
6.	Market Updates

Georgia

In June 2011, the Company received notification from the Georgia Department of Community Health (“GA DCH”) that the GA DCH was exercising its option to renew, effective July 1, 2011, the Company’s Temporary Assistance for Needy Families (“TANF”) and Children’s Health Insurance Program (“CHIP”) contract between the Company’s Georgia health plan and GA DCH. The renewal of the contract typically includes revised premium rates that are affected through an amendment to the existing contract. The revised premium rates will be recognized when known, commensurate with the effective date, if they are expected to decrease from the existing rates, which can be prior to the date the contract is considered to be final. If the revised premium rates are anticipated to be an increase over the existing rates, the increase will be recognized in the period in which the rates become final. The time lag between the effective date of the premium rate changes and the final contract can and has in the past been delayed one quarter or more. The value of the impact could be significant in the period in which it is recognized dependent on the magnitude of the premium rate change, the membership to which it applies and the length of the delay between the effective date of the rate increase and the contract date. The effect, if any, will not be known to the Company until the third quarter of 2011 or later. The contract, as renewed, will terminate on June 30, 2012. Additionally, the State has indicated its intent to begin reprocurement of the contract through a competitive bidding process sometime in the forthcoming twelve months.

Louisiana

On July 25, 2011, the Louisiana Department of Health and Hospitals announced that the Company was one of five managed care organizations selected through a competitive procurement to offer healthcare coverage to Medicaid recipients in Louisiana through its Louisiana health plan. The State indicated that the managed care organizations will enroll collectively approximately 900,000 members statewide, including children and families served by Medicaid’s TANF as well as people with disabilities. It is not known at this time what portion of the statewide membership will be covered by the Company’s Louisiana health plan. Of the five managed care organizations selected, the Company is one of three providers that will offer services on a full-risk basis. Pending the completion of a final agreement, the Company anticipates beginning operations in early 2012.

New Jersey

On July 1, 2011, the Company’s New Jersey health plan entered into a renewal of its managed care contract with the State of New Jersey Department of Human Services Division of Medical Assistance and Health Services (“NJ DMAS”) under which it provides managed care services to eligible members of the State’s New Jersey Medicaid/NJ FamilyCare program. The renewed contract includes a revision to the premium rates and an expansion of certain healthcare services provided to eligible members. These new healthcare services include personal care assistant services, medical day care (adult and pediatric), outpatient rehabilitation (physical therapy, occupational therapy, and speech pathology services), and aged, blind and disabled (“ABD”) and dual-eligible pharmacy benefits. The managed care contract renewal also includes participation by the Company’s New Jersey health plan in a three-year medical home demonstration project with NJ DMAS. This project requires the provision of services to participating enrollees under the Medical Home Model Guidelines. As of June 30, 2011, the Company’s New Jersey health plan served approximately 133,000 members.

Tennessee

The Company’s Tennessee health plan and the State of Tennessee TennCare Bureau are in the process of finalizing an amendment to the existing contract to provide Medicaid managed care services to eligible Medicaid members for the contract period beginning July 1, 2011. The amendment will include a revision to premium rates resulting in an anticipated decrease of approximately 4.7%. The revised premium rates will be recognized for periods subsequent to the effective date of July 1, 2011. The Company can make no assurance that the decrease in premium rates will not have a material adverse effect on its financial position, results of operations, or cash flows in future periods.

Texas

The Company’s Texas health plan and the Texas Health and Human Services Commission (“HHSC”) are in the process of finalizing an amendment to the existing Medicaid and CHIP Managed Care Services Contract for the contract period beginning September 1, 2011. The amendment will include a revision to premium rates resulting in an anticipated net decrease of approximately 5.4%. The revised premium rates will be recognized for periods subsequent to the effective date of September 1, 2011. The Company can make no assurance that the impact of the decrease in premium rates will not have a materially adverse effect on the Company’s financial position, results of operations or cash flows in future periods.

On August 1, 2011, HHSC announced that the Company’s Texas health plan was awarded a contract to continue to provide Medicaid managed care services to its existing service areas of Austin, Dallas/Fort Worth, Houston (including the planned September 1, 2011 expansion into the Jefferson service area) and San Antonio. The Company will no longer participate in the Corpus Christi area, for which it served approximately 10,000 members as of June 30, 2011. In addition to the existing service areas, the Company will begin providing Medicaid managed care services in the Lubbock and El Paso service areas and in the 164 counties of the three rural service areas. Additionally, the Company will begin providing prescription drug benefits for all of the Company’s Texas members and, pending final approval of the State’s waiver filed with the Centers for Medicare and Medicaid Services, inpatient hospital services for the STAR+PLUS program. As of June 30, 2011, the Company’s Texas health plan served approximately 593,000 members. Pending completion of a final agreement, the Company anticipates beginning operations for new markets and products in early 2012.

In February 2011, the Company’s Texas health plan began serving ABD members in the six-county service area surrounding Fort Worth, Texas through an expansion contract awarded by HHSC. As of June 30, 2011, approximately 28,000 members were served by the Company’s Texas health plan under this contract. Previously, the Company served approximately 14,000 ABD members in the Dallas and Fort Worth areas under an administrative services only contract that terminated on January 31, 2011.