Health Net 2013 Annual Report Download - page 72

70
Year Ended December 31,
2013 2012
(Dollars in millions)
Reconciliation of Adjusted Days Claims Payable:
(1) Reserve for Claims and Other Settlements—GAAP ................................................... $ 984.1 $ 1,038.0
Less: Capitation, Provider and Other Claim Settlements and MAPD Payables ......... (93.9)(105.0)
(2) Reserve for Claims and Other Settlements—Adjusted................................................ $ 890.2 $ 933.0
(3) Health Plan Services Cost—GAAP............................................................................. $ 8,886.5 $ 9,316.3
Less: Capitation, Provider and Other Claim Settlements and MAPD Costs............... (3,348.9)(3,386.3)
(4) Health Plan Services Cost—Adjusted.......................................................................... $ 5,537.6 $ 5,930.0
(5) Number of Days in Period ............................................................................................ 365 366
(1) / (3) * (5) Days Claims Payable—GAAP (using end of period reserve amount)......... 40.4 40.8
(2) / (4) * (5) Days Claims Payable—Adjusted (using end of period reserve amount) ..... 58.7 57.6
Income Tax Provision
Our income tax expense (benefit) and the effective income tax rate for the years ended December 31, 2013, 2012 and
2011 are as follows:
2013 2012 2011
(Dollars in millions)
Continuing Operations:
Income tax expense from continuing operations...................................... $ 99.8 $ 6.0 $ 100.7
Effective income tax rate for continuing operations................................. 37.0% 18.9% 62.3%
Discontinued Operations:
Income tax (benefit) expense from discontinued operation A................... $(10.3) $ 6.2
Effective income tax rate for discontinued operation A............................ 35.8% 35.8%
Income tax expense from gain on sale of discontinued operation B......... $ 18.0
Effective income tax rate for gain on sale of discontinued operation B
.... 13.5%
________
A - For the year ended December 31, 2013, we had no discontinued operations; therefore, income tax expense from
discontinued operation and the corresponding effective income tax rate are not applicable.
B - For the years ended December 31, 2013 and 2011, we had no sale of a discontinued operation; therefore, income tax
expense from gain on sale of discontinued operation and the corresponding effective income tax rate are not applicable.
Continuing Operations
The effective income tax rate for continuing operations was 37.0% and 18.9% for the years ended December 31,
2013 and 2012, respectively. The effective income tax rate varies from the statutory federal tax rate of 35% for the year
ended December 31, 2013 primarily due to state income taxes, tax exempt investment income, and non-deductible
compensation.
The most significant change in the effective income tax rates from the 2011 to 2012 periods presented above was as
a result of the absence of litigation effects in 2012. During the year ended December 31, 2011, a judgment was rendered in
the AmCareco litigation (see Note 13 to our consolidated financial statements for additional information regarding the
AmCareco litigation) that resulted in deferred tax assets of $51.1 million. Realization of these deferred tax assets was
uncertain and therefore, a valuation allowance for the full amount was established. Additionally, our tax rate for the year
ended December 31, 2012 was lower than the statutory federal rate of 35% primarily due to the effect of tax-exempt
income and reductions of valuation allowances against deferred assets, which resulted from the utilization of capital loss
carryforwards against gains on sale of marketable securities. Such beneficial impacts were partially offset by the effect of