1. ORGANIZATION AND COMPANY BACKGROUND
Except as otherwise indicated, references to the "Company," "Universal American," "we," "our," and "us" are to Universal American Corp., a Delaware corporation, and its subsidiaries.
Universal American, through our family of healthcare companies, provides health benefits to people covered by Medicare. We are dedicated to working collaboratively with healthcare professionals, especially primary care physicians, in order to improve the health and well-being of those we serve and reduce healthcare costs.
Through our health plans and insurance subsidiary, we sell Medicare Coordinated Care Plan products in Texas, which we call HMOs, and sell Medicare Coordinated Care products in New York and Maine that are built around contracted networks of providers, which we call PPOs and Medicare Advantage Network private fee-for-service products, known as PFFS Plans. Our Medicare Advantage plans currently serve approximately 119,500 members, including 72,100 members in our Texas HMOs and 47,400 members in upstate New York and Maine.
Our subsidiary, Collaborative Health Systems, LLC, also known as CHS, works with physicians and other healthcare professionals to operate Accountable Care Organizations, or ACOs, under the Medicare Shared Savings Program, or MSSP and Next Generation ACO Model. We currently have sixteen MSSP ACOs in ten states previously approved for participation in the program by the Centers for Medicare & Medicaid Services, known as CMS and two Next Generation ACOs operating in Texas and Maryland/Virginia. Based on data provided by CMS, these ACOs currently include approximately 5,200 participating providers with approximately 221,800 assigned Medicare fee-for-service beneficiaries, both within and outside our current Medicare Advantage footprint. CHS provides these ACOs with care coordination, analytics and reporting, technology and other administrative capabilities to enable participating providers to deliver better care and lower healthcare costs for their Medicare fee-for-service beneficiaries. The Company provides funding to CHS to support the operating activities of CHS and the ACOs.
On November 17, 2016, we entered into a definitive agreement with WellCare Health Plans, Inc. ("WellCare") under which WellCare will acquire Universal American in an all cash transaction valued at $10.00 per share of common stock. We refer to this transaction throughout this Form 10-K as the "Sale Transaction." On December 30, 2016, the request for early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) was approved. In addition, on February 16, 2017, our stockholders approved the Sale Transaction. WellCare and the Company are pursuing the remaining regulatory approvals from regulatory agencies in Texas and New York. The Sale Transaction is expected to close in the second quarter of 2017, subject to the receipt of regulatory approvals and other customary closing conditions.
On August 3, 2016 we completed the sale of our Traditional Insurance business to Nassau Reinsurance Group Holdings, L.P. ("Nassau Re"). Under the terms of the agreement, Nassau Re acquired all of the shares of Constitution Life Insurance Company ("Constitution Life") and The Pyramid Life Insurance Company ("Pyramid"), as well as the Traditional Insurance business written by American Progressive Life & Health Insurance Company of New York ("Progressive") on a 100% coinsurance basis. As of December 31, 2015, we determined that our Traditional Insurance business should be classified as held for sale and reported as discontinued operations. Consequently, the related assets and liabilities were adjusted to fair value as of December 31, 2015 based on the estimated net amounts realizable upon sale and for all periods presented were classified as assets and liabilities of discontinued operations in our consolidated balance sheets. The related operating results and cash flows are reported in discontinued operations in our consolidated financial statements. At December 31, 2016, assets of discontinued operations include reinsurance recoverables and cash and investments held in connection with the reinsurance treaty with Nassau Re and liabilities of discontinued operations include insurance reserves and claims payable and a liability to Nassau Re for funds held. See Note 21—Discontinued Operations for further details.
On August 1, 2016, we completed the sale of our subsidiary, Today's Options of New York, Inc., ("TONY") which operates the Total Care Medicaid Plan, to Molina Healthcare, Inc. ("Molina"). As of June 30, 2016, we determined that our Medicaid business should be classified as held for sale and reported as discontinued operations. Consequently, the related assets and liabilities were reclassified as assets and liabilities of discontinued operations in our consolidated balance sheets for all periods presented. The related operating results and cash flows are reported in discontinued operations in our consolidated financial statements. See Note 21—Discontinued Operations for further details.
On May 1, 2015, we sold our APS Healthcare domestic subsidiaries and we sold our APS Healthcare Puerto Rico subsidiaries on February 4, 2015 and these businesses are reported as discontinued operations. As a result, the related assets and liabilities for APS Healthcare have been reclassified as assets and liabilities of discontinued operations in our consolidated balance sheets and the related operating results and cash flows are reported in discontinued operations in our consolidated financial statements for all periods presented. See Note 21—Discontinued Operations for further details.