HEALTH CARE REFORM

The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010 (which we collectively refer to as the Health Care Reform Law) established risk spreading premium stabilization programs effective January 1, 2014, including a permanent risk adjustment program and temporary risk corridor and reinsurance programs, which we collectively refer to as the 3Rs. The 3Rs, applicable to certain of our commercial medical insurance products, are further discussed in Note 2 to our 2017 Form 10-K. The temporary programs were only applicable for years 2014 through 2016. As a result of our exit from our individual commercial medical business effective January 1, 2018, the permanent risk adjustment program is currently only applicable to our commercial small group health insurance business.

On November 2, 2017, we filed suit against the United States of America in the United States Court of Federal Claims, on behalf of our health plans seeking recovery from the federal government of approximately $611 million in payments under the risk corridor premium stabilization program established under the Health Care Reform Law, for years 2014, 2015 and 2016. Our case has been stayed by the Court, pending resolution of similar cases filed by other insurers.

The accompanying condensed consolidated balance sheets include the following amounts associated with the 3Rs at September 30, 2018 and December 31, 2017.



	September 30, 2018					December 31, 2017
	Risk Adjustment Settlement			Reinsurance Recoverables		Risk Adjustment Settlement			Reinsurance Recoverables
	(in millions)
Premiums receivable	$	68		$	—	$	62		$	—
Other current assets	—			—		—			44
Trade accounts payable and accrued expenses	(40		)	—		(80		)	—
Other long-term assets	—			—		5			—
Total net asset (liability)	$	28		$	—	$	(13	)	$	44

Net payments under the 3Rs were $60 million during the nine months ended September 30, 2018. Net collections were $307 million during the nine months ended September 30, 2017.

In October 2018, we paid the federal government approximately $1.04 billion for our portion of the annual health insurance industry fee attributed to calendar year 2018 in accordance with the Health Care Reform Law. This fee, fixed in amount by law and apportioned to insurance carriers based on market share, is not deductible for tax purposes. Each year on January 1, except for when the fee is suspended, we record a liability for this fee in trade accounts payable and accrued expenses which we carry until the fee is paid. We record a corresponding deferred cost in other current assets in our condensed consolidated financial statements which is amortized ratably to expense over the calendar year. Amortization of the deferred cost was recorded in operating cost expense of approximately $258 million and $778 million for the three and nine months ended September 30, 2018, resulting from the amortization of the 2018 annual health insurance industry fee. The annual health insurance industry fee was suspended for calendar year 2017, and is also, under current law, suspended for calendar year 2019.