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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
CENTENE CORPORATION
Identification Number)
7700 Forsyth Boulevard
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days x Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "small reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Non-accelerated filer o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of April 12, 2019, the registrant had 413,320,160 shares of common stock outstanding.
QUARTERLY REPORT ON FORM 10-Q
Consolidated Balance Sheets as of March 31, 2019 (unaudited) and December 31, 2018
Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018 (unaudited)
Consolidated Statements of Comprehensive Earnings for the Three Months Ended March 31, 2019 and 2018 (unaudited)
Consolidated Statement of Stockholders' Equity for the Three Months Ended March 31, 2019 and 2018 (unaudited)
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 (unaudited)
Notes to the Consolidated Financial Statements (unaudited)
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
All statements, other than statements of current or historical fact, contained in this filing are forward-looking statements. Without limiting the foregoing, forward-looking statements often use words such as "believe," "anticipate," "plan," "expect," "estimate," "intend," "seek," "target," "goal," "may," "will," "would," "could," "should," "can," "continue" and other similar words or expressions (and the negative thereof). We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with these safe-harbor provisions. In particular, these statements include, without limitation, statements about our future operating or financial performance, market opportunity, growth strategy, competition, expected activities in completed and future acquisitions, including statements about the impact of our proposed acquisition (the WellCare Transaction) of WellCare Health Plans, Inc. (WellCare), our recent acquisition (the Fidelis Care Acquisition) of substantially all the assets of New York State Catholic Health Plan, Inc., d/b/a Fidelis Care New York ( Fidelis Care), investments and the adequacy of our available cash resources. These statements may be found in the various sections of this filing, such as Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations," Part II, Item 1. "Legal Proceedings," and Part II, Item 1A. "Risk Factors."
These forward-looking statements reflect our current views with respect to future events and are based on numerous assumptions and assessments made by us in light of our experience and perception of historical trends, current conditions, business strategies, operating environments, future developments and other factors we believe appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties and are subject to change because they relate to events and depend on circumstances that will occur in the future, including economic, regulatory, competitive and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions.
All forward-looking statements included in this filing are based on information available to us on the date of this filing. Except as may be otherwise required by law, we undertake no obligation to update or revise the forward-looking statements included in this filing, whether as a result of new information, future events or otherwise, after the date of this filing. You should not place undue reliance on any forward-looking statements, as actual results may differ materially from projections, estimates, or other forward-looking statements due to a variety of important factors, variables and events including but not limited to:
the risk that regulatory or other approvals required for the WellCare Transaction may be delayed or not obtained or are obtained subject to conditions that are not anticipated that could require the exertion of management's time and our resources or otherwise have an adverse effect on us;
the risk that our stockholders do not approve the issuance of shares of Centene common stock in the WellCare Transaction;
the risk that WellCare's stockholders do not adopt the merger agreement (the Merger Agreement);
the possibility that certain conditions to the consummation of the WellCare Transaction will not be satisfied or completed on a timely basis and, accordingly, the WellCare Transaction may not be consummated on a timely basis or at all;
uncertainty as to the expected financial performance of the combined company following completion of the WellCare Transaction;
the possibility that the expected synergies and value creation from the WellCare Transaction will not be realized, or will not be realized within the expected time period;
the exertion of management's time and the Company's resources, and other expenses incurred and business changes required, in connection with any regulatory, governmental or third party consents or approvals for the WellCare Transaction;
the risk that unexpected costs will be incurred in connection with the completion and/or integration of the WellCare Transaction or that the integration of WellCare will be more difficult or time consuming than expected;
the risk that potential litigation in connection with the WellCare Transaction may affect the timing of the WellCare Transaction, cause it not to close at all, or result in significant costs of defense, indemnification and liability;
unexpected costs, charges or expenses resulting from the WellCare Transaction;
the possibility that competing offers will be made to acquire WellCare;
the inability to retain key personnel;
disruption from the announcement, pendency and/or completion of the WellCare Transaction, including potential adverse reactions or changes to business relationships with customers, employees, suppliers or regulators, making it more difficult to maintain business and operational relationships;
the risk that, following the WellCare Transaction, the combined company may not be able to effectively manage its expanded operations;
our ability to accurately predict and effectively manage health benefits and other operating expenses and reserves;
competition;
membership and revenue declines or unexpected trends;
changes in healthcare practices, new technologies, and advances in medicine;
increased healthcare costs;
changes in economic, political or market conditions;
changes in federal or state laws or regulations, including changes with respect to income tax reform or government healthcare programs as well as changes with respect to the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act, collectively referred to as the Affordable Care Act (ACA) and any regulations enacted thereunder that may result from changing political conditions or judicial actions, including the ultimate outcome of the District Court decision in "Texas v. United States of America" regarding the constitutionality of the ACA;
rate cuts or other payment reductions or delays by governmental payors and other risks and uncertainties affecting our government businesses;
our ability to adequately price products on federally facilitated and state-based Health Insurance Marketplaces;
tax matters;
disasters or major epidemics;
the outcome of legal and regulatory proceedings;
changes in expected contract start dates;
provider, state, federal and other contract changes and timing of regulatory approval of contracts;
the expiration, suspension, or termination of our contracts with federal or state governments (including but not limited to Medicaid, Medicare, TRICARE or other customers);
the difficulty of predicting the timing or outcome of pending or future litigation or government investigations;
challenges to our contract awards;
cyber-attacks or other privacy or data security incidents;
the possibility that the expected synergies and value creation from acquired businesses, including, without limitation, the Fidelis Care Acquisition, will not be realized, or will not be realized within the expected time period;
the exertion of management's time and our resources, and other expenses incurred and business changes required in connection with complying with the undertakings in connection with any regulatory, governmental or third party consents or approvals for acquisitions, including the Fidelis Care Acquisition;
disruption caused by significant completed and pending acquisitions, including, among others, the Fidelis Care Acquisition, making it more difficult to maintain business and operational relationships;
the risk that unexpected costs will be incurred in connection with the completion and/or integration of acquisition transactions, including among others, the Fidelis Care Acquisition;
changes in expected closing dates, estimated purchase price and accretion for acquisitions;
the risk that acquired businesses, including Fidelis Care, will not be integrated successfully;
the risk that, following the Fidelis Care Acquisition, we may not be able to effectively manage our expanded operations;
restrictions and limitations in connection with our indebtedness;
our ability to maintain the Centers for Medicare and Medicaid Services (CMS) Star ratings and maintain or achieve improvement in other quality scores in each case that can impact revenue and future growth;
availability of debt and equity financing, on terms that are favorable to us;
inflation; and
foreign currency fluctuations.
This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain other factors that may affect our business operations, financial condition and results of operations, in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Item 1A. "Risk Factors" of Part II of this filing contains a further discussion of these and other important factors that could cause actual results to differ from expectations. Due to these important factors and risks, we cannot give assurances with respect to our future performance, including without limitation our ability to maintain adequate premium levels or our ability to control our future medical and selling, general and administrative costs.
Non-GAAP Financial Presentation
The Company is providing certain non-GAAP financial measures in this report, as the Company believes that these figures are helpful in allowing investors to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently across periods. The Company uses the presented non-GAAP financial measures internally to allow management to focus on period-to-period changes in the Company's core business operations. Therefore, the Company believes that this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.
Specifically, the Company believes the presentation of non-GAAP financial information that excludes amortization of acquired intangible assets and acquisition related expenses allows investors to develop a more meaningful understanding of the Company's performance over time. The tables below provide reconciliations of non-GAAP items ($ in millions, except per share data):
GAAP net earnings
Amortization of acquired intangible assets
Acquisition related expenses
Income tax effects of adjustments (1)
Adjusted net earnings
GAAP diluted earnings per share (EPS)
Amortization of acquired intangible assets (2)
Acquisition related expenses (3)
Adjusted Diluted EPS
The income tax effects of adjustments are based on the effective income tax rates applicable to adjusted (non-GAAP) results.
The amortization of acquired intangible assets per diluted share is net of an income tax benefit of $0.04 and $0.02 for the three months ended March 31, 2019 and 2018, respectively.
Acquisition related expenses per diluted share are net of an income tax benefit of $0.01 and $0.02 for the three months ended March 31, 2019 and 2018, respectively.
GAAP selling, general and administrative expenses
Adjusted selling, general and administrative expenses
CENTENE CORPORATION AND SUBSIDIARIES
(In millions, except shares in thousands and per share data in dollars)
Premium and trade receivables
Long-term investments
Restricted deposits
Property, software and equipment, net
Intangible assets, net
Other long-term assets
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY
Medical claims liability
Accounts payable and accrued expenses
Return of premium payable
Unearned revenue
Current portion of long-term debt
Redeemable noncontrolling interests
Stockholders' equity:
Preferred stock, $0.001 par value; authorized 10,000 shares; no shares issued or outstanding at March 31, 2019 and December 31, 2018
Common stock, $0.001 par value; authorized 800,000 shares; 419,058 issued and 413,305 outstanding at March 31, 2019, and 417,695 issued and 412,478 outstanding at December 31, 2018
Accumulated other comprehensive earnings (loss)
Treasury stock, at cost (5,753 and 5,217 shares, respectively)
Total Centene stockholders' equity
Total liabilities, redeemable noncontrolling interests and stockholders' equity
The accompanying notes to the consolidated financial statements are an integral part of these statements.
Premium and service revenues
Premium tax and health insurer fee
Selling, general and administrative expenses
Premium tax expense
Health insurer fee expense
Earnings from operations
Other income (expense):
Investment and other income
Earnings from operations, before income tax expense
Loss attributable to noncontrolling interests
Net earnings attributable to Centene Corporation
Net earnings per common share attributable to Centene Corporation:
Basic earnings per common share
Diluted earnings per common share
Weighted average number of common shares outstanding:
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
Change in unrealized gain (loss) on investments, net of tax
Foreign currency translation adjustments
Other comprehensive earnings (loss)
Comprehensive earnings
Comprehensive loss attributable to noncontrolling interests
Comprehensive earnings attributable to Centene Corporation
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Three Months Ended March 31, 2019
Centene Stockholders' Equity
$0.001 Par
Earnings (Loss)
Retained
$.001 Par
Balance, December 31, 2018
Comprehensive Earnings:
Net earnings (loss)
Other comprehensive earnings, net of $30 tax
Common stock issued for employee benefit plans
Common stock repurchases
Stock compensation expense
Balance, March 31, 2019
Other comprehensive loss, net of ($16) tax
Common stock issued for acquisitions
(6,351
Cumulative-effect of accounting guidance
Purchase of noncontrolling interests
Acquisition resulting in noncontrolling interests
The accompanying notes to the consolidated financial statements are an integral part of this statement.
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization
Deferred income taxes
Medical claims liabilities
Other operating activities, net
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of investments
Sales and maturities of investments
Acquisitions, net of cash acquired
Net cash used in investing activities
Proceeds from long-term debt
Payments of long-term debt
Other financing activities, net
Net increase in cash, cash equivalents and restricted cash and cash equivalents
Cash, cash equivalents, and restricted cash and cash equivalents, beginning of period
Cash, cash equivalents, and restricted cash and cash equivalents, end of period
Equity issued in connection with acquisitions
The following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents reported within the Consolidated Balance Sheets to the totals above:
Restricted cash and cash equivalents, included in restricted deposits
Total cash, cash equivalents, and restricted cash and cash equivalents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Operations
The accompanying interim financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited financial statements included in the Form 10-K for the fiscal year ended December 31, 2018. The unaudited interim financial statements herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, footnote disclosures that would substantially duplicate the disclosures contained in the December 31, 2018 audited financial statements have been omitted from these interim financial statements, where appropriate. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of the interim periods presented.
Certain 2018 amounts in the consolidated financial statements and notes to the consolidated financial statements have been reclassified to conform to the 2019 presentation. These reclassifications have no effect on net earnings or stockholders' equity as previously reported.
On December 12, 2018, our Board of Directors declared a two-for-one split of our common stock in the form of a 100% stock dividend distributed on February 6, 2019 to stockholders of record as of December 24, 2018. All share and per share information presented in this Form 10-Q has been adjusted for the two-for-one stock split.
Recently Adopted Accounting Guidance
In February 2016, the FASB issued an ASU that introduces a lessee model that requires the majority of leases to be recognized on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in Accounting Standards Codification 606, the FASB's new revenue recognition standard, and addresses other concerns related to the current lessee model. The standard also requires lessors to increase the transparency of their exposure to changes in value of their residual assets and how they manage that exposure. It is effective for annual and interim periods beginning after December 15, 2018. The Company adopted the new guidance in the first quarter of 2019 using the modified retrospective transition approach. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allows an entity to not reassess lease classification for existing leases. The impact of the new guidance is further discussed in Note 8. Leases.
In August 2017, the FASB issued an ASU that amends the hedge accounting model to enable entities to better align the economics of risk management activities and financial reporting. In addition, the new standard enhances the understandability of hedge results and simplifies the application of hedge accounting in certain situations. The Company adopted the new guidance in the first quarter of 2019. The new guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.
In March 2017, the FASB issued an ASU that changes the period over which premiums on callable debt securities are amortized. The new standard requires the premiums on callable debt securities to be amortized to the earliest call date rather than to the contractual maturity date of the instrument. The new guidance more closely aligns the amortization period of premiums to expectations incorporated in the market pricing on the underlying securities. The Company adopted the new guidance in the first quarter of 2019. The new guidance did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.
2. Acquisitions
WellCare Transaction
On March 26, 2019, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with Wellington Merger Sub I, Inc., a direct, wholly owned subsidiary of the Company (Merger Sub I), Wellington Merger Sub II, Inc., a direct, wholly owned subsidiary of the Company (Merger Sub II), and WellCare, providing for (i) the merger of Merger Sub I with and into WellCare (the First Merger), with WellCare continuing as the surviving corporation of the First Merger and a direct, wholly owned subsidiary of the Company (the Surviving Corporation), and (ii) immediately after the effective time of the First Merger (the First Effective Time), the merger of the Surviving Corporation with and into Merger Sub II (the Second Merger), with Merger Sub II continuing as the surviving corporation of the Second Merger and a direct, wholly owned subsidiary of the Company. At the First Effective Time, each share of common stock of WellCare issued and outstanding immediately prior to the First Effective Time will be automatically canceled and converted into the right to receive 3.38 of validly issued, fully paid and nonassessable shares of Centene common stock and $120.00 in cash, without interest. The WellCare transaction is valued at approximately $17.3 billion, including existing WellCare debt (based on the Centene closing stock price on March 25, 2019). The transaction is subject to approval by Centene and WellCare stockholders and is also conditioned on clearance under the Hart-Scott Rodino Act, receipt of state regulatory approvals and other customary closing conditions.
Fidelis Care Acquisition
On July 1, 2018, the Company acquired substantially all of the assets of Fidelis Care for approximately $3.6 billion of cash consideration, including a working capital adjustment. The purchase price continues to be subject to adjustments related to changes in working capital through June 2019, which will be settled subsequent to the second quarter of 2019. The Fidelis Care acquisition expanded the Company's scale and presence to New York State.
The acquisition of Fidelis Care was accounted for as a business combination using the acquisition method of accounting that requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. Any necessary adjustments from preliminary estimates will be finalized within one year from the date of acquisition. Measurement period adjustments will be recorded in the period in which they are determined, as if they had been completed at the acquisition date. The Company has completed its valuation procedures on cash and cash equivalents, restricted deposits, and property, software and equipment, but the valuation of all remaining assets and liabilities has not been finalized. The Company has performed preliminary valuation procedures on all assets acquired and liabilities assumed and accordingly has recorded provisional amounts, which are subject to adjustment. The Company is waiting on additional information related to certain liabilities and performing a detailed analysis on the valuation of premium and related receivables.
The Company's preliminary allocation of the fair value of assets acquired and liabilities assumed as of the acquisition date of July 1, 2018 is as follows ($ in millions):
Assets acquired and liabilities assumed
Premium and related receivables
Intangible assets (a)
Total assets acquired
Total liabilities assumed
Total identifiable net assets
Goodwill (b)
Total assets acquired and liabilities assumed
The Company has made the following preliminary fair value adjustments based on information reviewed through March 31, 2019. Significant fair value adjustments are noted as follows:
The identifiable intangible assets acquired are to be measured at fair value as of the completion of the acquisition. The preliminary fair value of intangible assets is determined primarily using variations of the "income approach," which is based on the present value of the future after tax cash flows attributable to each identified intangible asset. Other valuation methods, including the market approach and cost approach, were also considered in estimating the fair value. The Company has estimated the fair value of intangible assets to be $956 million with a weighted average life of 13 years. The identifiable intangible assets include customer relationships, trade names, provider contracts and developed technology.
The fair values and weighted average useful lives for identifiable intangible assets acquired are as follows:
Weighted Average Useful Life (in years)
Provider contracts
Developed technologies
Total intangible assets acquired
The acquisition resulted in $1.6 billion of goodwill related primarily to synergies expected from the acquisition and the assembled workforce of Fidelis Care. All of the goodwill has been assigned to the Managed Care segment. The goodwill is deductible for income tax purposes.
3. Short-term and Long-term Investments, Restricted Deposits
Short-term and long-term investments and restricted deposits by investment type consist of the following ($ in millions):
Amortized
Unrealized Losses
U.S. Treasury securities and obligations of U.S. government corporations and agencies
Corporate securities
Restricted certificates of deposit
Restricted cash equivalents
Municipal securities
Residential mortgage-backed securities
Commercial mortgage-backed securities
Life insurance contracts
The Company's investments are debt securities classified as available-for-sale with the exception of life insurance contracts and certain private equity investments. The Company's investment policies are designed to provide liquidity, preserve capital and maximize total return on invested assets with the focus on high credit quality securities. The Company limits the size of investment in any single issuer other than U.S. treasury securities and obligations of U.S. government corporations and agencies. As of March 31, 2019, 97% of the Company's investments in rated securities carry an investment grade rating by nationally recognized statistical rating organizations. At March 31, 2019, the Company held certificates of deposit, life insurance contracts and private equity investments that did not carry a credit rating.
The Company's residential mortgage-backed securities are primarily issued by the Federal National Mortgage Association, Government National Mortgage Association or Federal Home Loan Mortgage Corporation, which carry implicit or explicit guarantees of the U.S. government. The Company's commercial mortgage-backed securities are primarily senior tranches with a weighted average rating of AA+ and a weighted average duration of 3.8 years at March 31, 2019.
The fair value of available-for-sale debt securities with gross unrealized losses by investment type and length of time that individual securities have been in a continuous unrealized loss position were as follows ($ in millions):
Less Than 12 Months
12 Months or More
As of March 31, 2019, the gross unrealized losses were generated from 1,966 positions out of a total of 4,339 positions. The change in fair value of fixed income securities is primarily a result of movement in interest rates subsequent to the purchase of the security.
For each security in an unrealized loss position, the Company assesses whether it intends to sell the security or if it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If the security meets this criterion, the decline in fair value is other-than-temporary and is recorded in earnings. The Company does not intend to sell these securities prior to maturity and it is not likely that the Company will be required to sell these securities prior to maturity; therefore, there is no indication of other-than-temporary impairment for these securities.
The contractual maturities of short-term and long-term investments and restricted deposits are as follows ($ in millions):
One year or less
One year through five years
Five years through ten years
Greater than ten years
Actual maturities may differ from contractual maturities due to call or prepayment options. Private equity investments and life insurance contracts are included in the five years through ten years category. Residential mortgage-backed securities and commercial mortgage-backed securities are included in the asset-backed securities category. The Company has an option to redeem at amortized cost substantially all of the securities included in the greater than ten years category listed above.
The Company continuously monitors investments for other-than-temporary impairment. Certain investments have experienced a decline in fair value due to changes in credit quality, market interest rates and/or general economic conditions. The Company recognizes an impairment loss for private equity investments when evidence demonstrates that it is other-than-temporarily impaired. Evidence of a loss in value that is other-than-temporary may include the absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment.
4. Fair Value Measurements
Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are categorized based upon observable or unobservable inputs used to estimate fair value. Level inputs are as follows:
Level Input:
Input Definition:
Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date.
Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.
The following table summarizes fair value measurements by level at March 31, 2019, for assets and liabilities measured at fair value on a recurring basis ($ in millions):
Investments available for sale:
Total investments
Restricted deposits available for sale:
Total restricted deposits
Total assets at fair value
Other long-term liabilities:
Interest rate swap agreements
Total liabilities at fair value
The following table summarizes fair value measurements by level at December 31, 2018, for assets and liabilities measured at fair value on a recurring basis ($ in millions):
The Company utilizes matrix-pricing services to estimate fair value for securities that are not actively traded on the measurement date. The Company designates these securities as Level II fair value measurements. In addition, the aggregate carrying amount of the Company's life insurance contracts and other private equity investments, which approximates fair value, was $539 million and $515 million as of March 31, 2019 and December 31, 2018, respectively.
5. Medical Claims Liability
The following table summarizes the change in medical claims liability ($ in millions):
Balance, January 1
Less: Reinsurance recoverable
Balance, January 1, net
Acquisitions and purchase accounting adjustments
Incurred related to:
Total incurred
Paid related to:
Balance at March 31, net
Plus: Reinsurance recoverable
Balance, March 31
Reinsurance recoverables related to medical claims are included in premium and related receivables. Changes in estimates of incurred claims for prior years are primarily attributable to reserving under moderately adverse conditions. Additionally, as a result of development within "Incurred related to: Prior years" due to minimum health benefits ratio (HBR) and other return of premium programs, we recorded $8 million as an increase to premium revenues and $13 million as a reduction to premium revenues in the three months ended March 31, 2019 and 2018, respectively.
Incurred but not reported (IBNR) plus expected development on reported claims as of March 31, 2019 was $5,569 million. Total IBNR plus expected development on reported claims represents estimates for claims incurred but not reported, development on reported claims, and estimates for the costs necessary to process unpaid claims at the end of each period. We estimate our liability using actuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice. These actuarial methods consider factors such as historical data for payment patterns, cost trends, product mix, seasonality, utilization of healthcare services and other relevant factors.
6. Affordable Care Act
The Affordable Care Act contains risk spreading premium stabilization programs as well as a minimum annual MLR and cost sharing reductions. The Company's net receivables (payables) for each of the ongoing programs are as follows ($ in millions):
Risk adjustment
Minimum MLR
Cost sharing reductions
7. Debt
Debt consists of the following ($ in millions):
$1,400 million 5.625% Senior notes, due February 15, 2021
$1,000 million 4.75% Senior notes, due May 15, 2022
$1,200 million 4.75% Senior notes, due January 15, 2025
$1,800 million 5.375% Senior notes, due June 1, 2026
Fair value of interest rate swap agreements
Total senior notes
Revolving credit agreement
Mortgage notes payable
Construction loan payable
Finance leases and other
Debt issuance costs
Less current portion
8. Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases, which introduced a lessee model that requires the majority of leases to be recognized on the balance sheet. On January 1, 2019, the Company adopted the ASU using the modified retrospective transition approach and elected the transition option to recognize the adjustment in the period of adoption rather than in the earliest period presented. Adoption of the new guidance resulted in the initial recognition of right-of-use (ROU) assets of $661 million, ROU lease liabilities of $774 million and the elimination of $113 million of straight-line lease liabilities.
The Company records ROU assets and liabilities for non-cancelable operating leases primarily for real estate and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Expense related to leases is recorded on a straight-line basis over the lease term, including rent holidays. During the three months ended March 31, 2019, the Company recognized operating lease expense of $50 million.
The following table sets forth the ROU assets and liabilities as of March 31, 2019 ($ in millions):
ROU assets (recorded within other long-term assets)
Short-term (recorded within accounts payable and accrued expenses)
Long-term (recorded within other long-term liabilities)
Total ROU liabilities
During the three months ended March 31, 2019, the Company reduced its ROU liabilities by $64 million for cash paid. In addition, new operating leases commenced resulting in the recognition of ROU assets and liabilities of $32 million, respectively. As of March 31, 2019, the Company had additional operating leases that have not yet commenced of $13 million. These operating leases will commence in 2019 with lease terms of 1 year to 5 years.
As of March 31, 2019, the weighted average remaining lease term of the Company's operating leases was 6.1 years. The ROU liabilities as of March 31, 2019 reflect a weighted average discount rate of 4.6%. Lease payments over the next five years and thereafter are as follows ($ in millions):
Total lease payments
Less: imputed interest
9. Earnings Per Share
The following table sets forth the calculation of basic and diluted net earnings per common share ($ in millions, except shares in thousands and per share data in dollars):
Earnings attributable to Centene Corporation
Shares used in computing per share amounts:
Common stock equivalents (as determined by applying the treasury stock method)
Weighted average number of common shares and potential dilutive common shares outstanding
The calculation of diluted earnings per common share for the three months ended March 31, 2019 and 2018 excludes the impact of 1.4 million and 9 thousand shares, respectively, related to anti-dilutive stock options, restricted stock and restricted stock units.
10. Segment Information
Centene operates in two segments: Managed Care and Specialty Services. The Managed Care segment consists of Centene's health plans, including all of the functions needed to operate them. The Specialty Services segment consists of Centene's specialty companies offering auxiliary healthcare services and products.
Segment information for the three months ended March 31, 2019, follows ($ in millions):
Eliminations
Total revenues from external customers
Total revenues from internal customers
11. Contingencies
The Company records reserves and accrues costs for certain legal proceedings and regulatory matters to the extent that it determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While such reserves and accrued costs reflect the Company's best estimate of the probable loss for such matters, the recorded amounts may differ materially from the actual amount of any such losses. In some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and regulatory proceedings, which may be exacerbated by various factors, including but not limited to, they may involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; involve a large number of parties, claimants or regulatory bodies; are in the early stages of the proceedings; involve a number of separate proceedings and/or a wide range of potential outcomes; or result in a change of business practices.
As of the date of this report, amounts accrued for legal proceedings and regulatory matters were not material. However, it is possible that in a particular quarter or annual period the Company's financial condition, results of operations, cash flow and/or liquidity could be materially adversely affected by an ultimate unfavorable resolution of or development in legal and/or regulatory proceedings, including as described below. Except for the proceedings discussed below, the Company believes that the ultimate outcome of any of the regulatory and legal proceedings that are currently pending against it should not have a material adverse effect on financial condition, results of operations, cash flow or liquidity.
On October 20, 2015, the Company's California subsidiary, Health Net of California, Inc. (Health Net California), was named as a defendant in a California taxpayer action filed in Los Angeles County Superior Court, captioned as Michael D. Myers v. State Board of Equalization, Dave Jones, Insurance Commissioner of the State of California, Betty T. Yee, Controller of the State of California, et al., Los Angeles Superior Court Case No. BS158655. This action is brought under a California statute that permits an individual taxpayer to sue a governmental agency when the taxpayer believes the agency has failed to enforce governing law. Plaintiff contends that Health Net California, a California licensed Health Care Service Plan (HCSP), is an "insurer" for purposes of taxation despite acknowledging it is not an "insurer" under regulatory law. Under California law, "insurers" must pay a gross premiums tax (GPT), calculated as 2.35% on gross premiums. As a licensed HCSP, Health Net California has paid the California Corporate Franchise Tax (CFT), the tax generally paid by California businesses. Plaintiff contends that Health Net California must pay the GPT rather than the CFT. Plaintiff seeks a writ of mandate directing the California taxing agencies to collect the GPT, and seeks an order requiring Health Net California to pay GPT, interest and penalties for a period dating to eight years prior to the October 2015 filing of the complaint. This lawsuit is being coordinated with similar lawsuits filed against other entities (collectively, "Related Actions"). In March 2018, the Court overruled the Company's demurrer seeking to dismiss the complaint and denied the Company's motion to strike allegations seeking retroactive relief. In August 2018, the trial court stayed all the Related Actions pending determination of a writ of mandate by the California Court of Appeals in two of the Related Actions. In March 2019, the California Court of Appeals denied the writ of mandate and the defendants in those Related Actions have sought review by the California Supreme Court. It is not yet known whether the trial court will stay the Related Actions pending a decision from the California Supreme Court. The Company intends to vigorously defend itself against these claims; however, this matter is subject to many uncertainties, and an adverse outcome in this matter could potentially have a materially adverse impact on our financial position, results of operations and cash flows.
Federal Securities Class Action
On November 14, 2016, a putative federal securities class action, Israel Sanchez v. Centene Corp., et al., was filed against the Company and certain of its executives in the U.S. District Court for the Central District of California. In March 2017, the court entered an order transferring the matter to the U.S. District Court for the Eastern District of Missouri. The plaintiffs in the lawsuit allege that the Company's accounting and related disclosures for certain liabilities acquired in the acquisition of Health Net violated federal securities laws. In July 2017, the lead plaintiff filed a Consolidated Class Action Complaint. The Company filed a motion to dismiss this complaint in September 2017. In February 2018, the Court held a hearing on the motion to dismiss but has not yet issued a ruling.
The Company denies any wrongdoing and is vigorously defending itself against these claims. Nevertheless, this matter is subject to many uncertainties and the Company cannot predict how long this litigation will last or what the ultimate outcome will be, and an adverse outcome in this matter could potentially have a materially adverse impact on our financial position and results of operations.
Additionally, on January 24, 2018, a separate derivative action was filed by plaintiff Harkesh Parekh on behalf of Centene Corporation against the Company and certain of its officers and directors in the United States District Court for the Eastern District of Missouri. Plaintiff purports to bring suit derivatively on behalf of the Company against certain officers and directors for violation of securities laws, breach of fiduciary duty, waste of corporate assets and unjust enrichment. The derivative complaint repeats many of the allegations in the federal securities class action described above and asserts that defendants made inaccurate or misleading statements, and/or failed to correct the alleged misstatements.
A second shareholder derivative action was filed on March 9, 2018, by plaintiffs Laura Wood and Peoria Police Pension Fund on behalf of Centene Corporation against the Company and certain of its officers and directors in the United States District Court for the Eastern District of Missouri. This second derivative complaint repeats many of the allegations in the securities class action and the first derivative suit.
A third shareholder derivative action was filed on December 14, 2018, by plaintiffs Carpenter Pension Fund of Illinois and Iron Workers Local 11 Pension Fund on behalf of Centene Corporation against the Company and certain of its officers and directors in the United States District Court for the Eastern District of Missouri. This third derivative action repeats many of the allegations in the securities class action and the other derivative suits and adds additional allegations asserting violations of securities laws, breach of fiduciary duty, insider trading and unjust enrichment. On January 9, 2019, the Court consolidated the three derivative suits and established a schedule for determining lead plaintiff and lead counsel. On February 5, 2019, plaintiffs in the three derivative suits filed a consolidated amended complaint. Lead plaintiffs and counsel have been appointed. On February 22, 2019, the Company moved to stay the consolidated derivative action pending resolution of the Sanchez matter. That motion has not yet been decided.
Medicare Parts C and D Matter
In December 2016, a Civil Investigative Demand (CID) was issued to Health Net by the United States Department of Justice regarding Health Net's submission of risk adjustment claims to CMS under Parts C and D of Medicare. The CID may be related to a federal qui tam lawsuit filed under seal in 2011 naming more than a dozen health insurers including Health Net. The lawsuit was unsealed in February 2017 when the Department of Justice intervened in the case with respect to one of the insurers (not Health Net). In subsequent pleadings, both the Department of Justice and the Relator excluded Health Net from the lawsuit. The Company is complying with the CID and will vigorously defend any lawsuits. At this point, it is not possible to determine what level of liability, if any, the Company may face as a result of this matter.
Veterans Administration Matter
In October 2017, a CID was issued to Health Net Federal Services, LLC (HNFS) by the United States Department of Justice. The CID seeks documents and interrogatory responses concerning whether HNFS submitted, or caused to be submitted, excessive, duplicative or otherwise improper claims to the U.S. Department of Veterans Affairs (VA) under a contract to provide healthcare coordination services for veterans. The contract began in late 2014 and ended September 30, 2018. In 2016, modifications to the contract were made to allow for possible duplicate billings with a reconciliation period at the end of the contract term. The Company is complying with the CID and believes it has met its contractual obligations. At this point, it is not possible to determine what level of liability, if any, the Company may face as a result of this matter. This matter is separate from the negotiated settlements with the VA in connection with the contract expiration on September 30, 2018.
Ambetter Class Action
On January 11, 2018, a putative class action lawsuit was filed by Cynthia Harvey and Steven A. Milman against the Company and certain subsidiaries in the U.S. District Court for the Eastern District of Washington. The complaint alleges that the Company failed to meet federal and state requirements for provider networks and directories with regard to its Ambetter policies, denied coverage and/or refused to pay for covered benefits, and failed to address grievances adequately, causing some members to incur unexpected costs. In March 2018, the Company filed separate motions to dismiss each defendant. In July 2018, the plaintiff voluntarily filed a First Amended Complaint that removed Steven Milman as a plaintiff, dropped Centene Corporation and Superior Health Plan as defendants, abandoned certain claims, narrowed the putative class to Washington State only, and added Centene Management Company as a defendant. In August 2018, the Company moved to dismiss the First Amended Complaint. In response, the plaintiff voluntarily filed a Second Amended Complaint. In September 2018, the Company filed a motion to dismiss the Second Amended Complaint. On November 21, 2018, the Court granted in part and denied in part the Company's motion to dismiss. Plaintiff Cynthia Harvey filed a Third Amended Complaint, on November 28, 2018, against Centene Management Company and Coordinated Care Corporation ("Defendants"), both subsidiaries of the Company. Defendants filed an answer on December 12, 2018. Class certification discovery is occurring. The Company intends to vigorously defend itself against these claims. Nevertheless, this matter is subject to many uncertainties and the Company cannot predict how long this litigation will last or what the ultimate outcome will be, and an adverse outcome in this matter could potentially have a materially adverse impact on our financial position and results of operations.
Miscellaneous Proceedings
Excluding the matters discussed above, the Company is also routinely subjected to legal and regulatory proceedings in the normal course of business. These matters can include, without limitation:
periodic compliance and other reviews and investigations by various federal and state regulatory agencies with respect to requirements applicable to the Company's business, including, without limitation, those related to payment of out-of-network claims, submissions to CMS for risk adjustment payments or the False Claims Act, pre-authorization penalties, timely review of grievances and appeals, timely and accurate payment of claims, and the Health Insurance Portability and Accountability Act of 1996;
litigation arising out of general business activities, such as tax matters, disputes related to healthcare benefits coverage or reimbursement, putative securities class actions and medical malpractice, privacy, real estate, intellectual property and employment-related claims;
disputes regarding reinsurance arrangements, claims arising out of the acquisition or divestiture of various assets, class actions and claims relating to the performance of contractual and non-contractual obligations to providers, members, employer groups and others, including, but not limited to, the alleged failure to properly pay claims and challenges to the manner in which the Company processes claims and claims alleging that the Company has engaged in unfair business practices.
Among other things, these matters may result in awards of damages, fines or penalties, which could be substantial, and/or could require changes to the Company's business. The Company intends to vigorously defend itself against the miscellaneous legal and regulatory proceedings to which it is currently a party; however, these proceedings are subject to many uncertainties. In some of the cases pending against the Company, substantial non-economic or punitive damages are being sought.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this filing. The discussion contains forward-looking statements that involve known and unknown risks and uncertainties, including those set forth under Part II, Item 1A. "Risk Factors" of this Form 10-Q.
EXECUTIVE OVERVIEW
We are a diversified, multi-national healthcare enterprise that provides services to government sponsored and commercial healthcare programs, focusing on under-insured and uninsured individuals. We provide member-focused services through locally based staff by assisting in accessing care, coordinating referrals to related health and social services and addressing member concerns and questions.
Results of operations depend on our ability to manage expenses associated with health benefits (including estimated costs incurred) and selling, general and administrative (SG&A) costs. We measure operating performance based upon two key ratios. The health benefits ratio (HBR) represents medical costs as a percentage of premium revenues, excluding premium tax and health insurer fee revenues that are separately billed, and reflects the direct relationship between the premiums received and the medical services provided. The SG&A expense ratio represents SG&A costs as a percentage of premium and service revenues, excluding premium tax and health insurer fee revenues that are separately billed.
Our insurance subsidiaries are subject to the Affordable Care Act annual health insurer fee (HIF), absent a HIF moratorium. The Affordable Care Act (ACA) imposed the HIF in 2018, however the HIF was suspended in 2019. In 2018, the Company recognized revenue for reimbursement of the HIF, including the "gross-up" to reflect the non-deductibility of the HIF. Collectively, this revenue is recorded as premium tax and health insurer fee revenue in the Consolidated Statements of Operations. For certain products, premium taxes, state assessments and the HIF are not pass-through payments and are recorded as premium revenue and premium tax expense or health insurer fee expense in the Consolidated Statements of Operations. Due to the size of the HIF fee, one of the primary drivers of the year-over-year variances discussed throughout this section is related to the moratorium in 2019.
On December 12, 2018, the Board of Directors declared a two-for-one split of our common stock in the form of a 100% stock dividend distributed on February 6, 2019 to stockholders of record as of December 24, 2018. All share and per share information presented in this Form 10-Q has been adjusted for the two-for-one stock split.
On March 26, 2019, we entered into a definitive merger agreement (the Merger Agreement) with WellCare Health Plans, Inc., (WellCare) under which Centene will acquire all of the issued and outstanding shares of WellCare (the WellCare Transaction). Under the terms of the agreement, at the closing of the transaction, WellCare common stock will be automatically canceled and converted into the right to 3.38 of validly issued, fully paid, nonassessable shares of Centene common stock and $120.00 in cash, without interest. The transaction is valued at approximately $17.3 billion, including the existing WellCare debt (based on the Centene closing stock price on March 25, 2019), and is expected to close in the first half of 2020. The transaction is subject to approval by Centene and WellCare stockholders and is also conditioned on clearance under the Hart-Scott Rodino Act, receipt of state regulatory approvals and other customary closing conditions. We have an $8.4 billion financing commitment, but intend to fund the cash portion of the acquisition primarily through debt financing in advance of the closing date.
On July 1, 2018, we acquired substantially all of the assets of New York State Catholic Health Plan, Inc., d/b/a Fidelis Care New York (Fidelis Care) for approximately $3.60 billion of cash consideration, including a working capital adjustment. Due to the size of the acquisition, one of the primary drivers of the year-over-year variances discussed throughout this section is related to the acquisition of Fidelis Care.
Regulatory Trends and Uncertainties
The United States government, politicians, and healthcare experts continue to discuss and debate various elements of the United States healthcare payment model. From the constitutionality of the Affordable Care Act, to Medicare for All (single payer), to pharmacy pricing structures, all areas of healthcare are being challenged to assure adequate healthcare is delivered to all segments of the population.
During this time of deliberation, the Company remains focused on the promise of delivering access to quality, affordable healthcare to all of its members and believes it is well positioned to meet the needs of the changing healthcare landscape. We have more than three decades of experience, spanning six presidents from both sides of the aisle, in delivering high-quality healthcare services on behalf of states and the Federal government to under-insured and uninsured families, commercial organizations and military families. This expertise has allowed us to deliver cost effective services to our government sponsors and our members. While healthcare experts maintain focus on personalized healthcare technology, we continue to make strategic decisions to accelerate development of new software platforms and analytical capabilities, including meaningful investments in RxAdvance, Interpreta and Casenet. We continue to believe we have both the capacity and capability to successfully navigate industry changes to the benefit of our members, customers and shareholders.
For additional information regarding regulatory trends and uncertainties, see Part II, Item 1A, "Risk Factors."
First Quarter 2019 Highlights
Our financial performance for the first quarter of 2019 is summarized as follows:
Managed care membership of 14.7 million, an increase of 1.8 million members, or 14% year-over-year.
Total revenues of $18.4 billion, representing 40% growth year-over-year.
Health benefits ratio of 85.7%, compared to 84.3% for the first quarter of 2018.
SG&A expense ratio of 9.6%, compared to 10.5% for the first quarter of 2018.
Adjusted SG&A expense ratio of 9.5%, compared to 10.3% for the first quarter of 2018.
Operating cash flows of $1.3 billion.
Diluted earnings per share (EPS) for the first quarter of 2019 of $1.24, compared to $0.96 for the first quarter of 2018.
Adjusted Diluted EPS for the first quarter of 2019 of $1.39, compared to $1.09 for the first quarter of 2018.
Adjusted Diluted EPS is highlighted below and additional detail is provided above under the heading "Non-GAAP Financial Presentation":
GAAP diluted EPS
The following items contributed to our revenue and membership growth over the last year:
Arizona. In October 2018, our Arizona subsidiary, Health Net Access, began providing physical and behavioral healthcare services under a new integrated contract through the Arizona Health Care Cost Containment System Complete Care program in the Central region and the Southern region.
Arkansas. In February 2018, our Arkansas subsidiary, Arkansas Total Care, began managing a Medicaid special needs population comprised of people with high behavioral health needs and individuals with developmental/intellectual disabilities. Arkansas Total Care assumed full-risk on this population in March 2019.
CMG. In March 2018, we completed the acquisition of Community Medical Holdings Corp., d/b/a Community Medical Group (CMG), an at-risk primary care provider serving Medicaid, Medicare Advantage, and Health Insurance Marketplace patients in Miami-Dade County, Florida.
Correctional. In February 2019, Centurion began operating under a new contract to provide comprehensive healthcare services to detainees of the Metropolitan Detention Center located in Albuquerque, New Mexico. In December 2018, Centurion began operating under a new contract to provide comprehensive healthcare services to detainees of Volusia County detention facilities located near Daytona, Florida. In April 2018, we completed the acquisition of MHM Services Inc. (MHM), a national provider of healthcare and staffing services to correctional systems and other government agencies. Under the terms of the agreement, Centene also acquired the remaining 49% ownership of Centurion, the correctional healthcare services joint venture between Centene and MHM.
Fidelis Care. In July 2018, we completed the acquisition of substantially all of the assets of Fidelis Care for $3.6 billion of cash consideration, making Fidelis Care Centene's health plan in New York State.
Florida. In December 2018, our Florida subsidiary, Sunshine Health, began providing physical and behavioral healthcare services through Florida's Statewide Medicaid Managed Care Program under its new five year contract which was implemented for all 11 regions by February 2019.
Illinois. In January 2018, our Illinois subsidiary, IlliniCare Health, began operating under a state-wide contract for the Medicaid Managed Care Program. Implementation dates varied by region and the contract was fully implemented statewide in April 2018.
Interpreta. In March 2018, we acquired an additional 61% ownership in Interpreta Holdings, Inc. (Interpreta), a clinical and genomics data analytics business, bringing our total ownership to 80%.
Health Insurance Marketplace. In January 2019, we expanded our offerings in the 2019 Health Insurance Marketplace. We entered Pennsylvania, North Carolina, South Carolina and Tennessee, and expanded our footprint in six existing markets: Florida, Georgia, Indiana, Kansas, Missouri and Texas.
Kansas. In January 2019, our Kansas subsidiary, Sunflower Health Plan, continued providing managed care services to KanCare beneficiaries statewide under a new contract.
New Mexico. In January 2019, our New Mexico subsidiary, Western Sky Community Care, began operating under a new statewide contract in New Mexico for the Centennial Care 2.0 Program.
Pennsylvania. In January 2019, our Pennsylvania subsidiary, Pennsylvania Health & Wellness, began serving enrollees in the Community HealthChoices program in the Southeast region as part of the statewide contract that is expected to be fully implemented statewide by January 2020.
Primero Salud. In December 2018, our Spanish subsidiary, Primero Salud, acquired 89% of Torrejón Salud, a public-private partnership in the Community of Madrid.
RxAdvance. In March 2018, we made a 25% equity method investment in RxAdvance (RxA), a full-service pharmacy benefit manager (PBM), and expect to use its platform to improve health outcomes and reduce avoidable drug-impacted medical and administrative costs. This partnership includes both a customer relationship and a strategic investment in RxAdvance. As part of the initial transaction, Centene has certain rights to expand its equity investment in the future. In May 2018, we made an additional investment in RxAdvance, bringing the total ownership to 28%. In September 2018, we made an additional investment in convertible preferred stock. In 2018, we began moving our health plans onto the RxAdvance pharmacy platform, beginning with the transition of our Mississippi health plan in November 2018.
The growth items listed above were partially offset by the following items:
Beginning January 1, 2019, Health Net of Arizona, Inc. began discontinuing and non-renewing all of its Employer Group plans for small and large business groups in Arizona. The effective date of coverage termination for existing groups is dependent on remaining renewals; however, coverage will no longer be provided to any group policyholders and/or members after December 31, 2019.
Beginning in July 2018, we no longer serve correctional healthcare members in Massachusetts.
Effective October 2018, we no longer provide healthcare coordination services to veterans under the Patient-Centered Community Care and Veterans Choice Programs.
We expect the following items to contribute to our revenue or future growth potential:
We expect to realize the full year benefit in 2019 of acquisitions, investments, and business commenced during 2018 and 2019, as discussed above.
In April 2019, we completed the acquisition of QCA Health Plan, Inc. and QualChoice Life and Health Insurance Company, Inc. The acquisition expands our footprint in Arkansas by adding additional members primarily through Commercial products.
In March 2019, we signed a definitive Merger Agreement to acquire all of the issued and outstanding shares of WellCare Health Plans, Inc. The transaction is valued at approximately $17.3 billion (based on the Centene closing stock price on March 25, 2019) and is expected to close in the first half of 2020. The transaction is subject to approval by Centene and WellCare stockholders and is also conditioned on clearance under the Hart-Scott Rodino Act, receipt of state regulatory approvals and other customary closing conditions.
In March 2019, our New Hampshire subsidiary, NH Healthy Families, was awarded a contract to continue providing Medicaid services to enrollees statewide under a new five-year contract, which is expected to commence September 1, 2019.
In February 2019, our North Carolina joint venture, Carolina Complete Health, was awarded a contract for the Medicaid Managed Care program. Under the agreement, Carolina Complete Health will provide Medicaid managed care services in Regions 3 and 5. Pending regulatory approval, the new three-year contract is effective February 1, 2020.
In January 2019, Centurion was notified by Arizona's Department of Corrections of the state's intent to award a contract to provide comprehensive healthcare services to inmates housed in Arizona's state prison system. The contract is expected to commence July 1, 2019, subject to customary contract negotiation.
In October 2018, CMS published updated Medicare Star quality ratings for the 2019 rating year. Our Star ratings returned to a 4.0 Star parent rating. The 2019 rating year will positively affect quality bonus payments for Medicare Advantage plans in 2020.
In July 2018, we announced a joint venture with Ascension to establish a Medicare Advantage plan. The plan is expected to be implemented in multiple geographic markets beginning in 2020.
In July 2018, our subsidiary, Health Net Federal Services, was awarded the next generation Military & Family Life Counseling Program contract. The awarded contract is up to ten years, including multiple one-year option periods.
In May 2018, our Iowa subsidiary, Iowa Total Care, Inc., was selected to negotiate a new statewide contract for the IA Health Link Program. The contract is expected to commence on July 1, 2019.
In January 2018, our Illinois subsidiary, IlliniCare Health, began operating under a state-wide contract for the Medicaid Managed Care Program. Implementation dates varied by region and the contract was fully implemented statewide in April 2018. The new contract will also include children who are in need through the Department of Children and Family Services/Youth in Care by the Illinois Department of Healthcare and Family Services and Foster Care. These additional products are expected to be implemented in 2019 or 2020.
From March 31, 2018 to March 31, 2019, we increased our managed care membership by 1,841,400, or 14%. The following table sets forth our membership by line of business:
Medicaid:
TANF, CHIP & Foster Care
ABD & LTSS
Total Medicaid
Total at-risk membership
TRICARE eligibles
Non-risk membership
(1) Membership includes Medicare Advantage, Medicare Supplement, Special Needs Plans, and Medicare-Medicaid Plans (MMP).
The following table sets forth additional membership statistics, which are included in the membership information above:
Dual-eligible (2)


Indians seem to have that 'genius gene' in them, and it always adds a feather to our cap of the 'Great Indian Intellectual Legacy' when any international competitive event toppers' list is adorned by a quite a few number of familiar Indian names. This time it is the Bloomberg Hall of Fame, published based on the performance in Bloomberg Aptitude Test (BAT).
The BAT is conducted by the Bloomberg Institute. It is a worldwide test, which allows the participants to showcase their strength in financial domain. The test is conducted in 60 countries in 3526 universities. It allows a successful taker to connect to as high as 665 financial employers worldwide. It is a competitive playground to juxtapose one's strengths against the rest of the world, and it commands a high value addition to one's resume from the perspective of financial recruiters.
Indian students fared well in the test, and Indian Institute of Management, Rohtak (IIM R) is proud to see many names in its students-roll appearing in the Hall of Fame. Kartik Kalra of IIM R 2012-14 batch is Number 3 among the test takers of the world. Coming to region-specific lists, The Asia and Pacific (APAC) list has five students from IIM Rohtak. Along with Kartik Kalra at Rank 1, there are Rakesh Gandhari and Varun Gogia at Rank 2, Naresh Sharma at Rank 3, and Vivek Rokade at Rank 5.
It is a sure sign that IIM R is qualitatively out of its imposed infancy that comes with the overly used tag "New IIM". Well past its infant years, the institute has become a mature player, and its students are surpassing the ones in the world's best universities in highly challenging exams like the BAT. Great way to declare a transition to adulthood, IIM Rohtak!
Great ork guys. Proud to be part of IIM Rohtak. We will surely be in top league in coming time.


We all know Herman Melville, Jack Kerouac, Thomas Pynchon, Flannery O'Connor, Raymond Chandler, Chester Himes, and Pam Houston. Now meet their metaphysical ukuleles.
Mixing the flair of literary invention with real events in each writer's life—Herman Melville living with a tribe of cannibals; Raymond Chandler holding The Blue Dahlia hostage from Paramount Studios; Flannery O'Connor falling in love; Chester Himes threatening to decapitate his landlord, and many more—Sean Carswell takes the nonfiction of some our most famous writer's lives and turns it into exquisite fiction, with a ukulele thrown in for good measure. At times heartbreaking, at times absurd, the stories in this truly one-of-a-kind collection delightfully blur the line between what is life, and what is literature.
Sean Carswell is the author of the novels Drinks for the Little Guy, Train Wreck Girl, and Madhouse Fog, and the short story collections Barney's Crew and Glue and Ink Rebellion. He co-founded the independent book publisher Gorsky Press and the music magazine Razorcake. He currently teaches writing and literature at California State University, Channel Islands.
Sean Carswell is the author of the novels Drinks for the Little Guy, Train Wreck Girl, and Madhouse Fog. He wrote the short story collections Barney's Crew and Glue and Ink Rebellion. He co-founded the independent book publisher Gorsky Press and the music magazine Razorcake. He has been a regular contributor to Flipside, Ink 19, and Clamor. His writing has also appeared in such diverse places as the skateboarding magazine Thrasher, tiny zines like Zisk, and prestigious literary journals like The Southeastern Review and The Rattling Wall. He currently teaches writing and literature at California State University Channel Islands.


In this video I demonstrate some GDAX Exchange Bitcoin, Ether, and Litecoin Advanced Limit Order Options. Good 'Til Canceled (GTC), Immediate or Cancel (IOC), and Fill or Kill (FOC) are demonstrated. I also show how to cancel open orders.


text:
Q: Solidity BlockChain invalid amount check      // Attempt transfer tokens, when you have none
     invalidAmount = tokens(10) // recipient has no tokens ??
     await token.transfer(deployer, invalidAmount, { from: receiver }).should.be.rejectedWith(EVM_REVERT)

Fellow Developers , I am following a tutorial to make a standard ERC-20 token, wherein there is a test to check if user is sending zero tokens. but still in the code presented by tutor the test defines invalidAmount as 10 token.
Can someone please let me know why is it so that we are passing 10 tokens and not 0 . Is it some kind of a convention?
Thank you in advance.

A: If the sender doesn't have 10 (or 20, or any number of) tokens that they're trying to send, the transaction should revert. Which is the case that is tested in this snippet:
should.be.rejectedWith(EVM_REVERT)

So it's a code that checks if the transaction really reverts when it should.

Depending on how the contract is implemented, it might be possible to successfully transfer 0 tokens, and the transaction might not revert.
For example:
function transfer(address _to, uint256 _amount) external returns (bool) {
    // doesn't revert, because their 0 balance is "greater or equal" to the 0 `amount`
    require(balances[msg.sender] >= _amount);

    balances[msg.sender] -= _amount; // subtract 0 from 0
    balances[_to] += _amount; // add 0

    emit Transfer(msg.sender, _to, _amount);
    return true;
}

redpajama_set_name: RedPajamaStackExchange


Remarks: Large 3/2 Furnished home in gated community ! Great location off SR 82 makes this home a perfect winter retreat and close to all Fort Myers has to offer. Located in Magnolia Lakes this home is nicely furnished in a gated community Sorry no pets !


Bethnee aka Bethh Turner is a 25 year old (DOB: October 20, 1993) pure-blood witch living in Hogwart during term time, London in holidays :). She wields a 14½" Willow, Demiguise Hair wand, and is a member of the unsorted masses of Hogwarts students just off the train eagerly crowding around the Sorting Hat. Her favorite Harry Potter book is Harry Potter and the Goblet of Fire and her favorite Harry Potter character is Draco Malfoy.
I Like Making New Friends.


Tuesday we will be headed off to sunny Florida. A two-fold trip. Eric is on the school board and was able to find a van through his Dad, that is a need for the school. Well, we will leave on Tuesday and return on Friday with the new school van. I am looking forward to it. One last little get away to spend with my boys before school starts on the 25th.
Have a wonderful time on your last little jont for the summer. I'll pray for safety and lots of fun times!
Now, when your little man gets on the bus on his first school morning, take advantage of your alone time and let all of your emotions out. Have a good cry, eat some chocolate and spend some time on yourself. I think we can let our emotions get too bottled up and then when they come flooding out, it's nearly impossible to stop them. You have a lot weighing on your heart and it's essential to release some of that anguish. Hey, I'm crying right now just giving you advice. Maybe it'll help us both. You'll feel better if you just give yourself some time to let all of that out, spend some time in meditation and prayer, and you'll be ready to face the rest of your week refreshed.......I hope. I'll pray for it to be so.
Have a fun and safe trip. Praying for you. Lets talk or get together when you get back.
The Lord has put you on this journey and will fulfill his promises. His timing is rarely ours but there is so much to do and learn during the wait. He hasn't forgotten you and does love you.
Am praying hard Michelle. I believe God has a wonderful new season of your life waiting for you when you are ready.
And a very wise pastor I know once said that he thinks there is no better chemical adjustment than a good Godly cry.
Blessings to all the Selents as you hit the beach together - sounds like a blast!
Michelle, I am just so sorry for your heartache with all of this. Hope deferred DOES make a heart sick! And I so appreciate all of your support and encouragement with our process-I pray for you all the time b/c I know how much you all are frustrated with things in your process. I wish I could make the way clear for you to get to Mercy, and I cannot, but I know the ONE who can and I am so glad you know Him too so you can cling to Him in this crazy walk. The first day of school-I am dreading it, too. I love DCA, but I miss my kids and if you want to hang out any on Monday or any day, let me know!! Enjoy every second of your trip to Florida with each other-I am praying for ALL of you!
We love you guys so much and we miss you. Have fun on your vacations. You are in our prayers everyday. I am waiting for a part time position to be with my babies because they are growing too fast (you know!!!) Your little man will be the life of his class room.
I feel the pain you are experiencing. No, it was not my youngest's first day of school, it was my middle son. We had to leave him at college. Unbelief at time passed, and hope for the future collide. AH, a mother's heart...aint it grand?!!
Remember : When you cannot see the Father's hand...trust His heart!!!
Praying you have a wonderful trip. There is HOPE in our father - cling to it!
Bless your heart. I will pray for you.
have fun! I love your header!


Location: 195 Hemphill Knob Rd, Asheville, NC 28803.
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Strawbees, the Swedish creative toy startup were invited to create installations in four themed rooms at the Nobel Prize afterparty. Strawbees, being a creative toy for future innovators, was also a perfect giveaway for the 2500 attendees.
"We were of course both excited and humbled for getting invited to such a prestigious event, and it's a sign that our products are highly innovative and much appreciated", says Strawbees CEO, Erik Bergelin. Strawbees have recently launched their new educational products that brings play and curiosity into classrooms, and encourages learning by making. They will continue to launch more exciting and unique educational products in 2017.
"Even though our retail sales are increasing quickly, with distribution in 15+ countries, the educational sales is still about 70% of our sales, and that is a mix we would like to keep. Next year's product, the Hovercraft kit, will be one of the most exciting and educational products out there", continues Erik Bergelin.
The theme for the Nobel Prize after party was gaming, for which Strawbees was asked to decorate four differently themed rooms with their installations – a huge MockingJay for the Hunger Games room, stars and mushrooms for the Mario Cart room, a moving neon roof for the Arcade room and a Pokestop for the Pokemon room. The giveaways to the attendees were two different sets of Strawbees kits that inspire innovation.
— Strawbees is an award winning (Forbes, Make Magazine, Fast Company) creative construction toy with retail and educational sales in 15+ countries.


Vocabulary: Penny Nickel Dime Quarter Dollar Cents The children will use addition to figure out how much change is in each bag.
The students will learn to match a quarter, penny, nickel, and a dime to the amount specified throughout activities. They will learn that we use these coins everyday of our lives. By the end of the lesson, the students will be able to look at a coin and tell what it is called and how much it is worth. The children will use addition, counting and grouping to decide the value of each bag.
Pennies, nickels, dimes, and quarters for group activities. Sandwich bags will contain the coins. Overhead or powerpoint as an introduction to the lesson. Coin Couting Worksheet.
Introduce the lesson by telling the students what we use the coins for in everyday life. Next show the overhead or power point presentation describing each coin.
The children will be split into pairs and will be given a bag with coins in it. The children are to figure out how much their bag contains. The bags will be numbered and the children are to record how much the believe is in each bag. The children will decide on a value amount for each bag by using teamwork, grouping and addition.
The children will rotate the bags around the room until each pair of children has had every bag. In order to control time, the chilren will have 3 minutes with each bag.
When the group work is done, as a class we will count the coins in each bag. The pair with the most number of correct answers will recieve a prize.
The children will be given an additional assignment to take home for homework. Questions from the students will be answered in order to assure everyone understood the value of the lesson.


Archives|OUR SPECIAL ARMY CORRESPONDENCE.; Further Details of the Great Battles of Friday. GETTYSBURGH, Penn., Sunday, July 5.
OUR SPECIAL ARMY CORRESPONDENCE.; Further Details of the Great Battles of Friday. GETTYSBURGH, Penn., Sunday, July 5.
As the details, the incidents and the general history of the great victory are brought to light, it is clearly defined as the most hotly contested and destructive engagement of the great rebellion. The peculiar feature of the battle is the ferocity and desperation with which it was fought by both armies, and the glorious issue places the lustre of the National arms, and the valor of the Army of the Potomac in the imperishable annals of brilliant history.
The battle occupied three days. Six hours fighting on Wednesday, four hours on Thursday, and including the artillery firing on Friday, thirteen hours that day, making a total of twenty-three hours, during which the battle raged with extreme fury.
The momentous and decisive part of the battle was that on Friday. It began really at daylight, and continued until 10 o'clock, the principal part of the musketry fighting being on the right, with SLOCUM's corps. A lull of three hours followed, during which the enemy massed his artillery on our centre, held by HANCOOK with the Second, and NEWTON with the First corps. At 1 o'clock one hundred and twenty guns opened on that position, and rained shot and shell in a perfect deluge for one hour and forty minutes. A graphic description of this awful period has already been furnished to the TIMES by an abler pen than mine for that writer and one of the TIMES' messengers bad the exciting felicity of enduring that storm of iron during the whole time. Mr. WILKESON is today engaged in the mournful duty of obtaining the remains and effects of his eldest son, the gallant young BAYARD, who was mortally wounded on Wednesday, left on the field, and dying finally, after ten hours suffering, without a friend or a word to soothe the dying agonies of his soul. Lieut. WILKERSON was but nineteen years old, yet had command of Battery G, Fourth regular artillery. His death adds another noble soul to the holocaust of this terrible war.
I rode this morning over the entire length of the battle-field, and it is not too much to say, for I have seen nearly every other battle-field in Maryland and Virginia, that the slaughter was perfectly unparalleled. Our details were busily engaged in collecting and burying the dead, and the ghastly, terrible sights were enough to shock a heart of adamant.
The vast number of dead lying in front of SLOCUM's line, on the right, and of HANCOCK's and NEWTON's on the centre, attracted much comment. They had been literally mown down by whole ranks at a single discharge. SLOOUM accomplished a bloody repulse of EWELL's corps on Friday morning, sustaining but Small loss himself, his position being very formidable, against which the enemy insanely charged.
But the field, full of the greatest incidents and the scene of the most desperate fighting, was on the centre, in front of HANCOCK and NEWTON, against whom LONGSTREET's corps was precipitated. The enemy's front was that of one division in line of battle; there were two such lines, and a very heavy line of skirmishers, almost equal to another line of battle. Out of their concealment in the woods they came across the open fields and up the gentle crest, on the top of which was our line -- a weak line of men behind a line of defences hastily thrown up and composed partly of stone walls, partly of rifle-pits, and partly or natural projections of soil and rock. The first charge was repulsed; the line broke and fell back before it had reached a point two-thirds the way over. A second line was formed; the officers came to the front, and with the onset of fierce and brutal hearts they rushed. Our men looked with astonishment, wire fighting with great vigor; their line was dangerously Weak; the defences were not formidable. A few men temporarily gave way; our advance, in some instances, slightly faltered. The artillery engaged was small in force, having been seriously weakened during the early part of the fight. The rebels came on so close that their expressions of fierce rage were plainly distinguished; some of them actually gained the inside of the first wall -- but they never returned. Our immortal men, nerved to a degree of desperation never before equaled, poured forth such a devastating fire, and the artillery joining with its terrible canister, that the two long lines of the foe literally sank into the earth. Of the divisions of PICKETT and HETH, who made that charge, composed of eight brigades, positively not two brigades returned uninjured across the field. The color-bearers of thirty-five rebel regiments, who were in that charge, were shot down, the colors fell on the field, and were gathered by the victorious veterans of the Second corps. Being repulsed, large numbers of the enemy started back on the retreat, but our fire was so destructive that they fell flat on their faces, or again rushed about and implored mercy at our hands as prisoners of war. Seven Colonels of rebel regiments were buried on that field this morning; eight more were captured, beside those who were wounded and crawled or were taken off. Among the rebel officers killed and captured on that front were BARKSDALR on Thursday; Garnett killed, and Armistead wounded on Friday; -- these general officers; Col. Magruder, brother of Gen. Magruder, killed; Col. Lee, of the Forty-eighth Virginia is a prisoner; Col. Allen, of the Forty-eighth Georgia is killed; Col. Miller, of the Forty-second Mississippi is a prisoner and wounded; Col. Frye, of the Thirteenth Alabama, and Col. Asborn, of Virginia are both prisoners. All these captured or destroyed by the brigade of Gen. Webb, a most intrepid officer, who won, with many others, the highest plaudits for his conduct.
A peculiar fact concerning our position is contained in the expression of surprise which the rebel officers uttered when they crossed our lines as prisoners of war. One of the Colonels said, as he looked at our thin line, "Where are the men who fought us?" "Here," said a Captain. "My God!" exclaimed the Colonel, "if we only had another line we could have whipped you;" and then, still gazing about him with astonishment, he continued, with great emphasis, "By G -- d, we could have whipped you at it was!" This is a positive fact, and illustrates how the noble Army of the Potomac can yet fight, after all the imputations of demoralization and inefficiency which have been heaped upon it.
The Second division of the Second corps loses 42 officers killed and wounded, and 1,786 enlisted men killed and wounded.
The highest praise is awarded to Gens. HANCOCK and NEWTON, for their distinguished conduct on this portion of the field. HANCOCK was severely wounded in the thigh, but remained, laying on his back on the field, and giving the orders. Gen. NEWTON was especially active in supporting the line on the right with reinforcements.
History will never chronicle a tenth part of the gallant deeds performed during these bloody days; but the satisfaction of having nobly performed his duty shall be the sweet recompense of every patriot's heart.
The enemy, by a partially secret and ignominious retreat, has awarded to this gallant army the acknowledgment of victory. His forces are now on their way back to Virginia, beaten, weakened and demoralized by a terrible defeat; he is hotly pursued, a victorious army on his rear, a strong local force on his flank, and a swollen river in his front, are the obstacles to his successful retreat.
I regret to say that my esteemed friend, Capt. JAMES J. GRIFFITHS, of Gen. HOWARD's Staff, was severely wounded in the hip to-day while reconnoitering the enemy's rear line in company with the General. The wound is not dangerous.


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Saturday BP: The Padres now have half as many no-hitters as Tim Lincecum has against them
Joe Musgrove threw the first no-hitter in San Diego's history on Friday night.
By Brady Klopfer@BradyKlopferNBA Apr 10, 2021, 5:02am PDT
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Photo by Denis Poroy/Getty Images
Hello and happy Saturday.
This is kind of a rude article.
On Friday night, San Diego Padres pitcher Joe Musgrove threw a no-hitter against the Texas Rangers. It was a special moment, and not just because it was the Padres first game since playing the San Francisco Giants — thanks for that timing, folks.
It was special because it was the first no-hitter in the history of the Padres franchise.
It was a normal Friday, until it wasn't.#HungryForMore pic.twitter.com/BNezFyF2FJ
— San Diego Padres (@Padres) April 10, 2021
We take no-hitters for granted as Giants fans, because we can rattle off Matt Cain, Jonathan Sanchez, Tim Lincecum, Tim Lincecum again, and Chris Heston without having to think twice. Those are just the recent ones.
The Padres have been around since 1969 and this is their first no-hitter.
Meanwhile, Tim Lincecum not only has two no-hitters on his own, but has two no-hitters against those very same Padres.
Say, let's watch those again.
So congrats to Joe Musgrove on an awesome, awesome achievement.
And congrats to the Padres for now having 50% as many no-hitters as Timmy has thrown against them, instead of 0%. Progress!
Old, random MCC article for you to read
No, seriously, Randy Johnson was on the Giants (Jan. 7, 2015 — Grant Brisbee)
Giants links
Roger Munter looks at the Giants Minor League depth chart in left field (There R Giants)
Grant Brisbee has worry rankings for the Giants struggling hitters (The Athletic, subscription required)
Ann Killion on a home opener that gave some hope for normalcy (SF Chronicle)
Nico Savidge on how the Giants first game with fans went smoothly (Mercury News)
Steve Berman talks with Henry Schulman about three decades covering the Giants (The Athletic, subscription required)
Dieter Kurtenbach on how Gabe Kapler was listening to the fans (Mercury News)
What time do the Giants play today?
The Giants play the Rockies today at 1:05 p.m. PT
Have a swell Saturday, friends.

redpajama_set_name: RedPajamaCommonCrawl