Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2014

Summary of Significant Accounting Policies

Schedule of customers generating in excess of ten percent of net revenues for respective segment

        In addition to the Maricopa Contract and the Iowa Contracts previously discussed, the following customers generated in excess of ten percent of net revenues for the respective segment for the years ended December 31, 2012, 2013 and 2014 (in thousands):

Segment	Term Date	2012			2013			2014
Commercial
Customer A	June 30, 2014(1)	$	192,415		$	207,080		$	110,153
Customer B	December 31, 2019		134,885			141,444			184,981
Customer C	August 14, 2017		12,722	*		70,390	*		107,247
Customer D	December 14, 2013(1)		118,351			74,203	*		—
Customer E	December 31, 2017		67,959	*		71,085	*		67,426
Public Sector
Customer F	December 31, 2018(2)		133,864	*		128,607	*		253,661
Specialty Solutions
Customer G	December 31, 2017(3)		117,739			130,895			146,930
Customer H	June 30, 2016(4)		60,094			55,078			33,492	*
Customer I	June 30, 2017		57,455			61,838			76,580
Customer A	November 30, 2016		1,339	*		6,399	*		54,413
Customer J	January 31, 2016		38,366			47,311			52,310
Pharmacy Management
Customer K	April 4, 2015 to December 31, 2015(5)		129,209			133,724			123,812
Customer L	December 31, 2013(6)		60,350			59,125	*		14,312	*
Customer E	December 31, 2013(6)		73,785			92,647			2,612	*
Customer M	March 31, 2014(1)(7)		69,090			66,153	*		18,055	*
Customer N	December 16, 2016		—			—			171,936

* Revenue amount did not exceed ten percent of net revenues for the respective segment for the year presented. Amount is shown for comparative purposes only.

(1)	The contract has terminated.
(2)	The Company had behavioral healthcare contracts with various areas in the State of Florida (the "Florida Areas") which were part of the Florida Medicaid program. The State of Florida implemented a new system of mandated managed care through which Medicaid enrollees will receive integrated healthcare services, and has phased out the behavioral healthcare programs under which the Florida Areas' contracts operated. The Company has a contract with the State of Florida to provide integrated healthcare services under the new program.
(3)	On December 31, 2014, this contract was amended and extended through December 31, 2017. Historically the Company provided services on a risk basis. Under the amended contract, the funding arrangement will be a combination of risk and ASO based services.
(4)	The contract transitioned from risk to ASO based services effective July 1, 2014.
(5)	The customer has more than one contract. The individual contracts are scheduled to terminate at various points during the time period indicated above.
(6)	The contract has terminated, however, the Company continues to provide services as the contract is transitioned to the new vendor.
(7)	This customer represented a subcontract with a Public Sector customer and was eliminated in consolidation.

Schedule of significant restricted assets

Significant restricted assets of the Company as of December 31, 2013 and 2014 were as follows (in thousands):

	2013		2014
Restricted cash	$	236,696	$	215,325
Restricted short-term investments		117,674		132,808
Restricted deposits (included in other current assets)		25,009		30,620
Restricted long-term investments		32,430		43,293
Total	$	411,809	$	422,046

Schedule of fair value of financial assets and liabilities

In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company's financial assets and liabilities that are required to be measured at fair value as of December 31, 2013 and 2014 (in thousands):

	Fair Value Measurements at December 31, 2013
	Level 1		Level 2		Level 3		Total
Assets
Cash and Cash Equivalents(1)	$	—	$	101,028	$	—	$	101,028
Restricted Cash(2)		—		128,318		—		128,318
Investments:
U.S. Government and agency securities		1,129		—		—		1,129
Obligations of government-sponsored enterprises(3)		—		8,440		—		8,440
Corporate debt securities		—		198,594		—		198,594
Certificates of deposit		—		150		—		150
Total assets held at fair value	$	1,129	$	436,530	$	—	$	437,659

	Fair Value Measurements at December 31, 2014
	Level 1		Level 2		Level 3		Total
Assets
Cash and Cash Equivalents(4)	$	—	$	139,280	$	—	$	139,280
Restricted Cash(5)		—		65,992		—		65,992
Investments:
U.S. Government and agency securities		4,303		—		—		4,303
Obligations of government-sponsored enterprises(3)		—		15,315		—		15,315
Corporate debt securities		—		246,886		—		246,886
Certificates of deposit		—		1,150		—		1,150
Total assets held at fair value	$	4,303	$	468,623	$	—	$	472,926
Liabilities
Contingent consideration	$	—	$	—	$	58,153	$	58,153
Total liabilities held at fair value	$	—	$	—	$	58,153	$	58,153

(1)	Excludes $102.2 million of cash held in bank accounts by the Company.
(2)	Excludes $108.4 million of restricted cash held in bank accounts by the Company.
(3)	Includes investments in notes issued by the Federal Home Loan Bank.
(4)	Excludes $116.0 million of cash held in bank accounts by the Company.
(5)	Excludes $149.3 million of restricted cash held in bank accounts by the Company.

Summary of the Company's liability for contingent consideration

The following table summarizes the Company's liability for contingent consideration (in thousands):

	December 31, 2014
Balance as of beginning of period	$	—
Acquisition of CDMI		45,778
Acquisition of Cobalt		3,071
Changes in fair value		9,304
Balance as of end of period	$	58,153

Summary of short-term and long-term "available-for-sale" investments

The following is a summary of short-term and long-term investments at December 31, 2013 and 2014 (in thousands):

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. Government and agency securities	$	1,129	$	—	$	—		$	1,129
Obligations of government-sponsored enterprises(1)		8,441		2		(3	)		8,440
Corporate debt securities		198,748		18		(172	)		198,594
Certificates of deposit		150		—		—			150
Total investments at December 31, 2013	$	208,468	$	20	$	(175	)	$	208,313

	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. Government and agency securities	$	4,305	$	—	$	(2	)	$	4,303
Obligations of government-sponsored enterprises(1)		15,318		1		(4	)		15,315
Corporate debt securities		247,118		8		(240	)		246,886
Certificates of deposit		1,150		—		—			1,150
Total investments at December 31, 2014	$	267,891	$	9	$	(246	)	$	267,654

(1) Includes investments in notes issued by the Federal Home Loan Bank.

Summary of maturity dates of investments

The maturity dates of the Company's investments as of December 31, 2014 are summarized below (in thousands):

	Amortized Cost		Estimated Fair Value
2015	$	224,509	$	224,361
2016		43,382		43,293
Total investments at December 31, 2014	$	267,891	$	267,654

Schedule of net property and equipment

Property and equipment, net, consisted of the following at December 31, 2013 and 2014 (in thousands):

	2013			2014
Building improvements	$	12,074		$	13,416
Equipment		180,540			185,391
Capital leases—property		26,945			26,945
Capital leases—equipment		2,794			7,883
Capitalized internal-use software		304,146			351,978
		526,499			585,613
Accumulated depreciation		(354,166	)		(413,697	)
Property and equipment, net	$	172,333		$	171,916

Schedule of allocation of goodwill by reporting units

Goodwill for each of the Company's reporting units with goodwill at December 31, 2013 and 2014 were as follows (in thousands):

	2013		2014
Health Plan	$	120,485	$	129,042
Specialty Solutions		104,549		104,549
Pharmacy Management		242,290		311,636
Magellan Complete Care		20,882		20,879
Total	$	488,206	$	566,106

Summary changes in the carrying amount of goodwill

The changes in the carrying amount of goodwill for the years ended December 31, 2013 and 2014 are reflected in the table below (in thousands):

	2013		2014
Balance as of beginning of period	$	426,939	$	488,206
Acquisition of Partners Rx(1)		40,385		254
Acquisition of AlphaCare Holdings(1)		20,882		(3	)
Acquisition of CDMI		—		69,092
Acquisition of Cobalt		—		8,557
Balance as of end of period	$	488,206	$	566,106

Schedule of intangible assets

The following is a summary of intangible assets at December 31, 2013 and 2014, and the estimated useful lives for such assets (in thousands):

	December 31, 2013
Asset	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer agreements and lists	2.5 to 18 years	$	163,990	$	(100,482	)	$	63,508
Provider networks and other	1 to 16 years		11,593		(5,407	)		6,186
		$	175,583	$	(105,889	)	$	69,694

	December 31, 2014
Asset	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer agreements and lists	2.5 to 18 years	$	249,390	$	(121,788	)	$	127,602
Provider networks and other	1 to 16 years		13,013		(6,897	)		6,116
		$	262,403	$	(128,685	)	$	133,718

Schedule of changes in medical claims payable

The following table presents the components of the change in medical claims payable for the years ended December 31, 2012, 2013 and 2014 (in thousands):

	2012			2013			2014
Claims payable and IBNR, beginning of period	$	157,099		$	222,929		$	242,229
Cost of care:
Current year		2,076,190			2,264,276			2,097,395
Prior years(3)		(4,300	)		(31,300	)		(8,800	)
Total cost of care		2,071,890			2,232,976			2,088,595
Claim payments and transfers to other medical liabilities(1):
Current year		1,877,459			2,053,274			1,845,325
Prior years		128,601			160,402			206,696
Total claim payments and transfers to other medical liabilities		2,006,060			2,213,676			2,052,021
Claims payable and IBNR, end of period		222,929			242,229			278,803
Withhold receivables, end of period(2)		(24,500	)		(13,888	)		(321	)
Medical claims payable, end of period	$	198,429		$	228,341		$	278,482

(1)	For any given period, a portion of unpaid medical claims payable could be covered by reinvestment liability (discussed below) and may not impact the Company's results of operations for such periods.
(2)	Medical claims payable is offset by customer withholds from capitation payments in situations in which the customer has the contractual requirement to pay providers for care incurred.
(3)	Favorable development in 2012, 2013, and 2014 was $4.3 million, $31.3 million, and $8.8 million, respectively.