Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

4.  Fair Value Measurements

The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash, premium receivables, provider and other receivables, prepaid expenses, other current assets, cash surrender value of life insurance (included in other long-term assets), claims payable, unearned revenue, accrued payroll and related liabilities, contractual refunds payable, accounts payable, accrued expenses and other current liabilities and deferred compensation (included in other long-term liabilities): The fair value of these financial instruments, except cash surrender value of life insurance and deferred compensation, approximates the historical cost because of the short maturity of these items. Cash surrender value of life insurance and deferred compensation are carried at the fair value of the underlying assets due to the nature of the life insurance policies and deferred compensation plan.

Cash equivalents, short-term investments, long-term investments (other than auction rate securities and certificates of deposit), investments on deposit for licensure and long-term convertible debt: Fair value for these items is determined based upon quoted market prices.

Auction rate securities and certificates of deposit: Fair value is determined based upon discounted cash flow analyses.

Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are categorized based upon a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

Level 1 — Observable inputs such as quoted prices in active markets:  The Company’s Level 1 securities consist of debt securities of government sponsored entities, equity index funds, Federally insured corporate bonds, money market funds and U.S. Treasury securities. Level 1 securities are classified as cash equivalents, short-term investments, long-term investments and investments on deposit for licensure in the accompanying Condensed Consolidated Balance Sheets. These securities are actively traded and therefore the fair value for these securities is based on quoted market prices on one or more securities exchanges.

Level 2 — Inputs other than quoted prices in active markets that are either directly or indirectly observable:  The Company’s Level 2 securities consist of certificates of deposit, commercial paper, corporate bonds and municipal bonds and are classified as cash equivalents, short-term investments, long-term investments and investments on deposit for licensure in the accompanying Condensed Consolidated Balance Sheets. The Company’s investments in securities classified as Level 2 are traded frequently though not necessarily daily. Fair value for these securities, except certificates of deposit, is determined using a market approach based on quoted prices for similar securities in active markets or quoted prices for identical securities in inactive markets. Fair value of certificates of deposit is determined using a discounted cash flow model comparing the stated rates of the certificates of deposit to current market interest rates for similar instruments.

Level 3 — Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions:  The Company’s Level 3 securities consist of auction rate securities issued by student loan corporations established by various state governments. The auction events for these securities failed during early 2008 and have not resumed. Therefore, the estimated fair values of these securities have been determined utilizing an income approach, specifically discounted cash flow analyses. These analyses consider among other items, the creditworthiness of the issuer, the timing of the expected future cash flows, including the final maturity associated with the securities, and an assumption of when the next time the security is expected to have a successful auction. These securities were also compared, when possible, to other observable and relevant market data. As the timing of future successful auctions, if any, cannot be predicted, auction rate securities are classified as long-term investments in the accompanying Condensed Consolidated Balance Sheets.

The Company has not elected to apply the fair value option available under current guidance for any financial assets and liabilities that are not required to be measured at fair value. Transfers between levels, as a result of changes in the inputs used to determine fair value, are recognized as of the beginning of the reporting period in which the transfer occurs. There were no transfers between levels for the periods ended June 30, 2011 and December 31, 2010.

Assets

The Company’s assets measured at fair value on a recurring basis at June 30, 2011 were as follows:

							Fair Value Measurements at Reporting Date Using
							Quoted Prices in				Significant
	Fair Value		Fair Value of				Active Markets for		Significant Other		Unobservable
	of Cash		Available-for-		Total Fair		Identical Assets		Observable Inputs		Inputs
	Equivalents		Sale Securities		Value		(Level 1)		(Level 2)		(Level 3)
Auction rate securities	$	—	$	15,672	$	15,672	$	—	$	—	$	15,672
Certificates of deposit		135,653		7,002		142,655		—		142,655		—
Commercial paper		1,000		51,262		52,262		—		52,262		—
Corporate bonds		—		346,179		346,179		—		346,179		—
Debt securities of government sponsored entities		13,000		375,444		388,444		388,444		—		—
Equity index funds		—		16,217		16,217		16,217		—		—
Federally insured corporate bonds		—		21,230		21,230		21,230		—		—
Money market funds		427,168		23,791		450,959		450,959		—		—
Municipal bonds		—		361,755		361,755		—		361,755		—
U.S. Treasury securities		—		34,498		34,498		34,498		—		—
Total assets measured at fair value	$	576,821	$	1,253,050	$	1,829,871	$	911,348	$	902,851	$	15,672

The Company’s assets measured at fair value on a recurring basis at December 31, 2010 were as follows:

							Fair Value Measurements at Reporting Date Using
							Quoted Prices in				Significant
	Fair Value		Fair Value of				Active Markets for		Significant Other		Unobservable
	of Cash		Available-for-		Total Fair		Identical Assets		Observable Inputs		Inputs
	Equivalents		Sale Securities		Value		(Level 1)		(Level 2)		(Level 3)
Auction rate securities	$	—	$	21,293	$	21,293	$	—	$	—	$	21,293
Certificates of deposit		137,215		13,651		150,866		—		150,866		—
Commercial paper		34,742		14,793		49,535		—		49,535		—
Corporate bonds		1,002		237,916		238,918		—		238,918		—
Debt securities of government sponsored entities		—		332,051		332,051		332,051		—		—
Federally insured corporate bonds		—		21,454		21,454		21,454		—		—
Money market funds		564,112		20,315		584,427		584,427		—		—
Municipal bonds		3,764		300,817		304,581		—		304,581		—
U.S. Treasury securities		1,000		21,721		22,721		22,721		—		—
Total assets measured at fair value	$	741,835	$	984,011	$	1,725,846	$	960,653	$	743,900	$	21,293

The following table presents the changes in the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2011 and 2010:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Balance at beginning of period	$	17,394		$	50,522		$	21,293		$	58,003
Total net realized loss included in investment income and other		—			(211	)		—			(290	)
Total net unrealized (loss) gain included in other comprehensive income		(47	)		1,073			279			1,541
Sales		—			(9,050	)		—			(12,000	)
Calls by issuers		(1,675	)		(11,290	)		(5,900	)		(16,210	)
Balance at end of period	$	15,672		$	31,044		$	15,672		$	31,044

During the three and six months ended June 30, 2011 and 2010, proceeds from the sale or call of certain investments in auction rate securities, the net realized gains and the amount of prior period net unrealized losses reclassified from accumulated other comprehensive income on a specific-identification basis were as follows (excludes the impact of the forward contract discussed below):

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011		2010			2011		2010
Proceeds from sale or call of auction rate securities	$	1,675	$	20,340		$	5,900	$	28,210
Total net realized gain included in investment income and other		—		674			—		875
Net unrealized loss reclassified from accumulated other comprehensive income, included in realized gain above		—		(210	)		—		(290	)

During the fourth quarter of 2008, the Company entered into a forward contract with a registered broker-dealer, at no cost, which provided the Company with the ability to sell certain auction rate securities to the registered broker-dealer at par within a defined timeframe, beginning June 30, 2010. These securities were classified as trading securities because the Company did not intend to hold these securities until final maturity. Trading securities are carried at fair value with changes in fair value recorded in earnings. The value of the forward contract was estimated using a discounted cash flow analysis taking into consideration the creditworthiness of the counterparty to the agreement. The forward contract was included in other long-term assets. As of June 30, 2010, all of the remaining trading securities under the terms of this forward contract were repurchased by the broker-dealer; therefore, the forward contract expired at the end of the period resulting in a realized loss of $1,165 for the six months ended June 30, 2010, which was largely offset by recovery of the related auction rate securities at par.

Liabilities

The 2.0% Convertible Senior Notes are carried at cost plus the value of the accrued discount in the accompanying Condensed Consolidated Balance Sheets, or $251,432 and $245,750 as of June 30, 2011 and December 31, 2010, respectively. The estimated fair value of the 2.0% Convertible Senior Notes is determined based upon a quoted market price. As of June 30, 2011 and December 31, 2010, the fair value of the borrowings under the 2.0% Convertible Senior Notes was $431,769 and $303,550, respectively, compared to the face value of $260,000.