1.	Refer to your response to Comment 1.

•	It is unclear how the $860,000 loss for the debt extinguishment was determined. Please provide us with an analysis of how this amount was calculated. Include in your analysis the reacquisition price of the debt and the net carrying amount of the extinguished debt and how you determined these amounts. Also include in the analysis your

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•	Tell us how the $21,963,000 credited to stockholders' equity was determined. Explain how the amount related to the convertible senior notes transaction and provide us your support in the accounting literature.

•	Tell us the amount of the discount you recorded for the 1.625% Notes, how you determined it and your support in the accounting literature.

a.	Measure the fair value of the consideration transferred to the holder. If the transaction is a modification or exchange that results in derecognition of the original instrument, measure the new instrument at fair value (including both the liability and equity components if the new instrument is also within the scope of the Cash Conversion Subsections).

b.	Allocate the fair value of the consideration transferred to the holder between the liability and equity components of the original instrument as follows:

1.	Allocate a portion of the settlement consideration to the extinguishment of the liability component equal to the fair value of that component immediately before extinguishment.

2.	Recognize in the statement of financial performance as a gain or loss on debt extinguishment any difference between (i) and (ii):

i.	The consideration attributed to the liability component.

ii.	The sum of both of the following:

01.	The net carrying amount of the liability component

02.	Any unamortized debt issuance costs.

3.	Allocate the remaining settlement consideration to the reacquisition of the equity component and recognize that amount as a reduction of stockholders’ equity.

a.	Measure the fair value of the consideration transferred to the holder. If the transaction is a modification or exchange that results in derecognition of the original instrument, measure the new instrument at fair value (including both the liability and equity components if the new instrument is also within the scope of the Cash Conversion Subsections).

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b.	Allocate the fair value of the consideration transferred to the holder between the liability and equity components of the original instrument as follows:

1.	Allocate a portion of the settlement consideration to the extinguishment of the liability component equal to the fair value of that component immediately before extinguishment.

2.	Recognize in the statement of financial performance as a gain or loss on debt extinguishment any difference between (i) and (ii):

i.	The consideration attributed to the liability component.

ii.	The sum of both of the following:

01.	The net carrying amount of the liability component

02.	Any unamortized debt issuance costs.

3.	Allocate the remaining settlement consideration to the reacquisition of the equity component and recognize that amount as a reduction of stockholders’ equity.

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Determine the carrying amount of the liability component based on the fair value of a similar debt instrument excluding the embedded conversion option. Typically, an income valuation approach, or a present value calculation, is used to calculate the fair value of the debt liability. To perform this calculation the issuer should determine (1) the expected life of the liability; and (2) the borrowing rate of a nonconvertible debt instrument.

•	Recognize the embedded conversion option in equity by ascribing the difference between the proceeds and the fair value of the debt liability to additional paid-in capital.

•	Report the difference between the principal amount of the debt and the amount of the proceeds allocated to the liability component as a debt discount, which is subsequently amortized to interest expense over the instrument’s expected life using the effective interest method.

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1.	1

2.	Please refer to your response to Comment 4:

•	You state that you record receivables or payables related to the 3Rs based on your year-to-date experience. For each program, please tell us what authoritative guidance you are using and why you determined that such reliance is appropriate. In addition, please tell us your classification of the amounts associated with each program within your statement of operations.

•	Please clarify the accounting policy for the medical loss ratio and your classification within the statement of operations when the minimum medical loss ratio is not met.

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Permanent risk adjustment program: Under this permanent program, our health plans' risk scores are compared to the overall average risk score for the relevant state and market pool. Generally, our health plans will pay into the pool if their risk scores are below the average risk score, and will receive funds from the pool if their risk scores are above the average risk score. We recognize estimates relating to the risk adjustment program as an adjustment to premium revenue in our consolidated statements of income.

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Transitional reinsurance program: This program is designed to provide reimbursement to insurers for high cost members. Our health plans pay an annual contribution on a per-member basis, and are eligible for recoveries if claims for individual members exceed a specified threshold, up to a maximum amount. This three-year program will end in 2016. We recognize recoveries under the reinsurance program as a reduction to medical care costs in our consolidated statements of income.

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Temporary risk corridor program: This program is intended to limit gains and losses of insurers by comparing allowable costs to a target amount as defined by the U.S. Department of Health and Human Services (HHS). Variances from the target amount exceeding certain thresholds may result in amounts due to or receivable from HHS. This three-year program will end in 2016. Due to uncertainties as to the amount of federal funding available to support the risk corridor program, we have not recognized amounts receivable under this program. All liabilities are recognized as incurred. We recognize estimates relating to the risk corridor program as an adjustment to premium revenue in our consolidated statements of income.

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•	The Company is responsible for the adequacy and accuracy of the disclosure in the filings;

•	Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filings; and

•	The Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.