Recent Accounting Changes

3 Months Ended

Mar. 31, 2015

New Accounting Pronouncements And Changes In Accounting Principles [Abstract]

Recent Accounting Pronouncements

Note 2 – Recent Accounting Changes

Simplifying the Presentation of Debt Issuance Costs (Accounting Standards Update (“ASU”) 2015-03).  In April 2015, the Financial Accounting Standards Board (“FASB”) issued guidance to simplify the presentation of debt issuance costs in financial statements. The amendment requires debt issuance costs to be presented as a direct deduction from the associated debt liability, consistent with the presentation of a debt discount. In addition, amortization of discount or premium is reported as interest expense. This amendment is effective beginning January 1, 2016, with early adoption permitted, and shall be applied retrospectively.  The Company is evaluating this guidance to determine any resulting estimated effects on its financial statements.   

Amendments to the Consolidation Analysis (ASU 2015-02). In February 2015, the FASBissued guidance to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability companies and securitization structures.  In addition to reducing the number of consolidation models, the new standard aims to simplify and improve GAAP by placing more emphasis on risk of loss when determining a controlling financial interest.  This new standard is effective beginning January 1, 2016, with early adoption permitted.  The Company is evaluating this guidance to determine any resulting estimated effects on its financial statements.

Revenue from Contracts with Customers (ASU 2014-09). In May 2014, the FASB issued new revenue recognition guidance that will apply to various contracts with customers to provide goods or services, including the Company's non-insurance, administrative services contracts. This new guidance introduces a model that requires companies to estimate and allocate the expected contract revenue among distinct goods or services in the contract based on relative stand-alone selling prices. Revenue is recognized as goods or services are delivered. This new method replaces the current GAAP approach of recognizing revenue that is fixed and determinable primarily based on contract terms. In addition, extensive new disclosures will be required. The Company may choose to adopt these changes through retrospective restatement with or without using certain practical expedients or with a cumulative effect adjustment on adoption. As issued, the new revenue recognition standard would take effect beginning on January 1, 2017; however, in April 2015, the FASB proposed a one-year deferral to January 1, 2018. The Company continues to monitor developing guidance and to evaluateany resulting estimated effects on its financial statements.

Accounting for Health Care Reform's Risk Mitigation Programs. Beginning in 2014, as prescribed by the Patient Protection and Affordable Care Act (referred to as “Health Care Reform”), programs went into effect to reduce the risk for participating health insurance companies selling coverage on the public exchanges.

• A three-year (2014-2016) reinsurance program is designed to provide reimbursement to insurers for high cost individual business sold on or off the public exchanges. The reinsurance entity established by the U.S. Department of Health and Human Services (“HHS”) is funded by a per-customer reinsurance fee assessed on all insurers, HMOs and self-insured group health plans, excluding certain products such as Medicare Advantage and Medicare Part D. Only non-grandfathered individual plans are eligible for recoveries if claims exceed a specified threshold, up to a reinsurance cap. Reinsurance contributions associated with non-grandfathered individual plans are reported as a reduction in premium revenue, and estimated reinsurance recoveries are established with an offsetting reduction in Global Health Care medical costs. Reinsurance fee contributions for other insured business are reported in other operating expenses. Final recoverable amounts are determined and settled with HHS in the year following the policy year.
• A premium stabilization program is comprised of two components: 1) a permanent component that reallocates funds from insurers with lower risk populations to insurers with higher risk populations based on the relative risk scores of participants in non-grandfathered plans in the individual and small group markets, both on and off the exchanges. We estimate our receivable or payable based on the risk of our members compared to the risk of other members in the same state and market, considering data obtained from industry studies; and 2) a temporary (2014-2016) component designed to limit insurer gains and losses by comparing allowable medical costs to a target amount as defined by HHS. This program applies to individual and small group qualified health plans, operating on and off the exchanges. Variances from the target amount exceeding certain thresholds may result in amounts due to or due from HHS.

For the premium stabilization program, the Company records receivables or payables as adjustments to premium revenue based on our year-to-date experience when the amounts are reasonably estimable and collection is reasonably assured. Final revenue adjustments are determined by HHS in the year following the policy year.

Fees Paid to the Federal Government by Health Insurers (ASU 2011-06).Effective January 1, 2014, the Company adopted the FASB's accounting guidance for the health insurance industry assessment (the “tax”) mandated by Health Care Reform. This non-deductible tax is being levied based on a ratio of an insurer's net health insurance premiums written for the previous calendar year compared to the U.S. health insurance industry total. As required by the guidance, the Company reports a liability at the beginning of each year in accounts payable, accrued expenses and other liabilities and a corresponding deferred cost in other assets, including other intangibles based on a preliminary assessment of the full year. The Company recognizes the tax in operating expenses on a straight line basis and reduces the deferred cost correspondingly. Based on industry studies, the Company recorded a liability in accounts payable, accrued expenses and other liabilities in the first quarter of 2015 of approximately $310 million representing an estimate of the fee for 2015. This is compared to a full-year 2014 tax of $238 million. The Company will update this estimate for any adjustment in subsequent quarters. During the first quarter of 2015, approximately $80 million of the deferred cost was recognized in other operating expenses compared with $60 million for the same period in 2014.