10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________________________________________

FORM 10-Q

____________________________________________

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to

____________________________________________

Commission file number: 001-31826

____________________________________________

CENTENE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	42-1406317
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
7700 Forsyth Boulevard
St. Louis, Missouri	63105
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

(314) 725-4477

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.  Large accelerated filer x Accelerated filer o Non-accelerated filer o (do not check if a smaller reporting company) Smaller reporting company 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 October 14, 2016, the registrant had 170,892,049 shares of common stock outstanding.

CENTENE CORPORATION

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		PAGE
	Part I
	Financial Information
Item 1.	Financial Statements	1
	Consolidated Balance Sheets as of September 30, 2016 (unaudited) and December 31, 2015	1
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2016 and 2015 (unaudited)	2
	Consolidated Statements of Comprehensive Earnings for the Three and Nine Months Ended September 30, 2016 and 2015 (unaudited)	3
	Consolidated Statement of Stockholders' Equity for the Nine Months Ended September 30, 2016 (unaudited)	4
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015 (unaudited)	5
	Notes to the Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
	Part II
	Other Information
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 6.	Exhibits	53
Signatures		54

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

All statements, other than statements of current or historical fact, contained in this filing or incorporated by reference herein are forward-looking statements.  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. We have attempted to identify these statements by terminology including “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) in connection with, among other things, any discussion of future operating or financial performance.  In particular, these statements include without limitation statements about our market opportunity, our growth strategy, competition, expected activities and future acquisitions, 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.”  Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, 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, including but not limited to:

• 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 health care costs;

• inflation;

• foreign currency fluctuations;

• tax matters;

• availability of debt and equity financing, on terms that are favorable to us;

• disasters or major epidemics;

• changes in economic, political or market conditions;

• the outcome of legal and regulatory proceedings;

• changes in federal or state laws or regulations, including the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act and any regulations enacted thereunder;

• 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, and TRICARE);

• challenges to our contract awards;

• 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;

• 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 acquisition of Health Net, Inc., will not be realized, or will not be realized within the expected time period, including, but not limited to, as a result of conditions, terms, obligations or restrictions imposed by regulators in connection with their approval of, or consent to, the acquisition;

• 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 certain regulatory approvals;

• disruption from the acquisition making it more difficult to maintain business and operational relationships;

• the risk that unexpected costs will be incurred in connection with, among other things, the acquisition and/or the integration;

• changes in expected closing dates, estimated purchase price and accretion for acquisitions;

• the risk that acquired businesses will not be integrated successfully; and

• our ability to maintain or achieve improvement in the Centers for Medicare and Medicaid Services (CMS) Star ratings and other quality scores that impact revenue.

This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain other risk 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 reports 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 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 Health Net acquisition related expenses and amortization of acquired intangible assets allows investors to develop a more meaningful understanding of the Company's performance over time. The tables below provide a reconciliation of non-GAAP items ($ in millions, except per share data):

	Three Months Ended September 30,						Nine Months Ended  September 30,
	2016			2015			2016			2015
GAAP general and administrative expenses	$	940		$	458		$	2,611		$	1,291
Health Net acquisition related expenses	10			18			224			20
General and administrative expenses, excluding Health Net acquisition related expenses	$	930		$	440		$	2,387		$	1,271
GAAP net earnings from continuing operations	$	146		$	92		$	300		$	244
Health Net acquisition related expenses	10			18			224			20
Amortization of acquired intangible assets	43			6			95			18
Income tax effects of adjustments (1)	(5		)	(9		)	(106		)	(14		)
Adjusted net earnings from continuing operations	$	194		$	107		$	513		$	268
GAAP diluted earnings per share (EPS)	$	0.84		$	0.75		$	1.89		$	1.99
Health Net acquisition related expenses (2)	0.12			0.09			0.98			0.10
Amortization of acquired intangible assets (3)	0.15			0.03			0.36			0.09
Adjusted diluted EPS	$	1.11		$	0.87		$	3.23		$	2.18

(1) The income tax effects of adjustments are based on the effective income tax rates applicable to adjusted (non-GAAP) results. The amounts are based on the annual estimated effective income tax rate that would increase or decrease based on the exclusion of these expenses.

(2) The Health Net acquisition related expenses per diluted share presented above are net of the income tax benefit (expense) of $(0.06) and $0.05 for the three months ended September 30, 2016 and 2015, respectively, and $0.44 and $0.06 for the nine months ended September 30, 2016 and 2015, respectively.

(3) The amortization of acquired intangible assets per diluted share presented above are net of the income tax benefit of $0.09 and $0.02 for the three months ended September 30, 2016 and 2015, respectively, and $0.23 and $0.05 for the nine months ended September 30, 2016 and 2015, respectively.

PART I

FINANCIAL INFORMATION

ITEM 1. Financial Statements.

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

	September 30, 2016			December 31, 2015
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,982		$	1,760
Premium and related receivables	3,445			1,279
Short term investments	406			176
Other current assets	922			390
Total current assets	7,755			3,605
Long term investments	4,568			1,927
Restricted deposits	137			115
Property, software and equipment, net	725			518
Goodwill	4,730			842
Intangible assets, net	1,566			155
Other long term assets	153			177
Total assets	$	19,634		$	7,339
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims liability	$	3,767		$	2,298
Accounts payable and accrued expenses	3,187			976
Return of premium payable	651			207
Unearned revenue	573			143
Current portion of long term debt	845			5
Total current liabilities	9,023			3,629
Long term debt	3,744			1,216
Other long term liabilities	995			170
Total liabilities	13,762			5,015
Commitments and contingencies
Redeemable noncontrolling interests	148			156
Stockholders’ equity:
Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued or outstanding at September 30, 2016 and December 31, 2015	—			—
Common stock, $0.001 par value; authorized 400,000,000 shares; 176,467,825 issued and 170,860,752 outstanding at September 30, 2016, and 126,855,477 issued and 120,342,981 outstanding at December 31, 2015	—			—
Additional paid-in capital	4,154			956
Accumulated other comprehensive earnings (loss)	46			(10		)
Retained earnings	1,655			1,358
Treasury stock, at cost (5,607,073 and 6,512,496 shares, respectively)	(145		)	(147		)
Total Centene stockholders’ equity	5,710			2,157
Noncontrolling interest	14			11
Total stockholders’ equity	5,724			2,168
Total liabilities and stockholders’ equity	$	19,634		$	7,339

The accompanying notes to the consolidated financial statements are an integral part of these statements. 

1

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Revenues:
Premium	$	9,625		$	4,983		$	25,299		$	13,974
Service	590			480			1,603			1,434
Premium and service revenues	10,215			5,463			26,902			15,408
Premium tax and health insurer fee	631			358			1,794			1,050
Total revenues	10,846			5,821			28,696			16,458
Expenses:
Medical costs	8,376			4,433			22,072			12,475
Cost of services	504			413			1,386			1,234
General and administrative expenses	940			458			2,611			1,291
Amortization of acquired intangible assets	43			6			95			18
Premium tax expense	512			274			1,460			794
Health insurer fee expense	129			54			333			161
Total operating expenses	10,504			5,638			27,957			15,973
Earnings from operations	342			183			739			485
Other income (expense):
Investment and other income	33			8			80			27
Interest expense	(57		)	(11		)	(142		)	(32		)
Earnings from continuing operations, before income tax expense	318			180			677			480
Income tax expense	171			87			376			234
Earnings from continuing operations, net of income tax expense	147			93			301			246
Discontinued operations, net of income tax benefit	(1		)	1			(3		)	—
Net earnings	146			94			298			246
(Earnings) attributable to noncontrolling interests	(1		)	(1		)	(1		)	(2		)
Net earnings attributable to Centene Corporation	$	145		$	93		$	297		$	244
Amounts attributable to Centene Corporation common shareholders:
Earnings from continuing operations, net of income tax expense	$	146		$	92		$	300		$	244
Discontinued operations, net of income tax benefit	(1		)	1			(3		)	—
Net earnings	$	145		$	93		$	297		$	244
Net earnings (loss) per common share attributable to Centene Corporation:
Basic:
Continuing operations	$	0.85		$	0.77		$	1.93		$	2.05
Discontinued operations	—			0.01			(0.02		)	—
Basic earnings per common share	$	0.85		$	0.78		$	1.91		$	2.05
Diluted:
Continuing operations	$	0.84		$	0.75		$	1.89		$	1.99
Discontinued operations	(0.01		)	0.01			(0.02		)	—
Diluted earnings per common share	$	0.83		$	0.76		$	1.87		$	1.99
Weighted average number of common shares outstanding:
Basic	170,774,587			119,121,524			155,680,769			118,970,853
Diluted	174,312,416			123,131,810			158,960,068			122,904,476

The accompanying notes to the consolidated financial statements are an integral part of these statements.

2

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In millions)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net earnings	$	146		$	94		$	298		$	246
Reclassification adjustment, net of tax	(1		)	—			—			—
Change in unrealized gain on investments, net of tax	5			2			57			3
Foreign currency translation adjustments	(1		)	—			(1		)	(4		)
Other comprehensive earnings (loss)	3			2			56			(1		)
Comprehensive earnings	149			96			354			245
Comprehensive (earnings) attributable to noncontrolling interests	(1		)	(1		)	(1		)	(2		)
Comprehensive earnings attributable to Centene Corporation	$	148		$	95		$	353		$	243

The accompanying notes to the consolidated financial statements are an integral part of these statements.

3

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In millions, except share data)

(Unaudited)

Nine Months Ended September 30,2016

	Centene Stockholders’ Equity
	Common Stock										Treasury Stock
	$.001 Par Value Shares	Amt		Additional Paid-in Capital		Accumulated Other Comprehensive Earnings (Loss)			Retained Earnings		$.001 Par Value Shares		Amt			Non controlling Interest		Total
Balance, December 31, 2015	126,855,477	$	—	$	956	$	(10	)	$	1,358	6,512,496		$	(147	)	$	11	$	2,168
Comprehensive Earnings:
Net earnings	—	—		—		—			297		—		—			—		297
Other comprehensive earnings, net of $20 tax	—	—		—		56			—		—		—			—		56
Common stock issued for acquisitions	48,218,310	—		3,074		—			—		(1,375,596	)	31			—		3,105
Common stock issued for employee benefit plans	1,394,038	—		7		—			—		—		—			—		7
Common stock repurchases	—	—		—		—			—		470,173		(29		)	—		(29		)
Stock compensation expense	—	—		112		—			—		—		—			—		112
Excess tax benefits from stock compensation	—	—		5		—			—		—		—			—		5
Contribution from noncontrolling interest	—	—		—		—			—		—		—			3		3
Balance, September 30, 2016	176,467,825	$	—	$	4,154	$	46		$	1,655	5,607,073		$	(145	)	$	14	$	5,724

The accompanying notes to the consolidated financial statements are an integral part of this statement.

4

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Nine Months Ended September 30,
	2016			2015
Cash flows from operating activities:
Net earnings	$	298		$	246
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	189			82
Stock compensation expense	112			48
Deferred income taxes	(17		)	(14		)
Gain on contingent consideration	(2		)	(37		)
Goodwill and intangible adjustment	—			28
Changes in assets and liabilities
Premium and related receivables	(906		)	(360		)
Other current assets	(81		)	(103		)
Medical claims liabilities	15			394
Unearned revenue	301			(104		)
Accounts payable and accrued expenses	99			209
Other long term liabilities	156			101
Other operating activities, net	91			(33		)
Net cash provided by operating activities	255			457
Cash flows from investing activities:
Capital expenditures	(211		)	(101		)
Purchases of investments	(1,528		)	(1,077		)
Sales and maturities of investments	955			418
Investments in acquisitions, net of cash acquired	(848		)	(16		)
Other investing activities, net	—			7
Net cash used in investing activities	(1,632		)	(769		)
Cash flows from financing activities:
Proceeds from borrowings	6,956			1,305
Payment of long term debt	(4,257		)	(910		)
Common stock repurchases	(29		)	(9		)
Purchase of noncontrolling interest	(14		)	—
Debt issue costs	(59		)	(4		)
Other financing activities, net	1			(15		)
Net cash provided by financing activities	2,598			367
Effect of exchange rate changes on cash and cash equivalents	1			—
Net increase in cash and cash equivalents	1,222			55
Cash and cash equivalents, beginning of period	1,760			1,610
Cash and cash equivalents, end of period	$	2,982		$	1,665
Supplemental disclosures of cash flow information:
Interest paid	$	113		$	28
Income taxes paid	$	394		$	229
Equity issued in connection with acquisitions	$	3,105		$	12

The accompanying notes to the consolidated financial statements are an integral part of these statements.

5

CENTENE CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except share data)

(Unaudited)

1.Basis of Presentation

Basis of Presentation

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, 2015.  The unaudited interim financial statements herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  Accordingly, footnote disclosures which would substantially duplicate the disclosures contained in the December 31, 2015 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 2015 amounts in the notes to the consolidated financial statements have been reclassified to conform to the 2016 presentation. These reclassifications have no effect on net earnings or stockholders’ equity as previously reported.

On March 24, 2016, the Company completed the acquisition of Health Net, Inc. (Health Net) for approximately $6.0 billion, including the assumption of debt. The acquisition was accounted for as a business combination, which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Those estimated amounts are reflected in the accompanying financial statements.

As a result of the completion of the Health Net acquisition, the Company's results of operations for the three and nine months ended September 30, 2016 include the results of operations of Health Net from March 24, 2016 to September 30, 2016. The Health Net segment previously known as the Western Region Operations, with the exception of certain operations of its pharmaceutical services and behavioral health subsidiaries, is included in the Company's Managed Care segment. The portions of Health Net's Western Region Operations segment included in the Managed Care segment consist of the following Health Net operations: commercial, Medicare, Medicaid and dual eligible health plans, primarily in Arizona, California, Oregon, and Washington.

The Company's Specialty Services segment includes the Health Net segment previously known as Government Contracts as well as certain operations of its pharmaceutical services and behavioral health subsidiaries, primarily in Arizona, California, Oregon and Washington (which Health Net previously included in its Western Region Operations segment). Health Net's Government Contracts segment included its federal government-sponsored managed care support contract with the U.S. Department of Defense (DoD) under the TRICARE program in the North Region, its Military and Family Life Counseling (MFLC) contract with the DoD and other health care related government contracts, including the Veterans Choice and Patient Centered Community Care program (PC3/Choice) with the U.S. Department of Veterans Affairs (VA).

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) which 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. Early adoption is permitted. The Company is currently evaluating the effect of the new lease guidance.

6

In March 2016, the FASB issued an ASU which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under the new guidance, an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. The ASU also allows an entity to elect as an accounting policy either to continue to estimate the total number of awards for which the requisite service period will not be rendered, as currently required, or to account for forfeitures when they occur. Finally, the ASU modifies the current exception to liability classification of an award when an employer uses a net-settlement feature to withhold shares to meet the employee's minimum statutory tax withholding requirement. The new standard is effective for annual periods beginning after December 15, 2016, including interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the effect of the employee share-based payment guidance.

In August 2016, the FASB issued an ASU which clarifies how entities should classify certain cash receipts and cash payments on the Consolidated Statements of Cash Flows. The new guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The new standard is effective for annual periods beginning after December 15, 2017, including interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the effect of the new statement of cash flows guidance.

2.Summary of Significant Accounting Policies

A summary of the Company’s significant accounting policies is included in Note 2 entitled “Summary of Significant Accounting Policies” to the company’s Annual Report on Form 10-K for the year ended December 31, 2015. As a result of the Health Net acquisition, material changes to the Company's significant accounting policies during the three and nine months ended September 30, 2016 are described below:

Business Combinations

Business combinations are accounted for using the acquisition method of accounting. The Company allocates the fair value of purchase consideration to the assets acquired and liabilities assumed based on their fair values at the acquisition date. The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Goodwill is generally attributable to the value of the synergies between the combined companies and the value of the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset.

The Company uses its best estimates and assumptions to value assets acquired and liabilities assumed at the acquisition date; however, these estimates are sometimes preliminary and in some instances, all information required to value the assets acquired and liabilities assumed may not be available or final as of the end of a reporting period subsequent to the business combination. If the accounting for the business combination is incomplete, provisional amounts are recorded. The provisional amounts are updated during the period determined, up to one year from the acquisition date. The Company includes the results of operations of acquired businesses in the Company's consolidated results prospectively from the date of acquisition.

Acquisition related expenses and post-acquisition restructuring costs are recognized separately from the business combination and are expensed as incurred.

Revenue Recognition

The Company's health plans generate revenues primarily from premiums received from the states in which it operates health plans. The Company receives a fixed premium per member per month pursuant to its state contracts. The Company generally receives premium payments during the month it provides services and recognizes premium revenue during the period in which it is obligated to provide services to its members. In some instances, the Company's base premiums are subject to an adjustment, or risk score, based on the acuity of its membership. Generally, the risk score is determined by the State analyzing submissions of processed claims data to determine the acuity of the Company's membership relative to the entire state's Medicaid membership. Some states enact premium taxes, similar assessments and provider pass-through payments, collectively premium taxes, and these taxes are recorded as a separate component of both revenues and operating expenses. Some contracts allow for additional premiums related to certain supplemental services provided such as maternity deliveries.

7

Revenues are recorded based on membership and eligibility data provided by the states, which is adjusted on a monthly basis by the states for retroactive additions or deletions to membership data. These eligibility adjustments are estimated monthly and subsequent adjustments are made in the period known. The Company continuously reviews and updates those estimates as new information becomes available. It is possible that new information could require us to make additional adjustments, which could be significant, to these estimates.

The Company's Medicare Advantage contracts are with the CMS. CMS deploys a risk adjustment model which apportions premiums paid to all health plans according to health severity and certain demographic factors. The CMS risk adjustment model pays more for members whose medical history would indicate that they are expected to have higher medical costs. Under this risk adjustment methodology, CMS calculates the risk adjusted premium payment using diagnosis data from hospital inpatient, hospital outpatient and physician treatment settings. The Company and the health care providers collect, compile and submit the necessary and available diagnosis data to CMS within prescribed deadlines. The Company estimates risk adjustment revenues based upon the diagnosis data submitted and expected to be submitted to CMS.

The Company's specialty services generate revenues under contracts with state and federal programs, healthcare organizations, and other commercial organizations, as well as from our own subsidiaries. Revenues are recognized when the related services are provided or as ratably earned over the covered period of services. The Company recognizes revenue related to administrative services under the T-3 TRICARE government-sponsored managed care support contract in the North Region for the DoD's TRICARE program (T-3 contract) on a straight-line basis over the option period, when the fees become fixed and determinable. The T-3 contract includes various performance-based incentives and penalties. For each of the incentives or penalties, the Company adjusts revenue accordingly based on the amount that it has earned or incurred at each interim date and are legally entitled to in the event of a contract termination.

Premium and Related Receivables and Unearned Revenue

Premium and service revenues collected in advance are recorded as unearned revenue. For performance-based contracts the Company does not recognize revenue subject to refund until data is sufficient to measure performance. Premiums and service revenues due to the Company are recorded as premium and related receivables and are recorded net of an allowance based on historical trends and management's judgment on the collectibility of these accounts. As the Company generally receives payments during the month in which services are provided, the allowance is typically not significant in comparison to total revenues and does not have a material impact on the presentation of the financial condition or results of operations.

Amounts receivable under government contracts are comprised primarily of contractually defined billings, accrued contract incentives under the terms of the contract and amounts related to change orders for services not originally specified in the contract. Pursuant to the Company's T-3 contract, the government has the right to unilaterally modify the contract in certain respects by issuing change orders directing it to implement terms or services that were not originally included in the contract. Following receipt of a change order, the Company has a contractual right to negotiate an equitable adjustment to the contract terms to account for the impact of the change order. The Company starts to perform under such change orders and begins to incur associated costs after it receives the government's unilateral modification, but before it has negotiated the final scope and/or value of the change order. In these situations, costs are expensed as incurred, and the Company estimates and records revenue when it has met all applicable revenue recognition criteria. These criteria include the requirements that change order amounts are determinable, that the Company has performed under the change orders, and that collectability of amounts payable to the Company is reasonably assured.

3.Health Net

On March 24, 2016, the Company acquired all of the issued and outstanding shares of Health Net, a publicly traded managed care organization that delivers health care services through health plans and government-sponsored managed care plans. The transaction was valued at approximately $5,990 million, including the assumption of $703 million of outstanding debt. The acquisition allows the Company to offer a more comprehensive and scalable portfolio of solutions and provides opportunity for additional growth across the combined company's markets.

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The total consideration for the acquisition was $5,287 million, consisting of Centene common shares valued at $3,038 million (based on Centene's stock price of $62.70), $2,247 million in cash, and $2 million related to the fair value adjustment to stock based compensation associated with pre-combination service. Each Health Net share was converted into 0.622 of a validly issued, fully paid, non-assessable share of Centene common stock and $28.25 in cash. In total, 48,449,444 shares of Centene common stock were issued in connection with the transaction. The cash portion of the acquisition consideration was funded through the issuance of long-term debt as further discussed in Note 7.Debt. For the three and nine months ended September 30, 2016, the Company also recognized acquisition related expenses of $10 million and $224 million, respectively, that were recorded in general and administrative expense in the Consolidated Statements of Operations.

The acquisition of Health Net has been accounted for as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. The valuation of all the assets acquired and liabilities assumed has not yet been finalized. As a result, preliminary estimates have been recorded and are subject to change. Any necessary adjustments from our 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.

Since the initial allocation of purchase price, the Company made adjustments and reclassifications to the fair value of certain assets and liabilities acquired, including the premium and related receivables, medical claims liability, accrued liabilities, return of premium payable and deferred taxes, resulting in a net increase of $275 million to goodwill. The Company will continue to revise its preliminary purchase price allocation as additional information becomes available during the remainder of the measurement period. The Company's preliminary allocation of the fair value of assets acquired and liabilities assumed as of the acquisition date of March 24, 2016 is as follows ($ in millions):

Assets Acquired and Liabilities Assumed
Cash and cash equivalents	$	1,401
Premium and related receivables (a)	1,258
Short term investments	74
Other current assets	448
Long term investments	2,037
Restricted deposits	30
Property, software and equipment, net	41
Intangible assets (b)	1,500
Other long term assets	136
Total assets acquired	6,925
Medical claims liability	1,453
Borrowings under revolving credit facility	285
Accounts payable and accrued expenses (c)	2,033
Return of premium payable	435
Unearned revenue	130
Long term deferred tax liabilities (d)	330
Long term debt (e)	418
Other long term liabilities	430
Total liabilities assumed	5,514
Total identifiable net assets	1,411
Goodwill (f)	3,876
Total assets acquired and liabilities assumed	$	5,287

The Company has made certain preliminary fair value adjustments based on information reviewed through September 30, 2016. Significant preliminary fair value adjustments are noted as follows:

(a) The preliminary fair value of premium and related receivables approximated their historical cost, with the exception of the risk corridor receivable associated with the Health Insurance Marketplace. The fair value of the risk corridor receivable was estimated at $9 million.

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(b) The identifiable intangible assets acquired are to be measured at fair value as of the completion of the acquisition. The 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 preliminary fair value of intangibles to be $1.5 billion with a weighted average life of 10 years. The Company expects the identifiable intangible assets to include purchased contract rights, provider contracts, trade names and developed technology. The Company is still in the process of finalizing its intangible valuation.

(c) Accounts payable and accrued expenses includes approximately $285 million related to premium deficiency reserves based on cost trends existing prior to the acquisition date. The premium deficiency reserves are primarily associated with losses in the individual commercial business, largely in California, unfavorable performance in the Arizona commercial business as well as unfavorable performance in the Medicare business primarily in Oregon and Arizona. The premium deficiency reserve for the individual PPO commercial contracts in California includes anticipated future losses in 2016 associated with substance abuse rehabilitation claims. During the third quarter, the Company lowered the premium deficiency reserve by $15 million, reflecting its revised estimate of substance abuse cost trends.

(d) The preliminary deferred tax liabilities are presented net of $526 million of deferred tax assets.

(e) Debt is required to be measured at fair value under the acquisition method of accounting. The fair value of Health Net's $400 million Senior Notes assumed in the acquisition was $418 million. The $18 million increase will be amortized as a reduction to interest expense over the remaining life of the debt.

(f) The acquisition resulted in $3.9 billion of goodwill related primarily to buyer specific synergies expected from the acquisition and the assembled workforce of Health Net. This goodwill is not deductible for income tax purposes. The assignment of goodwill to the Company's respective segments has not been completed at this time.    

Statement of Operations

From the acquisition date through September 30, 2016, the Company's Consolidated Statements of Operations include total Health Net revenues of $3,981 million and $8,604 million for the three and nine months ended September 30, 2016, respectively. It is impracticable to determine the effect on net income resulting from the Health Net acquisition for the three and nine months ended September 30, 2016, as the Company immediately integrated Health Net into its ongoing operations.

Unaudited Pro Forma Financial Information

The unaudited pro forma total revenues for the nine months ended September 30, 2016 were $32,369 million. The following table presents supplemental pro forma information for the three and nine months ended September 30, 2015 ($ in millions, except per share data).

	Three Months Ended September 30, 2015		Nine Months Ended September 30, 2015
Total revenues	$	9,960	$	28,617
Net earnings attributable to Centene Corporation	$	85	$	215
Diluted earnings per share	$	0.49	$	1.25

The pro forma results do not reflect any anticipated synergies, efficiencies, or other cost savings of the acquisition. Accordingly, the unaudited pro forma financial information is not indicative of the results if the acquisition had been completed on January 1, 2015 and is not a projection of future results. It is impracticable for the Company to determine the pro forma earnings information for the nine months ended September 30, 2016 due to the nature of obtaining that information as the Company immediately integrated Health Net into its ongoing operations.

The unaudited pro forma financial information reflects the historical results of Centene and Health Net adjusted as if the acquisition had occurred on January 1, 2015, primarily for the following:

• Additional interest income associated with adjusting the amortized cost of Health Net's investment portfolio to fair value.

• Elimination of historical Health Net intangible asset amortization expense and addition of amortization expense based on the current preliminary values of identifiable intangible assets.

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• Interest expense associated with financing the acquisition and amortization of the fair value adjustment to Health Net's debt.

• Additional stock compensation expense related to the amortization of the fair value increase to Health Net rollover stock awards.

• Increased tax expense due to the assumption that Centene would be subject to the IRS Regulation 162(m)(6) beginning in 2015.

• Elimination of acquisition related costs.

Restructuring Related Charges

In connection with the Health Net acquisition, the Company undertook a restructuring plan as a result of the integration of Health Net's operations into its business, resulting in a reduction in workforce beginning in 2016 and expected to continue through early 2017. The restructuring related costs are classified as general and administrative expenses in the Consolidated Statements of Operations. Changes in the restructuring liability for the nine months ended September 30, 2016 were as follows ($ in millions):

	September 30, 2016
	Employee Termination Costs			Stock Based Compensation			Total
Total accrued restructuring costs as of December 31, 2015	$	—		$	—		$	—
Charges incurred	39			40			79
Paid/settled	(25		)	(40		)	(65		)
Total accrued restructuring costs as of September 30, 2016	$	14		$	—		$	14

For the three and nine months ended September 30, 2016, the Company recorded employee termination costs of $7 million and $39 million and stock based compensation of $2 million and $40 million, respectively, in the Managed Care Segment. The Company expects to record a total of approximately $50 million of employee termination costs and $44 million of stock based compensation in connection with the acquisition, the majority of which is expected to be incurred through 2016 and early 2017.

Commitments

In connection with obtaining regulatory approval of the Health Net acquisition from the California Department of Insurance and the California Department of Managed Health Care, the Company committed to certain undertakings (the Undertakings). The Undertakings included, among other items, operational commitments around premiums, dividend restrictions, minimum Risk Based Capital (RBC) levels, local offices, growth, accreditation, HEDIS scores and other quality measures, network adequacy, certifications, investments and capital expenditures. Specifically, the Company agreed to, among other things:

• invest an additional $30 million through the California Organized Investment Network over the five years following completion of the acquisition;

• build a service center in an economically distressed community in California, investing $200 million over ten years and employing at least 300 people;

• contribute $65 million to improve enrollee health outcomes ($10 million over ten years), support locally-based consumer assistance programs ($5 million over five years) and strengthen the health care delivery system ($50 million over five years), (of which, the present value of $61 million was expensed in the nine months ended September 30, 2016 and classified as general and administrative expenses in the Consolidated Statements of Operations); and

• invest $75 million of its investment portfolio in vehicles supporting California’s health care infrastructure.

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4.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):

	September 30, 2016									December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	288	$	2	$	—		$	290	$	431	$	—	$	(2	)	$	429
Corporate securities	1,915		30		(2		)	1,943		859		2		(8		)	853
Restricted certificates of deposit	6		—		—			6		5		—		—			5
Restricted cash equivalents	70		—		—			70		78		—		—			78
Municipal securities	1,638		24		(1		)	1,661		496		2		(1		)	497
Asset-backed securities	289		2		—			291		163		—		(1		)	162
Residential mortgage-backed securities	215		3		(1		)	217		66		1		—			67
Commercial mortgage-backed securities	341		15		(1		)	355		40		—		—			40
Cost and equity method investments	162		—		—			162		71		—		—			71
Life insurance contracts	116		—		—			116		16		—		—			16
Total	$	5,040	$	76	$	(5	)	$	5,111	$	2,225	$	5	$	(12	)	$	2,218

The Company’s investments are classified as available-for-sale with the exception of life insurance contracts and certain cost and equity method 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 September 30, 2016, 95% of the Company’s investments in rated securities carry an investment grade rating by S&P and Moody's.  At September 30, 2016, the Company held certificates of deposit, life insurance contracts and cost and equity method investments which 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 3.3 years at September 30, 2016.

In January 2016, the Company completed a 19% investment in a data analytics business and as a result, issued 1.1 million shares of Centene common stock, valued at $68 million, to the selling stockholders. The investment is being accounted for using the equity method of accounting.

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The fair value of available-for-sale investments 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):

	September 30, 2016										December 31, 2015
	Less Than 12 Months					12 Months or More					Less Than 12 Months					12 Months or More
	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	—		$	4	$	—		$	2	$	(2	)	$	294	$	—		$	14
Corporate securities	(1		)	309		(1		)	80		(6		)	561		(2		)	41
Municipal securities	(1		)	231		—			32		(1		)	208		—			5
Asset-backed securities	—			29		—			21		(1		)	121		—			8
Residential mortgage-backed securities	(1		)	45		—			—		—			30		—			—
Commercial mortgage-backed securities	(1		)	119		—			1		—			34		—			—
Total	$	(4	)	$	737	$	(1	)	$	136	$	(10	)	$	1,248	$	(2	)	$	68

As of September 30, 2016, the gross unrealized losses were generated from 569 positions out of a total of 2,731 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):

	September 30, 2016								December 31, 2015
	Investments				Restricted Deposits				Investments				Restricted Deposits
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	406	$	406	$	122	$	123	$	176	$	176	$	93	$	93
One year through five years	1,978		2,000		14		14		1,662		1,654		22		22
Five years through ten years	1,098		1,116		—		—		267		268		—		—
Greater than ten years	577		589		—		—		5		5		—		—
Asset-backed securities	845		863		—		—		—		—		—		—
Total	$	4,904	$	4,974	$	136	$	137	$	2,110	$	2,103	$	115	$	115

Actual maturities may differ from contractual maturities due to call or prepayment options.  Cost and equity method investments and life insurance contracts are included in the five years through ten years 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 cost and equity method 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.

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5.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:
Level I	Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level II	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.
Level III	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 September 30, 2016, for assets and liabilities measured at fair value on a recurring basis ($ in millions):  

	Level I		Level II		Level III		Total
Assets
Cash and cash equivalents	$	2,982	$	—	$	—	$	2,982
Investments available for sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	215	$	14	$	—	$	229
Corporate securities	—		1,943		—		1,943
Municipal securities	—		1,661		—		1,661
Asset-backed securities	—		291		—		291
Residential mortgage-backed securities	—		217		—		217
Commercial mortgage-backed securities	—		355		—		355
Total investments	$	215	$	4,481	$	—	$	4,696
Restricted deposits available for sale:
Cash and cash equivalents	$	70	$	—	$	—	$	70
Certificates of deposit	6		—		—		6
U.S. Treasury securities and obligations of U.S. government corporations and agencies	61		—		—		61
Total restricted deposits	$	137	$	—	$	—	$	137
Other long term assets: Interest rate swap agreements	$	—	$	25	$	—	$	25
Total assets at fair value	$	3,334	$	4,506	$	—	$	7,840

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The following table summarizes fair value measurements by level at December 31, 2015, for assets and liabilities measured at fair value on a recurring basis ($ in millions): 

	Level I		Level II		Level III		Total
Assets
Cash and cash equivalents	$	1,760	$	—	$	—	$	1,760
Investments available for sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	325	$	72	$	—	$	397
Corporate securities	—		853		—		853
Municipal securities	—		497		—		497
Asset-backed securities	—		162		—		162
Residential mortgage-backed securities	—		67		—		67
Commercial mortgage-backed securities	—		40		—		40
Total investments	$	325	$	1,691	$	—	$	2,016
Restricted deposits available for sale:
Cash and cash equivalents	$	78	$	—	$	—	$	78
Certificates of deposit	5		—		—		5
U.S. Treasury securities and obligations of U.S. government corporations and agencies	32		—		—		32
Total restricted deposits	$	115	$	—	$	—	$	115
Other long term assets:
Interest rate swap agreements	$	—	$	11	$	—	$	11
Total assets at fair value	$	2,200	$	1,702	$	—	$	3,902
Liabilities
Other long term liabilities:
Interest rate swap agreements	$	—	$	2	$	—	$	2
Total liabilities at fair value	$	—	$	2	$	—	$	2

The Company periodically transfers U.S. Treasury securities and obligations of U.S. government corporations and agencies between Level I and Level II fair value measurements dependent upon the level of trading activity for the specific securities at the measurement date.  The Company’s policy regarding the timing of transfers between Level I and Level II is to measure and record the transfers at the end of the reporting period.  At September 30, 2016, there were no transfers from Level I to Level II and $46 million of transfers from Level II to Level I.  The Company utilizes matrix pricing services to estimate fair value for securities which are not actively traded on the measurement date.  The Company designates these securities as Level II fair value measurements.  The aggregate carrying amount of the Company’s life insurance contracts and other non-majority owned investments, which approximates fair value, was $278 million and $87 million as of September 30, 2016 and December 31, 2015, respectively.

6.Affordable Care Act

The Affordable Care Act (ACA) established risk spreading premium stabilization programs effective January 1, 2014. These programs, commonly referred to as the “three Rs,” include a permanent risk adjustment program, a transitional reinsurance program, and a temporary risk corridor program. Additionally, the ACA established a minimum annual medical loss ratio. Each of the three R programs are taken into consideration to determine if the Company’s estimated annual medical costs are less than the minimum loss ratio and require an adjustment to Premium revenue to meet the minimum medical loss ratio.

During the second quarter of 2016, the Company recognized a $70 million net pre-tax benefit related to the reconciliation of 2015 risk adjustment and reinsurance programs. During the third quarter of 2016, the Company received information from CMS, indicating that some of the participants in the Arizona risk adjustment program were unable to pay the amounts owed. As a result, the uncollected portion has been allocated pro-rata to other insurers in the market. Accordingly, the Company reduced the pre-tax earnings by $19 million during the third quarter.

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The Company's receivables (payables) for each of these programs are as follows ($ in millions):

	September 30, 2016			December 31, 2015
Risk adjustment	$	(294	)	$	(108	)
Reinsurance	101			24
Risk corridor	—			(4		)
Minimum medical loss ratio	(18		)	(15		)

7.Debt

Debt consists of the following ($ in millions):

	September 30, 2016			December 31, 2015
$425 million 5.75% Senior notes, due June 1, 2017	$	426		$	428
$400 million 6.375% Senior notes, due June 1, 2017	411			—
$1,400 million 5.625% Senior notes, due February 15, 2021	1,400			—
$1,000 million 4.75% Senior notes, due May 15, 2022	1,008			500
$1,000 million 6.125% Senior notes, due February 15, 2024	1,000			—
Fair value of interest rate swap agreements	25			9
Total senior notes	4,270			937
Revolving credit agreement	300			225
Mortgage notes payable	65			67
Capital leases and other	18			6
Debt issuance costs	(64		)	(14		)
Total debt	4,589			1,221
Less current portion	(845		)	(5		)
Long term debt	$	3,744		$	1,216

Senior Notes

In February 2016, a wholly owned unrestricted subsidiary of the Company (Escrow Issuer) issued $1,400 million in aggregate principal amount of 5.625% Senior Notes ($1,400 Million Notes) at par due 2021 and $1,000 million in aggregate principal amount of 6.125% Senior Notes ($1,000 Million Notes) at par due 2024. In July 2016, the Company completed an exchange offer, whereby it offered to exchange all of the outstanding $1,400 Million Notes and the $1,000 Million Notes for identical securities that have been registered under the Securities Act of 1933. The Company used the net proceeds of the offering, together with borrowings under the Company's new $1,000 million revolving credit facility and cash on hand, primarily to fund the cash consideration for the Health Net acquisition, and to pay acquisition and offering related fees and expenses.

In connection with the February 2016 issuance, the Company entered into interest rate swap agreements for notional amounts of $600 million and $1,000 million, at floating rates of interest based on the three month LIBOR plus 4.22% and the three month LIBOR plus 4.44%, respectively. Gains and losses due to changes in the fair value of the interest rate swaps completely offset changes in the fair value of the hedged portion of the underlying debt and are recorded as an adjustment to the $1,400 Million Notes and $1,000 Million Notes.

In connection with the closing of the Health Net acquisition, the Company assumed the $400 million in aggregate principal amount of Health Net's 6.375% Senior Notes due 2017, recorded at acquisition date fair value of $418 million.

In June 2016, the Company issued an additional $500 million in aggregate principal amount of 4.75% Senior Notes due 2022 ($500 Million Add-on Notes) at a premium to yield of 4.41%. The $500 Million Add-on Notes were offered as additional debt securities under the indenture governing the $500 million in aggregate principal amount of 4.75% Senior Notes issued in April 2014. The Company used the net proceeds of the offering to repay amounts outstanding under its Revolving Credit Facility and to pay offering related fees and expenses.

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The indentures governing the $425 million in aggregate principal amount of 5.75% Senior Notes due 2017, the $1,400 Million Notes, the $1,000 million of its 4.75% Senior Notes due 2022, and the $1,000 Million Notescontain non-financial and financial covenants of Centene Corporation, including requirements of a minimum fixed charge coverage ratio. The indentures governing the $400 million notes due 2017 contain non-financial and financial covenants of Health Net, Inc., including requirements of a minimum fixed charge coverage ratio. At September 30, 2016, the Company was in compliance with all covenants.

Interest Rate Swaps

The Company uses interest rate swap agreements to convert a portion of its interest rate exposure from fixed rates to floating rates to more closely align interest expense with interest income received on its cash equivalent and variable rate investment balances. The Company has $2,350 million of notional amount of interest rate swap agreements consisting of:

•$250 million expiring on June 1, 2017;

•$600 million expiring on February 15, 2021;

•$500 million expiring on May 15, 2022; and,

•$1,000 million expiring on February 15, 2024.

Under the Swap Agreements, the Company receives a fixed rate of interest and pays an average variable rate of the three month LIBOR plus 3.88% adjusted quarterly. At September 30, 2016, the weighted average rate was 4.69%.

The Swap Agreements are formally designated and qualify as fair value hedges and are recorded at fair value in the Consolidated Balance Sheets in other assets or other liabilities. Gains and losses due to changes in fair value of the interest rate swap agreements completely offset changes in the fair value of the hedged portion of the underlying debt. Therefore, no gain or loss has been recognized due to hedge ineffectiveness. Offsetting changes in fair value of both the interest rate swaps and the hedged portion of the underlying debt both were recognized in interest expense in the Consolidated Statements of Operations. The Company does not hold or issue any derivative instrument for trading or speculative purposes.

Revolving Credit Agreement

In connection with the closing of the Health Net acquisition on March 24, 2016, the Company's existing unsecured $500 million revolving credit facility was terminated and simultaneously replaced with a new $1,000 million unsecured revolving credit facility. Borrowings under the agreement bear interest based upon LIBOR rates, the Federal Funds Rate or the Prime Rate. The agreement has a maturity date of March 24, 2021. As of September 30, 2016, the Company had $300 million of borrowings outstanding under the agreement with a weighted average interest rate of 4.25%, and the Company was in compliance with all covenants.

The revolving credit facility contains non-financial and financial covenants, including requirements of minimum fixed charge coverage ratios and maximum debt-to-EBITDA ratios. The Company is required to not exceed a maximum debt-to-EBITDA ratio of 3.5 to 1.0 prior to December 31, 2016 and 3.0 to 1.0 on and subsequent to December 31, 2016. As of September 30, 2016, there were no limitations on the availability under the revolving credit agreement as a result of the debt-to-EBITDA ratio.

Also, upon the closing of the Health Net acquisition, the Company assumed, fully repaid $285 million in outstanding borrowings under, and terminated the existing Health Net revolving credit facility.

Letters of Credit & Surety Bonds

The Company had outstanding letters of credit of $43 million as of September 30, 2016, which were not part of the revolving credit facility. The Company also had letters of credit for $48 million (valued at September 30, 2016 conversion rate), or €42 million, representing its proportional share of the letters of credit issued to support Ribera Salud’s outstanding debt, which are a part of the revolving credit facility. Collectively, the letters of credit bore interest at 1.44% as of September 30, 2016. The Company had outstanding surety bonds of $370 million as of September 30, 2016.

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8.Stockholders' Equity

In March 2016, the Company issued 48,449,444 shares of Centene common stock, with a fair value of approximately $3,038 million, paid approximately $2,247 million in cash in exchange for all the outstanding shares of Health Net common stock and outstanding equity awards, and recorded $2 million related to the fair value adjustment to stock based compensation associated with pre-combination service.

In January 2016, the Company completed a 19% investment in a data analytics business and as a result, issued 1,144,462 shares of Centene common stock to the selling stockholders. The investment is being accounted for using the equity method of accounting.

9.Earnings Per Share

The following table sets forth the calculation of basic and diluted net earnings per common share ($ in millions, except per share data):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2016			2015		2016			2015
Earnings attributable to Centene Corporation:
Earnings from continuing operations, net of tax	$	146		$	92	$	300		$	244
Discontinued operations, net of tax	(1		)	1		(3		)	—
Net earnings	$	145		$	93	$	297		$	244
Shares used in computing per share amounts:
Weighted average number of common shares outstanding	170,774,587			119,121,524		155,680,769			118,970,853
Common stock equivalents (as determined by applying the treasury stock method)	3,537,829			4,010,286		3,279,299			3,933,623
Weighted average number of common shares and potential dilutive common shares outstanding	174,312,416			123,131,810		158,960,068			122,904,476
Net earnings per common share attributable to Centene Corporation:
Basic:
Continuing operations	$	0.85		$	0.77	$	1.93		$	2.05
Discontinued operations	—			0.01		(0.02		)	—
Basic earnings per common share	$	0.85		$	0.78	$	1.91		$	2.05
Diluted:
Continuing operations	$	0.84		$	0.75	$	1.89		$	1.99
Discontinued operations	(0.01		)	0.01		(0.02		)	—
Diluted earnings per common share	$	0.83		$	0.76	$	1.87		$	1.99

The calculation of diluted earnings per common share for the three and nine months ended September 30, 2016 excludes the impact of 51,593 and 48,380 shares, respectively, related to anti-dilutive restricted stock and restricted stock units. The calculation of diluted earnings per common share for the three and nine months ended September 30, 2015 excludes the impact of 28,716 and 84,644 shares, respectively, related to anti-dilutive restricted stock and restricted stock units.

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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. Subsequent to the closing of the Health Net acquisition, the Managed Care segment also includes the operations previously included in Health Net's Western Region Operations Segment, with the exception of certain operations of its pharmaceutical services and behavioral health subsidiaries. The portions of Health Net's Western Region Operations segment included in the Managed Care segment consist of the following Health Net operations: commercial, Medicare, Medicaid and dual eligible health plans, primarily in Arizona, California, Oregon and Washington.

The Specialty Services segment consists of Centene’s specialty companies offering auxiliary healthcare services and products. Subsequent to the closing of the Health Net acquisition, the Specialty Services segment also includes the operations previously included in the Government Contracts segment of Health Net as well as certain operations of its pharmaceutical services and behavioral health subsidiaries, the latter of which Health Net previously included in its Western Region Operations segment. The Government Contracts business includes the Company's government-sponsored managed care support contract with the DoD under the TRICARE program in the North Region, the MFLC contract with the DoD, and other health care related government contracts, including PC3/Choice with the VA.

Segment information for the three months ended September 30, 2016, follows ($ in millions):

	Managed Care		Specialty Services		Eliminations			Consolidated Total
Total revenues from external customers	$	10,010	$	836	$	—		$	10,846
Total revenues from internal customers	55		1,525		(1,580		)	—
Total revenues	$	10,065	$	2,361	$	(1,580	)	$	10,846
Earnings from operations	$	304	$	38	$	—		$	342

Segment information for the three months ended September 30, 2015, follows ($ in millions):

	Managed Care		Specialty Services		Eliminations			Consolidated Total
Total revenues from external customers	$	5,278	$	543	$	—		$	5,821
Total revenues from internal customers	23		1,274		(1,297		)	—
Total revenues	$	5,301	$	1,817	$	(1,297	)	$	5,821
Earnings from operations	$	138	$	45	$	—		$	183

Segment information for the nine months ended September 30, 2016, follows ($ in millions):

	Managed Care		Specialty Services		Eliminations			Consolidated Total
Total revenues from external customers	$	26,439	$	2,257	$	—		$	28,696
Total revenues from internal customers	143		4,384		(4,527		)	—
Total revenues	$	26,582	$	6,641	$	(4,527	)	$	28,696
Earnings from operations	$	618	$	121	$	—		$	739

Segment information for the nine months ended September 30, 2015, follows ($ in millions):

	Managed Care		Specialty Services		Eliminations			Consolidated Total
Total revenues from external customers	$	14,857	$	1,601	$	—		$	16,458
Total revenues from internal customers	73		3,525		(3,598		)	—
Total revenues	$	14,930	$	5,126	$	(3,598	)	$	16,458
Earnings from operations	$	358	$	127	$	—		$	485

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As discussed in Note 3. Health Net, the assignment of goodwill to the Company's segments has not been completed at this time. The Company will update segment asset disclosures once an allocation is finalized.

11.Contingencies

Overview

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 under the headings "Kentucky" and "California." Except for the "Kentucky" and "California" proceedings, 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.

Kentucky

On July 5, 2013, the Company's subsidiary, Kentucky Spirit Health Plan, Inc. (Kentucky Spirit), terminated its contract with the Commonwealth of Kentucky (the Commonwealth). Kentucky Spirit believed it had a contractual right to terminate the contract and filed a lawsuit in Franklin Circuit Court seeking a declaration of this right. In response, the Commonwealth alleged that Kentucky Spirit's exit would constitute a material breach of contract.  The Commonwealth seeks to recover substantial damages and to enforce its rights under Kentucky Spirit's $25 million performance bond. The Commonwealth has asserted that the Commonwealth's expenditures due to Kentucky Spirit's departure range from $28 million to $40 million plus interest, and that the associated CMS expenditures range from $92 million to $134 million. Kentucky Spirit disputes the Commonwealth's alleged damages on several grounds. Prior to terminating the contract, Kentucky Spirit filed a legal complaint in April 2013, amended in October 2014, in Franklin Circuit Court seeking damages against the Commonwealth for losses sustained due to the Commonwealth's alleged breaches.

On February 6, 2015, the Kentucky Court of Appeals affirmed a Franklin Circuit Court ruling that Kentucky Spirit did not have a contractual right to terminate the contract early. The Court of Appeals also found that the contract’s liquidated damages provision “is applicable in the event of a premature termination of the Contract term.” On April 27, 2016, the Kentucky Supreme Court declined discretionary review, thereby making the Court of Appeals decision final. The question of damages is pending and will be determined by the Franklin Circuit Court. Kentucky Spirit believes it is not liable for damages because there was a prior breach of the contract by the Commonwealth, as alleged in Kentucky Spirit’s complaint.

On May 26, 2015, the Commonwealth issued a demand for indemnification to its actuarial firm, for "all defense costs, and any resultant monetary awards in favor of Kentucky Spirit, arising from or related to Kentucky Spirit's claims which are predicated upon the alleged omissions and errors in the Data Book and the certified actuarially sound rates." The actuarial firm moved to intervene in the litigation and the Franklin Circuit Court granted that motion on September 8, 2015. Also, on August 19, 2015, the actuarial firm filed a petition seeking a declaratory judgment that it is not liable to the Commonwealth for indemnification related to the claims asserted by Kentucky Spirit against the Commonwealth. On October 5, 2015, the Commonwealth filed an answer to the actuarial firm's petition and asserted counterclaims/cross-claims against the firm.

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On March 9, 2015, the Secretary of the Kentucky Cabinet for Health and Family Services (CHFS) issued a determination letter finding that Kentucky Spirit owed the Commonwealth $40 million in actual damages plus prejudgment interest at 8% percent. On March 18, 2015, in a letter to the Kentucky Finance and Administration Cabinet (FAC), Kentucky Spirit contested CHFS' jurisdiction to make such a determination. The FAC did not issue a decision within the required 120 days. On August 13, 2015, Kentucky Spirit filed a declaratory judgment action against the Commonwealth in Franklin Circuit Court seeking a declaration that the Commonwealth may not purport to issue a decision against Kentucky Spirit awarding damages to itself when the matter is already before the Kentucky courts. The Commonwealth filed counterclaims seeking a Declaration of Rights and Entry of Judgment on its determination letter. On December 1, 2015 the Franklin Circuit Court consolidated this declaratory judgment action with Kentucky Spirit’s other litigation claims against the Commonwealth. On August 19, 2016, the Franklin Circuit Court held a status conference with all parties. Discovery is continuing in the consolidated litigation matters. If the litigation is not settled, a trial is expected in the latter half of 2017.

The resolution of the Kentucky litigation matters are subject to numerous uncertainties and may result in a range of possible outcomes.  If Kentucky Spirit prevails on its claims, it would be entitled to damages.  If the Commonwealth prevails, a liability to the Commonwealth could be recorded. 

California

The Company's California subsidiary, Health Net of California, Inc. (Health Net California), has been 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, 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 20, 2015 filing of the complaint. This lawsuit is being coordinated with similar lawsuits filed against other entities. The Company expects an initial status conference shortly after the assignment of a presiding judge. The Company intends to vigorously defend itself against these claims; however this matter is subject to many uncertainties.

Miscellaneous Proceedings

Excluding the "Kentucky" and "California" 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 by various federal and state regulatory agencies with respect to requirements applicable to the Company's business, including, without limitation, payment of out-of-network claims, rules relating to 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 health care benefits coverage or reimbursement, 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.

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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. The following discussion and analysis, with the exception of cash flow information, is presented in the context of continuing operations unless otherwise identified.

OVERVIEW

Key performance metrics for the third quarter of 2016 are summarized as follows:

• Managed care membership of 11.4 million, an increase of 6.6 million members, or 137% year over year.

• Total revenues of $10.8 billion, representing 86% growth year over year.

• Health benefits ratio of 87.0%, compared to 89.0% in 2015.

• General and administrative expense ratio of 9.2%, or 9.1% excluding Health Net acquisition related expenses for the third quarter of 2016, compared to 8.4% in the third quarter of 2015.

• Operating cash flows of $480 million for the third quarter of 2016.

• Diluted earnings per share (EPS) for the third quarter of 2016 of $0.84, or $1.11 of Adjusted diluted EPS, including a $0.05diluted EPS charge related to a revised reconciliation of the 2015 risk adjustment under the Affordable Care Act (ACA) in connection with our Health Insurance Marketplace business. In comparison, diluted EPS for the third quarter of 2015 was $0.75, or $0.87 Adjusted diluted EPS. A reconciliation of GAAP diluted EPS to Adjusted diluted EPS is highlighted below and additional detail is provided above under the heading "Non-GAAP Financial Presentation":

	Three Months Ended September 30,
	2016		2015
GAAP diluted EPS	$	0.84	$	0.75
Health Net acquisition related expenses	0.12		0.09
Amortization of acquired intangible assets	0.15		0.03
Adjusted diluted EPS	$	1.11	$	0.87

The following items contributed to our revenue and membership growth since January 1, 2015:

• Arizona. In October 2015, our subsidiary, Cenpatico Integrated Care, in partnership with University of Arizona Health Plan, began operating under a contract with the Arizona Department of Health Services/Division of Behavioral Health Services to be the Regional Behavioral Health Authority for the new southern geographic service area.

• Centurion. In February 2015, Centurion began operating under a new contract with the State of Vermont Department of Corrections to provide comprehensive correctional healthcare services.

In July 2015, Centurion began operating under a new contract with the Mississippi Department of Corrections to provide comprehensive correctional healthcare services.

In April 2016, Centurion began providing correctional healthcare services for the Florida Department of Corrections in Regions 1, 2 and 3.

In June 2016, Centurion began operating under two new contracts with the State of New Mexico Corrections Department to provide correctional medical health care services and pharmacy services.

• Florida. In October 2015, our Florida subsidiary, Sunshine Health began operating under a two-year, statewide contract with the Florida Healthy Kids Corporation to manage healthcare services for children ages five through 18 in all 11 regions of Florida.

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• Health Insurance Marketplaces (HIM). In January 2016, we began serving members enrolled in the federally facilitated Health Insurance Marketplace in the state of New Hampshire.

In January 2016, we started operating under a contract with the New Hampshire Department of Health and Human Services to participate in the Medicaid expansion model that New Hampshire has adopted (referred to as the “premium assistance program”). This contract expires December 31, 2016 and may be extended for subsequent and consecutive one-year terms.

• Health Net. On March 24, 2016, we acquired all of the issued and outstanding shares of Health Net for approximately $6.0 billion, including the assumption of debt. This strategic acquisition broadened our service offerings, providing expansion in Medicaid and Medicare programs. This acquisition provided further diversification across our markets and products through the addition of commercial products and government-sponsored care under federal contracts with the Department of Defense (DoD) and the U.S. Department of Veteran's Affairs (VA), as well as Medicare Advantage. Health Net's operations are primarily concentrated in the states of California, Arizona, Oregon, and Washington.

• Indiana. In February 2015, our Indiana subsidiary, Managed Health Services, began operating under an expanded contract with the Indiana Family & Social Services Administration to provide Medicaid services under the state's Healthy Indiana Plan 2.0 program.

In April 2015, Managed Health Services began operating under an expanded contract with the Indiana Family & Social Services Administration to provide services to its ABD Medicaid enrollees who qualify for the new Hoosier Care Connect Program.

• Louisiana. In February 2015, our Louisiana subsidiary, Louisiana Healthcare Connections, began operating under a new contract with the Louisiana Department of Health to serve Healthy Louisiana (Medicaid) beneficiaries. Members previously served under the shared savings program were transitioned to the at-risk program on February 1, 2015.

In December 2015, Louisiana Healthcare Connections began operating under an expanded contract to include behavioral health benefits.

In July 2016, Louisiana Healthcare Connections, began serving Medicaid expansion members pursuant to an executive order, signed by the governor of Louisiana, to expand Medicaid coverage under the Affordable Care Act.

• Michigan. In May 2015, we completed the acquisition of Fidelis SecureCare of Michigan, Inc. (Fidelis). Fidelis began operating under a new contract with the Michigan Department of Community Health and the Centers for Medicare and Medicaid Services to provide integrated healthcare services to members who are dually eligible for Medicare and Medicaid in Macomb and Wayne counties in May 2015. Passive enrollment began in July 2015.

• Mississippi. In July 2014, our Mississippi subsidiary, Magnolia Health, began operating as one of two contractors under a new statewide managed care contract serving members enrolled in the Mississippi Coordinated Access Network program. Program expansion began in December 2014 and continued through July 2015.

In July 2015, Magnolia Health began operating under a two-year CHIP contract with the State of Mississippi. In December 2015, Magnolia Health began operating under an expanded contract to include the inpatient benefit for Medicaid and ABD members.

• Oregon. In September 2015, we completed the acquisition of Agate Resources, Inc., a diversified holding company, that offers primarily Medicaid and other healthcare products and services to Oregon residents through Trillium Community Health Plan.

• South Carolina. In February 2015, our South Carolina subsidiary, Absolute Total Care, began operating under a new contract with the South Carolina Department of Health and Human Services and the Centers for Medicare and Medicaid Services to serve dual-eligible members as part of the state's dual demonstration program.

• Texas. In March 2015, we began operating under an expanded STAR+PLUS contract with the Texas Health and Human Services Commission (HHSC) to include nursing facility benefits.

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In March 2015, we also began operating under a new contract with the Texas HHSC and the Centers for Medicare and Medicaid Services to serve dual-eligible members in three counties as part of the state's dual demonstration program.

• Washington. In April 2016, our subsidiary, Coordinated Care of Washington, began operating as the sole contractor with the Washington State Health Care Authority to provide foster care services through the Apple Health Foster Care contract.

We expect the following items to contribute to our future growth potential:

• We expect to realize benefits from the Health Net acquisition completed on March 24, 2016.

• We expect to realize the full year benefit in 2016 of business commenced during 2015 in Arizona, Florida, Indiana, Louisiana, Michigan, Mississippi, Oregon, South Carolina, Texas and Vermont as discussed above.

• In October 2016, our subsidiary, Home State Health, was selected to provide managed care services to MO HealthNet Managed Care beneficiaries. Under the new contract, Home State Health expects to serve MO HealthNet Managed Care beneficiaries in all 114 counties in Missouri. The contract is expected to commence May 1, 2017, pending regulatory approval.

• In September 2016, the Alabama legislature approved the funding needed to create its regional care organization (RCO) structure. Our subsidiary, AHA Administrative Services, has contracted with five nonprofit RCOs in Alabama to provide management services. Operations are expected to commence July 1, 2017.

• In August 2016, we announced our filing with the Arizona Department of Insurance and the Centers for Medicare and Medicaid Services to continue our participation as a qualified health plan issuer in the Arizona Health Insurance Marketplace in 2017. We have exited the Health Net preferred provider organization offerings in Arizona, effective January 1, 2017.

• In August 2016, our Pennsylvania subsidiary, Pennsylvania Health & Wellness, was selected by the department of Human Services and Aging to serve enrollees in the Community HealthChoices program statewide. Expected contract commencement dates vary by zone, starting July 2017, and will be fully implemented by January 2019, pending regulatory approval.

• In July 2016, it was announced that the Department of Defense awarded our wholly-owned subsidiary, Health Net Federal Services, the TRICARE West Region contract. We currently administer services for the TRICARE program in the North Region. In connection with this latest generation of TRICARE contracts, the Department of Defense has consolidated the prior North, South and West TRICARE regions into two: the West and East Regions (the East combining the current North and South Regions). The contract awards for both the West Region and East Region are subject to pending bid protests. We will continue to operate in the TRICARE North Region pending the resolution of these protests.

• In June 2016, Managed Health Services, was selected by the Indiana Family & Social Services Administration to begin contract negotiations to provide risk-based managed care services for enrollees in the Healthy Indiana Plan and Hoosier Healthwise programs. This new contract is expected to commence on January 1, 2017.

• In May 2016, our specialty solutions division, Envolve, Inc. was selected by Maryland Care Inc. d/b/a Maryland Physicians Care MCO to provide health plan management services for its Medicaid operations in Maryland effective July 1, 2017.

• In April 2016, our Pennsylvania subsidiary, Pennsylvania Health & Wellness, was selected by the Pennsylvania Department of Human Services to service Medicaid recipients enrolled in the HealthChoices program in three zones. In July 2016, the Commonwealth reissued the request for proposal with an anticipated commencement of April 2017.

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• In April 2016, our Nebraska subsidiary, Nebraska Total Care, executed a contract with the Nebraska Department of Health and Human Services' Division of Medicaid and Long-Term Care as one of three managed care organizations to administer its new Heritage Health Program for Medicaid, ABD, CHIP, Foster Care and LTC enrollees. The contract is expected to commence in the first quarter of 2017.

• In October 2015, our subsidiary, Superior HealthPlan, Inc., was awarded a contract by the Texas HHSC to serve seven delivery areas for STAR Kids Medicaid recipients, more than any other successful bidder. The new contract is expected to commence on November 1, 2016.

• In September 2015, our subsidiary, Peach State Health Plan, was one of the Care Management Organizations selected to serve Medicaid recipients enrolled in the Georgia Families, PeachCare for Kids and Planning for Healthy Babies programs. The expiration of the current contract was extended for one year and expires June 30, 2017.

MEMBERSHIP

From September 30, 2015 to September 30, 2016, we increased our managed care membership by 6.6 million, or 137%.  The following table sets forth the Company's membership by state for its managed care organizations:

	September 30, 2016	December 31, 2015	September 30, 2015
Arizona	601,500	440,900	223,600
Arkansas	57,700	41,900	40,900
California	3,004,500	186,000	183,900
Florida	732,700	510,400	486,500
Georgia	498,000	408,600	406,700
Illinois	236,700	207,500	211,300
Indiana	289,600	282,100	276,700
Kansas	145,100	141,000	137,500
Louisiana	455,600	381,900	358,800
Massachusetts	45,300	61,500	63,700
Michigan	2,100	4,800	6,600
Minnesota	9,400	9,600	9,400
Mississippi	313,900	302,200	301,000
Missouri	104,700	95,100	88,400
New Hampshire	78,400	71,400	71,900
New Mexico	7,100	—	—
Ohio	319,500	302,700	308,100
Oregon	218,400	98,700	99,800
South Carolina	119,700	104,000	104,800
Tennessee	21,600	20,000	20,200
Texas	1,041,600	983,100	976,500
Vermont	1,700	1,700	1,500
Washington	240,500	209,400	208,600
Wisconsin	75,100	77,100	78,100
Total at-risk membership	8,620,400	4,941,600	4,664,500
TRICARE eligibles	2,815,700	—	—
Non-risk membership	—	166,300	169,900
Total	11,436,100	5,107,900	4,834,400

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The following table sets forth our membership by line of business:

	September 30, 2016	December 31, 2015	September 30, 2015
Medicaid:
TANF, CHIP & Foster Care	5,583,900	3,763,400	3,719,900
ABD & LTC	754,900	478,600	473,700
Behavioral Health	465,300	456,800	216,700
Commercial	1,365,600	146,100	155,600
Medicare & Duals	300,900	37,400	39,300
Correctional	149,800	59,300	59,300
Total at-risk membership	8,620,400	4,941,600	4,664,500
TRICARE eligibles	2,815,700	—	—
Non-risk membership	—	166,300	169,900
Total	11,436,100	5,107,900	4,834,400

At September 30, 2016, the Company served 1,048,500 members in Medicaid expansion programs in ten states compared to 442,600 members in eight states at September 30, 2015. At September 30, 2016, the Company served 369,300 dual-eligible members, compared to 200,900 at September 30, 2015. At September 30, 2016, the Company served 582,600 members in Health Insurance Marketplaces, compared to 155,600 at September 30, 2015.

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RESULTS OF OPERATIONS

The following discussion and analysis is based on our Consolidated Statements of Operations, which reflect our results of operations for the three and nine months ended September 30, 2016 and 2015, prepared in accordance with generally accepted accounting principles in the United States. 

Summarized comparative financial data for the three and nine months ended September 30, 2016 and 2015 is as follows ($ in millions, except per share data):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2016			2015			% Change 2015-2016		2016			2015			% Change 2015-2016
Premium	$	9,625		$	4,983		93	%	$	25,299		$	13,974		81	%
Service	590			480			23	%	1,603			1,434			12	%
Premium and service revenues	10,215			5,463			87	%	26,902			15,408			75	%
Premium tax and health insurer fee	631			358			76	%	1,794			1,050			71	%
Total revenues	10,846			5,821			86	%	28,696			16,458			74	%
Medical costs	8,376			4,433			89	%	22,072			12,475			77	%
Cost of services	504			413			22	%	1,386			1,234			12	%
General and administrative expenses	940			458			105	%	2,611			1,291			102	%
Amortization of acquired intangible assets	43			6			n.m.		95			18			n.m.
Premium tax expense	512			274			87	%	1,460			794			84	%
Health insurer fee expense	129			54			139	%	333			161			107	%
Earnings from operations	342			183			87	%	739			485			52	%
Other income (expense), net	(24		)	(3		)	n.m.		(62		)	(5		)	n.m.
Earnings from continuing operations, before income tax expense	318			180			77	%	677			480			41	%
Income tax expense	171			87			97	%	376			234			61	%
Earnings from continuing operations, net of income tax expense	147			93			58	%	301			246			22	%
Discontinued operations, net of income tax benefit	(1		)	1			(200	)%	(3		)	—			n.m.
Net earnings	146			94			55	%	298			246			21	%
(Earnings) attributable to noncontrolling interests	(1		)	(1		)	—	%	(1		)	(2		)	50	%
Net earnings attributable to Centene Corporation	$	145		$	93		56	%	$	297		$	244		22	%
Amounts attributable to Centene Corporation common shareholders:
Earnings from continuing operations, net of income tax expense	$	146		$	92		59	%	$	300		$	244		23	%
Discontinued operations, net of income tax benefit	(1		)	1			(200	)%	(3		)	—			n.m.
Net earnings	$	145		$	93		56	%	$	297		$	244		22	%
Diluted earnings (loss) per common share attributable to Centene Corporation:
Continuing operations	$	0.84		$	0.75		12	%	$	1.89		$	1.99		(5	)%
Discontinued operations	(0.01		)	0.01			(200	)%	(0.02		)	—			n.m.
Total diluted earnings per common share	$	0.83		$	0.76		9	%	$	1.87		$	1.99		(6	)%

n.m.: not meaningful

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Revenues and Revenue Recognition

Our health plans generate revenues primarily from premiums we receive from the states in which we operate. We generally receive a fixed premium per member per month pursuant to our state contracts. We generally receive premium payments and recognize premium revenue during the month in which we are obligated to provide services to our members. In some instances, our base premiums are subject to an adjustment, or risk score, based on the acuity of our membership. Generally, the risk score is determined by the state analyzing submissions of processed claims data to determine the acuity of our membership relative to the entire state's membership. Some contracts allow for additional premiums associated with certain supplemental services provided such as maternity deliveries.

Our contracts with states may require us to maintain a minimum health benefits ratio or may require us to share profits in excess of certain levels. In certain circumstances, our plans may be required to return premium to the state in the event profits exceed established levels. We recognize reductions in revenue in the current period for these programs. Other states may require us to meet certain performance and quality metrics in order to receive additional or full contractual revenue. For performance-based contracts, we do not recognize revenue subject to refund until data is sufficient to measure performance.

Revenues are recorded based on membership and eligibility data provided by the states, which is adjusted on a monthly basis by the states for retroactive additions or deletions to membership data. These eligibility adjustments are estimated monthly and subsequently adjusted in the period known. We continuously review and update those estimates as new information becomes available.  It is possible that new information could require us to make additional adjustments, which could be significant, to these estimates.

Our specialty services generate revenues under contracts with state and federal programs, healthcare organizations, and other commercial organizations, as well as from our own subsidiaries. Revenues are recognized when the related services are provided or as ratably earned over the covered period of services. The Company recognizes revenue related to administrative services under its government-sponsored managed care support contract with the DoD under the TRICARE program in the North Region (T-3 contract) on a straight-line basis over the option period, when the fees become fixed and determinable. The T-3 contract includes various performance-based incentives and penalties. For each of the incentives or penalties, the Company adjusts revenue accordingly based on the amount that it has earned or incurred at each interim date and are legally entitled to in the event of a contract termination.

In addition to the beneficiaries under the T-3 contract, we also provide behavioral health services to military families under the DoD sponsored Military and Family Life Counseling (MFLC) program and provide services to the VA under the Veteran's Choice and Patient Centered Community Care program (PC3/Choice) through our acquisition of Health Net. The PC3/Choice program provides eligible veterans coordinated, timely access to care through a comprehensive network of non-VA providers who meet VA quality standards when a local VA medical center cannot readily provide the care.

Some states enact premium taxes, similar assessments and provider and hospital pass-through payments, collectively, premium taxes, and these premium taxes are recorded as a component of revenues as well as operating expenses. Additionally, our insurance subsidiaries are subject to the Affordable Care Act annual health insurer fee (HIF). If we are able to negotiate reimbursement of portions of these premium taxes or the HIF, we recognize revenue associated with the HIF on a straight-line basis when we have binding agreements for such reimbursements, including the “gross-up” to reflect the HIFs non-tax deductible nature. We exclude both revenue and expenses associated with the HIF and premium taxes from our key ratios as we believe they are a pass-through of costs and not indicative of our operating performance. Collectively, this revenue is recorded as premium tax and health insurer fee revenue in the Consolidated Statements of Operations.

The Centers for Medicare and Medicaid Services (CMS) deploys a risk adjustment model that retroactively apportions Medicare premiums paid according to health severity and certain demographic factors. The model pays more for members whose medical history indicates they have certain medical conditions. Under this risk adjustment methodology, CMS calculates the risk adjusted premium payment using diagnosis data from hospital inpatient, hospital outpatient, physician treatment settings as well as prescription drug events. The Company estimates the amount of risk adjustment based upon the diagnosis and pharmacy data submitted and expected to be submitted to CMS and records revenues on a risk adjusted basis. Our Health Net acquisition expands our contracts with CMS to include Medicare Advantage products. In addition, with the Health Net acquisition, we now have Medicare Advantage Plus Prescription Drug (MAPD) plans that cover both prescription drugs (Part D) and medical care. The Part D benefit consists of pharmacy benefits for Medicare beneficiaries. We provide prescription drug benefits as part of our Medicare Advantage and dual eligible offerings.

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Premium and service revenues collected in advance are recorded as unearned revenue. Premium and service revenues due to us are recorded as premium and related receivables and are recorded net of an allowance based on historical trends and our management's judgment of the collectibility of these accounts. As we generally receive payments during the month in which services are provided, the allowance is typically not significant in comparison to total revenues and does not have a material impact on the presentation of our financial condition or results of operations.

Operating Expenses

Medical Costs

Medical costs include payments to physicians, hospitals, and other providers for healthcare and specialty services claims. Medical costs also include estimates of medical expenses incurred but not yet reported, or IBNR, and estimates of the cost to process unpaid claims. We use our judgment to determine the assumptions to be used in the calculation of the required IBNR estimate. The assumptions we consider include, without limitation, claims receipt and payment experience (and variations in that experience), changes in membership, provider billing practices, healthcare service utilization trends, cost trends, product mix, seasonality, prior authorization of medical services, benefit changes, known outbreaks of disease or increased incidence of illness such as influenza, provider contract changes, changes to Medicaid fee schedules, and the incidence of high dollar or catastrophic claims.

Our development of the IBNR estimate is a continuous process which we monitor and refine on a monthly basis as claims receipts and payment information becomes available. As more complete information becomes available, we adjust the amount of the estimate, and include the changes in estimates in medical expense in the period in which the changes are identified.

Additionally, we contract with independent actuaries to review our estimates on a quarterly basis. The independent actuaries provide us with a review letter that includes the results of their analysis of our medical claims liability. We do not solely rely on their report to adjust our claims liability. We utilize their calculation of our claims liability only as additional information, together with management's judgment, to determine the assumptions to be used in the calculation of our liability for medical costs.

While we believe our IBNR estimate is appropriate, it is possible future events could require us to make significant adjustments for revisions to these estimates. Accordingly, we cannot assure you that medical costs will not materially differ from our estimates.

Results of operations depend on our ability to manage expenses associated with health benefits and to accurately estimate costs incurred. Our health benefits ratio, or HBR, represents medical costs as a percentage of premium revenues (excluding premium tax and health insurer fee revenues) and reflects the direct relationship between the premium received and the medical services provided.

Cost of Services

Cost of services expense includes the pharmaceutical costs associated with our pharmacy benefit manager and specialty pharmacy's external revenues and certain direct costs to support the functions responsible for generation of our service revenues. These expenses consist of the salaries and wages of the professionals who provide the services and associated expenses. Health care costs associated with Part D of our MAPD plans are recognized as the costs and expenses are incurred.

General and Administrative Expenses

General and administrative expenses, or G&A, primarily reflect wages and benefits, including stock compensation expense, and other administrative costs associated with our health plans, specialty companies and centralized functions that support all of our business units. Our major centralized functions are finance, information systems and claims processing. G&A expenses also include business expansion costs, such as wages and benefits for administrative personnel, contracting costs, and information technology buildouts, incurred prior to the commencement of a new contract or health plan.

The G&A expense ratio represents G&A expenses as a percentage of premium and service revenues, and reflects the relationship between revenues earned and the costs necessary to earn those revenues.

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Health Insurer Fee

The HIF reflects our pro rata share of the annual fee mandated by the ACA to health insurers. The fee is determined based on our premium revenues in the previous year. Each health insurer's fee is calculated by multiplying its market share by the annual fee. Market share is based on commercial, Medicare, and Medicaid premium revenue.

Other Income (Expense)

Other income (expense) consists principally of investment income from cash and investments, earnings in equity method investments, and interest expense on debt. 

Discontinued Operations

Our subsidiary, Kentucky Spirit Health Plan (KSHP), ceased serving Medicaid members in Kentucky as of July 6, 2013. Accordingly, the results of operations for KSHP are classified as discontinued operations for all periods presented in our consolidated financial statements. The following discussion and analysis is presented primarily in the context of continuing operations unless otherwise identified.

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

Total Revenues

Total revenues increased 86% in the three months ended September 30, 2016 over the corresponding period in 2015primarily as a result of the acquisition of Health Net, as well as the impact from expansions and new programs in many of our states in 2015 and 2016 and growth in the Health Insurance Marketplace business in 2016.

Operating Expenses

Medical Costs

Results of operations depend on our ability to manage expenses associated with health benefits and to accurately estimate costs incurred. The health benefits ratio, or HBR, represents medical costs as a percentage of premium revenues (excluding premium tax and health insurer fee revenues) and reflects the direct relationship between the premium received and the medical services provided.

The HBR for the three months ended September 30, 2016 was 87.0%, compared to 89.0% in the same period in 2015.  The decrease compared to last year is primarily attributable to the acquisition of Health Net, which operates at a lower HBR due to a greater mix of commercial business.

Cost of Services

Cost of services increased by $91 million in the three months ended September 30, 2016, compared to the corresponding period in 2015.  This was primarily due to the acquisition of Health Net and growth in our correctional business, partially offset by lower pharmacy sales to external customers. The cost of service ratio for the three months ended September 30, 2016, was 85.4%, compared to 86.0% in the same period in 2015.  

General & Administrative Expenses

General and administrative expenses, or G&A, increased by $482 million in the three months ended September 30, 2016, compared to the corresponding period in 2015.  This was primarily due to the acquisition of Health Net as well as the impact from expansions, acquisitions, or new programs in many of our states in 2015 and 2016.

The G&A expense ratio was 9.2%, or 9.1% excluding Health Net acquisition related expenses, for the third quarter of 2016, compared to 8.4%, or 8.1% excluding Health Net acquisition related expenses, in the third quarter of 2015. The increase in the G&A expense ratio is primarily attributable to the addition of the Health Net business, which operates at a higher G&A ratio due to a greater mix of commercial and Medicare business.

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Other Income (Expense)

The following table summarizes the components of other income (expense) for the three months ended September 30, ($ in millions): 

	2016			2015
Investment and other income	$	33		$	8
Interest expense	(57		)	(11		)
Other income (expense), net	$	(24	)	$	(3	)

The increase in investment income in 2016 reflects an increase in investment balances over 2015. Interest expense increased in 2016 compared to 2015, primarily reflecting the issuance of an additional $2.4 billion in Senior Notes in February 2016 in connection with the financing of the Health Net transaction, the issuance of an additional $500 million in Senior Notes in June 2016, and the assumption of Health Net's $400 million in Senior Notes.

Income Tax Expense

Our effective tax rate for the three months ended September 30, 2016 and 2015, was 53.8% and 48.3%, respectively. The effective tax rate is higher than the applicable statutory rate primarily as a result of the non-deductibility of the HIF.

Segment Results

The following table summarizes our consolidated operating results by segment for the three months ended September 30, ($ in millions):

	2016			2015			% Change 2015-2016
Total Revenues
Managed Care	$	10,065		$	5,301		90	%
Specialty Services	2,361			1,817			30	%
Eliminations	(1,580		)	(1,297		)	(22	)%
Consolidated Total	$	10,846		$	5,821		86	%
Earnings from Operations
Managed Care	$	304		$	138		120	%
Specialty Services	38			45			(16	)%
Consolidated Total	$	342		$	183		87	%

Managed Care

The Managed Care segment consists of Centene’s health plans including all of the functions needed to operate them. Subsequent to the closing of the Health Net acquisition, the Managed Care segment also includes the operations previously included in Health Net's Western Region Operations Segment, with the exception of certain operations of its pharmaceutical services and behavioral health subsidiaries. The portions of Health Net's Western Region Operations segment included in the Managed Care segment consist of the following Health Net operations: commercial, Medicare, Medicaid and dual eligible health plans, primarily in Arizona, California, Oregon and Washington.

Total revenues increased90% in the three months ended September 30, 2016, compared to the corresponding period in 2015, primarily as a result of the acquisition of Health Net, as well as expansions, new programs and growth in many of our states, particularly Florida, Louisiana, Mississippi, Oregon, and Texas. Earnings from operations increased$166 million between years primarily reflecting the acquisition of Health Net.

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Specialty Services

The Specialty Services segment consists of Centene’s specialty companies offering auxiliary healthcare services and products. Subsequent to the closing of the Health Net acquisition, the Specialty Services segment also includes the operations previously included in the Government Contracts segment of Health Net as well as certain operations of its pharmaceutical services and behavioral health subsidiaries, the latter of which Health Net previously included in its Western Region Operations segment. The Government Contracts business includes the Company's government-sponsored managed care support contract with the DoD under the TRICARE program in the North Region, the MFLC contract with the DoD, and other health care related government contracts, including PC3/Choice with the VA.

Total revenues increased30% in the three months ended September 30, 2016, compared to the corresponding period in 2015, resulting primarily from the acquisition of Health Net, growth in our behavioral health and correctional services businesses, and increased services associated with membership growth in the Managed Care segment.  Earnings from operations decreased$7 million in the three months ended September 30, 2016, compared to the corresponding period in 2015, primarily due to lower earnings in our specialty pharmacy and home health businesses, partially offset by an increase in earnings related to our correctional services business.

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

Total Revenues

Total revenues increased 74% in the nine months ended September 30, 2016 over the corresponding period in 2015 primarily as a result of the acquisition of Health Net, as well as the impact from expansions, acquisitions or new programs in many of our states in 2016 and 2015. During the nine months ended September 30, 2016, we received premium rate adjustments which yielded a net 1% composite change across all of our markets.

Operating Expenses

Medical Costs

Results of operations depend on our ability to manage expenses associated with health benefits and to accurately estimate costs incurred. The HBR represents medical costs as a percentage of premium revenues (excluding premium tax and health insurer fee revenues) and reflects the direct relationship between the premium received and the medical services provided.

The HBR for the nine months ended September 30, 2016, was 87.2%, compared to 89.3% in the same period in 2015.  The decrease compared to last year is primarily attributable to the acquisition of Health Net (which operates at a lower HBR due to a higher mix of commercial and Medicare business) and membership growth in Medicaid expansion and Health Insurance Marketplace, which all operate at a lower HBR, as well as improvement in medical expense in the higher acuity populations.

Cost of Services

Cost of services increased by $152 million in the nine months ended September 30, 2016, compared to the corresponding period in 2015.  This was primarily due to the acquisition of Health Net and growth in our correctional business, partially offset by lower pharmacy sales to external customers. The cost of service ratio for the nine months ended September 30, 2016, was 86.5%, compared to 86.1% in the same period in 2015.  

General & Administrative Expenses

G&A increased by $1,320 million in the nine months ended September 30, 2016, compared to the corresponding period in 2015.  This was primarily due to the acquisition of Health Net, acquisition related expenses, restructuring and integration costs, and the impact from expansions, acquisitions, or new programs in many of our states in 2015 and 2016. During the nine months ended September 30, 2016, we recorded approximately $224 million of Health Net acquisition related expenses, which reduced our diluted earnings per share by $0.98.

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The consolidated G&A expense ratio for the nine months ended September 30, 2016 was 9.7%, or 8.9% excluding Health Net acquisition related expenses, compared to 8.4%, or 8.2% excluding Health Net acquisition related expenses, for the nine months ended September 30, 2015. The increase in the G&A expense ratio is primarily attributable to the addition of the Health Net business, which operates at a higher G&A ratio due to a greater mix of commercial and Medicare business.

Other Income (Expense)

The following table summarizes the components of other income (expense) for the nine months ended September 30, ($ in millions): 

	2016			2015
Investment and other income	$	80		$	27
Interest expense	(142		)	(32		)
Other income (expense), net	$	(62	)	$	(5	)

The increase in investment income in 2016 reflects an increase in investment balances over 2015. Interest expense increased during the nine months ended September 30, 2016 by $110 millionprimarily reflecting the issuance of an additional $2.4 billion in Senior Notes in February 2016 in connection with the financing of the Health Net transaction, the issuance of an additional $500 million in Senior Notes in June 2016, and the assumption of Health Net's $400 million in Senior Notes.

Income Tax Expense

Our effective tax rate for the nine months ended September 30, 2016 and 2015, was 55.5% and 48.8%, respectively. The effective tax rate is higher than the applicable statutory rate primarily as a result of the non-deductibility of the HIF as well as the non-deductibility of certain acquisition related costs incurred in connection with the closing of our acquisition of Health Net.

Segment Results

The following table summarizes our consolidated operating results by segment for the nine months ended September 30, ($ in millions):

	2016			2015			% Change 2015-2016
Total Revenues
Managed Care	$	26,582		$	14,930		78	%
Specialty Services	6,641			5,126			30	%
Eliminations	(4,527		)	(3,598		)	(26	)%
Consolidated Total	$	28,696		$	16,458		74	%
Earnings from Operations
Managed Care	$	618		$	358		73	%
Specialty Services	121			127			(5	)%
Consolidated Total	$	739		$	485		52	%

Managed Care

Total revenues increased78% in the nine months ended September 30, 2016, compared to the corresponding period in 2015, primarily as a result of the acquisition of Health Net and expansions or new programs in many of our states, particularly Florida, Louisiana, Mississippi, Oregon, and Texas. Earnings from operations increased$260 million between years primarily reflecting the acquisition of Health Net.

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Specialty Services

Total revenues increased30% in the nine months ended September 30, 2016, compared to the corresponding period in 2015, resulting primarily from the acquisition of Health Net, growth in our behavioral health and correctional services businesses, and increased services associated with membership growth in the Managed Care segment.  Earnings from operations decreased$6 million in the nine months ended September 30, 2016, compared to the corresponding period in 2015, primarily due to lower earnings in our specialty pharmacy and home health businesses as well as increased utilization in several specialty services businesses, partially offset by an increase in earnings related to our pharmacy benefits management and correctional services businesses and the Health Net acquisition.

LIQUIDITY AND CAPITAL RESOURCES

Shown below is a condensed schedule of cash flows used in the discussion of liquidity and capital resources ($ in millions).

	Nine Months Ended September 30,
	2016			2015
Net cash provided by operating activities	$	255		$	457
Net cash used in investing activities	(1,632		)	(769		)
Net cash provided by financing activities	2,598			367
Net increase in cash and cash equivalents	$	1,222		$	55

Cash Flows Provided by Operating Activities

Normal operations are funded primarily through operating cash flows and borrowings under our revolving credit facility.  Operating activities provided cash of $255 million in the nine months ended September 30, 2016, compared to cash provided of $457 million in the comparable period in 2015.  The cash provided by operating activities in 2016 was primarily due to net earnings and an increase in unearned revenue and other liabilities, partially offset by an increase in premium and related receivables.

Cash flows provided by operations in 2015was primarily related to an increase in medical claims liabilities resulting from the growth in the business and an increase in other long term liabilities, partially offset by increases in premium and related receivables.

Cash flows from operations in each year were impacted by the timing of payments we receive from our states.  As we have seen historically, states may prepay the following month premium payment, which we record as unearned revenue, or they may delay our premium payment, which we record as a receivable.  We typically receive capitation payments monthly; however, the states in which we operate may decide to adjust their payment schedules which could positively or negatively impact our reported cash flows from operating activities in any given period.  

The reimbursement of the HIF from our state customers may be settled as a separate payment or monthly in combination with our other premium payments. The vast majority of our state customers are settling the reimbursement through a separate payment after verification of each state’s portion of our HIF, resulting in an increase in premium and related receivables at September 30, 2016. During the third quarter of 2016, we paid the 2016 annual HIF invoice totaling $513 million. This negatively impacted our cash flows as we have not yet been reimbursed from the majority of our state customers.

Cash Flows Used in Investing Activities

Investing activities used cash of $1,632 million for the nine months ended September 30, 2016, and $769 million in the comparable period in 2015.  Cash flows used in investing activities in 2016 primarily consisted of our acquisition of Health Net, net additions to the investment portfolio of our regulated subsidiaries, including transfers from cash and cash equivalents to long term investments, and capital expenditures.

In March 2016, we completed the acquisition of Health Net for approximately $5,990 million, including the assumption of $703 million of debt. The total consideration for the acquisition was $5,287 million, consisting of Centene common shares valued at $3,038 million, $2,247 million in cash, and $2 million related to the fair value adjustment to stock based compensation associated with pre-combination service.

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We spent $211 million and $101 million in the nine months ended September 30, 2016 and 2015, respectively, on capital expenditures for system enhancements and market expansions.  

As of September 30, 2016, our investment portfolio consisted primarily of fixed-income securities with an average duration of 3.2 years.  We had unregulated cash and investments of $268 million at September 30, 2016, compared to $78 million at December 31, 2015.

Cash Flows Provided by Financing Activities

Our financing activities provided cash of $2,598 million in the nine months ended September 30, 2016, compared to $367 million in the comparable period in 2015.  During 2016, our financing activities primarily related to the proceeds from the issuance of Senior Notes in February 2016 associated with the Health Net acquisition and the issuance of additional Senior Notes in June 2016, partially offset by the repayment of debt.

In February 2016, our wholly owned unrestricted subsidiary (Escrow Issuer) issued $1,400 million of 5.625% Senior Notes ($1,400 Million Notes) at par due 2021 and $1,000 million of 6.125% Senior Notes ($1,000 Million Notes) at par due 2024. We used the net proceeds of the offering, together with borrowings under the our new $1,000 million revolving credit facility and cash on hand, to fund the cash consideration for the Health Net acquisition and to pay acquisition and offering related fees and expenses. In connection with the February 2016 issuance, we entered into interest rate swap agreements for notional amounts of $600 million and $1,000 million, at floating rates of interest based on the three month LIBOR plus 4.22% and the three month LIBOR plus 4.44%, respectively. Gains and losses due to changes in the fair value of the interest rate swaps completely offset changes in the fair value of the hedged portion of the underlying debt and are recorded as an adjustment to the $1,400 Million Notes and $1,000 Million Notes.

In connection with the closing of the Health Net acquisition on March 24, 2016, our then-existing unsecured $500 million revolving credit facility was terminated and simultaneously replaced with a new $1,000 million unsecured revolving credit facility (Revolving Credit Facility). Borrowings under the agreement bear interest based upon LIBOR rates, the Federal Funds Rate or the Prime Rate. The agreement has a maturity date of March 24, 2021.

In June 2016, we issued an additional $500 million of 4.75% Senior Notes due 2022 at a premium to yield 4.41% ($500 Million Add-on Notes). The $500 Million Add-on Notes were offered as additional debt securities under the indenture governing the $500 million of 4.75% Senior Notes issued April 2014. We used the net proceeds of the offering to repay amounts outstanding under our Revolving Credit Facility and to pay offering related fees and expenses.

During 2015, our financing activities primarily related to the proceeds from the issuance of senior debt and increased borrowings on our revolving credit agreement. In January 2015, we issued an additional $200 million of 4.75% Senior Notes at par. In connection with the January 2015 issuance, we entered into interest rate swap agreements for a notional amount of $200 million.

Liquidity Metrics

The credit agreement underlying our Revolving Credit Facility contains non-financial and financial covenants, including requirements of minimum fixed charge coverage ratios and maximum debt-to-EBITDA ratios. We are required to not exceed a maximum debt-to-EBITDA ratio of 3.5 to 1.0 prior to December 31, 2016 and 3.0 to 1.0 on and subsequent to December 31, 2016. As of September 30, 2016, we had $300 million in borrowings outstanding under our revolving credit facility, and we were in compliance with all covenants. As of September 30, 2016, there were no limitations on the availability under the revolving credit agreement as a result of the debt-to-EBITDA ratio.

We had outstanding letters of credit of $43 million as of September 30, 2016, which were not part of our revolving credit facility. We also had letters of credit for $48 million (valued at the September 30, 2016 conversion rate), or €42 million, representing our proportional share of the letters of credit issued to support Ribera Salud’s outstanding debt which are a part of the revolving credit facility. Collectively, the letters of credit bore weighted interest of 1.44% as of September 30, 2016. In addition, we had outstanding surety bonds of $370 million as of September 30, 2016.

The indentures governing the $425 million notes due 2017, the $1,400 Million Notes, the $1,000 million notes due 2022, and the $1,000 Million Notescontain non-financial and financial covenants of Centene Corporation, including requirements of a minimum fixed charge coverage ratio. The indentures governing the $400 million notes due 2017 contain non-financial and financial covenants of Health Net, Inc., including requirements of a minimum fixed charge coverage ratio.

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At September 30, 2016, we had working capital, defined as current assets less current liabilities, of negative $1,268 million, compared to negative $24 million at December 31, 2015.  The negative balance at September 30, 2016 is primarily due to the current portion of long term debt. We manage our short term and long term investments with the goal of ensuring that a sufficient portion is held in investments that are highly liquid and can be sold to fund short term requirements as needed.

At September 30, 2016, our debt to capital ratio, defined as total debt divided by the sum of total debt and total equity, was 44.5%, compared to 36.0% at December 31, 2015.  Excluding the $65 million non-recourse mortgage note, our debt to capital ratio was 44.1% as of September 30, 2016, compared to 34.7% at December 31, 2015.  We utilize the debt to capital ratio as a measure, among others, of our leverage and financial flexibility.

2016 Expectations

Subsequent to quarter end, we received amendments to our California contracts with the Department of Health Care Services to amend the Medicaid expansion medical loss ratio (MLR) definition. All reconciliation periods remain open, however, we expect the amendment to reduce our minimum MLR liability and are currently working with the state to evaluate the impact of the amendment.

During the remainder of 2016, we expect to make net capital contributions to our insurance subsidiaries of approximately$300 million associated with our growth and spend approximately $140 million in additional capital expenditures primarily associated with system enhancements and market expansions. These amounts are expected to be funded by unregulated cash flow generation in 2016 and borrowings on our Revolving Credit Facility. However, from time to time we may elect to raise additional funds for these and other purposes, either through issuance of debt or equity, the sale of investment securities or otherwise, as appropriate. In addition, we may strategically pursue refinancing opportunities to extend maturities and/or improve terms of our indebtedness if we believe such opportunities are favorable to us.

Based on our operating plan, we expect that our available cash, cash equivalents and investments, cash from our operations and cash available under our Revolving Credit Facility will be sufficient to finance our general operations and capital expenditures for at least 12 months from the date of this filing.

CONTRACTUAL OBLIGATIONS

The following table summarizes future contractual obligations. These obligations contain estimates and are subject to revision under a number of circumstances. Our debt consists of borrowings from our senior notes, Revolving Credit Facility, mortgages and capital leases. The purchase obligations consist primarily of software purchases and maintenance contracts. The contractual obligations and estimated period of payment over the next five years and beyond are as follows ($ in millions):

	Payments Due by Period
	Total		Less Than 1 Year		1-3 Years		3-5 Years		Thereafter
Medical claims liability	$	3,767	$	3,767	$	—	$	—	$	—
Debt and interest	5,800		1,049		408		299		4,044
Operating lease obligations	619		124		213		161		121
Purchase obligations	679		417		256		6		—
Other long term liabilities 1	—		—		—		—		—
Total	$	10,865	$	5,357	$	877	$	466	$	4,165

^{________________________________} 

¹ Our Consolidated Balance Sheet as of September 30, 2016, includes $995 million of other long term liabilities. This consists primarily of long term deferred income taxes, liabilities under our deferred compensation plan, reserves for uncertain tax positions and retirement benefit obligations. These liabilities have been excluded from the table above as the timing and/or amount of any cash payment is uncertain.

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Commitments

In connection with obtaining regulatory approval of the Health Net Acquisition from the California Department of Insurance and the California Department of Managed Health Care, we committed to certain undertakings (the Undertakings). The Undertakings included, among other items, operational commitments around premiums, dividend restrictions, minimum Risk Based Capital (RBC) levels, local offices, growth, accreditation, HEDIS scores and other quality measures, network adequacy, certifications, investments and capital expenditures. Specifically, we agreed to, among other things:

• invest an additional $30 million through the California Organized Investment Network over the five years following completion of the acquisition;

• build a service center in an economically distressed community in California, investing $200 million over ten years and employing at least 300 people;

• contribute $65 million to improve enrollee health outcomes ($10 million over ten years), support locally-based consumer assistance programs ($5 million over five years) and strengthen the health care delivery system ($50 million over five years), (of which, the present value of $61 million was expensed in the nine months ended September 30, 2016 and classified as general and administrative expenses in the Consolidated Statements of Operations); and

• invest $75 million of its investment portfolio in vehicles supporting California’s health care infrastructure.

The undertakings require significant investments by us, may restrict or impose additional material costs on our future obligations and strategic initiatives in certain geographies, and subject us to various enforcement mechanisms.

REGULATORY CAPITAL AND DIVIDEND RESTRICTIONS

Our operations are conducted through our subsidiaries.  As managed care organizations, most of our subsidiaries are subject to state regulations that, among other things, require the maintenance of minimum levels of statutory capital, as defined by each state, and restrict the timing, payment and amount of dividends and other distributions that may be paid to us.  Generally, the amount of dividend distributions that may be paid by a regulated subsidiary without prior approval by state regulatory authorities is limited based on the entity’s level of statutory net income and statutory capital and surplus.

Our regulated subsidiaries are required to maintain minimum capital requirements prescribed by various regulatory authorities in each of the states in which we operate.  As of September 30, 2016, our subsidiaries had aggregate statutory capital and surplus of $4,077 million, compared with the required minimum aggregate statutory capital and surplus requirements of $2,215 million.  During the nine months ended September 30, 2016, we contributed net $314 million of statutory capital to our subsidiaries. For our subsidiaries that file with the National Association of Insurance Commissioners (NAIC), we estimate our RBC percentage (including KSHP) to be in excess of 350% of the Authorized Control Level (excluding the interim impact of the health insurer fee).

The NAIC has adopted rules which set minimum risk based capital requirements for insurance companies, managed care organizations and other entities bearing risk for healthcare coverage.  As of September 30, 2016, each of our health plans was in compliance with the risk-based capital requirements enacted in those states.

RECENT ACCOUNTING PRONOUNCEMENTS

For this information, refer to Note 2, Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements, included herein.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

INVESTMENTS AND DEBT

As of September 30, 2016, we had short term investments of $406 million and long term investments of $4,705 million, including restricted deposits of $137 million.  The short term investments generally consist of highly liquid securities with maturities between three and 12 months.  The long term investments consist of municipal, corporate and U.S. Treasury securities, government sponsored obligations, life insurance contracts, asset-backed securities and equity securities and have maturities greater than one year.  Restricted deposits consist of investments required by various state statutes to be deposited or pledged to state agencies.  Due to the nature of the states’ requirements, these investments are classified as long term regardless of the contractual maturity date.  Substantially all of our investments are subject to interest rate risk and will decrease in value if market rates increase.  Assuming a hypothetical and immediate 1% increase in market interest rates at September 30, 2016, the fair value of our fixed income investments would decrease by approximately $148 million.  Declines in interest rates over time will reduce our investment income.

We have interest rate swap agreements for a notional amount of $2,350 million with creditworthy financial institutions to manage the impact of market interest rates on interest expense.  Our swap agreements convert a portion of our interest expense from fixed to variable rates to better match the impact of changes in market rates on our variable rate cash equivalent investments.  As a result, the fair value of $2,350 million of our long term debt varies with market interest rates.  Assuming a hypothetical and immediate 1% increase in market interest rates at September 30, 2016, the fair value of our debt would decrease by approximately $114 million.  An increase in interest rates decreases the fair value of the debt and conversely, a decrease in interest rates increases the value.

For a discussion of the interest rate risk that our investments are subject to, see Part II, Item 1A. "Risk Factors–Risks Related to Our Business–Our investment portfolio may suffer losses from reductions in market interest rates and changes in market conditions which could materially and adversely affect our results of operations or liquidity.”

INFLATION

The inflation rate for medical care costs has been higher than the overall inflation rate for all items.  We use various strategies to mitigate the negative effects of healthcare cost inflation.  Specifically, our health plans try to control medical and hospital costs through our state savings initiatives and contracts with independent providers of healthcare services.  Through these contracted care providers, our health plans emphasize preventive healthcare and appropriate use of specialty and hospital services.  Additionally, our contracts with states require actuarially sound premiums that include healthcare cost trend.

While we currently believe our strategies to mitigate healthcare cost inflation will continue to be successful, competitive pressures, new healthcare and pharmaceutical product introductions, demands from healthcare providers and customers, applicable regulations, an increase in the expected rate of inflation for healthcare costs or other factors may affect our ability to control the impact of healthcare cost increases.

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures - We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

In connection with the filing of this Form 10-Q, management evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2016. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2016.

Changes in Internal Control Over Financial Reporting  -  No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended September 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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On March 24, 2016, we acquired Health Net, Inc. Management is currently finalizing our evaluation of the internal controls and procedures of Health Net and plans to integrate Health Net's internal controls over financial reporting with our existing internal controls over financial reporting. This integration may lead to changes in the internal controls over financial reporting for us or the acquired Health Net business in future periods. Management expects the integration process to be completed during 2016.

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PART II

OTHER INFORMATION

ITEM 1. Legal Proceedings.

A description of the legal proceedings to which the Company and its subsidiaries are a party is contained in Note 11 to the consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q, and is incorporated herein by reference.

ITEM 1A. Risk Factors.

FACTORS THAT MAY AFFECT FUTURE RESULTS AND THE

TRADING PRICE OF OUR COMMON STOCK

You should carefully consider the risks described below before making an investment decision.  The trading price of our common stock could decline due to any of these risks, in which case you could lose all or part of your investment.  You should also refer to the other information in this filing, including our consolidated financial statements and related notes.  The risks and uncertainties described below are those that we currently believe may materially affect our Company.  Additional risks and uncertainties that we are unaware of or that we currently deem immaterial also may become important factors that affect our Company.

Reductions in funding, changes to eligibility requirements for government sponsored healthcare programs in which we participate and any inability on our part to effectively adapt to changes to these programs could substantially affect our financial position, results of operations and cash flows.

The majority of our revenues come from government subsidized healthcare programs including Medicaid, Medicare, TRICARE, VA, CHIP, LTC, ABD, Foster Care and Health Insurance Marketplace premiums. Under most programs, the base premium rate paid for each program differs, depending on a combination of factors such as defined upper payment limits, a member’s health status, age, gender, county or region and benefit mix. Since Medicaid was created in 1965, the federal government and the states have shared the costs for this program, with the federal share currently averaging around 57%. We are therefore exposed to risks associated with U.S. and state government contracting or participating in programs involving a government payor, including but not limited to the general ability of the federal and/or state government to terminate contracts with it, in whole or in part, without prior notice, for convenience or for default based on performance; potential regulatory or legislative action that may materially modify amounts owed; and our dependence upon Congressional or legislative appropriation and allotment of funds and the impact that delays in government payments could have on our operating cash flow and liquidity. For example, future levels of funding and premium rates may be affected by continuing government efforts to contain healthcare costs and may further be affected by state and federal budgetary constraints. Governments periodically consider reducing or reallocating the amount of money they spend for Medicaid, Medicare, TRICARE, VA, CHIP, LTC, ABD and Foster Care. Furthermore, Medicare remains subject to the automatic spending reductions imposed by the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012 (“sequestration”), subject to a 2% cap. In addition, reductions in defense spending could have an adverse impact on certain government programs in which we currently participate by, among other things, terminating or materially changing such programs, or by decreasing or delaying payments made under such programs. Adverse economic conditions may continue to put pressures on state budgets as tax and other state revenues decrease while the population that is eligible to participate in these programs increases, creating more need for funding. We anticipate this will require government agencies to find funding alternatives, which may result in reductions in funding for programs, contraction of covered benefits, and limited or no premium rate increases or premium rate decreases. A reduction (or less than expected increase), a protracted delay, or a change in allocation methodology in government funding for these programs, as well as termination of the contract for the convenience of the government, may materially and adversely affect our results of operations, financial position and cash flows. In addition, if a federal government shutdown were to occur for a prolonged period of time, federal government payment obligations, including its obligations under Medicaid, Medicare, TRICARE, VA, CHIP, LTC, ABD, Foster Care and the Health Insurance Marketplaces, may be delayed. Similarly, if state government shutdowns were to occur, state payment obligations may be delayed. If the federal or state governments fail to make payments under these programs on a timely basis, our business could suffer, and our financial position, results of operations or cash flows may be materially affected.

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There can be no assurance that we will avoid payment delays from government payors in the future, which, if extended for any significant period of time, could have a material adverse effect on our results of operations, financial position, cash flows or liquidity. In addition, delays in obtaining, or failure to obtain or maintain, governmental approvals, or moratoria imposed by regulatory authorities, could adversely affect our revenue or membership, increase costs or adversely affect our ability to bring new products to market as forecasted. Other changes to our government programs could affect our willingness or ability to participate in any of these programs or otherwise have a material adverse effect on our business, financial condition or results of operations.

Finally, changes in these programs could reduce the number of persons enrolled in or eligible for these programs or increase our administrative or healthcare costs under these programs. For example, recent legislation generally requires that eligibility levels be maintained, but this could cause states to reduce reimbursement or reduce benefits in order for states to afford to maintain eligibility levels. If any state in which we operate were to decrease premiums paid to us or pay us less than the amount necessary to keep pace with our cost trends, it could have a material adverse effect on our results of operations, financial position and cash flows.

Our Medicare programs are subject to a variety of risks that could adversely impact our financial results.

If we fail to design and maintain programs that are attractive to Medicare participants; if our Medicare operations are subject to program audits, sanctions or penalties; if we do not submit adequate bids in our existing markets or any expansion markets; if our existing contracts are terminated; or if we fail to maintain or improve our star ratings, our current Medicare business and our ability to expand our Medicare operations could be materially and adversely affected, negatively impacting our financial performance. There are also specific additional risks under Title XVIII, Part D of the Social Security Act associated with our provision of Medicare Part D prescription drug benefits as part of our Medicare Advantage plan offerings. These risks include potential uncollectibility of receivables, inadequacy of pricing assumptions, inability to receive and process information and increased pharmaceutical costs, as well as the underlying seasonality of this business, and extended settlement periods for claims submissions. Our failure to comply with Part D program requirements can result in financial and/or operational sanctions on our Part D products, as well as on our Medicare Advantage products that offer no prescription drug coverage.

Failure to accurately estimate and price our medical expenses or effectively manage our medical costs or related administrative costs could negatively affect our financial position, results of operations or cash flows.

Our profitability, to a significant degree, depends on our ability to estimate and effectively manage expenses related to health benefits through, among other things, our ability to contract favorably with hospitals, physicians and other healthcare providers. For example, our Medicaid revenue is often based on bids submitted before the start of the initial contract year. If our actual medical expense exceeds our estimates, our health benefits ratio (HBR), or our expenses related to medical services as a percentage of premium revenue, would increase and our profits would decline. Because of the narrow margins of our health plan business, relatively small changes in our HBR can create significant changes in our financial results. Changes in healthcare regulations and practices, the level of utilization of healthcare services, hospital and pharmaceutical costs, disasters, major epidemics, pandemics or newly emergent viruses, including the Zika virus, new medical technologies, new pharmaceutical compounds, increases in provider fraud and other external factors, including general economic conditions such as inflation and unemployment levels, are generally beyond our control and could reduce our ability to accurately predict and effectively control the costs of providing health benefits.

Our medical expense includes claims reported but not paid, estimates for claims incurred but not reported, and estimates for the costs necessary to process unpaid claims at the end of each period. Our development of the medical claims liability estimate is a continuous process which we monitor and refine on a monthly basis as claims receipts and payment information as well as inpatient acuity information becomes available. As more complete information becomes available, we adjust the amount of the estimate, and include the changes in estimates in medical expense in the period in which the changes are identified. Given the uncertainties inherent in such estimates, there can be no assurance that our medical claims liability estimate will be adequate, and any adjustments to the estimate may unfavorably impact our results of operations and may be material.

Additionally, when we commence operations in a new state, region or product, we have limited information with which to estimate our medical claims liability. For a period of time after the inception of the new business, we base our estimates on government-provided historical actuarial data and limited actual incurred and received claims and inpatient acuity information. The addition of new categories of individuals who are eligible under new legislation may pose the same difficulty in estimating our medical claims liability. Similarly, we may face difficulty in estimating our medical claims liability for the relatively new and evolving Health Insurance Marketplaces.

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From time to time in the past, our actual results have varied from our estimates, particularly in times of significant changes in the number of our members. If it is determined that our estimates are significantly different than actual results, our results of operations and financial position could be adversely affected. In addition, if there is a significant delay in our receipt of premiums, our business operations, cash flows, or earnings could be negatively impacted.

The implementation of the Health Reform Legislation and other reforms could materially and adversely affect our results of operations, financial position and cash flows.

In March 2010, the Patient Protection and Affordable Care Act and the accompanying Health Care and Education Affordability Reconciliation Act, collectively referred to as the Affordable Care Act (ACA), were enacted. While the constitutionality of the ACA was generally upheld by the Supreme Court in 2012, the Court determined that states could elect to opt out of the Medicaid expansion portion of ACA without losing all federal money for their existing Medicaid programs.

Under the ACA, Medicaid coverage was expanded to all individuals under age 65 with incomes up to 138% of the federal poverty level beginning January 1, 2014, subject to each states' election. The federal government will pay the entire costs for Medicaid coverage for newly eligible beneficiaries for three years (2014 through 2016). Beginning in 2017, the federal share begins to decline, ending at 90% for 2020 and subsequent years. As of September 30, 2016, 31 states and the District of Columbia have expanded Medicaid eligibility, and additional states continue to discuss expansion. The ACA also maintained CHIP eligibility standards through September 2019.

The ACA required the establishment of Health Insurance Marketplaces for individuals and small employers to purchase health insurance coverage commencing in January 2014. The ACA required insurers participating on the Health Insurance Marketplaces to offer a minimum level of benefits and included guidelines on setting premium rates and coverage limitations.

Any failure to adequately price products offered in the Health Insurance Marketplaces may have a negative impact on our results of operations, financial position and cash flow. Among other things, we may be adversely selected by individuals who have a higher acuity level than the anticipated pool of participants. In addition, the risk corridor, reinsurance and risk adjustment ("three Rs") provisions of the ACA established to apportion risk amongst insurers may not be effective in appropriately mitigating the financial risks related to the Marketplace product. Further, the three Rs may not be adequately funded. Moreover, changes in the competitive marketplace over time may exacerbate the uncertainty in these relatively new markets. For example, competitors seeking to gain a foothold in the changing market may introduce pricing that we may not be able to match, which may adversely affect our ability to compete effectively. Competitors may also choose to exit the market altogether or otherwise suffer financial difficulty, which could adversely impact the pool of potential insured, require us to increase premium rates or result in funding issues under the three Rs. These potential exits and other continued volatility in this market may be further exacerbated by the conclusion of the risk corridor and reinsurance programs as of January 1, 2017. Our continued success in the exchanges is dependent on our ability to successfully respond to these changes in the market over time. Any significant variation from our expectations regarding acuity, enrollment levels, adverse selection, the three Rs, or other assumptions utilized in setting adequate premium rates could have a material adverse effect on our results of operations, financial position and cash flows.

The U.S. Department of Health and Human Services (HHS) has stated that it will consider a limited number of premium assistance demonstration proposals from States that want to privatize Medicaid expansion. States must provide a choice between at least two qualified health plans and offer very similar benefits as those available in the Health Insurance Marketplaces. Arkansas became the first state to obtain federal approval to use Medicaid funding to purchase private insurance for low-income residents and we began operations under the program beginning January 1, 2014.

The ACA imposed an annual insurance industry assessment of $8.0 billion in 2014, and $11.3 billion in each of 2015 and 2016, with increasing annual amounts thereafter. Such assessments are not deductible for federal and most state income tax purposes. The fee is allocated based on health insurers' premium revenues in the previous year. Each health insurer's fee is calculated by multiplying its market share by the annual fee. Market share is based on commercial, Medicare, and Medicaid premium revenue. Not-for-profit insurers may have a competitive advantage since they are exempt from paying the fee if they receive at least 80% of their premium revenue from Medicare, Medicaid, and CHIP, and other not-for-profit insurers are allowed to exclude 50% of their premium revenue from the fee calculation. The health insurer fee payable in 2017 was suspended by the Consolidated Appropriations Act for fiscal year 2016. If we are not reimbursed by the states for the cost of the federal premium assessment (including the associated tax impact), or if we are unable to otherwise adjust our business model to address this new assessment, our results of operations, financial position and cash flows may be materially adversely affected.

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There are numerous steps required to implement the legislation, including the promulgation of a substantial number of new and potentially more onerous federal regulations. For example, in April 2016, the Centers for Medicare and Medicaid Services (CMS) issued final regulations that revised existing Medicaid managed care rules by establishing a minimum medical-loss ratio (MLR) standard for Medicaid of 85% and strengthening provisions related to network adequacy and access to care, enrollment and disenrollment protections, beneficiary support information, continued service during beneficiary appeals, and delivery system and payment reform initiatives, among others.

Further, legal challenges, additional legislative initiatives and various health insurance reform proposals continue to emerge at both the state and federal levels. For example, in 2015, the U.S. House of Representatives filed suit asserting that the Executive Branch violated the U.S. Constitution by making cost-sharing reduction (CSR) payments to health insurance issuers that had not been appropriated. In May 2016, a federal district court ruled that Congress did not appropriate funds for the ACA's CSR subsidies and enjoined the government from making CSR reimbursements to health insurance issuers, but stayed the ruling pending an appeal. Because of the unsettled nature of these reforms and the numerous steps still required to implement them, we cannot predict what additional requirements will be implemented at the federal or state level, or the effect that any legal challenges or future legislation or regulation will have on our business or our growth opportunities. Although we believe the legislation may provide us with significant opportunities to grow our business, the enacted reforms, as well as future regulations and legislative changes and changes resulting from legal challenges, may in fact have a material adverse effect on our business, results of operations, financial position or liquidity. If we fail to effectively implement or appropriately adjust our operational and strategic initiatives with respect to the implementation of healthcare reform, or do not do so as effectively as our competitors, our results of operations may be materially adversely affected.

Our business activities are highly regulated and new laws or regulations or changes in existing laws or regulations or their enforcement or application could force us to change how we operate and could harm our business.

Our business is extensively regulated by the states in which we operate and by the federal government. In addition, the managed care industry has received negative publicity that has led to increased legislation, regulation, review of industry practices and private litigation in the commercial sector. Such negative publicity may adversely affect our stock price and damage our reputation in various markets.

In each of the jurisdictions in which we operate, we are regulated by the relevant insurance, health and/or human services or government departments that oversee the activities of managed care organizations providing or arranging to provide services to Medicaid, Medicare, Health Insurance Marketplace enrollees or other beneficiaries. For example, our health plan subsidiaries, as well as our applicable specialty companies, must comply with minimum statutory capital and other financial solvency requirements, such as deposit and surplus requirements.

The frequent enactment of, changes to, or interpretations of laws and regulations could, among other things: force us to restructure our relationships with providers within our network; require us to implement additional or different programs and systems; restrict revenue and enrollment growth; increase our healthcare and administrative costs; impose additional capital and surplus requirements; and increase or change our liability to members in the event of malpractice by our contracted providers. In addition, changes in political party or administrations at the state, federal or country level may change the attitude towards healthcare programs and result in changes to the existing legislative or regulatory environment.

Additionally, the taxes and fees paid to federal, state and local governments may increase due to several factors, including:  enactment of, changes to, or interpretations of tax laws and regulations, audits by governmental authorities, geographic expansions into higher taxing jurisdictions and the effect of expansions into international markets.

Our contracts with states may require us to maintain a minimum HBR or may require us to share profits in excess of certain levels. In certain circumstances, our plans may be required to return premium back to the state in the event profits exceed established levels or HBR does not meet the minimum requirement. Other states may require us to meet certain performance and quality metrics in order to maintain our contract or receive additional or full contractual revenue.

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The governmental healthcare programs in which we participate are subject to the satisfaction of certain regulations and performance standards. For example, under Health Reform Legislation, Congress authorized CMS and the states to implement managed care demonstration programs to serve dually eligible beneficiaries to improve the coordination of their care. Participation in these demonstration programs is subject to CMS approval and the satisfaction of conditions to participation, including meeting certain performance requirements. Our inability to improve or maintain adequate quality scores and star ratings to meet government performance requirements or to match the performance of our competitors could result in limitations to our participation in or exclusion from these or other government programs. Specifically, several of our Medicaid contracts require us to maintain a Medicare health plan. Although we strive to comply with all existing regulations and to meet performance standards applicable to our business, failure to meet these requirements could result in financial fines and penalties. Also, states or other governmental entities may not allow us to continue to participate in their government programs, or we may fail to win procurements to participate in such programs which could materially and adversely affect our results of operations, financial position and cash flows.

In addition, as a result of the expansion of our businesses and operations conducted in foreign countries, we face political, economic, legal, compliance, regulatory, operational and other risks and exposures that are unique and vary by jurisdiction. These foreign regulatory requirements with respect to, among other items, environmental, tax, licensing, intellectual property, privacy, data protection, investment, capital, management control, labor relations, and fraud and corruption regulations are different than those faced by our domestic businesses. In addition, we are subject to U.S. laws that regulate the conduct and activities of U.S.-based businesses operating abroad, such as the Foreign Corrupt Practices Act. Our failure to comply with laws and regulations governing our conduct outside the United States or to successfully navigate international regulatory regimes that apply to us could adversely affect our ability to market our products and services, which may have a material adverse effect on our business, financial condition and results of operations.

Our businesses providing pharmacy benefit management (PBM) and specialty pharmacy services face regulatory and other risks and uncertainties which could materially and adversely affect our results of operations, financial position and cash flows.

We provide PBM and specialty pharmacy services, including through our Envolve Pharmacy Solutions product. These businesses are subject to federal and state laws that govern the relationships of the business with pharmaceutical manufacturers, physicians, pharmacies, customers and consumers. We also conduct business as a mail order pharmacy and specialty pharmacy, which subjects these businesses to extensive federal, state and local laws and regulations. In addition, federal and state legislatures regularly consider new regulations for the industry that could materially and adversely affect current industry practices, including the receipt or disclosure of rebates from pharmaceutical companies, the development and use of formularies, and the use of average wholesale prices.

Our PBM and specialty pharmacy businesses would be materially and adversely affected by an inability to contract on favorable terms with pharmaceutical manufacturers and other suppliers, including with respect to the pricing of new specialty and generic drugs. In addition, our PBM and specialty pharmacy businesses could face potential claims in connection with purported errors by our mail order or specialty pharmacies, including in connection with the risks inherent in the authorization, compounding, packaging and distribution of pharmaceuticals and other healthcare products. Disruptions at any of our mail order or specialty pharmacies due to an event that is beyond our control could affect our ability to process and dispense prescriptions in a timely manner and could materially and adversely affect our results of operations, financial position and cash flows.

If any of our government contracts are terminated or are not renewed on favorable terms or at all, or if we receive an adverse finding or review resulting from an audit or investigation, our business may be adversely affected.

A substantial portion of our business relates to the provision of managed care programs and selected services to individuals receiving benefits under governmental assistance or entitlement programs. We provide these and other healthcare services under contracts with government entities in the areas in which we operate. Our government contracts are generally intended to run for a fixed number of years and may be extended for additional specified number of years if the contracting entity or its agent elects to do so. When our contracts with the government expire, they may be opened for bidding by competing healthcare providers, and there is no guarantee that our contracts will be renewed or extended. Competitors may buy their way into the market by submitting bids with lower pricing. Even if our responsive bids are successful, the bids may be based upon assumptions or other factors which could result in the contracts being less profitable than we had anticipated. Further, our government contracts contain certain provisions regarding eligibility, enrollment and dis-enrollment processes for covered services, eligible providers, periodic financial and informational reporting, quality assurance, timeliness of claims payment and agreement to maintain a Medicare plan in the state and financial standards, among other things, and are subject to cancellation if we fail to perform in accordance with the standards set by regulatory agencies.

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We are also subject to various reviews, audits and investigations to verify our compliance with the terms of our contracts with various governmental agencies, as well as compliance with applicable laws and regulations. Any adverse review, audit or investigation could result in, among other things: cancellation of our contracts; refunding of amounts we have been paid pursuant to our contracts; imposition of fines, penalties and other sanctions on us; loss of our right to participate in various programs; increased difficulty in selling our products and services; loss of one or more of our licenses; or require changes to the way we do business. In addition, under government procurement regulations and practices, a negative determination resulting from a government audit of our business practices could result in a contractor being fined, debarred and/or suspended from being able to bid on, or be awarded, new government contracts for a period of time.

If any of our government contracts are terminated, not renewed, renewed on less favorable terms, or not renewed on a timely basis, or if we receive an adverse finding or review resulting from an audit or investigation, our business and reputation may be adversely impacted, our goodwill could be impaired and our financial position, results of operations or cash flows may be materially affected.

We contract with independent third party vendors and service providers who provide services to us and our subsidiaries or to whom we delegate selected functions. Violations of, or noncompliance with, laws and regulations governing our business by such third parties, or governing our dealings with such parties, could, among other things, subject us to additional audits, reviews and investigations and other adverse effects.

Ineffectiveness of state-operated systems and subcontractors could adversely affect our business.

A number of our health plans rely on other state-operated systems or subcontractors to qualify, solicit, educate and assign eligible members into managed care plans. The effectiveness of these state operations and subcontractors can have a material effect on a health plan’s enrollment in a particular month or over an extended period. When a state implements new programs to determine eligibility, new processes to assign or enroll eligible members into health plans, or chooses new subcontractors, there is an increased potential for an unanticipated impact on the overall number of members assigned to managed care plans.

Our investment portfolio may suffer losses which could materially and adversely affect our results of operations or liquidity.

We maintain a significant investment portfolio of cash equivalents and short term and long term investments in a variety of securities, which are subject to general credit, liquidity, market and interest rate risks and will decline in value if interest rates increase or one of the issuers’ credit ratings is reduced. As a result, we may experience a reduction in value or loss of our investments, which may have a negative adverse effect on our results of operations, liquidity and financial condition.

Execution of our growth strategy may increase costs or liabilities, or create disruptions in our business.

Our growth strategy includes, without limitation, the acquisition of health plans participating in government sponsored healthcare programs and specialty services businesses, contract rights and related assets of other health plans both in our existing service areas and in new markets and start-up operations in new markets or new products in existing markets. Although we review the records of companies or businesses we plan to acquire, it is possible that we could assume unanticipated liabilities or adverse operating conditions, or an acquisition may not perform as well as expected or may not achieve timely profitability. We also face the risk that we will not be able to effectively integrate acquisitions into our existing operations effectively without substantial expense, delay or other operational or financial problems and we may need to divert more management resources to integration than we planned.

In connection with start-up operations, we may incur significant expenses prior to commencement of operations and the receipt of revenue. For example, in order to obtain a certificate of authority in most jurisdictions, we must first establish a provider network, have systems in place and demonstrate our ability to administer a state contract and process claims. We may experience delays in operational start dates. As a result of these factors, start-up operations may decrease our profitability. In addition, we are planning to expand our business internationally and we will be subject to additional risks, including, but not limited to, political risk, an unfamiliar regulatory regime, currency exchange risk and exchange controls, cultural and language differences, foreign tax issues, and different labor laws and practices.

If we are unable to effectively execute our growth strategy, our future growth will suffer and our results of operations could be harmed.

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If competing managed care programs are unwilling to purchase specialty services from us, we may not be able to successfully implement our strategy of diversifying our business lines.

We are seeking to diversify our business lines into areas that complement our government sponsored health plan business in order to grow our revenue stream and balance our dependence on risk reimbursement. In order to diversify our business, we must succeed in selling the services of our specialty subsidiaries not only to our managed care plans, but to programs operated by third-parties. Some of these third-party programs may compete with us in some markets, and they therefore may be unwilling to purchase specialty services from us. In any event, the offering of these services will require marketing activities that differ significantly from the manner in which we seek to increase revenues from our government sponsored programs. Our ineffectiveness in marketing specialty services to third-parties may impair our ability to execute our business strategy.

Adverse credit market conditions may have a material adverse effect on our liquidity or our ability to obtain credit on acceptable terms.

In the past, the securities and credit markets have experienced extreme volatility and disruption. The availability of credit, from virtually all types of lenders, has at times been restricted. In the event we need access to additional capital to pay our operating expenses, fund subsidiary surplus requirements, make payments on or refinance our indebtedness, pay capital expenditures, or fund acquisitions, our ability to obtain such capital may be limited and the cost of any such capital may be significant, particularly if we are unable to access our existing credit facility.

Our access to additional financing will depend on a variety of factors such as prevailing economic and credit market conditions, the general availability of credit, the overall availability of credit to our industry, our credit ratings and credit capacity, and perceptions of our financial prospects. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us. If a combination of these factors were to occur, our internal sources of liquidity may prove to be insufficient, and in such case, we may not be able to successfully obtain sufficient additional financing on favorable terms, within an acceptable time, or at all.

If state regulators do not approve payments of dividends and distributions by our subsidiaries to us, we may not have sufficient funds to implement our business strategy.

We principally operate through our health plan subsidiaries. As part of normal operations, we may make requests for dividends and distributions from our subsidiaries to fund our operations. These subsidiaries are subject to regulations that limit the amount of dividends and distributions that can be paid to us without prior approval of, or notification to, state regulators. If these regulators were to deny our subsidiaries’ request to pay dividends, the funds available to us would be limited, which could harm our ability to implement our business strategy.

We derive a majority of our premium revenues from operations in a limited number of states, and our financial position, results of operations or cash flows would be materially affected by a decrease in premium revenues or profitability in any one of those states.

Operations in a limited number of states have accounted for most of our premium revenues to date. If we were unable to continue to operate in any of those states or if our current operations in any portion of one of those states were significantly curtailed, our revenues could decrease materially. Our reliance on operations in a limited number of states could cause our revenue and profitability to change suddenly and unexpectedly depending on legislative or other governmental or regulatory actions and decisions, economic conditions and similar factors in those states. For example, states we currently serve may open the bidding for their Medicaid program to other health insurers through a request for proposal process. Our inability to continue to operate in any of the states in which we operate could harm our business.

Competition may limit our ability to increase penetration of the markets that we serve.

We compete for members principally on the basis of size and quality of provider networks, benefits provided and quality of service. We compete with numerous types of competitors, including other health plans and traditional state Medicaid programs that reimburse providers as care is provided, among others. In addition, the impact of healthcare reform legislation and potential growth in our segment may attract new competitors.

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Some of the health plans with which we compete have greater financial and other resources and offer a broader scope of products than we do. In addition, significant merger and acquisition activity has occurred in the managed care industry, as well as complementary industries, such as the hospital, physician, pharmaceutical, medical device and health information systems businesses. To the extent that competition intensifies in any market that we serve, as a result of industry consolidation or otherwise, our ability to retain or increase members and providers, or maintain or increase our revenue growth, pricing flexibility and control over medical cost trends may be adversely affected.

If we are unable to maintain relationships with our provider networks, our profitability may be harmed.

Our profitability depends, in large part, upon our ability to contract at competitive prices with hospitals, physicians and other healthcare providers. Our provider arrangements with our primary care physicians, specialists and hospitals generally may be canceled by either party without cause upon 90 to 120 days prior written notice. We cannot provide any assurance that we will be able to continue to renew our existing contracts or enter into new contracts on a timely basis or under favorable terms enabling us to service our members profitably. Healthcare providers with whom we contract may not properly manage the costs of services, maintain financial solvency or avoid disputes with other providers. Any of these events could have a material adverse effect on the provision of services to our members and our operations.

In any particular market, physicians and other healthcare providers could refuse to contract, demand higher payments, or take other actions that could result in higher medical costs or difficulty in meeting regulatory or accreditation requirements, among other things. In some markets, certain healthcare providers, particularly hospitals, physician/hospital organizations or multi-specialty physician groups, may have significant market positions or near monopolies that could result in diminished bargaining power on our part. In addition, accountable care organizations, practice management companies, which aggregate physician practices for administrative efficiency and marketing leverage, and other organizational structures that physicians, hospitals and other healthcare providers choose may change the way in which these providers interact with us and may change the competitive landscape. Such organizations or groups of healthcare providers may compete directly with us, which could adversely affect our operations, and our results of operations, financial position and cash flows by impacting our relationships with these providers or affecting the way that we price our products and estimate our costs, which might require us to incur costs to change our operations. Provider networks may consolidate, resulting in a reduction in the competitive environment. In addition, if these providers refuse to contract with us, use their market position to negotiate contracts unfavorable to us or place us at a competitive disadvantage, our ability to market products or to be profitable in those areas could be materially and adversely affected.

From time to time healthcare providers assert or threaten to assert claims seeking to terminate non-cancelable agreements due to alleged actions or inactions by us. If we are unable to retain our current provider contract terms or enter into new provider contracts timely or on favorable terms, our profitability may be harmed. In addition, from time to time, we may be subject to class action or other lawsuits by healthcare providers with respect to claim payment procedures or similar matters. For example, the Company’s wholly owned subsidiary, Health Net Life Insurance Company (“HNL”), is and may continue to be subject to such disputes with respect to HNL’s payment levels in connection with the processing of out-of-network provider reimbursement claims for the provision of certain substance abuse related services. HNL expects to vigorously defend its claims payment practices. Nevertheless, in the event HNL receives an adverse finding in any related legal proceeding or from a regulator, or is otherwise required to reimburse providers for these claims at rates that are higher than expected or for claims HNL otherwise believes are unallowable, the Company’s financial condition and results of operations may be materially adversely affected. In addition, regardless of whether any such lawsuits brought against us are successful or have merit, they will still be time-consuming and costly and could distract our management’s attention. As a result, under such circumstances we may incur significant expenses and may be unable to operate our business effectively.

We may be unable to attract, retain or effectively manage the succession of key personnel.

We are highly dependent on our ability to attract and retain qualified personnel to operate and expand our business. We would be adversely impacted if we are unable to adequately plan for the succession of our executives and senior management. While we have succession plans in place for members of our executive and senior management team, these plans do not guarantee that the services of our executive and senior management team will continue to be available to us. Our ability to replace any departed members of our executive and senior management or other key employees may be difficult and may take an extended period of time because of the limited number of individuals in the managed care and specialty services industry with the breadth of skills and experience required to operate and successfully expand a business such as ours. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these personnel. If we are unable to attract, retain and effectively manage the succession plans for key personnel, executives and senior management, our business and financial position, results of operations or cash flows could be harmed.

47

If we are unable to integrate and manage our information systems effectively, our operations could be disrupted.

Our operations depend significantly on effective information systems. The information gathered and processed by our information systems assists us in, among other things, monitoring utilization and other cost factors, processing provider claims, and providing data to our regulators. Our healthcare providers also depend upon our information systems for membership verifications, claims status and other information. Our information systems and applications require continual maintenance, upgrading and enhancement to meet our operational needs and regulatory requirements. We regularly upgrade and expand our information systems’ capabilities. If we experience difficulties with the transition to or from information systems or do not appropriately integrate, maintain, enhance or expand our information systems, we could suffer, among other things, operational disruptions, loss of existing members and difficulty in attracting new members, regulatory problems and increases in administrative expenses. In addition, our ability to integrate and manage our information systems may be impaired as the result of events outside our control, including acts of nature, such as earthquakes or fires, or acts of terrorists.

From time to time, we may become involved in costly and time-consuming litigation and other regulatory proceedings, which require significant attention from our management.

We are a defendant from time to time in lawsuits and regulatory actions relating to our business, including, without limitation, medical malpractice claims, claims by members alleging failure to pay for or provide health care, claims related to non-payment or insufficient payments for out-of-network services, bad faith actions and claims related to the imposition of new taxes, including but not limited to claims that may have retroactive application. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have a material adverse impact on our business and financial position, results of operations and/or cash flows and may affect our reputation. In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are costly and time consuming and require significant attention from our management, and could therefore harm our business and financial position, results of operations or cash flows.

An impairment charge with respect to our recorded goodwill and intangible assets could have a material impact on our results of operations.

We periodically evaluate our goodwill and other intangible assets to determine whether all or a portion of their carrying values may be impaired, in which case a charge to earnings may be necessary. Changes in business strategy, government regulations or economic or market conditions have resulted and may result in impairments of our goodwill and other intangible assets at any time in the future. Our judgments regarding the existence of impairment indicators are based on, among other things, legal factors, market conditions, and operational performance. For example, the non-renewal of our health plan contracts with the state in which they operate may be an indicator of impairment. If an event or events occur that would cause us to revise our estimates and assumptions used in analyzing the value of our goodwill and other intangible assets, such revision could result in a non-cash impairment charge that could have a material impact on our results of operations in the period in which the impairment occurs.

If we fail to comply with applicable privacy, security, and data laws, regulations and standards, including with respect to third-party service providers that utilize sensitive personal information on our behalf, our business, reputation, results of operations, financial position and cash flows could be materially and adversely affected.

As part of our normal operations, we collect, process and retain confidential member information. We are subject to various federal and state laws and rules regarding the use and disclosure of confidential member information, including the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 and the Gramm-Leach-Bliley Act, which require us to protect the privacy of medical records and safeguard personal health information we maintain and use. Certain of our businesses are also subject to the Payment Card Industry Data Security Standard, which is a multifaceted security standard that is designed to protect credit card account data as mandated by payment card industry entities. Despite our best attempts to maintain adherence to information privacy and security best practices as well as compliance with applicable laws, rules and contractual requirements, our facilities and systems, and those of our third party service providers, may be vulnerable to privacy or security breaches, acts of vandalism or theft, malware or other forms of cyber attack, misplaced or lost data including paper or electronic media, programming and/or human errors or other similar events. In the past, we have had data breaches resulting in disclosure of confidential or protected health information that have not resulted in any material financial loss or penalty to date. However, future data breaches could require us to expend significant resources to remediate any damage, interrupt our operations and damage our reputation, subject us to state or federal agency review and could also result in enforcement actions, material fines and penalties, litigation or other actions which could have a material adverse effect on our business, reputation and results of operations, financial position and cash flows.

48

In addition, HIPAA broadened the scope of fraud and abuse laws applicable to healthcare companies.  HIPAA established new enforcement mechanisms to combat fraud and abuse, including civil and, in some instances, criminal penalties for failure to comply with specific standards relating to the privacy, security and electronic transmission of protected health information.  The HITECH Act expanded the scope of these provisions by mandating individual notification in instances of breaches of protected health information, providing enhanced penalties for HIPAA violations, and granting enforcement authority to states’ Attorneys General in addition to the HHS Office for Civil Rights.  It is possible that Congress may enact additional legislation in the future to increase penalties and to create a private right of action under HIPAA, which could entitle patients to seek monetary damages for violations of the privacy rules. In addition, HHS has announced that it will continue its auditing program in 2016 to assess compliance efforts by covered entities and business associates. Through a second phase of audits, HHS will focus on a review of policies and procedures adopted and employed by covered entities and their business associates to meet selected standards and implementation specifications of the HIPAA Privacy, Security, and Breach Notification Rules. An audit resulting in findings or allegations of noncompliance could have a material adverse effect on our results of operations, financial position and cash flows.

Under HIPAA, health plans are required to have the capacity to accept and send all covered transactions in a standardized electronic format. Penalties can be imposed for failure to comply with these requirements. The transaction standards were modified to version 5010 prior to the implementation of the ICD-10 coding system, on October 1, 2015. While we prepared for and have completed the transition to ICD-10, if unforeseen circumstances arise, it is possible that we could be exposed to investigations and allegations of noncompliance. In addition, if some providers continue to use ICD-9 codes on claims for dates of service on or after October 1, 2015, we may have to reject such claims, which may lead to claim resubmissions, increased call volume and provider and customer dissatisfaction. Further, providers may use ICD-10 codes differently than they used ICD-9 codes in the past, which could result in higher costs and reimbursement levels, or lost revenues under risk adjustment. As a result, circumstances following the implementation of ICD-10 may have a material adverse effect on our results of operations, financial position and cash flows.

If we fail to comply with the extensive federal and state fraud and abuse laws, our business, reputation, results of operations, financial position and cash flows could be materially and adversely affected.

Companies involved in public health care programs are often the subject of fraud and abuse investigations. The regulations and contractual requirements applicable to participants in these public sector programs are complex and subject to change. Violations of fraud and abuse laws applicable to us could result in civil monetary penalties, criminal fines and imprisonment, and/or exclusion from participation in Medicaid, Medicare, TRICARE, VA and other federal health care programs and federally funded state health programs. Fraud and abuse prohibitions encompass a wide range of activities, including kickbacks for referral of members, billing for unnecessary medical services, improper marketing and violations of patient privacy rights. These fraud and abuse laws include the federal False Claims Act, which prohibits the known filing of a false claim or the known use of false statements to obtain payment from the federal government. Many states have false claim act statutes that closely resemble the federal False Claims Act. In addition, the Deficit Reduction Act of 2005 encouraged states to enact state-versions of the federal False Claims Act that establish liability to the state for false and fraudulent Medicaid claims and that provide for, among other things, claims to be filed by qui tam relators. Federal and state governments have made investigating and prosecuting health care fraud and abuse a priority. In the event we fail to comply with the extensive federal and state fraud and abuse laws, our business, reputation, results of operations, financial position and cash flows could be materially and adversely affected.

A failure in or breach of our operational or security systems or infrastructure, or those of third parties with which we do business, including as a result of cyber attacks, could have an adverse effect on our business.

Information security risks have significantly increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct our operations, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including foreign state agents. Our operations rely on the secure processing, transmission and storage of confidential, proprietary and other information in our computer systems and networks.

49

Security breaches may arise from external or internal threats. External breaches include hacking personal information for financial gain, attempting to cause harm or interruption to our operations, or intending to obtain competitive information. We experience attempted external hacking or malicious attacks on a regular basis. We maintain a rigorous system of preventive and detective controls through our security programs; however, our prevention and detection controls may not prevent or identify all such attacks on a timely basis, or at all. Internal breaches may result from inappropriate security access to confidential information by rogue employees, consultants or third party service providers. Any security breach involving the misappropriation, loss or other unauthorized disclosure or use of confidential member information, financial data, competitively sensitive information, or other proprietary data, whether by us or a third party, could have a material adverse effect on our business reputation, financial condition, cash flows, or results of operations.

We may be unable to successfully integrate our business with Health Net and realize the anticipated benefits of the acquisition.

We completed the acquisition of Health Net on March 24, 2016. The success of the acquisition of Health Net will depend, in part, on our ability to successfully combine the businesses of the Company and Health Net and realize the anticipated benefits, including synergies, cost savings, growth in earnings, innovation and operational efficiencies, from the combination. If we are unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected and the value of our common stock may be harmed.

The integration of Health Net’s business with our existing business is a complex, costly and time-consuming process. We have not previously completed a transaction comparable in size or scope to the acquisition of Health Net. The integration of the two companies may result in material challenges, including, without limitation:

• the diversion of management’s attention from ongoing business concerns and performance shortfalls as a result of the devotion of management’s attention to the integration;

• managing a larger combined company;

• maintaining employee morale and retaining key management and other employees;

• the possibility of faulty assumptions underlying expectations regarding the integration process;

• retaining existing business and operational relationships and attracting new business and operational relationships;

• consolidating corporate and administrative infrastructures and eliminating duplicative operations;

• coordinating geographically separate organizations;

• unanticipated issues in integrating information technology, communications and other systems;

• unanticipated changes in federal or state laws or regulations, including the ACA and any regulations enacted thereunder; and

• unforeseen expenses or delays associated with the acquisition and/or integration.

Many of these factors will be outside of our control and any one of them could result in delays, increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could materially affect our financial position, results of operations and cash flows.

We have incurred substantial expenses related to the completion of the acquisition of Health Net and are incurring substantial expenses related to the integration of Health Net.

We are in the process of integrating a large number of processes, policies, procedures, operations, technologies and systems, including purchasing, accounting and finance, sales, payroll, pricing, revenue management, marketing and benefits, among other things. In addition, the businesses of Centene and Health Net will continue to maintain a presence in St. Louis, Missouri and Woodland Hills, California, respectively. The substantial majority of these costs will be non-recurring expenses related to the acquisition (including financing of the acquisition), facilities and systems consolidation costs. We may incur additional costs to maintain employee morale and to retain key employees. We are also incurring transaction fees and costs related to formulating integration plans for the combined business, and the execution of these plans may lead to additional unanticipated costs. These incremental transaction and acquisition-related costs may exceed the savings we expect to achieve from the elimination of duplicative costs and the realization of other efficiencies related to the integration of the businesses, particularly in the near term and in the event there are material unanticipated costs.

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The market price of our common stock may decline as a result of the acquisition of Health Net.

The market price of our common stock is generally subject to volatility, and there can be no assurances regarding the level or stability of our share price at any time. The market price of our common stock may decline as a result of the acquisition if, among other things, we are unable to achieve the expected growth in earnings, or if the operational cost savings estimates in connection with the integration of Health Net’s business with ours are not realized, or if the transaction costs related to the acquisition and integration are greater than expected. The market price also may decline if we do not achieve the perceived benefits of the acquisition as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the acquisition on our financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts.

Our future results may be adversely impacted if we do not effectively manage our expanded operations following the completion of our acquisition of Health Net.

The size of our business following the acquisition of Health Net is significantly larger than the size of either Centene’s or Health Net’s respective businesses prior to the acquisition. Our ability to successfully manage the expanded business will depend, in part, upon management’s ability to design and implement strategic initiatives that address not only the integration of two discrete companies, but also the increased scale and scope of the combined business with its associated increased costs and complexity. We will also have to manage the integration and our expanded operations in compliance with certain undertakings with regulators that were agreed to in connection with the approval of the acquisition. These undertakings require significant investments by us, may restrict or impose additional material costs on our future operations and strategic initiatives in certain geographies, and subject us to various enforcement mechanisms. There can be no assurances that we will be successful in managing our expanded operations or that we will realize the expected growth in earnings, operating efficiencies, cost savings and other benefits.

We are significantly more leveraged today than we were prior to our acquisition of Health Net.

We incurred additional indebtedness in connection with the acquisition of Health Net. As of September 30, 2016, we had consolidated indebtedness of approximately $4,589 million, which is significantly greater than the indebtedness of Centene prior to the acquisition. This increased indebtedness and higher debt-to-equity ratio will have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions and increasing borrowing costs.

Among other things, our revolving credit facility requires us to comply with various covenants that impose restrictions on our operations, including our ability to incur additional indebtedness, create liens, pay dividends, make investments or other restricted payments, sell or otherwise dispose of substantially all of our assets and engage in other activities. Our revolving credit facility also requires us to comply with a maximum leverage ratio and a minimum fixed charge coverage ratio. These restrictive covenants could limit our ability to pursue our business strategies. In addition, any failure by us to comply with these restrictive covenants could result in an event of default under the revolving credit facility and, in some circumstances, under the indentures governing our notes, which, in any case, could have a material adverse effect on our financial condition.

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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities Third Quarter 2016
Period	Total Number of Shares Purchased 1	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs2
July 1 - July 31, 2016	17,452	$	70.76	—	3,335,448
August 1 - August 31, 2016	6,840	69.66		—	3,335,448
September 1 - September 30, 2016	4,354	68.13		—	3,335,448
Total	28,646	$	70.10	—	3,335,448
(1) Shares acquired represent shares relinquished to the Company by certain employees for payment of taxes or option cost upon vesting of restricted stock units or option exercise. (2) Our Board of Directors adopted a stock repurchase program which allows for repurchases of up to a remaining amount of 3,335,448 shares.  No duration has been placed on the repurchase program.

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ITEM 6. Exhibits.

EXHIBIT NUMBER	DESCRIPTION
12.1	Computation of ratio of earnings to fixed charges.
31.1	Certification of Chairman, President and Chief Executive Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as amended.
31.2	Certification of Executive Vice President and Chief Financial Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as amended.
32.1	Certification of Chairman, President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1	XBRL Taxonomy Instance Document.
101.2	XBRL Taxonomy Extension Schema Document.
101.3	XBRL Taxonomy Extension Calculation Linkbase Document.
101.4	XBRL Taxonomy Extension Definition Linkbase Document.
101.5	XBRL Taxonomy Extension Label Linkbase Document.
101.6	XBRL Taxonomy Extension Presentation Linkbase Document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized as of October 25, 2016.

CENTENE CORPORATION
By:	/s/ MICHAEL F. NEIDORFF
	Chairman, President and Chief Executive Officer (principal executive officer)

By:	/s/ JEFFREY A. SCHWANEKE
	Executive Vice President and Chief Financial Officer (principal financial officer)

By:	/s/ CHRISTOPHER R. ISAAK
	Senior Vice President, Corporate Controller and Chief Accounting Officer (principal accounting officer)

54

EX-12.1

Exhibit 12.1

Centene Corporation

Computation of ratio of earnings to fixed charges

($ in millions)

	Nine Months Ended			Year Ended December 31,
	09/30/16			2015			2014		2013			2012		2011
Earnings:
Pre-tax earnings from continuing operations	$	677		$	697		$	457	$	269		$	123	$	188
Addback:
Fixed charges	175			65			50		37			29		28
Subtract:
Noncontrolling interest	(1		)	(2		)	7		(1		)	13		3
Interest capitalized	—			—			—		—			—		—
Total earnings	$	851		$	760		$	514	$	305		$	165	$	219
Fixed Charges:
Interest expensed and capitalized	$	142		$	43		$	35	$	27		$	20	$	20
Interest component of rental payments (1)	33			22			15		10			9		8
Total fixed charges	$	175		$	65		$	50	$	37		$	29	$	28
Ratio of earnings to fixed charges	4.9			11.7			10.3		8.2			5.7		7.8
(1) Estimated at 33% of rental expense as a reasonable approximation of the interest factor.

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Michael F. Neidorff, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Centene Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	October 25, 2016	/s/ MICHAEL F. NEIDORFF
		Chairman, President and Chief Executive Officer (principal executive officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Jeffrey A. Schwaneke, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Centene Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	October 25, 2016	/s/ JEFFREY A. SCHWANEKE
		Executive Vice President and Chief Financial Officer (principal financial officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C.  SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Centene Corporation (the Company) for the period ended September 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, Michael F. Neidorff, Chairman, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	October 25, 2016	/s/ MICHAEL F. NEIDORFF
		Chairman, President and Chief Executive Officer (principal executive officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C.  SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Centene Corporation (the Company) for the period ended September 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, Jeffrey A. Schwaneke, Executive Vice President and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	October 25, 2016	/s/ JEFFREY A. SCHWANEKE
		Executive Vice President and Chief Financial Officer (principal financial officer)

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Oct. 14, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	CENTENE CORP
Entity Central Index Key	0001071739
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		170,892,049

XML

Consolidated Balance Sheets - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 2,982	$ 1,760
Premium and related receivables	3,445	1,279
Short term investments	406	176
Other current assets	922	390
Total current assets	7,755	3,605
Long term investments	4,568	1,927
Restricted deposits	137	115
Property, software and equipment, net	725	518
Goodwill	4,730	842
Intangible assets, net	1,566	155
Other long term assets	153	177
Total assets	19,634	7,339
Current liabilities:
Medical claims liability	3,767	2,298
Accounts payable and accrued expenses	3,187	976
Return of premium payable	651	207
Unearned revenue	573	143
Current portion of long term debt	845	5
Total current liabilities	9,023	3,629
Long term debt	3,744	1,216
Other long term liabilities	995	170
Total liabilities	13,762	5,015
Commitments and contingencies
Redeemable noncontrolling interests	148	156
Stockholders’ equity:
Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued or outstanding at September 30, 2016 and December 31, 2015	0	0
Common stock, $0.001 par value; authorized 400,000,000 shares; 176,467,825 issued and 170,860,752 outstanding at September 30, 2016, and 126,855,477 issued and 120,342,981 outstanding at December 31, 2015	0	0
Additional paid-in capital	4,154	956
Accumulated other comprehensive earnings (loss)	46	(10)
Retained earnings	1,655	1,358
Treasury stock, at cost (5,607,073 and 6,512,496 shares, respectively)	(145)	(147)
Total Centene stockholders’ equity	5,710	2,157
Noncontrolling interest	14	11
Total stockholders’ equity	5,724	2,168
Total liabilities and stockholders’ equity	$ 19,634	$ 7,339

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Stockholders' equity
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	400,000,000	400,000,000
Common stock, shares issued	176,467,825	126,855,477
Common stock, shares outstanding	170,860,752	120,342,981
Treasury stock (in shares)	5,607,073	6,512,496

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Consolidated Statements of Operations - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Revenues:
Premium	$ 9,625	$ 4,983	$ 25,299	$ 13,974
Service	590	480	1,603	1,434
Premium and service revenues	10,215	5,463	26,902	15,408
Premium tax and health insurer fee	631	358	1,794	1,050
Total revenues	10,846	5,821	28,696	16,458
Expenses:
Medical costs	8,376	4,433	22,072	12,475
Cost of services	504	413	1,386	1,234
General and administrative expenses	940	458	2,611	1,291
Amortization of acquired intangible assets	43	6	95	18
Premium tax expense	512	274	1,460	794
Health insurer fee expense	129	54	333	161
Total operating expenses	10,504	5,638	27,957	15,973
Earnings from operations	342	183	739	485
Other income (expense):
Investment and other income	33	8	80	27
Interest expense	(57)	(11)	(142)	(32)
Earnings from continuing operations, before income tax expense	318	180	677	480
Income tax expense	171	87	376	234
Earnings from continuing operations, net of income tax expense	147	93	301	246
Discontinued operations, net of income tax benefit	(1)	1	(3)	0
Net earnings	146	94	298	246
(Earnings) attributable to noncontrolling interests	(1)	(1)	(1)	(2)
Net earnings	145	93	297	244
Amounts attributable to Centene Corporation common shareholders:
Earnings from continuing operations, net of income tax expense	146	92	300	244
Discontinued operations, net of income tax benefit	(1)	1	(3)	0
Net earnings	$ 145	$ 93	$ 297	$ 244
Basic:
Continuing operations (in dollars per share)	$ 0.85	$ 0.77	$ 1.93	$ 2.05
Discontinued operations (in dollars per share)	0.00	0.01	(0.02)	0.00
Basic earnings per common share (in dollars per share)	0.85	0.78	1.91	2.05
Diluted:
Continuing operations (in dollars per share)	0.84	0.75	1.89	1.99
Discontinued operations (in dollars per share)	(0.01)	0.01	(0.02)	0.00
Diluted earnings per common share (in dollars per share)	$ 0.83	$ 0.76	$ 1.87	$ 1.99
Weighted average number of common shares outstanding:
Basic (in shares)	170,774,587	119,121,524	155,680,769	118,970,853
Diluted (in shares)	174,312,416	123,131,810	158,960,068	122,904,476

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Consolidated Statements of Comprehensive Earnings - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Statement of Comprehensive Income [Abstract]
Net earnings	$ 146	$ 94	$ 298	$ 246
Reclassification adjustment, net of tax	(1)	0	0	0
Change in unrealized gain on investments, net of tax	5	2	57	3
Foreign currency translation adjustments	(1)	0	(1)	(4)
Other comprehensive earnings (loss)	3	2	56	(1)
Comprehensive earnings	149	96	354	245
Comprehensive (earnings) attributable to noncontrolling interests	(1)	(1)	(1)	(2)
Comprehensive earnings attributable to Centene Corporation	$ 148	$ 95	$ 353	$ 243

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Consolidated Statement of Stockholders' Equity - 9 months ended Sep. 30, 2016 - USD ($) $ in Millions	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Earnings (Loss)	Retained Earnings	Treasury Stock	Non controlling Interest
Balance at Dec. 31, 2015	$ 2,168	$ 0	$ 956	$ (10)	$ 1,358	$ (147)	$ 11
Balance (in shares) at Dec. 31, 2015	120,342,981	126,855,477				6,512,496
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings	$ 297				297
Other comprehensive earnings, net of $20 tax	56			56
Common stock issued for acquisitions	3,105	$ 0	3,074			$ 31
Common stock issued for acquisitions (in shares)		48,218,310				(1,375,596)
Common stock issued for employee benefit plans	7	$ 0	7
Common stock issued for employee benefit plans (in shares)		1,394,038
Common stock repurchases	(29)					$ (29)
Common stock repurchases (in shares)						470,173
Stock compensation expense	112		112
Excess tax benefits from stock compensation	5		5
Contribution from noncontrolling interest	3						3
Balance at Sep. 30, 2016	$ 5,724	$ 0	$ 4,154	$ 46	$ 1,655	$ (145)	$ 14
Balance (in shares) at Sep. 30, 2016	170,860,752	176,467,825				5,607,073

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Consolidated Statement of Stockholders' Equity (Parenthetical) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Other comprehensive earnings, tax	$ 20
Common Stock
Common stock, par value (in dollars per share)	$ 0.001	0.001
Treasury Stock
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001

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Consolidated Statements of Cash Flows - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities:
Net earnings	$ 298	$ 246
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization	189	82
Stock compensation expense	112	48
Deferred income taxes	(17)	(14)
Gain on contingent consideration	(2)	(37)
Goodwill and intangible adjustment	0	28
Changes in assets and liabilities
Premium and related receivables	(906)	(360)
Other current assets	(81)	(103)
Medical claims liabilities	15	394
Unearned revenue	301	(104)
Accounts payable and accrued expenses	99	209
Other long term liabilities	156	101
Other operating activities, net	91	(33)
Net cash provided by operating activities	255	457
Cash flows from investing activities:
Capital expenditures	(211)	(101)
Purchases of investments	(1,528)	(1,077)
Sales and maturities of investments	955	418
Investments in acquisitions, net of cash acquired	(848)	(16)
Other investing activities, net	0	7
Net cash used in investing activities	(1,632)	(769)
Cash flows from financing activities:
Proceeds from borrowings	6,956	1,305
Payment of long term debt	(4,257)	(910)
Common stock repurchases	(29)	(9)
Purchase of noncontrolling interest	(14)	0
Debt issue costs	(59)	(4)
Other financing activities, net	1	(15)
Net cash provided by financing activities	2,598	367
Effect of exchange rate changes on cash and cash equivalents	1	0
Net increase in cash and cash equivalents	1,222	55
Cash and cash equivalents, beginning of period	1,760	1,610
Cash and cash equivalents, end of period	2,982	1,665
Supplemental disclosures of cash flow information:
Interest paid	113	28
Income taxes paid	394	229
Equity issued in connection with acquisitions	$ 3,105	$ 12

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Basis of Presentation

9 Months Ended

Sep. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

Basis of Presentation

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, 2015.  The unaudited interim financial statements herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  Accordingly, footnote disclosures which would substantially duplicate the disclosures contained in the December 31, 2015 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 2015 amounts in the notes to the consolidated financial statements have been reclassified to conform to the 2016 presentation. These reclassifications have no effect on net earnings or stockholders’ equity as previously reported.

On March 24, 2016, the Company completed the acquisition of Health Net, Inc. (Health Net) for approximately $6.0 billion, including the assumption of debt. The acquisition was accounted for as a business combination, which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Those estimated amounts are reflected in the accompanying financial statements.

As a result of the completion of the Health Net acquisition, the Company's results of operations for the three and nine months ended September 30, 2016 include the results of operations of Health Net from March 24, 2016 to September 30, 2016. The Health Net segment previously known as the Western Region Operations, with the exception of certain operations of its pharmaceutical services and behavioral health subsidiaries, is included in the Company's Managed Care segment. The portions of Health Net's Western Region Operations segment included in the Managed Care segment consist of the following Health Net operations: commercial, Medicare, Medicaid and dual eligible health plans, primarily in Arizona, California, Oregon, and Washington.

The Company's Specialty Services segment includes the Health Net segment previously known as Government Contracts as well as certain operations of its pharmaceutical services and behavioral health subsidiaries, primarily in Arizona, California, Oregon and Washington (which Health Net previously included in its Western Region Operations segment). Health Net's Government Contracts segment included its federal government-sponsored managed care support contract with the U.S. Department of Defense (DoD) under the TRICARE program in the North Region, its Military and Family Life Counseling (MFLC) contract with the DoD and other health care related government contracts, including the Veterans Choice and Patient Centered Community Care program (PC3/Choice) with the U.S. Department of Veterans Affairs (VA).

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) which 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. Early adoption is permitted. The Company is currently evaluating the effect of the new lease guidance.

In March 2016, the FASB issued an ASU which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under the new guidance, an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. The ASU also allows an entity to elect as an accounting policy either to continue to estimate the total number of awards for which the requisite service period will not be rendered, as currently required, or to account for forfeitures when they occur. Finally, the ASU modifies the current exception to liability classification of an award when an employer uses a net-settlement feature to withhold shares to meet the employee's minimum statutory tax withholding requirement. The new standard is effective for annual periods beginning after December 15, 2016, including interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the effect of the employee share-based payment guidance.

In August 2016, the FASB issued an ASU which clarifies how entities should classify certain cash receipts and cash payments on the Consolidated Statements of Cash Flows. The new guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The new standard is effective for annual periods beginning after December 15, 2017, including interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the effect of the new statement of cash flows guidance.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

A summary of the Company’s significant accounting policies is included in Note 2 entitled “Summary of Significant Accounting Policies” to the company’s Annual Report on Form 10-K for the year ended December 31, 2015. As a result of the Health Net acquisition, material changes to the Company's significant accounting policies during the three and nine months ended September 30, 2016 are described below:

Business Combinations

Business combinations are accounted for using the acquisition method of accounting. The Company allocates the fair value of purchase consideration to the assets acquired and liabilities assumed based on their fair values at the acquisition date. The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Goodwill is generally attributable to the value of the synergies between the combined companies and the value of the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset.

The Company uses its best estimates and assumptions to value assets acquired and liabilities assumed at the acquisition date; however, these estimates are sometimes preliminary and in some instances, all information required to value the assets acquired and liabilities assumed may not be available or final as of the end of a reporting period subsequent to the business combination. If the accounting for the business combination is incomplete, provisional amounts are recorded. The provisional amounts are updated during the period determined, up to one year from the acquisition date. The Company includes the results of operations of acquired businesses in the Company's consolidated results prospectively from the date of acquisition.

Acquisition related expenses and post-acquisition restructuring costs are recognized separately from the business combination and are expensed as incurred.

Revenue Recognition

The Company's health plans generate revenues primarily from premiums received from the states in which it operates health plans. The Company receives a fixed premium per member per month pursuant to its state contracts. The Company generally receives premium payments during the month it provides services and recognizes premium revenue during the period in which it is obligated to provide services to its members. In some instances, the Company's base premiums are subject to an adjustment, or risk score, based on the acuity of its membership. Generally, the risk score is determined by the State analyzing submissions of processed claims data to determine the acuity of the Company's membership relative to the entire state's Medicaid membership. Some states enact premium taxes, similar assessments and provider pass-through payments, collectively premium taxes, and these taxes are recorded as a separate component of both revenues and operating expenses. Some contracts allow for additional premiums related to certain supplemental services provided such as maternity deliveries.

Revenues are recorded based on membership and eligibility data provided by the states, which is adjusted on a monthly basis by the states for retroactive additions or deletions to membership data. These eligibility adjustments are estimated monthly and subsequent adjustments are made in the period known. The Company continuously reviews and updates those estimates as new information becomes available. It is possible that new information could require us to make additional adjustments, which could be significant, to these estimates.

The Company's Medicare Advantage contracts are with the CMS. CMS deploys a risk adjustment model which apportions premiums paid to all health plans according to health severity and certain demographic factors. The CMS risk adjustment model pays more for members whose medical history would indicate that they are expected to have higher medical costs. Under this risk adjustment methodology, CMS calculates the risk adjusted premium payment using diagnosis data from hospital inpatient, hospital outpatient and physician treatment settings. The Company and the health care providers collect, compile and submit the necessary and available diagnosis data to CMS within prescribed deadlines. The Company estimates risk adjustment revenues based upon the diagnosis data submitted and expected to be submitted to CMS.

The Company's specialty services generate revenues under contracts with state and federal programs, healthcare organizations, and other commercial organizations, as well as from our own subsidiaries. Revenues are recognized when the related services are provided or as ratably earned over the covered period of services. The Company recognizes revenue related to administrative services under the T-3 TRICARE government-sponsored managed care support contract in the North Region for the DoD's TRICARE program (T-3 contract) on a straight-line basis over the option period, when the fees become fixed and determinable. The T-3 contract includes various performance-based incentives and penalties. For each of the incentives or penalties, the Company adjusts revenue accordingly based on the amount that it has earned or incurred at each interim date and are legally entitled to in the event of a contract termination.

Premium and Related Receivables and Unearned Revenue

Premium and service revenues collected in advance are recorded as unearned revenue. For performance-based contracts the Company does not recognize revenue subject to refund until data is sufficient to measure performance. Premiums and service revenues due to the Company are recorded as premium and related receivables and are recorded net of an allowance based on historical trends and management's judgment on the collectibility of these accounts. As the Company generally receives payments during the month in which services are provided, the allowance is typically not significant in comparison to total revenues and does not have a material impact on the presentation of the financial condition or results of operations.

Amounts receivable under government contracts are comprised primarily of contractually defined billings, accrued contract incentives under the terms of the contract and amounts related to change orders for services not originally specified in the contract. Pursuant to the Company's T-3 contract, the government has the right to unilaterally modify the contract in certain respects by issuing change orders directing it to implement terms or services that were not originally included in the contract. Following receipt of a change order, the Company has a contractual right to negotiate an equitable adjustment to the contract terms to account for the impact of the change order. The Company starts to perform under such change orders and begins to incur associated costs after it receives the government's unilateral modification, but before it has negotiated the final scope and/or value of the change order. In these situations, costs are expensed as incurred, and the Company estimates and records revenue when it has met all applicable revenue recognition criteria. These criteria include the requirements that change order amounts are determinable, that the Company has performed under the change orders, and that collectability of amounts payable to the Company is reasonably assured.

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Health Net

9 Months Ended

Sep. 30, 2016

Business Combinations [Abstract]

Health Net

Health Net

On March 24, 2016, the Company acquired all of the issued and outstanding shares of Health Net, a publicly traded managed care organization that delivers health care services through health plans and government-sponsored managed care plans. The transaction was valued at approximately $5,990 million, including the assumption of $703 million of outstanding debt. The acquisition allows the Company to offer a more comprehensive and scalable portfolio of solutions and provides opportunity for additional growth across the combined company's markets.

The total consideration for the acquisition was $5,287 million, consisting of Centene common shares valued at $3,038 million (based on Centene's stock price of $62.70), $2,247 million in cash, and $2 million related to the fair value adjustment to stock based compensation associated with pre-combination service. Each Health Net share was converted into 0.622 of a validly issued, fully paid, non-assessable share of Centene common stock and $28.25 in cash. In total, 48,449,444 shares of Centene common stock were issued in connection with the transaction. The cash portion of the acquisition consideration was funded through the issuance of long-term debt as further discussed in Note 7.Debt. For the three and nine months ended September 30, 2016, the Company also recognized acquisition related expenses of $10 million and $224 million, respectively, that were recorded in general and administrative expense in the Consolidated Statements of Operations.

The acquisition of Health Net has been accounted for as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. The valuation of all the assets acquired and liabilities assumed has not yet been finalized. As a result, preliminary estimates have been recorded and are subject to change. Any necessary adjustments from our 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.

Since the initial allocation of purchase price, the Company made adjustments and reclassifications to the fair value of certain assets and liabilities acquired, including the premium and related receivables, medical claims liability, accrued liabilities, return of premium payable and deferred taxes, resulting in a net increase of $275 million to goodwill. The Company will continue to revise its preliminary purchase price allocation as additional information becomes available during the remainder of the measurement period. The Company's preliminary allocation of the fair value of assets acquired and liabilities assumed as of the acquisition date of March 24, 2016 is as follows ($ in millions):

Assets Acquired and Liabilities Assumed
Cash and cash equivalents	$	1,401
Premium and related receivables (a)	1,258
Short term investments	74
Other current assets	448
Long term investments	2,037
Restricted deposits	30
Property, software and equipment, net	41
Intangible assets (b)	1,500
Other long term assets	136
Total assets acquired	6,925
Medical claims liability	1,453
Borrowings under revolving credit facility	285
Accounts payable and accrued expenses (c)	2,033
Return of premium payable	435
Unearned revenue	130
Long term deferred tax liabilities (d)	330
Long term debt (e)	418
Other long term liabilities	430
Total liabilities assumed	5,514
Total identifiable net assets	1,411
Goodwill (f)	3,876
Total assets acquired and liabilities assumed	$	5,287

The Company has made certain preliminary fair value adjustments based on information reviewed through September 30, 2016. Significant preliminary fair value adjustments are noted as follows:

(a) The preliminary fair value of premium and related receivables approximated their historical cost, with the exception of the risk corridor receivable associated with the Health Insurance Marketplace. The fair value of the risk corridor receivable was estimated at $9 million.

(b) The identifiable intangible assets acquired are to be measured at fair value as of the completion of the acquisition. The 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 preliminary fair value of intangibles to be $1.5 billion with a weighted average life of 10 years. The Company expects the identifiable intangible assets to include purchased contract rights, provider contracts, trade names and developed technology. The Company is still in the process of finalizing its intangible valuation.

(c) Accounts payable and accrued expenses includes approximately $285 million related to premium deficiency reserves based on cost trends existing prior to the acquisition date. The premium deficiency reserves are primarily associated with losses in the individual commercial business, largely in California, unfavorable performance in the Arizona commercial business as well as unfavorable performance in the Medicare business primarily in Oregon and Arizona. The premium deficiency reserve for the individual PPO commercial contracts in California includes anticipated future losses in 2016 associated with substance abuse rehabilitation claims. During the third quarter, the Company lowered the premium deficiency reserve by $15 million, reflecting its revised estimate of substance abuse cost trends.

(d) The preliminary deferred tax liabilities are presented net of $526 million of deferred tax assets.

(e) Debt is required to be measured at fair value under the acquisition method of accounting. The fair value of Health Net's $400 million Senior Notes assumed in the acquisition was $418 million. The $18 million increase will be amortized as a reduction to interest expense over the remaining life of the debt.

(f) The acquisition resulted in $3.9 billion of goodwill related primarily to buyer specific synergies expected from the acquisition and the assembled workforce of Health Net. This goodwill is not deductible for income tax purposes. The assignment of goodwill to the Company's respective segments has not been completed at this time.    

Statement of Operations

From the acquisition date through September 30, 2016, the Company's Consolidated Statements of Operations include total Health Net revenues of $3,981 million and $8,604 million for the three and nine months ended September 30, 2016, respectively. It is impracticable to determine the effect on net income resulting from the Health Net acquisition for the three and nine months ended September 30, 2016, as the Company immediately integrated Health Net into its ongoing operations.

Unaudited Pro Forma Financial Information

The unaudited pro forma total revenues for the nine months ended September 30, 2016 were $32,369 million. The following table presents supplemental pro forma information for the three and nine months ended September 30, 2015 ($ in millions, except per share data).

	Three Months Ended September 30, 2015		Nine Months Ended September 30, 2015
Total revenues	$	9,960	$	28,617
Net earnings attributable to Centene Corporation	$	85	$	215
Diluted earnings per share	$	0.49	$	1.25

The pro forma results do not reflect any anticipated synergies, efficiencies, or other cost savings of the acquisition. Accordingly, the unaudited pro forma financial information is not indicative of the results if the acquisition had been completed on January 1, 2015 and is not a projection of future results. It is impracticable for the Company to determine the pro forma earnings information for the nine months ended September 30, 2016 due to the nature of obtaining that information as the Company immediately integrated Health Net into its ongoing operations.

The unaudited pro forma financial information reflects the historical results of Centene and Health Net adjusted as if the acquisition had occurred on January 1, 2015, primarily for the following:

• Additional interest income associated with adjusting the amortized cost of Health Net's investment portfolio to fair value.

• Elimination of historical Health Net intangible asset amortization expense and addition of amortization expense based on the current preliminary values of identifiable intangible assets.

• Interest expense associated with financing the acquisition and amortization of the fair value adjustment to Health Net's debt.

• Additional stock compensation expense related to the amortization of the fair value increase to Health Net rollover stock awards.

• Increased tax expense due to the assumption that Centene would be subject to the IRS Regulation 162(m)(6) beginning in 2015.

• Elimination of acquisition related costs.

Restructuring Related Charges

In connection with the Health Net acquisition, the Company undertook a restructuring plan as a result of the integration of Health Net's operations into its business, resulting in a reduction in workforce beginning in 2016 and expected to continue through early 2017. The restructuring related costs are classified as general and administrative expenses in the Consolidated Statements of Operations. Changes in the restructuring liability for the nine months ended September 30, 2016 were as follows ($ in millions):

	September 30, 2016
	Employee Termination Costs			Stock Based Compensation			Total
Total accrued restructuring costs as of December 31, 2015	$	—		$	—		$	—
Charges incurred	39			40			79
Paid/settled	(25		)	(40		)	(65		)
Total accrued restructuring costs as of September 30, 2016	$	14		$	—		$	14

For the three and nine months ended September 30, 2016, the Company recorded employee termination costs of $7 million and $39 million and stock based compensation of $2 million and $40 million, respectively, in the Managed Care Segment. The Company expects to record a total of approximately $50 million of employee termination costs and $44 million of stock based compensation in connection with the acquisition, the majority of which is expected to be incurred through 2016 and early 2017.

Commitments

In connection with obtaining regulatory approval of the Health Net acquisition from the California Department of Insurance and the California Department of Managed Health Care, the Company committed to certain undertakings (the Undertakings). The Undertakings included, among other items, operational commitments around premiums, dividend restrictions, minimum Risk Based Capital (RBC) levels, local offices, growth, accreditation, HEDIS scores and other quality measures, network adequacy, certifications, investments and capital expenditures. Specifically, the Company agreed to, among other things:

• invest an additional $30 million through the California Organized Investment Network over the five years following completion of the acquisition;

• build a service center in an economically distressed community in California, investing $200 million over ten years and employing at least 300 people;

• contribute $65 million to improve enrollee health outcomes ($10 million over ten years), support locally-based consumer assistance programs ($5 million over five years) and strengthen the health care delivery system ($50 million over five years), (of which, the present value of $61 million was expensed in the nine months ended September 30, 2016 and classified as general and administrative expenses in the Consolidated Statements of Operations); and

• invest $75 million of its investment portfolio in vehicles supporting California’s health care infrastructure.

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Short term and Long term Investments, Restricted Deposits

9 Months Ended

Sep. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Short term and Long term Investments, Restricted Deposits

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):

	September 30, 2016									December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	288	$	2	$	—		$	290	$	431	$	—	$	(2	)	$	429
Corporate securities	1,915		30		(2		)	1,943		859		2		(8		)	853
Restricted certificates of deposit	6		—		—			6		5		—		—			5
Restricted cash equivalents	70		—		—			70		78		—		—			78
Municipal securities	1,638		24		(1		)	1,661		496		2		(1		)	497
Asset-backed securities	289		2		—			291		163		—		(1		)	162
Residential mortgage-backed securities	215		3		(1		)	217		66		1		—			67
Commercial mortgage-backed securities	341		15		(1		)	355		40		—		—			40
Cost and equity method investments	162		—		—			162		71		—		—			71
Life insurance contracts	116		—		—			116		16		—		—			16
Total	$	5,040	$	76	$	(5	)	$	5,111	$	2,225	$	5	$	(12	)	$	2,218

The Company’s investments are classified as available-for-sale with the exception of life insurance contracts and certain cost and equity method 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 September 30, 2016, 95% of the Company’s investments in rated securities carry an investment grade rating by S&P and Moody's.  At September 30, 2016, the Company held certificates of deposit, life insurance contracts and cost and equity method investments which 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 3.3 years at September 30, 2016.

In January 2016, the Company completed a 19% investment in a data analytics business and as a result, issued 1.1 million shares of Centene common stock, valued at $68 million, to the selling stockholders. The investment is being accounted for using the equity method of accounting.

The fair value of available-for-sale investments 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):

	September 30, 2016										December 31, 2015
	Less Than 12 Months					12 Months or More					Less Than 12 Months					12 Months or More
	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	—		$	4	$	—		$	2	$	(2	)	$	294	$	—		$	14
Corporate securities	(1		)	309		(1		)	80		(6		)	561		(2		)	41
Municipal securities	(1		)	231		—			32		(1		)	208		—			5
Asset-backed securities	—			29		—			21		(1		)	121		—			8
Residential mortgage-backed securities	(1		)	45		—			—		—			30		—			—
Commercial mortgage-backed securities	(1		)	119		—			1		—			34		—			—
Total	$	(4	)	$	737	$	(1	)	$	136	$	(10	)	$	1,248	$	(2	)	$	68

As of September 30, 2016, the gross unrealized losses were generated from 569 positions out of a total of 2,731 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):

	September 30, 2016								December 31, 2015
	Investments				Restricted Deposits				Investments				Restricted Deposits
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	406	$	406	$	122	$	123	$	176	$	176	$	93	$	93
One year through five years	1,978		2,000		14		14		1,662		1,654		22		22
Five years through ten years	1,098		1,116		—		—		267		268		—		—
Greater than ten years	577		589		—		—		5		5		—		—
Asset-backed securities	845		863		—		—		—		—		—		—
Total	$	4,904	$	4,974	$	136	$	137	$	2,110	$	2,103	$	115	$	115

Actual maturities may differ from contractual maturities due to call or prepayment options.  Cost and equity method investments and life insurance contracts are included in the five years through ten years 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 cost and equity method 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.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

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:
Level I	Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level II	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.
Level III	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 September 30, 2016, for assets and liabilities measured at fair value on a recurring basis ($ in millions):  

	Level I		Level II		Level III		Total
Assets
Cash and cash equivalents	$	2,982	$	—	$	—	$	2,982
Investments available for sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	215	$	14	$	—	$	229
Corporate securities	—		1,943		—		1,943
Municipal securities	—		1,661		—		1,661
Asset-backed securities	—		291		—		291
Residential mortgage-backed securities	—		217		—		217
Commercial mortgage-backed securities	—		355		—		355
Total investments	$	215	$	4,481	$	—	$	4,696
Restricted deposits available for sale:
Cash and cash equivalents	$	70	$	—	$	—	$	70
Certificates of deposit	6		—		—		6
U.S. Treasury securities and obligations of U.S. government corporations and agencies	61		—		—		61
Total restricted deposits	$	137	$	—	$	—	$	137
Other long term assets: Interest rate swap agreements	$	—	$	25	$	—	$	25
Total assets at fair value	$	3,334	$	4,506	$	—	$	7,840

The following table summarizes fair value measurements by level at December 31, 2015, for assets and liabilities measured at fair value on a recurring basis ($ in millions): 

	Level I		Level II		Level III		Total
Assets
Cash and cash equivalents	$	1,760	$	—	$	—	$	1,760
Investments available for sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	325	$	72	$	—	$	397
Corporate securities	—		853		—		853
Municipal securities	—		497		—		497
Asset-backed securities	—		162		—		162
Residential mortgage-backed securities	—		67		—		67
Commercial mortgage-backed securities	—		40		—		40
Total investments	$	325	$	1,691	$	—	$	2,016
Restricted deposits available for sale:
Cash and cash equivalents	$	78	$	—	$	—	$	78
Certificates of deposit	5		—		—		5
U.S. Treasury securities and obligations of U.S. government corporations and agencies	32		—		—		32
Total restricted deposits	$	115	$	—	$	—	$	115
Other long term assets:
Interest rate swap agreements	$	—	$	11	$	—	$	11
Total assets at fair value	$	2,200	$	1,702	$	—	$	3,902
Liabilities
Other long term liabilities:
Interest rate swap agreements	$	—	$	2	$	—	$	2
Total liabilities at fair value	$	—	$	2	$	—	$	2

The Company periodically transfers U.S. Treasury securities and obligations of U.S. government corporations and agencies between Level I and Level II fair value measurements dependent upon the level of trading activity for the specific securities at the measurement date.  The Company’s policy regarding the timing of transfers between Level I and Level II is to measure and record the transfers at the end of the reporting period.  At September 30, 2016, there were no transfers from Level I to Level II and $46 million of transfers from Level II to Level I.  The Company utilizes matrix pricing services to estimate fair value for securities which are not actively traded on the measurement date.  The Company designates these securities as Level II fair value measurements.  The aggregate carrying amount of the Company’s life insurance contracts and other non-majority owned investments, which approximates fair value, was $278 million and $87 million as of September 30, 2016 and December 31, 2015, respectively.

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Affordable Care Act

9 Months Ended

Sep. 30, 2016

Affordable Care Act [Abstract]

Affordable Care Act

Affordable Care Act

The Affordable Care Act (ACA) established risk spreading premium stabilization programs effective January 1, 2014. These programs, commonly referred to as the “three Rs,” include a permanent risk adjustment program, a transitional reinsurance program, and a temporary risk corridor program. Additionally, the ACA established a minimum annual medical loss ratio. Each of the three R programs are taken into consideration to determine if the Company’s estimated annual medical costs are less than the minimum loss ratio and require an adjustment to Premium revenue to meet the minimum medical loss ratio.

During the second quarter of 2016, the Company recognized a $70 million net pre-tax benefit related to the reconciliation of 2015 risk adjustment and reinsurance programs. During the third quarter of 2016, the Company received information from CMS, indicating that some of the participants in the Arizona risk adjustment program were unable to pay the amounts owed. As a result, the uncollected portion has been allocated pro-rata to other insurers in the market. Accordingly, the Company reduced the pre-tax earnings by $19 million during the third quarter.

The Company's receivables (payables) for each of these programs are as follows ($ in millions):

	September 30, 2016			December 31, 2015
Risk adjustment	$	(294	)	$	(108	)
Reinsurance	101			24
Risk corridor	—			(4		)
Minimum medical loss ratio	(18		)	(15		)

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Debt

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Debt

Debt

Debt consists of the following ($ in millions):

	September 30, 2016			December 31, 2015
$425 million 5.75% Senior notes, due June 1, 2017	$	426		$	428
$400 million 6.375% Senior notes, due June 1, 2017	411			—
$1,400 million 5.625% Senior notes, due February 15, 2021	1,400			—
$1,000 million 4.75% Senior notes, due May 15, 2022	1,008			500
$1,000 million 6.125% Senior notes, due February 15, 2024	1,000			—
Fair value of interest rate swap agreements	25			9
Total senior notes	4,270			937
Revolving credit agreement	300			225
Mortgage notes payable	65			67
Capital leases and other	18			6
Debt issuance costs	(64		)	(14		)
Total debt	4,589			1,221
Less current portion	(845		)	(5		)
Long term debt	$	3,744		$	1,216

Senior Notes

In February 2016, a wholly owned unrestricted subsidiary of the Company (Escrow Issuer) issued $1,400 million in aggregate principal amount of 5.625% Senior Notes ($1,400 Million Notes) at par due 2021 and $1,000 million in aggregate principal amount of 6.125% Senior Notes ($1,000 Million Notes) at par due 2024. In July 2016, the Company completed an exchange offer, whereby it offered to exchange all of the outstanding $1,400 Million Notes and the $1,000 Million Notes for identical securities that have been registered under the Securities Act of 1933. The Company used the net proceeds of the offering, together with borrowings under the Company's new $1,000 million revolving credit facility and cash on hand, primarily to fund the cash consideration for the Health Net acquisition, and to pay acquisition and offering related fees and expenses.

In connection with the February 2016 issuance, the Company entered into interest rate swap agreements for notional amounts of $600 million and $1,000 million, at floating rates of interest based on the three month LIBOR plus 4.22% and the three month LIBOR plus 4.44%, respectively. Gains and losses due to changes in the fair value of the interest rate swaps completely offset changes in the fair value of the hedged portion of the underlying debt and are recorded as an adjustment to the $1,400 Million Notes and $1,000 Million Notes.

In connection with the closing of the Health Net acquisition, the Company assumed the $400 million in aggregate principal amount of Health Net's 6.375% Senior Notes due 2017, recorded at acquisition date fair value of $418 million.

In June 2016, the Company issued an additional $500 million in aggregate principal amount of 4.75% Senior Notes due 2022 ($500 Million Add-on Notes) at a premium to yield of 4.41%. The $500 Million Add-on Notes were offered as additional debt securities under the indenture governing the $500 million in aggregate principal amount of 4.75% Senior Notes issued in April 2014. The Company used the net proceeds of the offering to repay amounts outstanding under its Revolving Credit Facility and to pay offering related fees and expenses.

The indentures governing the $425 million in aggregate principal amount of 5.75% Senior Notes due 2017, the $1,400 Million Notes, the $1,000 million of its 4.75% Senior Notes due 2022, and the $1,000 Million Notescontain non-financial and financial covenants of Centene Corporation, including requirements of a minimum fixed charge coverage ratio. The indentures governing the $400 million notes due 2017 contain non-financial and financial covenants of Health Net, Inc., including requirements of a minimum fixed charge coverage ratio. At September 30, 2016, the Company was in compliance with all covenants.

Interest Rate Swaps

The Company uses interest rate swap agreements to convert a portion of its interest rate exposure from fixed rates to floating rates to more closely align interest expense with interest income received on its cash equivalent and variable rate investment balances. The Company has $2,350 million of notional amount of interest rate swap agreements consisting of:

•$250 million expiring on June 1, 2017;

•$600 million expiring on February 15, 2021;

•$500 million expiring on May 15, 2022; and,

•$1,000 million expiring on February 15, 2024.

Under the Swap Agreements, the Company receives a fixed rate of interest and pays an average variable rate of the three month LIBOR plus 3.88% adjusted quarterly. At September 30, 2016, the weighted average rate was 4.69%.

The Swap Agreements are formally designated and qualify as fair value hedges and are recorded at fair value in the Consolidated Balance Sheets in other assets or other liabilities. Gains and losses due to changes in fair value of the interest rate swap agreements completely offset changes in the fair value of the hedged portion of the underlying debt. Therefore, no gain or loss has been recognized due to hedge ineffectiveness. Offsetting changes in fair value of both the interest rate swaps and the hedged portion of the underlying debt both were recognized in interest expense in the Consolidated Statements of Operations. The Company does not hold or issue any derivative instrument for trading or speculative purposes.

Revolving Credit Agreement

In connection with the closing of the Health Net acquisition on March 24, 2016, the Company's existing unsecured $500 million revolving credit facility was terminated and simultaneously replaced with a new $1,000 million unsecured revolving credit facility. Borrowings under the agreement bear interest based upon LIBOR rates, the Federal Funds Rate or the Prime Rate. The agreement has a maturity date of March 24, 2021. As of September 30, 2016, the Company had $300 million of borrowings outstanding under the agreement with a weighted average interest rate of 4.25%, and the Company was in compliance with all covenants.

The revolving credit facility contains non-financial and financial covenants, including requirements of minimum fixed charge coverage ratios and maximum debt-to-EBITDA ratios. The Company is required to not exceed a maximum debt-to-EBITDA ratio of 3.5 to 1.0 prior to December 31, 2016 and 3.0 to 1.0 on and subsequent to December 31, 2016. As of September 30, 2016, there were no limitations on the availability under the revolving credit agreement as a result of the debt-to-EBITDA ratio.

Also, upon the closing of the Health Net acquisition, the Company assumed, fully repaid $285 million in outstanding borrowings under, and terminated the existing Health Net revolving credit facility.

Letters of Credit & Surety Bonds

The Company had outstanding letters of credit of $43 million as of September 30, 2016, which were not part of the revolving credit facility. The Company also had letters of credit for $48 million (valued at September 30, 2016 conversion rate), or €42 million, representing its proportional share of the letters of credit issued to support Ribera Salud’s outstanding debt, which are a part of the revolving credit facility. Collectively, the letters of credit bore interest at 1.44% as of September 30, 2016. The Company had outstanding surety bonds of $370 million as of September 30, 2016.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2016

Equity [Abstract]

Stockholders' Equity

Stockholders' Equity

In March 2016, the Company issued 48,449,444 shares of Centene common stock, with a fair value of approximately $3,038 million, paid approximately $2,247 million in cash in exchange for all the outstanding shares of Health Net common stock and outstanding equity awards, and recorded $2 million related to the fair value adjustment to stock based compensation associated with pre-combination service.

In January 2016, the Company completed a 19% investment in a data analytics business and as a result, issued 1,144,462 shares of Centene common stock to the selling stockholders. The investment is being accounted for using the equity method of accounting.

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Earnings Per Share

9 Months Ended

Sep. 30, 2016

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The following table sets forth the calculation of basic and diluted net earnings per common share ($ in millions, except per share data):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2016			2015		2016			2015
Earnings attributable to Centene Corporation:
Earnings from continuing operations, net of tax	$	146		$	92	$	300		$	244
Discontinued operations, net of tax	(1		)	1		(3		)	—
Net earnings	$	145		$	93	$	297		$	244
Shares used in computing per share amounts:
Weighted average number of common shares outstanding	170,774,587			119,121,524		155,680,769			118,970,853
Common stock equivalents (as determined by applying the treasury stock method)	3,537,829			4,010,286		3,279,299			3,933,623
Weighted average number of common shares and potential dilutive common shares outstanding	174,312,416			123,131,810		158,960,068			122,904,476
Net earnings per common share attributable to Centene Corporation:
Basic:
Continuing operations	$	0.85		$	0.77	$	1.93		$	2.05
Discontinued operations	—			0.01		(0.02		)	—
Basic earnings per common share	$	0.85		$	0.78	$	1.91		$	2.05
Diluted:
Continuing operations	$	0.84		$	0.75	$	1.89		$	1.99
Discontinued operations	(0.01		)	0.01		(0.02		)	—
Diluted earnings per common share	$	0.83		$	0.76	$	1.87		$	1.99

The calculation of diluted earnings per common share for the three and nine months ended September 30, 2016 excludes the impact of 51,593 and 48,380 shares, respectively, related to anti-dilutive restricted stock and restricted stock units. The calculation of diluted earnings per common share for the three and nine months ended September 30, 2015 excludes the impact of 28,716 and 84,644 shares, respectively, related to anti-dilutive restricted stock and restricted stock units.

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Segment Information

9 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

Segment Information

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. Subsequent to the closing of the Health Net acquisition, the Managed Care segment also includes the operations previously included in Health Net's Western Region Operations Segment, with the exception of certain operations of its pharmaceutical services and behavioral health subsidiaries. The portions of Health Net's Western Region Operations segment included in the Managed Care segment consist of the following Health Net operations: commercial, Medicare, Medicaid and dual eligible health plans, primarily in Arizona, California, Oregon and Washington.

The Specialty Services segment consists of Centene’s specialty companies offering auxiliary healthcare services and products. Subsequent to the closing of the Health Net acquisition, the Specialty Services segment also includes the operations previously included in the Government Contracts segment of Health Net as well as certain operations of its pharmaceutical services and behavioral health subsidiaries, the latter of which Health Net previously included in its Western Region Operations segment. The Government Contracts business includes the Company's government-sponsored managed care support contract with the DoD under the TRICARE program in the North Region, the MFLC contract with the DoD, and other health care related government contracts, including PC3/Choice with the VA.

Segment information for the three months ended September 30, 2016, follows ($ in millions):

	Managed Care		Specialty Services		Eliminations			Consolidated Total
Total revenues from external customers	$	10,010	$	836	$	—		$	10,846
Total revenues from internal customers	55		1,525		(1,580		)	—
Total revenues	$	10,065	$	2,361	$	(1,580	)	$	10,846
Earnings from operations	$	304	$	38	$	—		$	342

Segment information for the three months ended September 30, 2015, follows ($ in millions):

	Managed Care		Specialty Services		Eliminations			Consolidated Total
Total revenues from external customers	$	5,278	$	543	$	—		$	5,821
Total revenues from internal customers	23		1,274		(1,297		)	—
Total revenues	$	5,301	$	1,817	$	(1,297	)	$	5,821
Earnings from operations	$	138	$	45	$	—		$	183

Segment information for the nine months ended September 30, 2016, follows ($ in millions):

	Managed Care		Specialty Services		Eliminations			Consolidated Total
Total revenues from external customers	$	26,439	$	2,257	$	—		$	28,696
Total revenues from internal customers	143		4,384		(4,527		)	—
Total revenues	$	26,582	$	6,641	$	(4,527	)	$	28,696
Earnings from operations	$	618	$	121	$	—		$	739

Segment information for the nine months ended September 30, 2015, follows ($ in millions):

	Managed Care		Specialty Services		Eliminations			Consolidated Total
Total revenues from external customers	$	14,857	$	1,601	$	—		$	16,458
Total revenues from internal customers	73		3,525		(3,598		)	—
Total revenues	$	14,930	$	5,126	$	(3,598	)	$	16,458
Earnings from operations	$	358	$	127	$	—		$	485

As discussed in Note 3. Health Net, the assignment of goodwill to the Company's segments has not been completed at this time. The Company will update segment asset disclosures once an allocation is finalized.

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Contingencies

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies

Overview

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 under the headings "Kentucky" and "California." Except for the "Kentucky" and "California" proceedings, 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.

Kentucky

On July 5, 2013, the Company's subsidiary, Kentucky Spirit Health Plan, Inc. (Kentucky Spirit), terminated its contract with the Commonwealth of Kentucky (the Commonwealth). Kentucky Spirit believed it had a contractual right to terminate the contract and filed a lawsuit in Franklin Circuit Court seeking a declaration of this right. In response, the Commonwealth alleged that Kentucky Spirit's exit would constitute a material breach of contract.  The Commonwealth seeks to recover substantial damages and to enforce its rights under Kentucky Spirit's $25 million performance bond. The Commonwealth has asserted that the Commonwealth's expenditures due to Kentucky Spirit's departure range from $28 million to $40 million plus interest, and that the associated CMS expenditures range from $92 million to $134 million. Kentucky Spirit disputes the Commonwealth's alleged damages on several grounds. Prior to terminating the contract, Kentucky Spirit filed a legal complaint in April 2013, amended in October 2014, in Franklin Circuit Court seeking damages against the Commonwealth for losses sustained due to the Commonwealth's alleged breaches.

On February 6, 2015, the Kentucky Court of Appeals affirmed a Franklin Circuit Court ruling that Kentucky Spirit did not have a contractual right to terminate the contract early. The Court of Appeals also found that the contract’s liquidated damages provision “is applicable in the event of a premature termination of the Contract term.” On April 27, 2016, the Kentucky Supreme Court declined discretionary review, thereby making the Court of Appeals decision final. The question of damages is pending and will be determined by the Franklin Circuit Court. Kentucky Spirit believes it is not liable for damages because there was a prior breach of the contract by the Commonwealth, as alleged in Kentucky Spirit’s complaint.

On May 26, 2015, the Commonwealth issued a demand for indemnification to its actuarial firm, for "all defense costs, and any resultant monetary awards in favor of Kentucky Spirit, arising from or related to Kentucky Spirit's claims which are predicated upon the alleged omissions and errors in the Data Book and the certified actuarially sound rates." The actuarial firm moved to intervene in the litigation and the Franklin Circuit Court granted that motion on September 8, 2015. Also, on August 19, 2015, the actuarial firm filed a petition seeking a declaratory judgment that it is not liable to the Commonwealth for indemnification related to the claims asserted by Kentucky Spirit against the Commonwealth. On October 5, 2015, the Commonwealth filed an answer to the actuarial firm's petition and asserted counterclaims/cross-claims against the firm.

On March 9, 2015, the Secretary of the Kentucky Cabinet for Health and Family Services (CHFS) issued a determination letter finding that Kentucky Spirit owed the Commonwealth $40 million in actual damages plus prejudgment interest at 8% percent. On March 18, 2015, in a letter to the Kentucky Finance and Administration Cabinet (FAC), Kentucky Spirit contested CHFS' jurisdiction to make such a determination. The FAC did not issue a decision within the required 120 days. On August 13, 2015, Kentucky Spirit filed a declaratory judgment action against the Commonwealth in Franklin Circuit Court seeking a declaration that the Commonwealth may not purport to issue a decision against Kentucky Spirit awarding damages to itself when the matter is already before the Kentucky courts. The Commonwealth filed counterclaims seeking a Declaration of Rights and Entry of Judgment on its determination letter. On December 1, 2015 the Franklin Circuit Court consolidated this declaratory judgment action with Kentucky Spirit’s other litigation claims against the Commonwealth. On August 19, 2016, the Franklin Circuit Court held a status conference with all parties. Discovery is continuing in the consolidated litigation matters. If the litigation is not settled, a trial is expected in the latter half of 2017.

The resolution of the Kentucky litigation matters are subject to numerous uncertainties and may result in a range of possible outcomes.  If Kentucky Spirit prevails on its claims, it would be entitled to damages.  If the Commonwealth prevails, a liability to the Commonwealth could be recorded. 

California

The Company's California subsidiary, Health Net of California, Inc. (Health Net California), has been 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, 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 20, 2015 filing of the complaint. This lawsuit is being coordinated with similar lawsuits filed against other entities. The Company expects an initial status conference shortly after the assignment of a presiding judge. The Company intends to vigorously defend itself against these claims; however this matter is subject to many uncertainties.

Miscellaneous Proceedings

Excluding the "Kentucky" and "California" 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 by various federal and state regulatory agencies with respect to requirements applicable to the Company's business, including, without limitation, payment of out-of-network claims, rules relating to 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 health care benefits coverage or reimbursement, 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.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Business Combinations

Business Combinations

Business combinations are accounted for using the acquisition method of accounting. The Company allocates the fair value of purchase consideration to the assets acquired and liabilities assumed based on their fair values at the acquisition date. The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Goodwill is generally attributable to the value of the synergies between the combined companies and the value of the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset.

The Company uses its best estimates and assumptions to value assets acquired and liabilities assumed at the acquisition date; however, these estimates are sometimes preliminary and in some instances, all information required to value the assets acquired and liabilities assumed may not be available or final as of the end of a reporting period subsequent to the business combination. If the accounting for the business combination is incomplete, provisional amounts are recorded. The provisional amounts are updated during the period determined, up to one year from the acquisition date. The Company includes the results of operations of acquired businesses in the Company's consolidated results prospectively from the date of acquisition.

Acquisition related expenses and post-acquisition restructuring costs are recognized separately from the business combination and are expensed as incurred.

Revenue Recognition

Revenue Recognition

The Company's health plans generate revenues primarily from premiums received from the states in which it operates health plans. The Company receives a fixed premium per member per month pursuant to its state contracts. The Company generally receives premium payments during the month it provides services and recognizes premium revenue during the period in which it is obligated to provide services to its members. In some instances, the Company's base premiums are subject to an adjustment, or risk score, based on the acuity of its membership. Generally, the risk score is determined by the State analyzing submissions of processed claims data to determine the acuity of the Company's membership relative to the entire state's Medicaid membership. Some states enact premium taxes, similar assessments and provider pass-through payments, collectively premium taxes, and these taxes are recorded as a separate component of both revenues and operating expenses. Some contracts allow for additional premiums related to certain supplemental services provided such as maternity deliveries.

Revenues are recorded based on membership and eligibility data provided by the states, which is adjusted on a monthly basis by the states for retroactive additions or deletions to membership data. These eligibility adjustments are estimated monthly and subsequent adjustments are made in the period known. The Company continuously reviews and updates those estimates as new information becomes available. It is possible that new information could require us to make additional adjustments, which could be significant, to these estimates.

The Company's Medicare Advantage contracts are with the CMS. CMS deploys a risk adjustment model which apportions premiums paid to all health plans according to health severity and certain demographic factors. The CMS risk adjustment model pays more for members whose medical history would indicate that they are expected to have higher medical costs. Under this risk adjustment methodology, CMS calculates the risk adjusted premium payment using diagnosis data from hospital inpatient, hospital outpatient and physician treatment settings. The Company and the health care providers collect, compile and submit the necessary and available diagnosis data to CMS within prescribed deadlines. The Company estimates risk adjustment revenues based upon the diagnosis data submitted and expected to be submitted to CMS.

The Company's specialty services generate revenues under contracts with state and federal programs, healthcare organizations, and other commercial organizations, as well as from our own subsidiaries. Revenues are recognized when the related services are provided or as ratably earned over the covered period of services. The Company recognizes revenue related to administrative services under the T-3 TRICARE government-sponsored managed care support contract in the North Region for the DoD's TRICARE program (T-3 contract) on a straight-line basis over the option period, when the fees become fixed and determinable. The T-3 contract includes various performance-based incentives and penalties. For each of the incentives or penalties, the Company adjusts revenue accordingly based on the amount that it has earned or incurred at each interim date and are legally entitled to in the event of a contract termination.

Premium and Related Receivables and Unearned Revenue

Premium and Related Receivables and Unearned Revenue

Premium and service revenues collected in advance are recorded as unearned revenue. For performance-based contracts the Company does not recognize revenue subject to refund until data is sufficient to measure performance. Premiums and service revenues due to the Company are recorded as premium and related receivables and are recorded net of an allowance based on historical trends and management's judgment on the collectibility of these accounts. As the Company generally receives payments during the month in which services are provided, the allowance is typically not significant in comparison to total revenues and does not have a material impact on the presentation of the financial condition or results of operations.

Amounts receivable under government contracts are comprised primarily of contractually defined billings, accrued contract incentives under the terms of the contract and amounts related to change orders for services not originally specified in the contract. Pursuant to the Company's T-3 contract, the government has the right to unilaterally modify the contract in certain respects by issuing change orders directing it to implement terms or services that were not originally included in the contract. Following receipt of a change order, the Company has a contractual right to negotiate an equitable adjustment to the contract terms to account for the impact of the change order. The Company starts to perform under such change orders and begins to incur associated costs after it receives the government's unilateral modification, but before it has negotiated the final scope and/or value of the change order. In these situations, costs are expensed as incurred, and the Company estimates and records revenue when it has met all applicable revenue recognition criteria. These criteria include the requirements that change order amounts are determinable, that the Company has performed under the change orders, and that collectability of amounts payable to the Company is reasonably assured.

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Health Net (Tables)

9 Months Ended

Sep. 30, 2016

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The Company's preliminary allocation of the fair value of assets acquired and liabilities assumed as of the acquisition date of March 24, 2016 is as follows ($ in millions):

Assets Acquired and Liabilities Assumed
Cash and cash equivalents	$	1,401
Premium and related receivables (a)	1,258
Short term investments	74
Other current assets	448
Long term investments	2,037
Restricted deposits	30
Property, software and equipment, net	41
Intangible assets (b)	1,500
Other long term assets	136
Total assets acquired	6,925
Medical claims liability	1,453
Borrowings under revolving credit facility	285
Accounts payable and accrued expenses (c)	2,033
Return of premium payable	435
Unearned revenue	130
Long term deferred tax liabilities (d)	330
Long term debt (e)	418
Other long term liabilities	430
Total liabilities assumed	5,514
Total identifiable net assets	1,411
Goodwill (f)	3,876
Total assets acquired and liabilities assumed	$	5,287

The Company has made certain preliminary fair value adjustments based on information reviewed through September 30, 2016. Significant preliminary fair value adjustments are noted as follows:

(a) The preliminary fair value of premium and related receivables approximated their historical cost, with the exception of the risk corridor receivable associated with the Health Insurance Marketplace. The fair value of the risk corridor receivable was estimated at $9 million.

(b) The identifiable intangible assets acquired are to be measured at fair value as of the completion of the acquisition. The 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 preliminary fair value of intangibles to be $1.5 billion with a weighted average life of 10 years. The Company expects the identifiable intangible assets to include purchased contract rights, provider contracts, trade names and developed technology. The Company is still in the process of finalizing its intangible valuation.

(c) Accounts payable and accrued expenses includes approximately $285 million related to premium deficiency reserves based on cost trends existing prior to the acquisition date. The premium deficiency reserves are primarily associated with losses in the individual commercial business, largely in California, unfavorable performance in the Arizona commercial business as well as unfavorable performance in the Medicare business primarily in Oregon and Arizona. The premium deficiency reserve for the individual PPO commercial contracts in California includes anticipated future losses in 2016 associated with substance abuse rehabilitation claims. During the third quarter, the Company lowered the premium deficiency reserve by $15 million, reflecting its revised estimate of substance abuse cost trends.

(d) The preliminary deferred tax liabilities are presented net of $526 million of deferred tax assets.

(e) Debt is required to be measured at fair value under the acquisition method of accounting. The fair value of Health Net's $400 million Senior Notes assumed in the acquisition was $418 million. The $18 million increase will be amortized as a reduction to interest expense over the remaining life of the debt.

(f) The acquisition resulted in $3.9 billion of goodwill related primarily to buyer specific synergies expected from the acquisition and the assembled workforce of Health Net. This goodwill is not deductible for income tax purposes. The assignment of goodwill to the Company's respective segments has not been completed at this time.    

Schedule of Unaudited Pro Forma Financial Information

The following table presents supplemental pro forma information for the three and nine months ended September 30, 2015 ($ in millions, except per share data).

	Three Months Ended September 30, 2015		Nine Months Ended September 30, 2015
Total revenues	$	9,960	$	28,617
Net earnings attributable to Centene Corporation	$	85	$	215
Diluted earnings per share	$	0.49	$	1.25

Restructuring Related Charges

Changes in the restructuring liability for the nine months ended September 30, 2016 were as follows ($ in millions):

	September 30, 2016
	Employee Termination Costs			Stock Based Compensation			Total
Total accrued restructuring costs as of December 31, 2015	$	—		$	—		$	—
Charges incurred	39			40			79
Paid/settled	(25		)	(40		)	(65		)
Total accrued restructuring costs as of September 30, 2016	$	14		$	—		$	14

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Short term and Long term Investments, Restricted Deposits (Tables)

9 Months Ended

Sep. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Short-Term and Long-Term Investments and Restricted Deposits by Investment Type

Short term and long term investments and restricted deposits by investment type consist of the following ($ in millions):

	September 30, 2016									December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	288	$	2	$	—		$	290	$	431	$	—	$	(2	)	$	429
Corporate securities	1,915		30		(2		)	1,943		859		2		(8		)	853
Restricted certificates of deposit	6		—		—			6		5		—		—			5
Restricted cash equivalents	70		—		—			70		78		—		—			78
Municipal securities	1,638		24		(1		)	1,661		496		2		(1		)	497
Asset-backed securities	289		2		—			291		163		—		(1		)	162
Residential mortgage-backed securities	215		3		(1		)	217		66		1		—			67
Commercial mortgage-backed securities	341		15		(1		)	355		40		—		—			40
Cost and equity method investments	162		—		—			162		71		—		—			71
Life insurance contracts	116		—		—			116		16		—		—			16
Total	$	5,040	$	76	$	(5	)	$	5,111	$	2,225	$	5	$	(12	)	$	2,218

Fair Value of Available-For-Sale Investments With Gross Unrealized Losses by Investment Type and Length of Time

The fair value of available-for-sale investments 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):

	September 30, 2016										December 31, 2015
	Less Than 12 Months					12 Months or More					Less Than 12 Months					12 Months or More
	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	—		$	4	$	—		$	2	$	(2	)	$	294	$	—		$	14
Corporate securities	(1		)	309		(1		)	80		(6		)	561		(2		)	41
Municipal securities	(1		)	231		—			32		(1		)	208		—			5
Asset-backed securities	—			29		—			21		(1		)	121		—			8
Residential mortgage-backed securities	(1		)	45		—			—		—			30		—			—
Commercial mortgage-backed securities	(1		)	119		—			1		—			34		—			—
Total	$	(4	)	$	737	$	(1	)	$	136	$	(10	)	$	1,248	$	(2	)	$	68

Contractual Maturities of Short-Term and Long-Term Investments and Restricted Deposits

The contractual maturities of short term and long term investments and restricted deposits are as follows ($ in millions):

	September 30, 2016								December 31, 2015
	Investments				Restricted Deposits				Investments				Restricted Deposits
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	406	$	406	$	122	$	123	$	176	$	176	$	93	$	93
One year through five years	1,978		2,000		14		14		1,662		1,654		22		22
Five years through ten years	1,098		1,116		—		—		267		268		—		—
Greater than ten years	577		589		—		—		5		5		—		—
Asset-backed securities	845		863		—		—		—		—		—		—
Total	$	4,904	$	4,974	$	136	$	137	$	2,110	$	2,103	$	115	$	115

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements by Level for Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes fair value measurements by level at September 30, 2016, for assets and liabilities measured at fair value on a recurring basis ($ in millions):  

	Level I		Level II		Level III		Total
Assets
Cash and cash equivalents	$	2,982	$	—	$	—	$	2,982
Investments available for sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	215	$	14	$	—	$	229
Corporate securities	—		1,943		—		1,943
Municipal securities	—		1,661		—		1,661
Asset-backed securities	—		291		—		291
Residential mortgage-backed securities	—		217		—		217
Commercial mortgage-backed securities	—		355		—		355
Total investments	$	215	$	4,481	$	—	$	4,696
Restricted deposits available for sale:
Cash and cash equivalents	$	70	$	—	$	—	$	70
Certificates of deposit	6		—		—		6
U.S. Treasury securities and obligations of U.S. government corporations and agencies	61		—		—		61
Total restricted deposits	$	137	$	—	$	—	$	137
Other long term assets: Interest rate swap agreements	$	—	$	25	$	—	$	25
Total assets at fair value	$	3,334	$	4,506	$	—	$	7,840

The following table summarizes fair value measurements by level at December 31, 2015, for assets and liabilities measured at fair value on a recurring basis ($ in millions): 

	Level I		Level II		Level III		Total
Assets
Cash and cash equivalents	$	1,760	$	—	$	—	$	1,760
Investments available for sale:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	325	$	72	$	—	$	397
Corporate securities	—		853		—		853
Municipal securities	—		497		—		497
Asset-backed securities	—		162		—		162
Residential mortgage-backed securities	—		67		—		67
Commercial mortgage-backed securities	—		40		—		40
Total investments	$	325	$	1,691	$	—	$	2,016
Restricted deposits available for sale:
Cash and cash equivalents	$	78	$	—	$	—	$	78
Certificates of deposit	5		—		—		5
U.S. Treasury securities and obligations of U.S. government corporations and agencies	32		—		—		32
Total restricted deposits	$	115	$	—	$	—	$	115
Other long term assets:
Interest rate swap agreements	$	—	$	11	$	—	$	11
Total assets at fair value	$	2,200	$	1,702	$	—	$	3,902
Liabilities
Other long term liabilities:
Interest rate swap agreements	$	—	$	2	$	—	$	2
Total liabilities at fair value	$	—	$	2	$	—	$	2

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Affordable Care Act (Tables)

9 Months Ended

Sep. 30, 2016

Affordable Care Act [Abstract]

Schedule of Receivables (Payables) Related to the Affordable Care Act Programs

The Company's receivables (payables) for each of these programs are as follows ($ in millions):

	September 30, 2016			December 31, 2015
Risk adjustment	$	(294	)	$	(108	)
Reinsurance	101			24
Risk corridor	—			(4		)
Minimum medical loss ratio	(18		)	(15		)

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Debt (Tables)

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Schedule of Debt

Debt consists of the following ($ in millions):

	September 30, 2016			December 31, 2015
$425 million 5.75% Senior notes, due June 1, 2017	$	426		$	428
$400 million 6.375% Senior notes, due June 1, 2017	411			—
$1,400 million 5.625% Senior notes, due February 15, 2021	1,400			—
$1,000 million 4.75% Senior notes, due May 15, 2022	1,008			500
$1,000 million 6.125% Senior notes, due February 15, 2024	1,000			—
Fair value of interest rate swap agreements	25			9
Total senior notes	4,270			937
Revolving credit agreement	300			225
Mortgage notes payable	65			67
Capital leases and other	18			6
Debt issuance costs	(64		)	(14		)
Total debt	4,589			1,221
Less current portion	(845		)	(5		)
Long term debt	$	3,744		$	1,216

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2016

Earnings Per Share [Abstract]

Calculation of Basic and Diluted Net Earnings Per Common Share

The following table sets forth the calculation of basic and diluted net earnings per common share ($ in millions, except per share data):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2016			2015		2016			2015
Earnings attributable to Centene Corporation:
Earnings from continuing operations, net of tax	$	146		$	92	$	300		$	244
Discontinued operations, net of tax	(1		)	1		(3		)	—
Net earnings	$	145		$	93	$	297		$	244
Shares used in computing per share amounts:
Weighted average number of common shares outstanding	170,774,587			119,121,524		155,680,769			118,970,853
Common stock equivalents (as determined by applying the treasury stock method)	3,537,829			4,010,286		3,279,299			3,933,623
Weighted average number of common shares and potential dilutive common shares outstanding	174,312,416			123,131,810		158,960,068			122,904,476
Net earnings per common share attributable to Centene Corporation:
Basic:
Continuing operations	$	0.85		$	0.77	$	1.93		$	2.05
Discontinued operations	—			0.01		(0.02		)	—
Basic earnings per common share	$	0.85		$	0.78	$	1.91		$	2.05
Diluted:
Continuing operations	$	0.84		$	0.75	$	1.89		$	1.99
Discontinued operations	(0.01		)	0.01		(0.02		)	—
Diluted earnings per common share	$	0.83		$	0.76	$	1.87		$	1.99

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

Segment Information

Segment information for the three months ended September 30, 2016, follows ($ in millions):

	Managed Care		Specialty Services		Eliminations			Consolidated Total
Total revenues from external customers	$	10,010	$	836	$	—		$	10,846
Total revenues from internal customers	55		1,525		(1,580		)	—
Total revenues	$	10,065	$	2,361	$	(1,580	)	$	10,846
Earnings from operations	$	304	$	38	$	—		$	342

Segment information for the three months ended September 30, 2015, follows ($ in millions):

	Managed Care		Specialty Services		Eliminations			Consolidated Total
Total revenues from external customers	$	5,278	$	543	$	—		$	5,821
Total revenues from internal customers	23		1,274		(1,297		)	—
Total revenues	$	5,301	$	1,817	$	(1,297	)	$	5,821
Earnings from operations	$	138	$	45	$	—		$	183

Segment information for the nine months ended September 30, 2016, follows ($ in millions):

	Managed Care		Specialty Services		Eliminations			Consolidated Total
Total revenues from external customers	$	26,439	$	2,257	$	—		$	28,696
Total revenues from internal customers	143		4,384		(4,527		)	—
Total revenues	$	26,582	$	6,641	$	(4,527	)	$	28,696
Earnings from operations	$	618	$	121	$	—		$	739

Segment information for the nine months ended September 30, 2015, follows ($ in millions):

	Managed Care		Specialty Services		Eliminations			Consolidated Total
Total revenues from external customers	$	14,857	$	1,601	$	—		$	16,458
Total revenues from internal customers	73		3,525		(3,598		)	—
Total revenues	$	14,930	$	5,126	$	(3,598	)	$	16,458
Earnings from operations	$	358	$	127	$	—		$	485

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Basis of Presentation (Details) $ in Millions	Mar. 24, 2016 USD ($)
Health Net, Inc.
Business Acquisition [Line Items]
Business combination, consideration transferred, including assumed debt	$ 5,990.0

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Health Net (Narrative) (Details) $ / shares in Units, $ in Millions		3 Months Ended	6 Months Ended	9 Months Ended
	Mar. 24, 2016 USD ($) $ / shares shares	Sep. 30, 2016 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2016 USD ($)
Business Acquisition [Line Items]
Centene's stock price (in dollars per share) | $ / shares	$ 62.7
Health Net, Inc.
Business Acquisition [Line Items]
Business combination, consideration transferred, including assumed debt	$ 5,990.0
Assumption of outstanding debt	703.0
Consideration transferred	5,287.0
Common stock issued for acquisition	3,038.0
Payments to acquire business	2,247.0
Fair value adjustment to stock based compensation	$ 2.0
Share exchange, per share	0.622
Cash paid with each share (in dollars per share) | $ / shares	$ 28.25
Common stock issued for acquisitions (in shares) | shares	48,449,444
Goodwill increase			$ 275.0
Revenue of acquiree since acquisition date, actual		$ 3,981.0		$ 8,604.0
Health Net, Inc. | General and Administrative Expense
Business Acquisition [Line Items]
Acquisition related costs		$ 10.0		$ 224.0

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Health Net (Schedule of Recognized Identified Assets Acquired and Liabilities Assumed) (Details) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
	Mar. 24, 2016	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Business Acquisition [Line Items]
Goodwill		$ 4,730		$ 4,730		$ 842
Health Net, Inc.
Business Acquisition [Line Items]
Cash and cash equivalents	$ 1,401
Premium and related receivables	1,258
Short term investments	74
Other current assets	448
Long term investments	2,037
Restricted deposits	30
Property, software and equipment, net	41
Intangible assets, net	1,500
Other long term assets	136
Total assets acquired	6,925
Medical claims liability	1,453
Borrowings under revolving credit facility	285
Accounts payable and accrued expenses	2,033
Return of premium payable	435
Unearned revenue	130
Long term deferred tax liabilities	330
Long term debt	418
Other long term liabilities	430
Total liabilities assumed	5,514
Total identifiable net assets	1,411
Goodwill	3,876
Total assets acquired and liabilities assumed	5,287
Fair value of the risk corridor receivable	$ 9
Weighted average life of intangibles	10 years
Premium deficiency reserves	$ 285	15		15
Deferred tax assets	526
Revenue of acquiree since acquisition date, actual		$ 3,981		8,604
Unaudited pro forma total revenues			$ 9,960	$ 32,369	$ 28,617
Health Net, Inc. | Senior Notes
Business Acquisition [Line Items]
Long term debt	418
Face amount of senior notes	400
Unamortized premium	$ 18

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Health Net (Schedule of Unaudited Pro Forma Financial Information) (Details) - Health Net, Inc. - USD ($) $ / shares in Units, $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Business Acquisition [Line Items]
Total revenues	$ 9,960	$ 32,369	$ 28,617
Net earnings attributable to Centene Corporation	$ 85		$ 215
Diluted earnings per share (in dollars per share)	$ 0.49		$ 1.25

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Health Net (Restructuring Related Charges) (Details) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2016 USD ($)
General and Administrative Expense
Accrued Restructuring Cost [Roll Forward]
Total accrued restructuring costs as of beginning of period		$ 0
Charges incurred		79
Paid/settled		(65)
Total accrued restructuring costs as of end of period	$ 14	14
Employee Termination Costs
Accrued Restructuring Cost [Roll Forward]
Employee termination costs	50	50
Employee Termination Costs | General and Administrative Expense
Accrued Restructuring Cost [Roll Forward]
Total accrued restructuring costs as of beginning of period		0
Charges incurred		39
Paid/settled		(25)
Total accrued restructuring costs as of end of period	14	14
Employee Termination Costs | General and Administrative Expense | Managed Care
Accrued Restructuring Cost [Roll Forward]
Charges incurred	7	39
Stock Based Compensation
Accrued Restructuring Cost [Roll Forward]
Employee termination costs	44	44
Stock Based Compensation | General and Administrative Expense
Accrued Restructuring Cost [Roll Forward]
Total accrued restructuring costs as of beginning of period		0
Charges incurred		40
Paid/settled		(40)
Total accrued restructuring costs as of end of period	0	0
Stock Based Compensation | General and Administrative Expense | Managed Care
Accrued Restructuring Cost [Roll Forward]
Charges incurred	$ 2	$ 40

XML

Health Net (Commitments) (Details)	9 Months Ended
	Sep. 30, 2016 USD ($) employee
Long Term Investment, California Organized Investment Network
Other Commitments [Line Items]
Committed to undertakings	$ 30,000,000
Committed to undertakings, term	5 years
Long Term Investment, Service Center in California
Other Commitments [Line Items]
Committed to undertakings	$ 200,000,000
Committed to undertakings, term	10 years
Long Term Investment, Improvement in Enrollee Health, Locally Based Consumer Assistance, and Health Care Delivery System
Other Commitments [Line Items]
Committed to undertakings	$ 65,000,000
Long Term Investment, Improvement in Enrollee Health, Locally Based Consumer Assistance, and Health Care Delivery System | General and Administrative Expense
Other Commitments [Line Items]
Committed to undertakings, expensed	61,000,000
Long Term Investment, Improvement in Enrollee Health
Other Commitments [Line Items]
Committed to undertakings	$ 10,000,000
Committed to undertakings, term	10 years
Long Term Investment, Support Locally Based Consumer Assistance
Other Commitments [Line Items]
Committed to undertakings	$ 5,000,000
Committed to undertakings, term	5 years
Long Term Investment, Strengthen the Health Care Delivery System
Other Commitments [Line Items]
Committed to undertakings	$ 50,000,000
Committed to undertakings, term	5 years
Long Term Investment, Vehicles Supporting California’s Health Care Infrastructure
Other Commitments [Line Items]
Committed to undertakings	$ 75,000,000
Minimum | Long Term Investment, Service Center in California
Other Commitments [Line Items]
Commitment to employ, employees | employee	300

XML

Short term and Long term Investments, Restricted Deposits (By Investment Type) (Details) - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Schedule Of Investments And Restricted Deposits By Type [Line Items]
Amortized Cost	$ 5,040	$ 2,225
Gross Unrealized Gains	76	5
Gross Unrealized Losses	(5)	(12)
Fair Value	5,111	2,218
U.S. Treasury securities and obligations of U.S. government corporations and agencies
Schedule Of Investments And Restricted Deposits By Type [Line Items]
Amortized Cost	288	431
Gross Unrealized Gains	2	0
Gross Unrealized Losses	0	(2)
Fair Value	290	429
Corporate securities
Schedule Of Investments And Restricted Deposits By Type [Line Items]
Amortized Cost	1,915	859
Gross Unrealized Gains	30	2
Gross Unrealized Losses	(2)	(8)
Fair Value	1,943	853
Restricted certificates of deposit
Schedule Of Investments And Restricted Deposits By Type [Line Items]
Amortized Cost	6	5
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	6	5
Restricted cash equivalents
Schedule Of Investments And Restricted Deposits By Type [Line Items]
Amortized Cost	70	78
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	70	78
Municipal securities
Schedule Of Investments And Restricted Deposits By Type [Line Items]
Amortized Cost	1,638	496
Gross Unrealized Gains	24	2
Gross Unrealized Losses	(1)	(1)
Fair Value	1,661	497
Asset-backed securities
Schedule Of Investments And Restricted Deposits By Type [Line Items]
Amortized Cost	289	163
Gross Unrealized Gains	2	0
Gross Unrealized Losses	0	(1)
Fair Value	291	162
Residential mortgage-backed securities
Schedule Of Investments And Restricted Deposits By Type [Line Items]
Amortized Cost	215	66
Gross Unrealized Gains	3	1
Gross Unrealized Losses	(1)	0
Fair Value	217	67
Commercial mortgage-backed securities
Schedule Of Investments And Restricted Deposits By Type [Line Items]
Amortized Cost	341	40
Gross Unrealized Gains	15	0
Gross Unrealized Losses	(1)	0
Fair Value	355	40
Cost and equity method investments
Schedule Of Investments And Restricted Deposits By Type [Line Items]
Amortized Cost	162	71
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	162	71
Life insurance contracts
Schedule Of Investments And Restricted Deposits By Type [Line Items]
Amortized Cost	116	16
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	$ 116	$ 16

XML

Short term and Long term Investments, Restricted Deposits (Narrative) (Details) $ in Millions	1 Months Ended	9 Months Ended
	Jan. 31, 2016 USD ($) shares	Sep. 30, 2016 position
Schedule Of Investments And Restricted Deposits By Type [Line Items]
Investments recorded at fair value that carry rating of AA, weighted average (in years)		3 years 3 months 18 days
Percentage of acquisition	19.00%
New stock issued (in shares) | shares	1,144,462
Common stock issued for acquisition | $	$ 68
Positions from which gross unrealized losses were generated		569
Total unrealized investment positions		2,731
Rated Securities | External Credit Rating, Investment Grade
Schedule Of Investments And Restricted Deposits By Type [Line Items]
Percentage of investments in rated securities carry an investment grade rating by S&P and Moody's		95.00%

XML

Short term and Long term Investments, Restricted Deposits (Fair Value of Available-For-Sale Investments with Gross Unrealized Losses by Investment Type and Length of Time) (Details) - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Unrealized Losses
Less Than 12 Months	$ (4)	$ (10)
12 Months or More	(1)	(2)
Fair Value
Less Than 12 Months	737	1,248
12 Months or More	136	68
U.S. Treasury securities and obligations of U.S. government corporations and agencies
Unrealized Losses
Less Than 12 Months	0	(2)
12 Months or More	0	0
Fair Value
Less Than 12 Months	4	294
12 Months or More	2	14
Corporate securities
Unrealized Losses
Less Than 12 Months	(1)	(6)
12 Months or More	(1)	(2)
Fair Value
Less Than 12 Months	309	561
12 Months or More	80	41
Municipal securities
Unrealized Losses
Less Than 12 Months	(1)	(1)
12 Months or More	0	0
Fair Value
Less Than 12 Months	231	208
12 Months or More	32	5
Asset-backed securities
Unrealized Losses
Less Than 12 Months	0	(1)
12 Months or More	0	0
Fair Value
Less Than 12 Months	29	121
12 Months or More	21	8
Residential mortgage-backed securities
Unrealized Losses
Less Than 12 Months	(1)	0
12 Months or More	0	0
Fair Value
Less Than 12 Months	45	30
12 Months or More	0	0
Commercial mortgage-backed securities
Unrealized Losses
Less Than 12 Months	(1)	0
12 Months or More	0	0
Fair Value
Less Than 12 Months	119	34
12 Months or More	$ 1	$ 0

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Short term and Long term Investments, Restricted Deposits (Contractual Maturities of Short-Term and Long-Term Investments and Restricted Deposits) (Details) - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Investments
Schedule of Available-for-sale Securities [Line Items]
Amortized cost, one year or less	$ 406	$ 176
Amortized cost, one year through five years	1,978	1,662
Amortized cost, five years through ten years	1,098	267
Amortized cost, greater than ten years	577	5
Amortized cost, asset-backed securities	845	0
Amortized cost, total	4,904	2,110
Fair value, one year or less	406	176
Fair value, one year through five years	2,000	1,654
Fair value, five years through ten years	1,116	268
Fair value, greater than ten years	589	5
Fair value, asset-backed securities	863	0
Fair value, total	4,974	2,103
Restricted Deposits
Schedule of Available-for-sale Securities [Line Items]
Amortized cost, one year or less	122	93
Amortized cost, one year through five years	14	22
Amortized cost, five years through ten years	0	0
Amortized cost, greater than ten years	0	0
Amortized cost, asset-backed securities	0	0
Amortized cost, total	136	115
Fair value, one year or less	123	93
Fair value, one year through five years	14	22
Fair value, five years through ten years	0	0
Fair value, greater than ten years	0	0
Fair value, asset-backed securities	0	0
Fair value, total	$ 137	$ 115

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Fair Value Measurements (Fair Value Measurements by Level for Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	$ 2,982	$ 1,760
U.S. Treasury securities and obligations of U.S. government corporations and agencies	229	397
Corporate securities	1,943	853
Municipal securities	1,661	497
Asset-backed securities	291	162
Total investments	4,696	2,016
Cash and cash equivalents	70	78
Certificates of deposit	6	5
U.S. Treasury securities and obligations of U.S. government corporations and agencies	61	32
Total restricted deposits	137	115
Interest rate swap agreements	25	11
Total assets at fair value	7,840	3,902
Interest rate swap agreements		2
Total liabilities at fair value		2
Residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage-backed securities	217	67
Commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage-backed securities	355	40
Level I
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	2,982	1,760
U.S. Treasury securities and obligations of U.S. government corporations and agencies	215	325
Corporate securities	0	0
Municipal securities	0	0
Asset-backed securities	0	0
Total investments	215	325
Cash and cash equivalents	70	78
Certificates of deposit	6	5
U.S. Treasury securities and obligations of U.S. government corporations and agencies	61	32
Total restricted deposits	137	115
Interest rate swap agreements	0	0
Total assets at fair value	3,334	2,200
Interest rate swap agreements		0
Total liabilities at fair value		0
Level I | Residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage-backed securities	0	0
Level I | Commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage-backed securities	0	0
Level II
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	0	0
U.S. Treasury securities and obligations of U.S. government corporations and agencies	14	72
Corporate securities	1,943	853
Municipal securities	1,661	497
Asset-backed securities	291	162
Total investments	4,481	1,691
Cash and cash equivalents	0	0
Certificates of deposit	0	0
U.S. Treasury securities and obligations of U.S. government corporations and agencies	0	0
Total restricted deposits	0	0
Interest rate swap agreements	25	11
Total assets at fair value	4,506	1,702
Interest rate swap agreements		2
Total liabilities at fair value		2
Level II | Residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage-backed securities	217	67
Level II | Commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage-backed securities	355	40
Level III
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	0	0
U.S. Treasury securities and obligations of U.S. government corporations and agencies	0	0
Corporate securities	0	0
Municipal securities	0	0
Asset-backed securities	0	0
Total investments	0	0
Cash and cash equivalents	0	0
Certificates of deposit	0	0
U.S. Treasury securities and obligations of U.S. government corporations and agencies	0	0
Total restricted deposits	0	0
Interest rate swap agreements	0	0
Total assets at fair value	0	0
Interest rate swap agreements		0
Total liabilities at fair value		0
Level III | Residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage-backed securities	0	0
Level III | Commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Mortgage-backed securities	$ 0	$ 0

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Fair Value Measurements (Narrative) (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Fair Value Disclosures [Abstract]
Transfers from Level I to Level II	$ 0
Transfers from Level II to Level I	46,000,000
Life insurance contracts and other non-majority owned investments, fair value	$ 278,000,000	$ 87,000,000

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Affordable Care Act (Details) - USD ($) $ in Millions	3 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015
Affordable Care Act [Abstract]
Pre-tax benefit		$ 70
Reduction in pre-tax benefit	$ 19
Risk adjustment	(294)		$ (108)
Reinsurance	101		24
Risk corridor	0		(4)
Minimum medical loss ratio	$ (18)		$ (15)

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Debt (Schedule of Debt) (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016	Mar. 24, 2016	Feb. 29, 2016	Dec. 31, 2015	Apr. 30, 2014
Debt Instrument [Line Items]
Fair value of interest rate swap agreements	$ 25,000,000				$ 9,000,000
Total senior notes	4,270,000,000				937,000,000
Mortgage notes payable	65,000,000				67,000,000
Capital leases and other	18,000,000				6,000,000
Debt issuance costs	(64,000,000)				(14,000,000)
Total debt	4,589,000,000				1,221,000,000
Less current portion	(845,000,000)				(5,000,000)
Long term debt	3,744,000,000				1,216,000,000
Revolving credit agreement
Debt Instrument [Line Items]
Revolving credit agreement	300,000,000				225,000,000
Senior Notes | $425 million 5.75% Senior notes, due June 1, 2017
Debt Instrument [Line Items]
Debt, face amount	$ 425,000,000
Interest rate, stated	5.75%
Senior notes	$ 426,000,000				428,000,000
Senior Notes | $400 million 6.375% Senior notes, due June 1, 2017
Debt Instrument [Line Items]
Debt, face amount	$ 400,000,000		$ 400,000,000
Interest rate, stated	6.375%		6.375%
Senior notes	$ 411,000,000				0
Senior Notes | $1,400 million 5.625% Senior notes, due February 15, 2021
Debt Instrument [Line Items]
Debt, face amount	$ 1,400,000,000			$ 1,400,000,000
Interest rate, stated	5.625%			5.625%
Senior notes	$ 1,400,000,000				0
Senior Notes | $1,000 million 4.75% Senior notes, due May 15, 2022
Debt Instrument [Line Items]
Debt, face amount	$ 1,000,000,000					$ 500,000,000
Interest rate, stated	4.75%	4.75%				4.75%
Senior notes	$ 1,008,000,000				500,000,000
Senior Notes | $1,000 million 6.125% Senior notes, due February 15, 2024
Debt Instrument [Line Items]
Debt, face amount	$ 1,000,000,000			$ 1,000,000,000
Interest rate, stated	6.125%			6.125%
Senior notes	$ 1,000,000,000				$ 0

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Debt (Senior Notes) (Details) - USD ($)	1 Months Ended
	Jun. 30, 2016	Sep. 30, 2016	Mar. 24, 2016	Mar. 23, 2016	Feb. 29, 2016	Apr. 30, 2014
Health Net, Inc.
Debt Instrument [Line Items]
Long term debt			$ 418,000,000
LIBOR plus 4.22%, Interest Rate Swap
Debt Instrument [Line Items]
Derivative, notional amount					$ 600,000,000
Variable rate of swap (percent)					4.22%
LIBOR plus 4.44%, Interest Rate Swap
Debt Instrument [Line Items]
Derivative, notional amount					$ 1,000,000,000
Variable rate of swap (percent)					4.44%
Revolving credit agreement
Debt Instrument [Line Items]
Maximum borrowing capacity			1,000,000,000	$ 500,000,000
Senior Notes | Health Net, Inc.
Debt Instrument [Line Items]
Long term debt			418,000,000
Senior Notes | $1,400 million 5.625% Senior notes, due February 15, 2021
Debt Instrument [Line Items]
Debt, face amount		$ 1,400,000,000			$ 1,400,000,000
Interest rate, stated		5.625%			5.625%
Senior Notes | $1,000 million 6.125% Senior notes, due February 15, 2024
Debt Instrument [Line Items]
Debt, face amount		$ 1,000,000,000			$ 1,000,000,000
Interest rate, stated		6.125%			6.125%
Senior Notes | $400 million 6.375% Senior notes, due June 1, 2017
Debt Instrument [Line Items]
Debt, face amount		$ 400,000,000	$ 400,000,000
Interest rate, stated		6.375%	6.375%
Senior Notes | $1,000 million 4.75% Senior notes, due May 15, 2022
Debt Instrument [Line Items]
Debt, face amount		$ 1,000,000,000				$ 500,000,000
Interest rate, stated	4.75%	4.75%				4.75%
Effective yield on add-on notes (percent)	4.41%
Add-on notes, face amount	$ 500,000,000
Senior Notes | $425 million 5.75% Senior notes, due June 1, 2017
Debt Instrument [Line Items]
Debt, face amount		$ 425,000,000
Interest rate, stated		5.75%

XML

Debt (Interest Rate Swaps) (Details) - USD ($)	Sep. 30, 2016	Feb. 29, 2016
Interest Rate Swap
Debt Instrument [Line Items]
Notional amount of interest rate swap agreements	$ 2,350,000,000
Average variable rate, interest rate swap agreements (percent)	3.88%
Weighted average rate, interest rate swap agreements (percent)	4.69%
June 1, 2017 Expiration, Interest Rate Swap
Debt Instrument [Line Items]
Notional amount of interest rate swap agreements	$ 250,000,000
LIBOR plus 4.22%, Interest Rate Swap
Debt Instrument [Line Items]
Notional amount of interest rate swap agreements		$ 600,000,000
May 15, 2022 Expiration, Interest Rate Swap
Debt Instrument [Line Items]
Notional amount of interest rate swap agreements	$ 500,000,000
LIBOR plus 4.44%, Interest Rate Swap
Debt Instrument [Line Items]
Notional amount of interest rate swap agreements		$ 1,000,000,000

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Debt (Revolving Credit Agreement) (Details) - Revolving credit agreement		9 Months Ended
	Mar. 24, 2016 USD ($)	Sep. 30, 2016 USD ($)	Mar. 23, 2016 USD ($)	Dec. 31, 2015 USD ($)
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 1,000,000,000		$ 500,000,000
Revolving credit agreement		$ 300,000,000		$ 225,000,000
Weighted average interest rate (percent)		4.25%
Ratio of debt to EBITDA, current year		3.5
Ratio of debt to EBITDA, after current year		3.0
Line of Credit
Debt Instrument [Line Items]
Termination of revolving credit facility	$ 285,000,000

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Debt (Letters of Credit & Surety Bonds) (Details) € in Millions, $ in Millions	Sep. 30, 2016 USD ($)	Sep. 30, 2016 EUR (€)
Surety Bond
Debt Instrument [Line Items]
Surety bonds	$ 370
Letter of Credit
Debt Instrument [Line Items]
Borrowings outstanding	$ 43
Letters of credit, effective yield (percent)	1.44%	1.44%
Letter of Credit | Ribera Salud
Debt Instrument [Line Items]
Borrowings outstanding	$ 48	€ 42

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Stockholders' Equity (Details) - USD ($) $ in Millions		1 Months Ended
	Mar. 24, 2016	Jan. 31, 2016
Business Acquisition [Line Items]
Percentage of acquisition		19.00%
New stock issued (in shares)		1,144,462
Health Net, Inc.
Business Acquisition [Line Items]
Common stock issued for acquisitions (in shares)	48,449,444
Common stock issued for acquisition	$ 3,038
Payments to acquire business	2,247
Fair value adjustment to stock based compensation	$ 2

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Earnings attributable to Centene Corporation:
Earnings from continuing operations, net of tax	$ 146	$ 92	$ 300	$ 244
Discontinued operations, net of tax	(1)	1	(3)	0
Net earnings	$ 145	$ 93	$ 297	$ 244
Shares used in computing per share amounts:
Weighted average number of common shares outstanding (in shares)	170,774,587	119,121,524	155,680,769	118,970,853
Common stock equivalents (as determined by applying the treasury stock method) (in shares)	3,537,829	4,010,286	3,279,299	3,933,623
Weighted average number of common shares and potential dilutive common shares outstanding (in shares)	174,312,416	123,131,810	158,960,068	122,904,476
Basic:
Continuing operations (in dollars per share)	$ 0.85	$ 0.77	$ 1.93	$ 2.05
Discontinued operations (in dollars per share)	0.00	0.01	(0.02)	0.00
Basic earnings per common share (in dollars per share)	0.85	0.78	1.91	2.05
Diluted:
Continuing operations (in dollars per share)	0.84	0.75	1.89	1.99
Discontinued operations (in dollars per share)	(0.01)	0.01	(0.02)	0.00
Diluted earnings per common share (in dollars per share)	$ 0.83	$ 0.76	$ 1.87	$ 1.99
Anti-dilutive restricted stock and restricted stock units excluded from the calculation of diluted earnings per common share (in shares)	51,593	28,716	48,380	84,644

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Segment Information (Details) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) segment	Sep. 30, 2015 USD ($)
Segment Reporting [Abstract]
Number of operating segments | segment			2
Segment Reporting Information [Line Items]
Total revenues	$ 10,846	$ 5,821	$ 28,696	$ 16,458
Earnings from operations	342	183	739	485
Managed Care
Segment Reporting Information [Line Items]
Total revenues	10,010	5,278	26,439	14,857
Earnings from operations	304	138	618	358
Specialty Services
Segment Reporting Information [Line Items]
Total revenues	836	543	2,257	1,601
Earnings from operations	38	45	121	127
Operating Segments | Managed Care
Segment Reporting Information [Line Items]
Total revenues	10,065	5,301	26,582	14,930
Operating Segments | Specialty Services
Segment Reporting Information [Line Items]
Total revenues	2,361	1,817	6,641	5,126
Eliminations
Segment Reporting Information [Line Items]
Total revenues	(1,580)	(1,297)	(4,527)	(3,598)
Eliminations | Managed Care
Segment Reporting Information [Line Items]
Total revenues	55	23	143	73
Eliminations | Specialty Services
Segment Reporting Information [Line Items]
Total revenues	$ 1,525	$ 1,274	$ 4,384	$ 3,525

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Contingencies (Details) - USD ($) $ in Millions		9 Months Ended
	Mar. 09, 2015	Sep. 30, 2016
Commitments and Contingencies Disclosure [Abstract]
Kentucky Spirit performance bond		$ 25
Loss Contingencies [Line Items]
Commonwealth of Kentucky alleged increased program costs	$ 40
Secretary of the Kentucky Cabinet for Health and Family Services determination letter damages prejudgment interest rate (percent)	8.00%
Commonwealth of Kentucky, expenditures due to departure | Minimum
Loss Contingencies [Line Items]
Commonwealth of Kentucky alleged increased program costs		28
Commonwealth of Kentucky, expenditures due to departure | Maximum
Loss Contingencies [Line Items]
Commonwealth of Kentucky alleged increased program costs		40
Commonwealth of Kentucky, CMS expenditures | Minimum
Loss Contingencies [Line Items]
Commonwealth of Kentucky alleged increased program costs		92
Commonwealth of Kentucky, CMS expenditures | Maximum
Loss Contingencies [Line Items]
Commonwealth of Kentucky alleged increased program costs		$ 134