In December 1997, the Company began a comprehensive restructuring of the Company's operations and businesses with a view towards enhancing and focusing on the Company's core operations which have generated substantially all of the membership growth in recent years. As a result of assessing various strategic alternatives, the Company concluded that the divestiture of the Company's operations in Illinois, the Carolinas and Wisconsin through either a sale or closure of these operations was in its best interest as the Company was unable to predict a return to profitability for these health plans in a reasonable time frame. Additionally, the Company initiated the restructuring of its commercial and Medicaid provider network arrangements in Southern Indiana to improve the operating margins in this region. Accordingly, the Company recorded in the second quarter of 1998 a $10.0 million charge for anticipated continuing losses primarily related to contracts in Illinois and the Carolinas for which the anticipated future health care costs and associated maintenance costs exceed the related premiums, and certain other costs associated with the divestiture of these health plans. On September 30, 1998, the Company completed the sale of its Wisconsin health plan which had approximately 4,700 commercial members and approximately 10,200 Medicaid members. On October 16, 1998, the Company completed the sale of its Illinois health plan which had approximately 22,600 commercial members. In addition, on September 30, 1998, the Company announced it would cease offering in North and South Carolina, all commercial health care lines of business, including its commercial health maintenance organization, preferred provider organization and point of service product lines. The Company's Carolinas health plans will not be providing commercial health care coverage beyond March 1999.
In September and October 1998, MHP completed the sale of its Wisconsin and Illinois health plans. Under the terms of the respective stock sales agreements, MHP retained certain assets and liabilities of the health plans (including premium receivables and estimated claims payable) which related to the operations of the health plans prior to October 1, 1998. Accordingly, the balance sheet of MHP as of December 31, 1998 reflects such remaining assets and liabilities retained by MHP under the terms of the respective sales agreements including an estimated claims payable balance of approximately $4.8 million related to the Wisconsin and Illinois health plans. Pursuant to the terms of the Illinois health plan sale agreement, approximately $1.0 million of cash and cash equivalents and marketable securities reflected on the balance
The contractual maturities of investments at December 31, 1998 were as follows:
Estimated Amortized Fair (Amounts in thousands) Cost Value --------- --------- Available-for-sale: Due in one year or less................ $ 6,223 $ 6,244
1998 1997 (Amounts in thousands) ------- ------- Premiums receivable.................... $35,020 $28,563 Allowance for retroactive billing adjustments.................. (5,481) (6,926) ------- ------- Premiums receivable, net............... 29,539 21,637
The Company is involved in litigation arising in the normal course of business, which, in the opinion of management, will not have a material adverse effect on the Company's consolidated financial position, results of operations and cash flows.
Froelich's Restricted Stock vested upon the termination of his employment with the Company on December 11, 1997. Mr. Ratican's Restricted Stock vested on February 27, 1998 upon the expiration of the three year vesting period.