Quarterly report pursuant to Section 13 or 15(d)

Affordable Care Act

v3.5.0.2
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
)