This excerpt taken from the WCG 10-K filed Feb 15, 2005.
Premium Deficiency Reserves
Premium deficiency reserves are recognized when it is probable that the future costs associated with a group of existing contracts will exceed the anticipated future premiums, investment income and stop-loss reinsurance
WELLCARE HEALTH PLANS, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS(Continued)
Year ended December 31, 2004 and 2003, five-month period ended December 31, 2002,
predecessor seven-month period ended July 31, 2002
(Dollars in thousands, except member, share and unit data)
recoveries on those contracts. For purposes of determining whether a premium deficiency exists, contracts are grouped in a manner consistent with the Companys method of acquiring, servicing and measuring profitability of such contracts. At December 31, 2004 and 2003, the Company recorded premium deficiency reserves of $0 and $500, respectively, in the accompanying Consolidated Balance Sheets.