WCG
#That's a good question.
There's a lot of things to play out still for 2017, obviously.
But I am pleased with how we ended the year strong in Medicare Advantage and being able to see cause-and-effect in terms of initiatives that we embarked on in 2015 and through 2016 and having that show up in the results, not just in the MBR but also in the value proposition to be provided to seniors and then ultimately growth.
So we'll have to see.
We're certainly in a good position having exited the year strongly, but we have to see how 2017 kicks off.
And now PDP, there's more mechanics in getting those reset to the low 80%s.
So while I am thrilled that we were able to outperform our targeted cost structure for 2016, there's only so many things you can bet on prospectively, and that is not one of them.
So we will have to see with the new business coming in and how that kicks off after the first quarter.
We do not have any California Medicaid lives.
Okay.
Let me take the first part of your question.
Fair question on terms of guidance, but as I laid out in the prepared remarks, you have to look at the sources of the Q4 beat because there is a sound basis for $6.00 to $6.25, as we laid out on December 19.
And the source of the Q4 beat tilted significantly towards PDP, which gets reset, and there are certain things [you don't bet] on recurring in PDP.
And then second, tax rate, and that gets a lot simpler for 2017, and there is nothing we see that 2016 tax rate that changes our view on the midpoint of the 2017 guidance.
So that's where the analysis it goes into, okay, as we look at 2017 guidance, where are we at.
And we do not even have January closed, so there is no ---+ I think some might view it irresponsible to increase guidance off of a zero-plus-12 forecast.
So let's see how the first few months go.
I think we are well-positioned exiting the year and thrilled that we could deliver an outstanding 2016 and feel good about our positioning with the current guidance that we have reaffirmed.
So <UNK>, we certainly painted a picture back in the Investor Day of a trajectory which had us growing our margin.
And we have also discussed, in different forms, doubling the size of the business.
What I will tell you is that, based on the line of sight that we have into 2017, we feel good that we are on track.
But there are lots of moving parts between organic growth, between changes in the mix of business and M&A, such that I do not think it would be sensible for us to try to get more granular on a year-by-year basis.
Hopefully, we are establishing the credibility of a team that executes on its commitments.
And part of that is being very thoughtful about not getting ahead of ourselves.
So we are pleased with the year.
We like the fact that we are ginning up the growth engine, but we're not going to start making predictions out into future years.
<UNK>, let me just give a little bit of context for those that might not be familiar.
We are talking about the state of Florida, and the governor has been very active in trying to ensure the sustainability of the Medicaid program and most recently has introduced some statutory regulation that would put a certain cap on hospital reimbursement.
We think it will benefit the taxpayers in a state of Florida.
We see this as essentially a pass-through relative to ourselves, so we are not looking at this as somehow an opportunity to improve our own margins.
But as states gain what we expect will be a little bit more autonomy and an opportunity to make more decisions about the program, I think what Governor <UNK> has done is one example of ways in which they will be innovative and find ways to drive better value to the Medicaid programs.
And we are extremely supportive of that kind of fresh thinking because these beneficiaries certainly need the care, and driving toward fiscal discipline is something that we support, but it has to be done in the right manner.
So yes, we are encouraged by what we are seeing come out of Governor <UNK>'s office.
I do not want to speculate or guess.
I think that the governor and legislature have had a pretty good track record of running an effective program.
They are good partners to us.
But I think it's too early to say and to try to gauge whether or not this is going to be finalized and get approved.
You are right.
That is a good question because the state's value is an 85% minimum MBR, but as you know and many others, there are adjustments to both the numerator and the denominator when you calculate that, including some pretty large adds to both the numerator and denominator, which effectively put in a priority position the risk corridor with the paybacks to CMS, which are already reflected in our GAAP results before you would even pierce the minimum MBR, which is a nuance in PDP.
So we are not at that minimum for the payback, but we certainly are at the ---+ we have got a large payable accrued for CMS for the risk corridor because of our performance this year.
Yes, that and the adjustments to the numerator and denominator combined, but the risk corridor payable trumps the minimum MBR.
<UNK>, as you might suspect, we are monitoring those developments really closely.
Remind everyone that we actually built out this capability as it relates to the exchange, so we were running an exchange product in both New York and <UNK>tucky.
Now we have since terminated those.
They had de minimis membership, but the goal there was to make sure that we had the operational infrastructure and capability so that we would have the optionality in case that became a popular forum for managing Medicaid beneficiaries or managing that strata which we now see on ACA exchanges.
So we've got that functionality, and we are looking to see which way things head based on the changes in Washington and changes in the ACA law.
Yes.
We do not see that we would have to buy something in order to pivot and take advantage of that new direction.
Essentially upon closing, we expect to use about $100 million of their parent cash to help fund the acquisition.
So it's an $800 million approximate total valuation, and WellCare would need to come up with $700 million.
That is what we are planning for, plus some expenses we have to pay.
In terms of the capital then in addition ---+ that's their parent cash, and that is their public information from the last time they reported.
Then we look at their underlying subs, and their risk-based capital is in the zone of ours, which is a pretty efficient level.
And so wouldn't expect any meaningful upstream dividends from their existing capital position.
Obviously as a business generates profits, there is future dividend opportunities.
But that's how we evaluated the capital structure.
That is a heck of a hypothetical, <UNK>.
We've got a New York business also, and we are excited to combine those footprints.
Right.
So let me make it clear.
As we are reporting, we are reporting on WellCare Health Plans, Inc.
's results, not Universal American.
They are still a standalone public company until we close the transaction, so all the figures that we are providing, including the minus 1%, that is for WellCare's existing book of business.
You are right to point out that Universal American, once again, public information, their private fee for service was down half a Star, but you should also look at their Houston HMO, which went from a four to 4 1/2.
So all of that was public information before we announced the transaction.
So the minus 1%, <UNK>, the difference between that and the plus 0.25% in the CMS publication is really WellCare-specific due to WellCare's Star rating change and a couple of 3 1/2s that are now threes.
<UNK>, in my prepared comments I mentioned that we did get the termination of the Hart-<UNK>-Rodino filing on December 30, so that was a major step forward.
We still have significant regulatory approvals that we need to obtain, including the states of Texas and New York.
And we remain with the second-quarter close as our best estimate, recognizing that we do not have control over the regulatory approval timing.
But second quarter we think continues to be a very reasonable estimate.
That is correct.
Since it closed literally the last second of the year, membership would be in there, but there is really no significant P&L activity.
