follows: Weighted Average Exercise Options Price Outstanding, beginning of period 2,843,177 $ 57.42 Granted 408,096 69.21 Forfeited (4,750) 61.85 Exercised (100,054) 50.81 Outstanding, end of period 3,146,469 $ 59.16 Vested and expected to vest at end of period 3,114,864 $ 59.09 Exercisable, end of period 2,016,716 $ 55.90
Schedule of nonvested restricted stock award activity	Summarized information related to the Company’s nonvested restricted stock awards (“RSAs”) for the three months ended March 31, 2017 is as follows: Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 615,472 $ 58.71 Awarded — — Vested — — Forfeited — — Outstanding, ending of period 615,472 58.71
Schedule of nonvested restricted stock units	Summarized information related to the Company’s nonvested restricted stock units (“RSUs”) for the three months ended March 31, 2017 is as follows: Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 200,178 $ 61.65 Awarded 105,280 68.50 Vested (117,069) 60.52 Forfeited (3,295) 63.26 Outstanding, ending of period 185,094 66.23
Schedule of nonvested restricted performance stock units	Summarized information related to the Company’s nonvested restricted performance stock units (“PSUs”) for the three months ended March 31, 2017 is as follows: Weighted Average Grant Date Shares Fair Value Outstanding, beginning of period 102,977 $ Awarded 101,989 Vested — — Forfeited — — Outstanding, end of period 204,966

Net Income per Common Share A16

Net Income per Common Share Attributable to Magellan Health, Inc. (Tables)	3 Months Ended
	Mar. 31, 2017
Net Income per Common Share Attributable to Magellan Health, Inc.
Computation of basic and diluted earnings per share	The following table reconciles income attributable to common shareholders (numerator) and shares (denominator) used in the computations of net income per share attributable to common shareholders (in thousands, except per share data): Three Months Ended March 31, 2016 2017 Numerator: Net income attributable to Magellan Health, Inc. $ 13,237 $ 17,747 Denominator: Weighted average number of common shares outstanding—basic 23,631 23,012 Common stock equivalents—stock options (1) 253 474 Common stock equivalents—RSAs (1) 563 402 Common stock equivalents—RSUs (1) 27 81 Common stock equivalents—PSUs (1) 35 66 Common stock equivalents—employee stock purchase plan 2 3 Weighted average number of common shares outstanding—diluted (1) 24,511 24,038 Net income attributable to Magellan Health, Inc. per common share—basic $ 0.56 $ 0.77 Net income attributable to Magellan Health, Inc. per common share—diluted $ 0.54 $ 0.74 1) During 2016, the Company early adopted ASU 2016-09. As a result, the common stock equivalents and diluted weighted average common shares outstanding as of March 31, 2016 have been adjusted. There was no impact to net income per common share – diluted.

Business Segment Information (T

Business Segment Information (Tables)	3 Months Ended
	Mar. 31, 2017
Business Segment Information
Schedule of operating results by business segment	The following tables summarize, for the periods indicated, operating results by business segment (in thousands): Corporate Pharmacy and Healthcare Management Elimination Consolidated Three Months Ended March 31, 2016 Managed care and other revenue $ 618,928 $ 57,577 $ (44) $ 676,461 PBM and dispensing revenue — 470,234 (29,673) 440,561 Cost of care (457,631) — — (457,631) Cost of goods sold — (443,949) 28,490 (415,459) Direct service costs and other (125,617) (60,841) (5,998) (192,456) Stock compensation expense (1) 2,019 5,422 1,446 8,887 Changes in fair value of contingent consideration (1) (320) 54 — (266) Less: non-controlling interest segment profit (loss) (2) 169 — (4) 165 Segment profit (loss) $ 37,210 $ 28,497 $ (5,775) $ 59,932 Corporate Pharmacy and Healthcare Management Elimination Consolidated Three Months Ended March 31, 2017 Managed care and other revenue $ 665,376 $ 64,180 $ (216) $ 729,340 PBM and dispensing revenue — 606,746 (30,463) 576,283 Cost of care (482,054) — — (482,054) Cost of goods sold — (571,837) 29,204 (542,633) Direct service costs and other (138,968) (75,853) (6,665) (221,486) Stock compensation expense (1) 2,659 5,730 1,751 10,140 Changes in fair value of contingent consideration (1) (49) — — (49) Less: non-controlling interest segment profit (loss) (2) (277) — (1) (278) Segment profit (loss) $ 47,241 $ 28,966 $ (6,388) $ 69,819 (1) Stock compensation expense and changes in the fair value of contingent consideration recorded in relation to the acquisitions are included in direct service costs and other operating expenses; however, these amounts are excluded from the computation of Segment Profit. (2) The non‑controlling portion of AlphaCare’s segment profit (loss) is excluded from the computation of Segment Profit.
Schedule of reconciliation of Segment Profit to income before income taxes	The following table reconciles income before income taxes to Segment Profit (in thousands): Three Months Ended March 31, 2016 2017 Income before income taxes $ 25,404 $ 29,275 Stock compensation expense 8,887 10,140 Changes in fair value of contingent consideration (266) (49) Non-controlling interest segment profit (loss) (165) 278 Depreciation and amortization 25,007 26,976 Interest expense 1,748 4,148 Interest and other income (683) (949) Segment Profit $ 59,932 $ 69,819

Commitments and Contingencies (

Commitments and Contingencies (Tables)	3 Months Ended
	Mar. 31, 2017
October 2015 Share Repurchase Program
Schedule of stock repurchases made	Pursuant to the 2015 Stock Repurchase Program, the Company made purchases as follows (aggregate cost excludes broker commissions and is reflected in millions): Total Number Average of Shares Price Paid Aggregate Period Purchased per Share Cost October 26, 2015 - December 31, 2015 345,044 $ 53.46 $ 18.4 January 1, 2016 - December 31, 2016 1,828,183 58.40 106.8 2,173,227 $ 125.2

General - Revenues and Signific

General - Revenues and Significant Customers (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Net revenues
Managed Care Revenue	$ 559,100	$ 545,000
Fee-For-Service, Fixed Fee and Cost-Plus Contracts Revenue	143,700	103,000
Rebate Revenues	22,300	19,800
PBM Revenue	432,900	344,500
Dispensing Revenue	55,200	55,300
Medicare Part D Revenues	111,600	50,300
Co-payments	23,400	9,500
Medicare Part D Receivables	126,700		$ 117,500
Revenues	$ 1,305,623	1,117,022
Florida Medicaid Contract
Net revenues
Termination notice	1 day
Termination notice period without cause	30 days
Florida Contracts
Net revenues
Revenues	$ 145,700	130,800
Pharmacy Management | Customer A
Net revenues
Revenues	1,730	$ 99,959
Pharmacy Management | Customer B
Net revenues
Revenues	$ 92,712

General - Concentration of Busi

General - Concentration of Business (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Concentration of Business
Net revenue	$ 1,305,623	$ 1,117,022
Minimum
Concentration of Business
Term of Contract	1 year
Term of renewed contract	1 year
Notice period for termination of contract	60 days
Maximum
Concentration of Business
Term of Contract	3 years
Term of renewed contract	2 years
Notice period for termination of contract	180 days
CMS
Concentration of Business
Net revenue	$ 111,600	50,300
Pennsylvania Counties
Concentration of Business
Net revenue	109,900	110,000
Agencies and departments of the United States federal government
Concentration of Business
Net revenue	$ 88,000	$ 42,500

General - Fair Value Measuremen

General - Fair Value Measurements (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Assets
Restricted cash and cash equivalents	$ 73,272	$ 81,776
Investments	313,700	305,253
Cash held in bank accounts	160,600	127,000
Liabilities
Contingent consideration	11,104	11,153
Level 2 | Term Loan
Liabilities
Fair value of debt	612,500
Fair value measured on recurring basis
Assets
Total assets held at fair value	426,680	482,748
Liabilities
Contingent consideration	11,104	11,153
Total liabilities held at fair value	11,104	11,153
Fair value measured on recurring basis | Other than cash held in bank accounts by Company
Assets
Cash and cash equivalents	112,980	177,495
Fair value measured on recurring basis | U.S. Government and agency securities
Assets
Investments	5,704	5,817
Fair value measured on recurring basis | Obligations of government-sponsored enterprises
Assets
Investments	28,110	25,767
Fair value measured on recurring basis | Corporate debt securities
Assets
Investments	273,391	272,219
Fair value measured on recurring basis | Certificates of deposit
Assets
Investments	1,450	1,450
Fair value measured on recurring basis | Taxable municipal bonds
Assets
Investments	5,045
Fair value measured on recurring basis | Level 1
Assets
Total assets held at fair value	5,704	5,817
Fair value measured on recurring basis | Level 1 | U.S. Government and agency securities
Assets
Investments	5,704	5,817
Fair value measured on recurring basis | Level 2
Assets
Total assets held at fair value	420,976	476,931
Fair value measured on recurring basis | Level 2 | Other than cash held in bank accounts by Company
Assets
Cash and cash equivalents	112,980	177,495
Fair value measured on recurring basis | Level 2 | Obligations of government-sponsored enterprises
Assets
Investments	28,110	25,767
Fair value measured on recurring basis | Level 2 | Corporate debt securities
Assets
Investments	273,391	272,219
Fair value measured on recurring basis | Level 2 | Certificates of deposit
Assets
Investments	1,450	1,450
Fair value measured on recurring basis | Level 2 | Taxable municipal bonds
Assets
Investments	5,045
Fair value measured on recurring basis | Level 3
Liabilities
Contingent consideration	11,104	11,153
Total liabilities held at fair value	$ 11,104	$ 11,153

General - Contingent Considerat

General - Contingent Consideration (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2020	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016	Jul. 01, 2016	Feb. 29, 2016	Jul. 01, 2014
Fair value measurement of contingent consideration
Estimated undiscounted future contingent payments					$ 12,200	$ 12,700
Fair value of short-term contingent consideration					9,761	9,354
Fair value of long-term contingent consideration					1,343	1,799
Fair value of the contingent consideration	$ 11,153			$ 11,153	11,104	$ 11,153
Liability for contingent consideration
Balance as of beginning of period	11,153			11,153
Changes in fair value	(49)
Balance as of end of period	11,104
Forecast
Liability for contingent consideration
Changes in fair value			$ (2,000)	$ (10,200)
Direct service costs and other operating expenses
Liability for contingent consideration
Changes in fair value	$ (100)	$ (300)
Cobalt
Contingent consideration disclosures
Maximum potential contingent payments					5,000				$ 6,000
TMG
Contingent consideration disclosures
Maximum potential contingent payments					15,000			$ 15,000
AFSC
Contingent consideration disclosures
Maximum potential contingent payments					$ 10,000		$ 10,000

General - Cash And Cash Equival

General - Cash And Cash Equivalents (Details) $ in Millions	Mar. 31, 2017USD ($)
Cash and Cash Equivalents
Excess capital and undistributed earnings for regulated subsidiaries included in cash and cash equivalents	$ 121.5

General - Investments (Details)

General - Investments (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Short-term and long-term investments
Other-than-temporary unrealized losses	$ 0		$ 0
Realized gains or losses	0	$ 0
Amortized Cost	314,020		305,540
Gross Unrealized Gains	35		3
Gross Unrealized Losses	(355)		(290)
Estimated Fair Value	313,700		305,253
U.S. Government and agency securities
Short-term and long-term investments
Amortized Cost	5,719		5,832
Gross Unrealized Losses	(15)		(15)
Estimated Fair Value	5,704		5,817
Obligations of government-sponsored enterprises
Short-term and long-term investments
Amortized Cost	28,132		25,779
Gross Unrealized Gains			2
Gross Unrealized Losses	(22)		(14)
Estimated Fair Value	28,110		25,767
Corporate debt securities
Short-term and long-term investments
Amortized Cost	273,668		272,479
Gross Unrealized Gains	35		1
Gross Unrealized Losses	(312)		(261)
Estimated Fair Value	273,391		272,219
Certificates of deposit
Short-term and long-term investments
Amortized Cost	1,450		1,450
Estimated Fair Value	1,450		$ 1,450
Taxable municipal bonds
Short-term and long-term investments
Amortized Cost	5,051
Gross Unrealized Losses	(6)
Estimated Fair Value	$ 5,045

General - Investments by Maturi

General - Investments by Maturity Date (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Amortized Cost
Investments amortized cost maturity dates 2017	$ 237,361
Investments amortized cost maturity dates 2018	76,253
Investment amortized cost maturity dates 2019	406
Amortized Cost	314,020	$ 305,540
Estimated Fair Value
Investments fair value maturity dates 2017	237,174
Investments fair value maturity dates 2018	76,120
Investments fair value maturity dates 2019	406
Estimated Fair Value	$ 313,700	$ 305,253

General - Income Taxes (Details

General - Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Income Taxes
Effective income tax rates (as a percent)	40.30%	47.30%
The ownership percentage for which the entity files a consolidated federal income tax return, low end of range	80.00%
Deferred Tax Assets, Valuation Allowance	$ 17.7		$ 17.1
Federal
Income Taxes
Operating Loss Carryforwards	1.8
State
Income Taxes
Operating Loss Carryforwards	103.6
AlphaCare | Federal
Income Taxes
Operating Loss Carryforwards	$ 41

General - Health Care Reform (D

General - Health Care Reform (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2016	Mar. 31, 2017
General
Health Insurer Fee (HIF) fiscal year annual fees paid during the period		$ 26.5
HIF fees expensed	$ 7.1
Amount of revenues associated with accrual for reimbursement of economic impact of HIF fees from its customers	$ 11.3
Receivables Related To Terminated Contract That Customer Has Expressed Unwillingness To Pay			$ 13.3

General - Stock Compensation (D

General - Stock Compensation (Details)	3 Months Ended
	Mar. 31, 2017USD ($)company$ / sharesshares	Mar. 31, 2016USD ($)
Stock options, Non vested restricted stock awards and nonvested restricted stock units
Stock compensation expense | $	$ 10,100,000	$ 8,900,000
Benefits of tax deductions in excess of recognized stock compensation expense | $	$ 900,000	$ 300,000
Minimum
Stock options, Non vested restricted stock awards and nonvested restricted stock units
Estimated forfeitures (as a percent)	0.00%	0.00%
Maximum
Stock options, Non vested restricted stock awards and nonvested restricted stock units
Estimated forfeitures (as a percent)	4.00%	4.00%
Stock options
Stock options, Non vested restricted stock awards and nonvested restricted stock units
Grants in period, weighted average grant date fair value (in dollars per share)	$ 17.10
Expected volatility (as a percent)	27.80%
Stock option activity
Outstanding, beginning of period (in shares) | shares	2,843,177
Granted (in shares) | shares	408,096
Forfeited (in shares) | shares	(4,750)
Exercised (in shares) | shares	(100,054)
Outstanding, end of period (in shares) | shares	3,146,469
Vested and expected to vest end of period (in shares) | shares	3,114,864
Exercisable, end of period (in shares) | shares	2,016,716
Weighted average exercise price of stock options
Outstanding, beginning of period (in dollars per share)	$ 57.42
Granted (in dollars per share)	69.21
Forfeited (in dollars per share)	61.85
Exercised (in dollars per share)	50.81
Outstanding, end of period (in dollars per share)	59.16
Vested and expected to vest end of period (in dollars per share)	59.09
Exercisable, end of period (in dollars per share)	$ 55.90
Assumptions used for estimating value of awards granted
Vesting period	3 years
Life of options (Expiration period)	10 years
Restricted stock awards
Nonvested restricted stock awards and units
Outstanding, beginning of period (in shares) | shares	615,472
Outstanding, end of period (in shares) | shares	615,472
Weighted average exercise price of nonvested restricted stock award and units
Outstanding, beginning of period (in dollars per share)	$ 58.71
Outstanding, end of period (in dollars per share)	$ 58.71
Restricted stock awards | Minimum
Assumptions used for estimating value of awards granted
Vesting period	12 months
Restricted stock awards | Maximum
Assumptions used for estimating value of awards granted
Vesting period	42 months
Restricted Stock Units (RSUs)
Nonvested restricted stock awards and units
Outstanding, beginning of period (in shares) | shares	200,178
Awarded (in shares) | shares	105,280
Vested (in shares) | shares	(117,069)
Forfeited (in shares) | shares	(3,295)
Outstanding, end of period (in shares) | shares	185,094
Weighted average exercise price of nonvested restricted stock award and units
Outstanding, beginning of period (in dollars per share)	$ 61.65
Awarded (in dollars per share)	68.50
Vested (in dollars per share)	60.52
Forfeited (in dollars per share)	63.26
Outstanding, end of period (in dollars per share)	$ 66.23
Assumptions used for estimating value of awards granted
Vesting period	3 years
Performance Based Restricted Stock Units (“PSUs”)
Nonvested restricted stock awards and units
Outstanding, beginning of period (in shares) | shares	102,977
Awarded (in shares) | shares	101,989
Outstanding, end of period (in shares) | shares	204,966
Estimated fair value | $	$ 76.24
Weighted average exercise price of nonvested restricted stock award and units
Outstanding, beginning of period (in dollars per share)	$ 93.03
Awarded (in dollars per share)	76.24
Outstanding, end of period (in dollars per share)	$ 84.67
Assumptions used for estimating value of awards granted
Vesting period	3 years
Expected dividend yield (as a percent)	0.00%
Risk-free interest rate (as a percent)	1.54%
Expected volatility, minimum (as a percent)	18.00%
Expected volatility, maximum (as a percent)	61.00%
Expected volatility, average (as a percent)	33.00%
Number of trading days considered for average share value	30
Number of companies in peer group | company	51
Performance Based Restricted Stock Units (“PSUs”) | Minimum
Assumptions used for estimating value of awards granted
Percentage of shares to be settled	0.00%
Performance Based Restricted Stock Units (“PSUs”) | Maximum
Assumptions used for estimating value of awards granted
Percentage of shares to be settled	200.00%

General - Long Term Debt and Ca

General - Long Term Debt and Capital Lease Obligation (Details) - USD ($) $ in Thousands	Mar. 14, 2017	Jan. 10, 2017	Sep. 30, 2014	Jul. 23, 2014	Mar. 31, 2017	Dec. 31, 2016	Jun. 27, 2016
Long-term Debt and Capital Lease Obligations
Proceeds from issuance of debt					$ 200,000
Debt disclosures
Capital lease obligations					25,400	$ 26,000
Revolving Loan borrowings
Debt disclosures
Revolving borrowings outstanding					0
Letter of Credit
Debt disclosures
Letters of credit outstanding					27,700	33,700
Term Loan
Long-term Debt, Fiscal Year Maturity
2,017					418,800
2,018					25,000
2,019					168,700
Long term debt and capital lease obligations
Debt disclosures
Deferred loan issuance cost					1,600	1,400
2014 Credit Facility
Long-term Debt and Capital Lease Obligations
Maximum borrowing capacity				$ 500,000
Term of option to extend credit facility				1 year
Debt disclosures
Available borrowing capacity					$ 222,300
2014 Credit Facility | Revolving Loan borrowings
Long-term Debt and Capital Lease Obligations
Maximum borrowing capacity				$ 250,000
Debt disclosures
Revolving borrowings outstanding						$ 175,000
2014 Credit Facility | Letter of Credit
Long-term Debt and Capital Lease Obligations
Maximum borrowing capacity				70,000
2014 Credit Facility | Letter of Credit | Minimum
Long-term Debt and Capital Lease Obligations
Stated interest rate (as a percent)					1.50%
Commitment commission (as a percent)					0.20%
2014 Credit Facility | Letter of Credit | Maximum
Long-term Debt and Capital Lease Obligations
Stated interest rate (as a percent)					2.00%
Commitment commission (as a percent)					0.35%
2014 Credit Facility | Term Loan
Long-term Debt and Capital Lease Obligations
Maximum borrowing capacity				$ 250,000
2014 Credit Facility | 2014 Term Loan
Long-term Debt and Capital Lease Obligations
Amount of term loan borrowings outstanding					$ 212,500
2014 Credit Facility | Revolving and Term Loan Borrowings | Minimum
Long-term Debt and Capital Lease Obligations
Borrowing margin (as a percent)					0.50%
2014 Credit Facility | Revolving and Term Loan Borrowings | Maximum
Long-term Debt and Capital Lease Obligations
Borrowing margin (as a percent)					1.00%
2014 Credit Facility | Overnight Federal Funds rate | Revolving and Term Loan Borrowings
Long-term Debt and Capital Lease Obligations
Basis spread on variable rate (as a percent)					0.50%
2014 Credit Facility | Eurodollar rate for one month | Revolving and Term Loan Borrowings
Long-term Debt and Capital Lease Obligations
Basis spread on variable rate (as a percent)					1.00%
2014 Credit Facility | Eurodollar denominated loans | Eurodollar rate for selected interest period | 2014 Term Loan
Long-term Debt and Capital Lease Obligations
Proceeds from issuance of debt			$ 250,000
Effective interest rate (as a percent)					2.607%
Weighted average interest rate (as a percent)					2.404%
2014 Credit Facility | Eurodollar denominated loans | Eurodollar rate for selected interest period | Revolving and Term Loan Borrowings | Minimum
Long-term Debt and Capital Lease Obligations
Borrowing margin (as a percent)					1.50%
2014 Credit Facility | Eurodollar denominated loans | Eurodollar rate for selected interest period | Revolving and Term Loan Borrowings | Maximum
Long-term Debt and Capital Lease Obligations
Borrowing margin (as a percent)					2.00%
2014 Credit Facility | Eurodollar denominated loans | LIBOR | 2014 Term Loan
Long-term Debt and Capital Lease Obligations
Effective borrowing margin (as a percent)					1.625%
2016 Credit Facility
Long-term Debt and Capital Lease Obligations
Maximum borrowing capacity							$ 200,000
2016 Credit Facility | 2016 Term Loan
Long-term Debt and Capital Lease Obligations
Amount of term loan borrowings outstanding					$ 200,000		$ 200,000
2016 Credit Facility | Revolving and Term Loan Borrowings | Minimum
Long-term Debt and Capital Lease Obligations
Borrowing margin (as a percent)					0.25%
2016 Credit Facility | Revolving and Term Loan Borrowings | Maximum
Long-term Debt and Capital Lease Obligations
Borrowing margin (as a percent)					0.75%
2016 Credit Facility | Overnight Federal Funds rate | Revolving and Term Loan Borrowings
Long-term Debt and Capital Lease Obligations
Basis spread on variable rate (as a percent)					0.50%
2016 Credit Facility | Eurodollar rate for one month | Revolving and Term Loan Borrowings
Long-term Debt and Capital Lease Obligations
Basis spread on variable rate (as a percent)					1.00%
2016 Credit Facility | Eurodollar denominated loans | Eurodollar rate for selected interest period | 2016 Term Loan
Long-term Debt and Capital Lease Obligations
Effective interest rate (as a percent)					2.357%
Weighted average interest rate (as a percent)					2.154%
2016 Credit Facility | Eurodollar denominated loans | Eurodollar rate for selected interest period | Revolving and Term Loan Borrowings | Minimum
Long-term Debt and Capital Lease Obligations
Borrowing margin (as a percent)					1.25%
2016 Credit Facility | Eurodollar denominated loans | Eurodollar rate for selected interest period | Revolving and Term Loan Borrowings | Maximum
Long-term Debt and Capital Lease Obligations
Borrowing margin (as a percent)					1.75%
2016 Credit Facility | Eurodollar denominated loans | LIBOR | 2016 Term Loan
Long-term Debt and Capital Lease Obligations
Effective borrowing margin (as a percent)					1.375%
2017 Credit Facility
Long-term Debt and Capital Lease Obligations
Maximum borrowing capacity		$ 200,000
Commitment commission (as a percent)		0.25%
Proceeds from issuance of debt	$ 100,000	$ 100,000
Amount of term loan borrowings outstanding					$ 200,000
Effective interest rate (as a percent)					2.516%
Weighted average interest rate (as a percent)					2.436%
2017 Credit Facility | Prime rate
Long-term Debt and Capital Lease Obligations
Basis spread on variable rate (as a percent)		0.625%
2017 Credit Facility | Overnight Federal Funds rate
Long-term Debt and Capital Lease Obligations
Basis spread on variable rate (as a percent)		0.50%
2017 Credit Facility | Eurodollar rate for one month
Long-term Debt and Capital Lease Obligations
Basis spread on variable rate (as a percent)		1.00%
2017 Credit Facility | Eurodollar rate for selected interest period
Long-term Debt and Capital Lease Obligations
Basis spread on variable rate (as a percent)		1.625%
2017 Credit Facility | LIBOR
Long-term Debt and Capital Lease Obligations
Effective borrowing margin (as a percent)					1.625%

General - Redeemable Non-Contro

General - Redeemable Non-Controllng Interest (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Redeemable Non-Controlling Interest disclosures
Redeemable non-controlling interest	$ 4,492	$ 4,770
Alpha Care Holdings Inc.
Redeemable Non-Controlling Interest disclosures
Percentage of ownership held by reporting entity	84.00%
Redeemable non-controlling interest	$ 4,500	$ 4,800
Increase (Reduction) in carrying value as a result of operating losses (income)	$ (300)

General - Reclassifications (De

General - Reclassifications (Details) $ in Millions	3 Months Ended
	Mar. 31, 2016USD ($)
ASU 2016-18 | Retrospective early adoption
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating cash flows	$ (52.7)

Net Income per Common Share A32

Net Income per Common Share Attributable to Magellan Helath, Inc (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Numerator:
Net income attributable to Magellan Health, Inc.	$ 17,747	$ 13,237
Denominator:
Weighted average number of common shares outstanding-basic (in shares)	23,012	23,631
Common stock equivalents-stock options (in shares)	474	253
Common stock equivalents-RSAs (in shares)	402	563
Common stock equivalents-RSUs (in shares)	81	27
Common stock equivalents- PSUs( in shares)	66	35
Common stock equivalents-employee stock purchase plan (in shares)	3	2
Weighted average number of common shares outstanding-diluted (in shares)	24,038	24,511
Net income attributable to Magellan Health, Inc. per common share-basic (in dollars per share)	$ 0.77	$ 0.56
Net income attributable to Magellan Health, Inc. per common share-diluted (in dollars per share)	$ 0.74	$ 0.54
Potential dilutive securities excluded from computation of dilutive securities (in shares)	600	1,500

Business Segment Information -

Business Segment Information - Operating Results by Segment (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Operating results by business segment
Managed care and other revenue		$ 729,340	$ 676,461
PBM and dispensing revenue		576,283	440,561
Cost of care		(482,054)	(457,631)
Cost of goods sold		(542,633)	(415,459)
Direct service costs and other	[1],[2]	(221,486)	(192,456)
Stock compensation expense		10,140	8,887
Changes in fair value of contingent consideration		(49)	(266)
Less: non-controlling interest segment profit (loss)		(278)	165
Segment profit (loss)		69,819	59,932
Operating segments | Healthcare
Operating results by business segment
Managed care and other revenue		665,376	618,928
Cost of care		(482,054)	(457,631)
Direct service costs and other		(138,968)	(125,617)
Stock compensation expense		2,659	2,019
Changes in fair value of contingent consideration		(49)	(320)
Less: non-controlling interest segment profit (loss)		(277)	169
Segment profit (loss)		47,241	37,210
Operating segments | Pharmacy Management
Operating results by business segment
Managed care and other revenue		64,180	57,577
PBM and dispensing revenue		606,746	470,234
Cost of goods sold		(571,837)	(443,949)
Direct service costs and other		(75,853)	(60,841)
Stock compensation expense		5,730	5,422
Changes in fair value of contingent consideration			54
Segment profit (loss)		28,966	28,497
Corporate and Elimination
Operating results by business segment
Managed care and other revenue		(216)	(44)
PBM and dispensing revenue		(30,463)	(29,673)
Cost of goods sold		29,204	28,490
Direct service costs and other		(6,665)	(5,998)
Stock compensation expense		1,751	1,446
Less: non-controlling interest segment profit (loss)		(1)	(4)
Segment profit (loss)		$ (6,388)	$ (5,775)
[1]	Includes changes in fair value of contingent consideration of $(266) and $(49) for the three months ended March 31, 2016 and 2017, respectively.
[2]	Includes stock compensation expense of $8,887 and $10,140 for the three months ended March 31, 2016 and 2017, respectively.

Business Segment Information 34

Business Segment Information - Reconciliation of Segment Profit to Income Before Taxes (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Reconciliation of segment profit to income before income taxes
Income before income taxes	$ 29,275	$ 25,404
Stock compensation expense	10,140	8,887
Changes in fair value of contingent consideration	(49)	(266)
Non-controlling interest segment profit (loss)	278	(165)
Depreciation and amortization	26,976	25,007
Interest expense	4,148	1,748
Interest and other income	(949)	(683)
Segment Profit	$ 69,819	$ 59,932

Commitments and Contingencies35

Commitments and Contingencies (Details) - October 2015 Share Repurchase Program - USD ($) $ / shares in Units, $ in Millions	2 Months Ended	4 Months Ended	12 Months Ended	14 Months Ended
	Dec. 31, 2015	Apr. 21, 2017	Dec. 31, 2016	Dec. 31, 2016	Oct. 26, 2015
Stock Repurchases
Amount authorized under stock repurchase plan					$ 200
Share repurchases made in open market (in shares)	345,044	0	1,828,183	2,173,227
Average Price Paid per Share (in dollars per share)	$ 53.46		$ 58.40
Aggregate Cost	$ 18.4		$ 106.8	$ 125.2

Acquisitions (Details)

Acquisitions (Details) - USD ($) $ in Millions	Dec. 13, 2016	Jul. 01, 2016	Mar. 31, 2017
AFSC
Acquisitions
Base purchase price		$ 117.5
Amount of consideration paid in cash		113.5
Maximum potential contingent payments		10	$ 10
Working capital receivable			3.2
AFSC | Restricted Common Stock
Acquisitions
Restricted common stock issued		$ 4
Restricted common stock issued, vesting period		2 years
Veridicus
Acquisitions
Base purchase price	$ 74.5
Decrease in Goodwill due to measurement period adjustment			0.8
Working capital receivable			$ 0.2