| Significant Accounting Policies (Policy) | 3 Months Ended |
| Mar. 31, 2015 |
| Accounting Policies [Abstract] | |
| Cash and Cash Equivalents | Cash and Cash Equivalents |
| Cash equivalents include all highly liquid investments with maturity of three months or less when purchased. We had no checks outstanding, net of deposits as of March 31, 2015 and December 31, 2014. Checks outstanding, net of deposits are classified as accounts payable and other liabilities in the consolidated balance sheets and the changes are reflected in the line item net increase (decrease) in checks outstanding, net of deposits within the cash flows from financing activities in the consolidated statements of cash flows. |
| Investments | Investments |
| Investments classified as available-for-sale, which consist primarily of debt securities, are stated at fair value. Unrealized gains and losses are excluded from earnings and reported as other comprehensive income, net of income tax effects. The cost of investments sold is determined in accordance with the specific identification method and realized gains and losses are included in net investment income. We analyze all debt investments that have unrealized losses for impairment consideration and assess the intent to sell such securities. If such intent exists, impaired securities are considered other-than-temporarily impaired. Management also assesses if we may be required to sell the debt investments prior to the recovery of amortized cost, which may also trigger an impairment charge. If securities are considered other-than-temporarily impaired based on intent or ability, we assess whether the amortized costs of the securities can be recovered. If management anticipates recovering an amount less than the amortized cost of the securities, an impairment charge is calculated based on the expected discounted cash flows of the securities. Any deficit between the amortized cost and the expected cash flows is recorded through earnings as a charge. All other temporary impairment changes are recorded through other comprehensive income. During the three months ended March 31, 2015 and 2014, respectively, no losses were recognized from other-than-temporary impairments. |
| Fair Value of Financial Instruments | Fair Value of Financial Instruments |
| The estimated fair value amounts of cash equivalents, investments available-for-sale, premiums and other receivables, notes receivable and notes payable have been determined by using available market information and appropriate valuation methodologies. The carrying amounts of cash equivalents approximate fair value due to the short maturity of those instruments. Fair values for debt and equity securities are generally based upon quoted market prices. Where quoted market prices were not readily available, fair values were estimated using valuation methodologies based on available and observable market information. Such valuation methodologies include reviewing the value ascribed to the most recent financing, comparing the security with securities of publicly traded companies in a similar line of business, and reviewing the underlying financial performance including estimating discounted cash flows. The carrying value of premiums and other receivables, long-term notes receivable and nonmarketable securities approximates the fair value of such financial instruments. The fair value of notes payable is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt with the same remaining maturities. The fair value of our fixed-rate borrowings was $426.5 million and $437.0 million as of March 31, 2015 and December 31, 2014, respectively. As of March 31, 2015 and December 31, 2014, the fair value of our variable-rate borrowings under our revolving credit facility was $195.0 million and $100.0 million, respectively. The fair value of our fixed-rate borrowings was determined using the quoted market price, which is a Level 1 input in the fair value hierarchy. The fair value of our variable-rate borrowings was estimated to equal the carrying value because the interest rates paid on these borrowings were based on prevailing market rates. Since the pricing inputs are other than quoted prices and fair value is determined using an income approach, our variable-rate borrowings are classified as a Level 2 in the fair value hierarchy. See Notes 7 and 8 for additional information regarding our financing arrangements and fair value measurements, respectively. |
| Health Plan Services Revenue Recognition | Health Plan Services Revenue Recognition |
| Health plan services premium revenues generally include HMO, PPO, EPO and POS premiums from employer groups and individuals and from Medicare recipients who have purchased supplemental benefit coverage, for which premiums are based on a predetermined prepaid fee, Medicaid revenues based on multi-year contracts to provide care to Medicaid recipients, revenue under Medicare risk contracts to provide care to enrolled Medicare recipients and revenue under our dual eligible members who are participating in the California Coordinated Care Initiative (the "CCI"). Revenue is recognized in the month in which the related enrollees are entitled to health care services. Premiums collected in advance of the month in which enrollees are entitled to health care services are recorded as unearned premiums. |
| Under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”), commercial health plans with medical loss ratios ("MLR") on fully insured products, as calculated as set forth in the ACA, that fall below certain targets are required to rebate ratable portions of their premiums annually. We classify the estimated rebates, if any, as a reduction to health plan services premiums in our consolidated statement of operations. Estimated rebates for our commercial health plans were $0 for the three months ended March 31, 2015 and 2014, respectively. In addition to the rebates for the commercial health plans under the ACA, there is also a medical loss ratio corridor for the California Department of Health Care Services ("DHCS") adult Medicaid expansion members under the state Medicaid program in California ("Medi-Cal") from January 1, 2014 to June 30, 2015. If our MLR for this population is below 85%, then we would have to pay DHCS a rebate. If the MLR is above 95%, then DHCS would have to pay us additional premium. As of March 31, 2015 and December 31, 2014, we have accrued $264.0 million and $200.6 million, respectively, in MLR rebates with respect to this population payable to DHCS. Accordingly, for the three months ended March 31, 2015, we reduced health plan services premium revenue by $63.4 million. No MLR rebates were recorded in the three months ended March 31, 2014. Our Medicaid contract with the state of Arizona contains profit-sharing provisions. Because our Arizona Medicaid profits were in excess of the amount we are allowed to fully retain, we reduced health plan services premium revenue by $15.8 million for the three months ended March 31, 2015 and by $1.4 million for the three months ended March 31, 2014. With respect to our Arizona Medicaid contract, the profit corridor receivable balance included in other noncurrent assets as of March 31, 2015 and December 31, 2014 was $0 and $2.3 million, respectively, and the profit corridor payable balance included in accounts payable and other liabilities as of March 31, 2015 and December 31, 2014 was $12.9 million and $27.0 million, respectively. The profit corridor payable balance included in other noncurrent liabilities as of March 31, 2015 was $3.8 million and $0 as of December 31, 2014. In the three months ended March 31, 2015, the Arizona Health Care Cost Containment System ("AHCCCS") withheld $23.8 million in connection with the profit corridor payable from our capitation payment. In addition, certain provisions of the ACA became effective January 1, 2014, including an annual insurance industry premium-based assessment and the establishment of federally facilitated, state and federal partnership or state-based health insurance exchanges coupled with premium stabilization programs. See below in this Note 2 under the heading "Accounting for Certain Provisions of the ACA" for additional information. |
| Our Medicare Advantage contracts are with the Centers for Medicare & Medicaid Services ("CMS"). CMS deploys a risk adjustment model which apportions premiums paid to all health plans according to health severity and certain demographic factors. This risk adjustment model results in periodic changes in our risk factor adjustment scores for certain diagnostic codes, which then result in changes to our health plan services premium revenues. Because the recorded revenue is based on our best estimate at the time, the actual payment we receive from CMS for risk adjustment reimbursement settlements may be materially different than the amounts we have initially recognized on our financial statements. The change in our estimate for the risk adjustment revenue related to prior years in the three months ended March 31, 2015 decreased health plan services premium revenues by $5.4 million. The change in our estimate for the risk adjustment revenue related to prior years in the three months ended March 31, 2014 increased health plan services premium revenues by $15.6 million. |
| Our premiums from the Medi-Cal programs and other state-sponsored health programs are subject to certain retroactive premium adjustments based on expected and actual health care costs. For the three months ended March 31, 2015, retroactive premium adjustments for our Medi-Cal member risk reassignment for prior periods increased premium revenue by $27.2 million. For the three months ended March 31, 2014, retroactive premium adjustments for prior periods were not material. |
| In addition, our state-sponsored health care programs in California, including Medi-Cal, seniors and persons with disabilities ("SPD") programs, the dual eligibles demonstration portion of the California Coordinated Care Initiative that began in April 2014 and Medicaid expansion under federal health care reform that began in January 2014, are subject to retrospective premium adjustments based on certain risk sharing provisions included in our state-sponsored health plans rate settlement agreement described below. We estimate and recognize the retrospective adjustments to premium revenue based upon experience to date under our state-sponsored health care programs contracts. The retrospective premium adjustment is recorded as an adjustment to premium revenue and other noncurrent assets. |
| On November 2, 2012, we entered into a state-sponsored health plans rate settlement agreement (the "Agreement") with the DHCS to settle historical rate disputes with respect to our participation in the Medi-Cal program, for rate years prior to the 2011–2012 rate year. As part of the Agreement, DHCS agreed, among other things, to (1) an extension of all of our Medi-Cal managed care contracts existing as of the date of the Agreement for an additional five years from their then existing expiration dates; (2) retrospective premium adjustments on all of our state-sponsored health care programs, including Medi-Cal, which includes SPDs, Healthy Families, the dual eligibles demonstration portion of the CCI that began in 2014 and Medi-Cal expansion populations that also began in 2014 (our “state-sponsored health care programs”), which are tracked in a settlement account as discussed in more detail below; and (3) compensate us should DHCS terminate any of our state-sponsored health care programs contracts early. |
| Effective January 1, 2013, the settlement account (the "Account") was established with an initial balance of zero. The balance in the Account is adjusted annually to reflect retrospective premium adjustments for each calendar year (referenced in the Agreement as a "deficit" or "surplus"). A deficit or surplus will result to the extent our actual pretax margin (as defined in the Agreement) on our state-sponsored health care programs is below or above a predetermined pretax margin target. The amount of any deficit or surplus is calculated as described in the Agreement. Cash settlement of the Account will occur on December 31, 2019, except that under certain circumstances the DHCS may extend the final settlement for up to three additional one-year periods (as may be extended, the "Term"). In addition, the DHCS will make an interim partial settlement payment to us if it terminates any of our state-sponsored health care programs contracts early. Upon expiration of the Term, if the Account is in a surplus position, then no monies are owed to either party. If the Account is in a deficit position, then DHCS shall pay the amount of the deficit to us. In no event, however, shall the amount paid by DHCS to us under the Agreement exceed $264 million or be less than an alternative minimum amount as defined in the Agreement. |
| We estimate and recognize the retrospective adjustments to premium revenue based upon experience to date under our state-sponsored health care programs contracts. The retrospective premium adjustment is recorded as an adjustment to premium revenue and other noncurrent assets. As of March 31, 2015, we had calculated a surplus of $83.8 million. As a surplus Account position results in no monies due to either party upon expiration of the Term, we have no receivable and no payable recorded as of March 31, 2015 in connection with the Agreement. As of December 31, 2014, we had calculated a surplus of $53.4 million under the Agreement and reduced our receivable to zero, reflecting our cumulative estimated retrospective premium adjustment to the Account based on our actual pretax margin for the period beginning on January 1, 2013 and ending on December 31, 2014. For the three months ended March 31, 2014, our health plan services premium revenue was reduced by $12.9 million, as a result of the change in the deficit calculated during the three months ended March 31, 2014. |
| Health Plan Services Health Care Cost | Health Plan Services Health Care Cost |
| The cost of health care services is recognized in the period in which services are provided and includes an estimate of the cost of services that have been incurred but not yet reported. Such costs include payments to primary care physicians, specialists, hospitals and outpatient care facilities, and the costs associated with managing the extent of such care. Our health care cost also can include from time to time remediation of certain claims as a result of periodic reviews by various regulatory agencies. |
| We estimate the amount of the provision for health care service costs incurred but not yet reported ("IBNR") in accordance with GAAP and using standard actuarial developmental methodologies based upon historical data including the period between the date services are rendered and the date claims are received and paid, denied claim activity, expected medical cost inflation, seasonality patterns and changes in membership, among other things. |
| Our IBNR best estimate also includes a provision for adverse deviation, which is an estimate for known environmental factors that are reasonably likely to affect the required level of IBNR reserves. This provision for adverse deviation is intended to capture the potential adverse development from known environmental factors such as our entry into new geographical markets, changes in our geographic or product mix, the introduction of new customer populations, variation in benefit utilization, disease outbreaks, changes in provider reimbursement, fluctuations in medical cost trend, variation in claim submission patterns and variation in claims processing speed and payment patterns, changes in technology that provide faster access to claims data or changes in the speed of adjudication and settlement of claims, variability in claims inventory levels, non-standard claim development, and/or exceptional situations that require judgmental adjustments in setting the reserves for claims. |
| We consistently apply our IBNR estimation methodology from period to period. Our IBNR best estimate is made on an accrual basis and adjusted in future periods as required. Any adjustments to the prior period estimates are included in the current period. As additional information becomes known to us, we adjust our assumptions accordingly to change our estimate of IBNR. Therefore, if moderately adverse conditions do not occur, evidenced by more complete claims information in the following period, then our prior period estimates will be revised downward, resulting in favorable development. However, any favorable prior period reserve development would increase current period net income only to the extent that the current period provision for adverse deviation is less than the benefit recognized from the prior period favorable development. If moderately adverse conditions occur and are more acute than we estimated, then our prior period estimates will be revised upward, resulting in unfavorable development, which would decrease current period net income. For the three months ended March 31, 2015, we had $85.3 million in net favorable reserve developments related to prior years. The amount for the three months ended March 31, 2015 consisted of $20.6 million in favorable prior year development and a release of $64.7 million of the provision for adverse deviation held at December 31, 2014. We believe that the $20.6 million favorable developments for the three months ended March 31, 2015 was primarily due to the growth of the new Medicaid expansion population in 2014. As part of our best estimate for IBNR, the provision for adverse deviation recorded as of March 31, 2015 and December 31, 2014 was $73.5 million and $77.7 million, respectively. For the three months ended March 31, 2014, we had $22.9 million in net favorable reserve developments related to prior years. The amount for the three months ended March 31, 2014 consisted of $23.0 million in unfavorable prior year development primarily due to the existence of moderately adverse conditions and a release of $45.9 million of the provision for adverse deviation held at December 31, 2013. We believe the $23.0 million unfavorable development was due to unanticipated benefit utilization in our commercial business arising from dates of service in the fourth quarter of 2013 as a result of an uncertain environment related to the ACA. For the three months ended March 31, 2015, the reserve development related to prior years, when considered together with the provision for adverse deviation recorded as of March 31, 2015, did not have a material impact on our operating results or financial condition. |
| The majority of the IBNR reserve balance held at each quarter-end is associated with the most recent months' incurred services because these are the services for which the fewest claims have been paid. The degree of uncertainty in the estimates of incurred claims is greater for the most recent months' incurred services. Revised estimates for prior periods are determined in each quarter based on the most recent updates of paid claims for prior periods. Estimates for service costs incurred but not yet reported are subject to the impact of changes in the regulatory environment, economic conditions, changes in claims trends, and numerous other factors. Given the inherent variability of such estimates, the actual liability could differ materially from the amounts estimated. |
| Government Contracts | Government Contracts |
| On April 1, 2011, we began delivery of administrative services under our Managed Care Support Contract (the "T-3 contract") for the TRICARE North Region. The T-3 contract was awarded to us on May 13, 2010, and included five one-year option periods. On March 15, 2014, the U.S. Department of Defense ("Department of Defense" or "DoD") exercised the last of these options, which extended the T-3 contract through March 31, 2015. On June 27, 2014, at the DoD's request, we submitted a proposal to add three additional one-year option periods to the T-3 contract. In March 2015, the DoD modified our T-3 contract to add three additional one-year option periods and awarded us the first of the three option periods, which allows us to continue providing access to health care services to TRICARE beneficiaries through March 31, 2016. If all three one-year option periods are ultimately exercised, the T-3 contract would conclude on March 31, 2018. On April 24, 2015, the DoD issued its final request for proposal for the next generation TRICARE contract, with health care delivery commencing on April 1, 2017. All proposals are due on June 23, 2015. |
| Revenues and expenses associated with the T-3 contract are reported as part of Government Contracts revenues and Government Contracts expenses in the consolidated statements of operations and included in the Government Contracts reportable segment. |
| Concentrations of Credit Risk | Concentrations of Credit Risk |
| Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, investments and premiums receivable. All cash equivalents and investments are managed within established guidelines, which provide us diversity among issuers. Concentrations of credit risk with respect to premiums receivable are limited due to the large number of payers comprising our customer base. The federal government is the primary customer of our Government Contracts reportable segment with fees and premiums associated with this customer accounting for approximately 97% of our Government Contracts revenue. In addition, the federal government is a significant customer of our Western Region Operations reportable segment as a result of our contract with CMS for coverage of Medicare-eligible individuals. Furthermore, our Medicaid revenue is derived in California through our contracts with the DHCS, and in Arizona through our contract with the Arizona Health Care Cost Containment System ("AHCCCS").The DHCS is a significant customer of our Western Region Operations reportable segment. |
| Comprehensive Income | Comprehensive Income |
| Comprehensive income includes all changes in stockholders’ equity (except those arising from transactions with stockholders) and includes net income (loss), net unrealized appreciation (depreciation) after tax on investments available-for-sale and prior service cost and net loss related to our defined benefit pension plan. |
| Our accumulated other comprehensive income (loss) for the three months ended March 31, 2015 and 2014 are as follows: |
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| (Dollars in millions) | Unrealized Gains (Losses) on investments available-for-sale | | Defined Benefit Pension Plans | | Accumulated Other Comprehensive Income (Loss) | | | | | | | | |
| Balance as of January 1, 2014 | $ | (28.3 | ) | | $ | (4.6 | ) | | $ | (32.9 | ) | | | | | | | | |
| Other comprehensive (loss) income before reclassifications | 18.5 | | | — | | | 18.5 | | | | | | | | | |
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| Amounts reclassified from accumulated other comprehensive income (loss) | (0.2 | ) | | 0.1 | | | (0.1 | ) | | | | | | | | |
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| Other comprehensive income for the three months ended March 31, 2014 | 18.3 | | | 0.1 | | | 18.4 | | | | | | | | | |
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| Balance as of March 31, 2014 | $ | (10.0 | ) | | $ | (4.5 | ) | | $ | (14.5 | ) | | | | | | | | |
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| Balance as of January 1, 2015 | $ | 8.2 | | | $ | (11.5 | ) | | $ | (3.3 | ) | | | | | | | | |
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| Other comprehensive income (loss) before reclassifications | 10.6 | | | — | | | 10.6 | | | | | | | | | |
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| Amounts reclassified from accumulated other comprehensive income (loss) | (0.4 | ) | | 0.4 | | | — | | | | | | | | | |
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| Other comprehensive income for the three months ended March 31, 2015 | 10.2 | | | 0.4 | | | 10.6 | | | | | | | | | |
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| Balance as of March 31, 2015 | $ | 18.4 | | | $ | (11.1 | ) | | $ | 7.3 | | | | | | | | | |
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| The following table shows reclassifications out of accumulated other comprehensive income and the affected line items in the consolidated statements of operations for the three months ended March 31, 2015 and 2014: |
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| Three months ended March 31, | Affected line item in the Consolidated Statements of Operations | | | | | | | | | | | |
| 2015 | | 2014 | | | | | | | | | | | | |
| (Dollars in millions) | | | | | | | | | | | | |
| Unrealized gains on investments available-for-sale | $ | 0.6 | | | $ | 0.3 | | Net investment income | | | | | | | | | | | |
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| 0.6 | | | 0.3 | | Total before tax | | | | | | | | | | | |
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| 0.2 | | | 0.1 | | Tax expense | | | | | | | | | | | |
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| 0.4 | | | 0.2 | | Net of tax | | | | | | | | | | | |
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| Amortization of defined benefit pension items: | | | | | | | | | | | | | | | |
| Prior-service cost | (0.1 | ) | | (0.1 | ) | (a) | | | | | | | | | | | |
| Actuarial gains (losses) | (0.5 | ) | | (0.1 | ) | (a) | | | | | | | | | | | |
| (0.6 | ) | | (0.2 | ) | Total before tax | | | | | | | | | | | |
| (0.2 | ) | | (0.1 | ) | Tax benefit | | | | | | | | | | | |
| (0.4 | ) | | (0.1 | ) | Net of tax | | | | | | | | | | | |
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| Total reclassifications for the period | $ | — | | | $ | 0.1 | | Net of tax | | | | | | | | | | | |
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| _________ |
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| (a) | These accumulated other comprehensive income components are included in the computation of net periodic pension cost. | | | | | | | | | | | | | | | | | | |
| Earnings Per Share | Earnings Per Share |
| Basic earnings per share excludes dilution and reflects net income divided by the weighted average shares of common stock outstanding during the periods presented. Diluted earnings per share is based upon the weighted average shares of common stock and dilutive common stock equivalents (this reflects the potential dilution that could occur if stock options were exercised and restricted stock units ("RSUs") and performance share units ("PSUs") were vested) outstanding during the periods presented. |
| The inclusion or exclusion of common stock equivalents arising from stock options, RSUs and PSUs in the computation of diluted earnings per share is determined using the treasury stock method. For the three months ended March 31, 2015 and 2014, respectively, 1,285,000 shares and 1,120,000 shares of dilutive common stock equivalents were outstanding and were included in the computation of diluted earnings per share. |
| For the three months ended March 31, 2015 and 2014, respectively, an aggregate of 26,000 shares and 961,000 shares of common stock equivalents were considered anti-dilutive and were not included in the computation of diluted earnings per share. Stock options expire at various times through February 2019. |
| In May 2011, our Board of Directors authorized a stock repurchase program for the repurchase of up to $300 million of our outstanding common stock (our "stock repurchase program"). On March 8, 2012, our Board of Directors approved a $323.7 million increase to our stock repurchase program and on December 16, 2014, our Board of Directors approved another $257.8 million increase to our stock repurchase program. This latest increase, which when taken together with the remaining authorization at that time, brought our total authorization up to $400 million. As of December 31, 2014 and March 31, 2015, the remaining authorization under our stock repurchase program was $400.0 million and $306.2 million, respectively. See Note 6 for more information regarding our stock repurchase program. |
| Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets |
| We performed our annual impairment test on our goodwill and other intangible assets as of June 30, 2014 for our Western Region Operations reporting unit and also re-evaluated the useful lives of our other intangible assets. No goodwill impairment was identified. We also determined that the estimated useful lives of our other intangible assets properly reflected the current estimated useful lives. |
| The carrying amount of goodwill by reporting unit is as follows: |
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| Western | | Total | | | | | | | | | | | | |
| Region | | | | | | | | | | | | |
| Operations | | | | | | | | | | | | |
| (Dollars in millions) | | | | | | | | | | | | |
| Balance as of December 31, 2014 | $ | 558.9 | | | $ | 558.9 | | | | | | | | | | | | | |
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| Balance as of March 31, 2015 | $ | 558.9 | | | $ | 558.9 | | | | | | | | | | | | | |
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| On November 2, 2014, we signed a definitive master services agreement with Cognizant to provide certain services to us. In connection with this agreement, we have agreed to sell certain software assets and related intellectual property ("software system assets") we own to Cognizant. The transaction, including the related asset sale, is subject to the receipt of required regulatory approvals. See Note 3 for additional information regarding our agreements with Cognizant. Because the sale of these software system assets meets the definition of a sale of a business under GAAP, as of September 30, 2014, we re-allocated $7 million of goodwill based on relative fair values of the Western Region Operations reporting unit with and without the impact of the business to be sold. Our measurement of fair values is based on a combination of the discounted total consideration expected to be received in connection with the services and asset sale agreements, income approach based on a discounted cash flow methodology, and replacement cost methodology. After the reallocation of goodwill, we performed a two-step impairment test to determine the existence of any impairment and the amount of the impairment. In the first step, we compared the fair values to the related carrying value and concluded that the carrying value of the business to be sold was impaired; however, we determined that the carrying value of the Western Region Operations reporting unit was not impaired. In the second step, we measured the impairment amount by comparing the implied value of the allocated goodwill to the carrying amount of such goodwill. Based on the results of our Step 2 test, we concluded that the implied value of the goodwill allocated to the business to be sold was zero, which resulted in an impairment charge for the total carrying value of the allocated goodwill of $7 million. See Note 8 for goodwill fair value measurement information. |
| The ratio of the fair value of our Western Region Operations reporting unit to its carrying value was approximately 224% and 190% as of September 30, 2014 and June 30, 2014, respectively. |
| The intangible assets that continue to be subject to amortization using the straight-line method over their estimated lives are as follows: |
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| Gross | | Accumulated | | Net | | Weighted | | | | | | |
| Carrying | Amortization | Balance | Average Life | | | | | | |
| Amount | | | (in years) | | | | | | |
| (Dollars in millions) | | | | | | | | |
| As of March 31, 2015: | | | | | | | | | | | | | |
| Provider networks | $ | 41.5 | | | $ | (37.2 | ) | | $ | 4.3 | | | 18.9 | | | | | | |
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| Customer relationships and other | 29.5 | | | (22.7 | ) | | 6.8 | | | 11.1 | | | | | | |
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| $ | 71 | | | $ | (59.9 | ) | | $ | 11.1 | | | | | | | | | |
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| As of December 31, 2014: | | | | | | | | | | | | | |
| Provider networks | $ | 41.5 | | | $ | (36.9 | ) | | $ | 4.6 | | | 18.9 | | | | | | |
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| Customer relationships and other | 29.5 | | | (22.3 | ) | | 7.2 | | | 11.1 | | | | | | |
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| $ | 71 | | | $ | (59.2 | ) | | $ | 11.8 | | | | | | | | | |
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| Estimated annual pretax amortization expense for other intangible assets for each of the next five years ending December 31 is as follows (dollars in millions): |
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| Year | Amount | | | | | | | | | | | | | | | | | |
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| 2015 | $ | 2.8 | | | | | | | | | | | | | | | | | |
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| 2016 | 2.2 | | | | | | | | | | | | | | | | | |
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| 2017 | 2.2 | | | | | | | | | | | | | | | | | |
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| 2018 | 2.1 | | | | | | | | | | | | | | | | | |
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| 2019 | 0.9 | | | | | | | | | | | | | | | | | |
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| Restricted Assets | Restricted Assets |
| We and our consolidated subsidiaries are required to set aside certain funds that may only be used for certain purposes pursuant to state regulatory requirements. We have discretion as to whether we invest such funds in cash and cash equivalents or other investments. As of March 31, 2015 and December 31, 2014, the restricted cash and cash equivalents balances totaled $0.5 million and $0.2 million, respectively, and are included in other noncurrent assets. Investment securities held by trustees or agencies were $29.8 million and $24.0 million as of March 31, 2015 and December 31, 2014, respectively, and are included in investments available-for-sale. |
| Accounting for Certain Provisions of the ACA | Accounting for Certain Provisions of the ACA |
| Premium-based Fee on Health Insurers |
| The ACA mandated significant reforms to various aspects of the U.S. health insurance industry. Among other things, the ACA imposes an annual premium-based fee on health insurers (the "health insurer fee") for each calendar year beginning on or after January 1, 2014 which is not deductible for federal income tax purposes and in many state jurisdictions. The health insurer fee is levied based on a ratio of an insurer's net health insurance premiums written for the previous calendar year compared to the U.S. health insurance industry total. We are required to estimate a liability for our portion of the health insurer fee and record it in full once qualifying insurance coverage is provided in the applicable calendar year in which the fee is payable with a corresponding deferred cost that is amortized ratably to expense over the calendar year that it is payable. |
| We expect to pay the federal government approximately $231.3 million in September 2015 for our portion of the 2015 health insurer fee based on 2014 premiums in accordance with the ACA. We have recorded a liability for this fee in other current liabilities with an offsetting deferred cost in other current assets in our consolidated financial statements. In September 2014, we paid the federal government $141.4 million for our portion of the health insurer fee based on 2013 premiums. Our general and administrative expense for the three months ended March 31, 2015 and 2014 includes amortization of the deferred cost of $57.8 million and $36.3 million, respectively. The remaining deferred cost asset was approximately $173.5 million as of March 31, 2015 and $0 as of December 31, 2014. |
| Public Health Insurance Exchanges |
| The ACA requires the establishment of state-based, state and federal partnership or federally facilitated health insurance exchanges ("exchanges") where individuals and small groups may purchase health insurance coverage under regulations established by U.S. Department of Health and Human Services ("HHS"). We currently participate in exchanges in Arizona and California. Effective January 1, 2014, the ACA includes permanent and temporary premium stabilization provisions for transitional reinsurance, permanent risk adjustment, and temporary risk corridors (collectively referred to as the "3Rs"), which are applicable to those insurers participating inside, and in some cases outside, of the exchanges. |
| Member Related Components |
| Member Premium—We receive a monthly premium from members. The member premium, which is fixed for the entire plan year, is recognized evenly over the contract period and reported as part of health plan services premium revenue. |
| Premium Subsidy—For qualifying low-income members, HHS will reimburse us, on the member’s behalf, some or all of the monthly member premium depending on the member’s income level in relation to the Federal Poverty Level. We recognize the premium subsidy evenly over the contract period and report it as part of health plan services premium revenue. |
| Cost Sharing Subsidy—For qualifying low-income members, HHS will reimburse us, on the member’s behalf, some or all of a member’s cost sharing amounts (e.g., deductible, co-pay/coinsurance). The amount paid for the member by HHS is dependent on the member’s income level in relation to the Federal Poverty Level. The Cost Sharing Subsidy offsets health care costs when incurred. We record a liability if the Cost Sharing Subsidy is paid in advance or a receivable if incurred health care costs exceed the Cost Sharing Subsidy received to date. |
| 3Rs: Reinsurance, Risk Adjustment and Risk Corridor |
| Our accounting estimates are impacted as a result of the provisions of the ACA, including the 3Rs. The substantial influx of previously uninsured individuals into the new health insurance exchanges under the ACA could make it more difficult for health insurers, including us, to establish pricing accurately, at least during the early years of the exchanges. The 3Rs are intended to mitigate some of the risks around pricing and lack of information surrounding the previously uninsured. We will experience premium adjustments to our health plan services premium revenues and health plan services expenses based on changes to our estimated amounts related to the 3Rs. Such estimated amounts may differ materially from actual amounts ultimately received or paid under the provisions, which may have a material impact on our consolidated results of operations and financial condition. |
| Reinsurance—The transitional reinsurance program requires us to make reinsurance contributions for calendar years 2014 through 2016 to a state or HHS established reinsurance entity based on a national contribution rate per covered member as determined by HHS. While all commercial medical plans, including self-funded plans, are required to fund the reinsurance entity, only fully-insured non-grandfathered plans in the individual commercial market will be eligible for recoveries if individual claims exceed a specified threshold. Accordingly, we account for transitional reinsurance contributions associated with all commercial medical health plans other than non-grandfathered individual plans as an assessment in general and administrative expenses in our consolidated statement of income and recorded $9.1 million and $17.2 million for the three months ended March 31, 2015 and 2014, respectively. We account for contributions made by individual commercial plans which are subject to recoveries as contra-health plan services premium revenue and recorded $3.6 million and $0 for the three months ended March 31, 2015 and 2014, respectively. We account for any recoveries as contra-health plan services expense in our consolidated statements of income and recorded $39.4 million and $33.1 million for the three months ended March 31, 2015 and 2014, respectively. Reinsurance assessments and recoveries are classified as current or long-term receivable or payable based on the timing of expected settlement. |
| Risk Adjustment—The risk adjustment provision applies to individual and small group business both within and outside the exchange and requires measurement of the relative health status risk of each insurer’s pool of insured enrollees in a given market. The risk adjustment provision then operates to transfer funds from insurers whose pools of insured enrollees have lower-than-average risk scores to those insurers whose pools have greater-than-average risk scores. Our estimate for the risk adjustment incorporates our risk scores by state and market relative to the market average using data provided by the participating insurers and available information about the HHS model. This information is consistent with our knowledge and understanding of market conditions. |
| As part of our ongoing estimation process, we consider information as it becomes available at interim dates along with our actuarially determined expectations, and we update our estimates incorporating such information as appropriate. |
| We estimate and recognize adjustments to our health plan services premium revenue for the risk adjustment provision by projecting our ultimate premium for the calendar year. Such estimated calendar year amounts are recognized ratably during the year and are revised each period to reflect current experience. We record receivables and/or payables and classify the amounts as current or long-term in the consolidated balance sheets based on the timing of expected settlement. |
| Risk Corridor—The temporary risk corridor program will be in place for three years and applies to individual and small group business operating both inside and outside of the exchanges. The risk corridor provisions limit health insurers' gains and losses by comparing allowable medical costs to a target amount, each defined/prescribed by HHS, and sharing the risk for allowable costs with the federal government. Variances from the target exceeding certain thresholds may result in HHS making additional payments to us or require us to make payments to HHS. |
| We estimate and recognize adjustments to our health plan services premium revenue for the risk corridor provision by projecting our ultimate premium for the calendar year. Such estimated calendar year amounts are recognized ratably during the year and are revised each period to reflect current experience, including changes in risk adjustment and reinsurance recoverables. We record receivables or payables and classify the amounts as current or long-term in the consolidated balance sheets based on the timing of expected settlement. |
| HHS recognizes, in both final regulations and guidance, it is obligated to make the risk corridors program payments without regard to budget neutrality. Although HHS anticipates the program will be budget neutral, the ACA requires HHS to make full payments to those issuers with risk corridors ratios above 103 percent. Additionally, HHS states in final regulations and guidance that if the program’s collections, including any potential carryover from prior years, are insufficient to satisfy its payment obligations, the agency will use other sources of funding to meet its payment obligations, subject to the availability of appropriations. If corridor collections are insufficient in 2014, HHS explains that it shall fulfill its obligations for the 2014 benefit year by using funds collected for the 2015 benefit year prior to making payments on 2015 obligations. |
| The following table presents the assets and liabilities related to the 3Rs as of March 31, 2015 and December 31, 2014: |
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| | 31-Mar-15 | | 31-Dec-14 | | | | | | | | | | | |
| Other receivables: | | (Dollars in millions) | | | | | | | | | | | |
| Reinsurance | | $ | 238 | | | $ | 234 | | | | | | | | | | | | |
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| Risk adjustment | | 36.5 | | | 81 | | | | | | | | | | | | |
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| Other noncurrent assets: | | | | | | | | | | | | | | | |
| Reinsurance | | 35.4 | | | — | | | | | | | | | | | | |
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| Risk adjustment | | 15 | | | — | | | | | | | | | | | | |
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| Risk corridor | | 143.4 | | | 90.4 | | | | | | | | | | | | |
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| Accounts payable and other liabilities: | | | | | | | | | | | | | | | |
| Risk adjustment | | 150 | | | 153.4 | | | | | | | | | | | | |
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| Other noncurrent liabilities: | | | | | | | | | | | | | | | |
| Risk adjustment | | 46 | | | — | | | | | | | | | | | | |
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| Risk corridor | | — | | | 3.6 | | | | | | | | | | | | |
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| Net Receivable (Payable) Balance: | | | | | | | | | | | | | | | |
| Risk adjustment | | $ | (144.5 | ) | | $ | (72.4 | ) | | | | | | | | | | | |
| Risk corridor | | 143.4 | | | 86.8 | | | | | | | | | | | | |
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| Reinsurance | | 273.4 | | | 234 | | | | | | | | | | | | |
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| The following table presents the changes in our balances related to the 3Rs during the three months ended March 31, 2015: |
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| Net Receivable/(Payable) Balance as of | | Change in Estimates Related to Prior period | | Current Estimates | | Total Estimates for the Three Months Ended | | Net Receivable/(Payable) Balance as of |
| 31-Dec-14 | 31-Mar-15 | 31-Mar-15 |
| | | (Dollars in millions) | | |
| Risk adjustment | $ | (72.4 | ) | | $ | (41.1 | ) | | $ | (31.0 | ) | | $ | (72.1 | ) | | $ | (144.5 | ) |
| Risk corridor | 86.8 | | | 25.7 | | | 30.9 | | | 56.6 | | | 143.4 | |
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| Reinsurance | 234 | | | 4 | | | 35.4 | | | 39.4 | | | 273.4 | |
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| The change in estimates related to the prior period reduced our pretax income by $11.4 million for three months ended March 31, 2015. |
| The final reconciliation and settlement with HHS of the premium and cost sharing subsidies and the amounts related to the 3Rs for the current year will be completed in the following year with HHS. |
| Section 1202 of ACA |
| Section 1202 of the ACA mandates increases in Medicaid payment rates for primary care in calendar years 2013 and 2014. The final rule has been in effect since January 1, 2013. The provisions of section 1202 impact our 1.6 million Medi-Cal members in California and 81,000 Medicaid members in Arizona. DHCS, the agency that regulates the Medi-Cal program, initially implemented a reimbursement methodology with no underwriting risk to the managed care plans ("MCPs") in 2013. Subsequently, DHCS changed the reimbursement methodology during the second quarter of 2014, and this change transferred full underwriting risk to the MCPs. |
| For the periods prior to this reimbursement methodology change, i.e., the year ended December 31, 2013 and the three months ended March 31, 2014, we accounted for the provisions of section 1202 on an administrative services only basis since it transferred no underwriting risk to the MCPs, and recorded the receipts and payments on a net basis. |
| Following the change in reimbursement methodology, we have full underwriting risk for 2013, including both utilization and unit cost risk. Accordingly, for the second quarter of 2014, with respect to our Medi-Cal business, we had: |
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| • | Reversed $7.9 million previously recorded as administrative services fees and other income in 2013 and for the three months ended March 31, 2014. | | | | | | | | | | | | | | | | | | |
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| • | Recorded payments on a grossed-up basis by recording Medi-Cal payments received as premium revenue and estimated Medi-Cal claim payments as health care costs (incurred claims), each via retroactive adjustments to premium revenues and health care costs. | | | | | | | | | | | | | | | | | | |
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| • | Recorded retrospective premium revenue adjustments based upon the state settlement agreement (see Note 2 - "Health Plan Services Revenue Recognition" above). | | | | | | | | | | | | | | | | | | |
| The financial statement impact of the section 1202 reimbursement methodology change is summarized in the table below. |
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| Recorded In | | | | | | | | |
| Year Ended December 31, 2013 | | Three Months Ended March 31, 2014 | | Three Months Ended June 30, 2014 | | | | | | | | |
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| (Dollars in millions) | No Risk | | No Risk | | Full Risk | | | | | | | | |
| Health plan services premiums | $ | 4.4 | | | $ | — | | | $ | 154.7 | | | | | | | | | |
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| Health plan services expenses | — | | | — | | | 144 | | | | | | | | | |
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| General and administrative expenses | 4.4 | | | — | | | — | | | | | | | | | |
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| Administrative services fees and other income | 6.5 | | | 1.4 | | | (7.9 | ) | | | | | | | | |
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| Pretax income | $ | 6.5 | | | $ | 1.4 | | | $ | 2.8 | | | | | | | | | |
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| Recently Issued Accounting Pronouncement | Recently Issued Accounting Pronouncement |
| In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-03, "Interest—Imputation of Interest" (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). ASU 2015-03 changes the presentation of debt issuance costs from an asset to a direct reduction of the related debt liability. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. ASU 2015-03 will become effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015 with early adoption permitted. We do not expect this new guidance to have a material effect on our results of operations, financial condition, or cash flows. |
| In April 2015, the FASB issued ASU No. 2015-05, "Intangibles—Goodwill and Other—Internal-Use Software" (Subtopic 350-40), Customer's Accounting for Fees Paid in a Cloud Computing Arrangement ("ASU 2015-05"). This ASU helps entities determine whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software or as a service contract. ASU 2015-05 will become effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. Upon adoption, an entity has the option to apply the provisions either prospectively to all arrangements entered into or materially modified, or retrospectively. We do not expect this new guidance to have a material effect on our results of operations, financial condition, or cash flows. |
