CNC
#I think we've obviously gotten a deeper understanding of the Medicare book and I think this question came up in the June Investor Day too, what do we see as the margins for the Medicare Advantage product on a go-forward basis.
And I think we continue to see the opportunity for our standard, if you will, 3% to 5% pretax margins for the Medicare Advantage product.
So some of the dynamic that existed on a legacy basis is what I would call mix, so the proportion of the Medicare business that's in California and there are certain contracts and other things that exist within the California market that would be different as we think about the other markets that we've already indicated we will be expanding into in 2017.
I also think that the ---+ and that's why I commented earlier that I'm glad that we will be adding the medical management systems to some of those products.
Commercial will be the last part of it, but in the Medicaid/Medicare because there's clearly going to be some real benefits from them having the analytical capabilities to improve margins through that data.
Once again, it will take a little longer to get the medical measurement systems in, but as we get those in we expect to have some minimal opportunities to improve it.
I guess I'm confused by your no flowthrough reserve adjustments through the MLR.
Do you mean like prior-period ---+.
Yes, that's right.
Those were opening balance sheet adjustments included in purchase accounting.
I think we've talked historically about the quarterly impact for leap year.
There's additional costs in Q1, so I think our HBR improved, but the biggest reason why our HBR obviously changed is just the acquisition of Health Net and the different mix in the business.
It's hard to hear.
What testing did you say.
That recommendation is just out and so we are tracking that.
I don't believe it is on the formulary in Florida yet, but we can get back to you on that information, but it's a very recent recommendation from CDC.
In any case, we don't really feel this will have a very significant financial impact though.
The cost of tests are very low.
That's right.
We believe that for 2017 the certificate of coverages have been corrected and it's well along the way to being approved.
Anytime.
They've been talking about it.
They understand it.
It's ongoing discussions.
It's kind of routine.
You may want to add something.
So this is a routine approval that we will be getting for the new certificate.
<UNK>.
Yes, this is part of the normal filing process for products for 2017, and that process is not finalized at this point, so we are going through it and there's been, as <UNK> indicated, discussions that we feel confident that based on the discussions that we will have this immunized for 2017.
There's nothing controversial we are asking for.
We are closing, I don't want to call it loopholes, some openings that the state understands and they are not sure why they are there are to begin with in the conversations I've had.
And so it's a non-risk in my mind.
You are right, <UNK>, I'm not going to get into too much detail here, but I think what we've said is, with all the actions we are taking and what <UNK> said is that we believe that's going to resolve the issues.
As we sit here today, right.
Because if we don't resolve the issues, there'd be a PDR at the end of this year and that's not what we are communicating here today.
If we thought this wasn't resolved, we'd tell you that.
We have a track record of saying where things stand, and transparent and they tend to turn out ---+ they not just tend to, they do turn out that way.
A PDR, we've booked it for the right reasons in the right way.
We've made the adjustments going forward to benefit pricing, withdrawing products and I want to emphasize one last point here.
We are not talking about a big broad-based endemic problem across the Company.
We are talking about a product, basically one product in one state.
We are talking about another product in Arizona, which we are exiting and taking care of it that way.
So we are not talking about something that affects all the places where the systems are broken down and we haven't booked the right IBNR and all those things.
We are talking about one product, one state where we've taken the action to do what we can to improve it this year.
We improve on that, but definitely have taken the necessary steps to fix it for next year.
Well, give me an understanding of the color you want.
We are saying that we've corrected the certificates of authority.
Yes, substantially all in the Arizona piece, and I think we've talked about the Medicare piece and what's being done there.
And then you have the substance abuse issue primarily in California and the changes that <UNK> has talked about.
So we've dealt with it all (multiple speakers) all the product problems.
I would say yes.
No, it's part of the acquisition accounting, Matt.
So what happens is is you increase the reserves and the offset is really embedded in goodwill on the opening balance sheet.
So what I would say is that the original creation of the PDR is embedded in goodwill on March 24 and then effectively that PDR amortizes throughout the year to absorb the losses on those products that we've identified and businesses we've identified.
So there's no income into it.
Yes.
No, that's both companies.
That's both Health Net and Centene combined.
Yes, that's for 2015.
That's correct.
And I'd say the majority of it is Health Net-related.
Yes, because we are effectively fair valuing that item as of the date of the transaction, and you have to remember that a lot of the encounters data and edge server submissions don't happen until May.
And ultimately we were relying on, and Health Net was relying on the information from the data aggregators to effectively fair value that as of the transaction date.
I thank everybody.
I'm glad we were able to have this call today because I think it's important we understand the PDR does not affect us on a going-forward basis.
And it's been dealt with and we are looking forward to continuing for it to growing results for the Company.
So talk to you soon.
