Business Combinations

3 Months Ended

Mar. 31, 2014

Business Combinations [Abstract]

Business Combinations

Business Combinations

Health Plans Segment

South Carolina. In July 2013, we entered into an agreement with Community Health Solutions of America, Inc. (CHS) to acquire certain assets, including the rights to convert certain of CHS’ Medicaid members covered by South Carolina’s full-risk Medicaid managed care program. The conversion conditions under the agreement were satisfied by January 1, 2014, and on that date such Medicaid members were converted to the managed care program and enrolled with our South Carolina health plan. In January 2014 we made an interim payment of $38.1 million according to the terms of the agreement, which included indemnification withhold funds transferred to restricted investments amounting to $4.6 million. Such indemnification funds will become unrestricted on the one-year anniversary date of the conversion, or January 1, 2015.

Because the number of Medicaid members we would ultimately convert was unknown as of the acquisition date in 2013, we have recorded a contingent consideration liability for such members we expect to enroll through the final purchase price determination date in the second quarter of 2014. We have also recorded a contingent consideration liability for dual-eligible members we may enroll in our Medicare-Medicaid Plan (MMP) implementation in South Carolina. The contingent consideration liability is remeasured to fair value at each quarter until the contingency is resolved, with fair value adjustments, if any, recorded to operations. As of March 31, 2014, the fair value of the contingent consideration liability amounted to $14.7 million. This amount reflects a reduction from the December 31, 2013 balance for the January 2014 payment noted above, and for the fair value adjustment measured as of March 31, 2014. The fair value adjustment resulted in a decrease to the liability of $2.7 million, with a corresponding gain recorded to operations. On April 17, 2014, we paid $11.6 million, including indemnification withhold funds transferred to restricted investments, in satisfaction of the final purchase price determination relating to the converted Medicaid membership.

New Mexico. In August 2013, our New Mexico health plan acquired the Lovelace Community Health Plan’s contract for the state of New Mexico's Medicaid program. In addition to Lovelace's Medicaid members, we also added membership previously covered under New Mexico’s State Coverage Insurance (SCI) program with Lovelace. Effective January 1, 2014, these SCI members were either a) enrolled in New Mexico's Medicaid program, or b) eligible to enroll in New Mexico’s Marketplace.

Because the number of SCI members we would ultimately retain was unknown as of the acquisition date in 2013, we have recorded a contingent consideration liability for such members we expect to enroll through the final purchase price determination date in the second quarter of 2014. As of March 31, 2014, the fair value of this contingent consideration liability amounted to $0.5 million. The fair value adjustment resulted in a decrease to the liability of $1.6 million, with a corresponding gain recorded to operations.